The state of Delaware has launched a new website (corplaw.delaware.gov) to promote Delaware’s business-friendly incorporation laws abroad.

An individual may- in any of 10 languages- register a corporation without providing information on the entities’ “beneficial owners”- or the real people behind the corporation.

Delaware is known for its policies, which allow for the creation of anonymous shell companies. In fact, Delaware is one of the easiest places in the world to obtain an untraceable shell company.

The state’s decision to flaunt its easy policy on incorporation ignores the impact that these policies have on American families and their communities.

According to Rebecca Wilkins of Citizens for Tax Justice:

Shell companies are often used for tax evasion-- and the rest of us pick up the slack. They are also used for all kinds of other illegal purposes, including financing terrorists and laundering money from activities like dealing in drugs, guns, and human trafficking.

Shell corporations can be used to anonymously influence domestic elections. “Nearly 17 percent of all business contributions to Super PACs came from identified shell companies [in 2012],” according to USPIRG. Similarly, shell companies have been utilized to defraud Medicare of millions of dollars.

The Delaware website is in part a response to recent negative media attention the state has received (see here and here). The site includes a “Myth v. Fact” landing page, which responds to recent criticism. The page addresses its allowance of anonymous shell companies, saying, “As a general matter, U.S. states do not collect the names of beneficial owners—the natural persons who ultimately own, control, or derive benefits from a company—through the incorporation process.”

In our view that’s the problem.

Senator Carl Levin (D-MI) has introduced the Incorporation Transparency and Law Enforcement Assistance Act (S.1465), which would require states to collect the names of beneficial owners for all businesses they incorporate. The main opposition to this legislation comes from state Secretaries of State, including Delaware’s.

To learn more about the “Delaware Loophole”, watch here.