I have heard, that in the United States, some individuals are able to conceal their identities from the public when purchasing a home by setting up a LLC and buying the house through the said corporation.
Is this true? and can someone explain how this might work?
Yes, that's correct, and I've done it successfully.
When I used it, my purpose was privacy - we needed to buy three properties, and we were pinned - no other properties would do. We had two sworn enemies (it was personal) both of whom were expert real-estate traders in our county, and would have locked up the other two properties just to spite us. We got all three, catching them totally by surprise.
And yes, we were opaque. They couldn't have guessed who we were.
First we must talk about Registered Agents. In order to proceed in a lawsuit, you must serve the other party with notice of the suit. You may have heard of private citizens delaying lawsuits by hiding from the process server. The state won't let you do that with a corporation or LLC. You must have an office with a physical address -- staffed Monday-Friday 9-5 so a process server is assured of finding a person there to serve papers on.
Obviously a "small shop" or holding company doesn't have the resources to do that. So they hire a Registered Agent, a company whose One Job is to staff a desk those hours and contact you if they receive anything. This Registered Agent is the keystone of the deal.
You'd think private mailbox firms like The UPS Store/Mailboxes Etc. would be naturals at being Registered Agents - but I rarely see that. The Wyoming one I used was someone's house (at least at the time of the 20/20 TV investigation of them; I lost my mind when they showed a list of aged LLCs just for drama and there was mine.)
Let's go get our LLC
Certain states do not not publish the owners or managers of LLCs. Wyoming is a popular one, so let's go with it. And remember. Your goal isn't just to keep the info private, but to demoralize anyone who's even trying. Thus it helps to use the more famous states, so they stop immediately and give up.
You can hit the Wyoming (or whichever state)'s Corporations website and DIY all the paperwork. But you still need to find a Registered Agent. Knowing this, many Registered Agents in popular LLC states have all the templates ready to set up the LLC for you very cheaply, while also giving you Registered Agent services. Find someone who holds themselves out to do this, one-stop shop and done.
Ongoing, you will pay the Wyoming (or whoever) annual registration fee which is very modest, and the annual fee of the Registered Agent (a few hundred dollars a year).
Next, to do business in YOUR state, you must register as a Foreign LLC in that state. "Foreign" means you're from another state. And you guessed it! Your state will also require a Registered Agent in your state. So you will have two. So you will have a second registration fee.
Ongoing, you will also pay your home-state annual registration fee (often trivial; sometimes outrageous, I think California is $1000-ish?) as well as pay the annual costs of a Registered Agent in your state also.
Now you may think "I can hire a national Registered Agent firm that does this in many states. One stop shop." Maybe. But since that firm does business in your state, they must answer subpoenas from your state courts. That foreign-state Registered Agent, maybe not!
Do you really want this, though
So you do have a considerable annual maintenance expense; 95% of which (in most states) is the cost of two Registered Agents.
Back in our day this amounted to about $500/year. Probably pushing $1000/year now. So do you really want this thing? is a question you ought to ask.
LLCs are also liability shields. Lenders don't like that.
LLCs aren't just for privacy. They are also liability shields. Properly managed, the owners and managers can't be sued for the liabilities of the LLC - they can't lose any more money than they willfully invested into it. So it is a liability stop-loss.
Here's the problem. Mortgage lenders aren't going to like that, because if the mortgage isn't paid, they have no recourse whatsoever against anyone except assets in the LLC and the secured property itself, of course. So they are looking at the value of the property (in a potential downturn market) versus the money lent. And they may be reluctant to write a mortgage without a human co-signer.
I don't know how this goes because we paid cash. However, the issue is that liens are recorded - they are public record at the courthouse. Depending on the state, the lien may expose the name of the human co-signing.