[lbo-talk] business that doesn't exist

[Wojtek Sokolowski]

> A question from my partner.
> 
> How is it that a business just doesn't exist?
> 
> the Fed Employer ID number doesn't lead to anything. None of the
> names, person and biz names or DBAs, lead anywhere. De nada. It's not
> registered with the state of physical location. The business holds
> itself out as in "inc." in its name and popaganda, but....
> 
> The state called my partner in response to a FOIA request, and they
> had absolutely NOTHING on this biz. It seems really strange, too,
> because it's not as if it's hard to incporate in this state. _I_ can
> incorporate it's that easy. You only need one person. The advantages
> of doing so, especially if you're making over $100k and doing work
> with the US gubmint and military ist, are probably really important.
> But, even if NOT registered as a corp., you have to be registered
> somehow, at least according to the material I've been reading. Banks
> require you to be registered as sole prop, partnerships, S corp, etc.
> etc. in order to have a biz checking account.
> 
> Anyway, any thoughts? Off shored? Simply gone out of state. THAT makes
> no sense. THIS state is very biz friendly.
> 
> Anyway, my partner is just really curious.

Federal Employer Id Number (FEIN) is not necessarily connected to any
particular establishment or an organization.  It may refer to a project i.e.
one organization can have several FEINs for different operations, or to a
defunct organization - especially if it is tax exempt under IRS Code section
501c.  Exempt organizations master file does not get purged (except when an
entity is stripped of its exempt status, but that does not happen often), so
it contains a lot of "dead end" FEINs.

One way to know if a FEIN is active is to match it with the Unemployment
Insurance files (aka ES-202) - as every active business is required to file
quarterly reports wits state UI agencies which are then transmitted to the
BLS (there are some exceptions though that vary from state to state).
However ES-202 is subject to disclosure limitations (e.g. prohibition on
disclosing info on single establishments), and "Active status" is subject to
such limitations.  Therefore, you will not get status information even under
FOIA.

If you want to form a "phantom business" the best way to do so is to open it
as a church, especially south of the Mason-Dixon line, as churches have
virtually no reporting requirements and enjoy all kinds of tax exemptions,
including certain salaries of the clergy.  After all, it a god's country, he
he he.

Wojtek