Looking Behind the Curtain: Why Anonymous Corporate Ownership Undermines Texas Community Autonomy and How Beneficial Ownership Transparency Can Help

Introduction

Esmeralda Nolasco stood in her apartment in Houston, Texas, staring at the mold spreading across her dining area right next to the gaping hole in her ceiling. Nolasco and her apartment complex neighbors had been living in terrible conditions for months while management had repeatedly ignored their maintenance requests. After the property changed hands following a foreclosure, she and over 100 families received mass eviction notices from a new owner listed only as “Cabo United LLC.” Trapped between an uninhabitable apartment and the threat of eviction, Nolasco wanted to know who was deciding to evict her, with the hope of negotiating and holding someone accountable for the deteriorating conditions. However, her search hit a wall. Texas Housers, a nonprofit housing advocacy organization, spent months investigating who actually owned the property and found that the beneficial owners (individuals who own 25% or more of an asset or exercise substantial control over an asset or equity) remained entirely hidden behind layers of shell companies. The LLC’s “governing person” was listed as Sheridan Capital, a Florida bridge loan company that typically does not own property. Nobody could determine who was making decisions about these families’ homes. With support from Lone Star Legal Aid and Texas Housers, residents had organized and won the dismissal of over 100 eviction cases. Yet, the ruling could not reverse the displacement and distress the community experienced. Equity ownership had already been transferred to an entity no one could identify or reach, and by the time investigators finished tracing ownership through every layer of beneficial ownership, over 100 families had been scattered across Houston (Amari and Trombly 2023; Beaty 2024).

Nolasco’s story is not unique, and it illustrates a structural transparency problem in which citizens lack the ability to identify who controls the institutions that determine whether communities thrive or deteriorate. Across Texas, private equity firms and anonymous shell companies have transformed housing, healthcare, and essential services by systematically stripping communities of value while remaining invisible. Private equity firms control over 440,000 apartment units across nearly 1,500 properties in Texas, the largest concentration by absolute number in the nation, with the Dallas-Fort Worth area alone accounting for nearly half of the national increase in private equity-owned housing over the past decade (Ash 2026). Sixty-three percent of these acquisitions have occurred since 2018 (Ash 2026). However, the same opaque ownership structures extend across nearly every sector of daily life in Texas: grocery stores, auto repair chains, dental and veterinary practices, nursing homes, funeral homes, plumbing and electrical contractors, and local hardware stores. Extensive documentation and research show that patterns of rapid, opaque consolidation are directly related to residents’ quality of life. Within each of these cases, communities lose the ability to identify who owns the institutions they depend on, and with it, the ability to advocate, negotiate, litigate, or organize effectively.

The families most vulnerable to this opacity are disproportionately Black and Latino, working-class, and housing-insecure, many of whom are concentrated in rural communities, food deserts, and medically underserved communities. These communities become even more vulnerable when anonymous owners close grocery stores, shutter hospitals, or allow housing to decay without accountability.

Meanwhile, the same opacity that prevents tenants from identifying their landlords also prevents pension trustees and other institutional investors from fulfilling their fiduciary duties. As Texas public pension funds increase allocations to private credit and other alternative assets to address unfunded liabilities, they extend capital to entities whose beneficial owners and cross-portfolio track records they cannot independently verify. Texas teachers, nurses, and public servants may discover their retirement savings are invested with the same predatory actors displacing families like Nolasco’s, creating a vicious cycle in which working Texans are exploited as both tenants and pension beneficiaries.

This policy brief argues that Texas should establish a state-level beneficial ownership database requiring all limited liability companies doing business in Texas to disclose their beneficial owners, with broad public access and a private right of action for community members harmed by nondisclosure. Ownership transparency will not, by itself, stop extraction. But it is a necessary precondition for virtually every other form of accountability: litigation, regulation, code enforcement, market discipline, pension oversight, and informed democratic participation. This is a crisis that is fundamentally about power and information. This draws on a core principle of stakeholder governance that the information needed to hold corporate power accountable should be available not only to shareholders who bear financial risk, but to the communities and residents who bear societal risk from how that power is exercised (Palladino and Karlsson 2018). When residents cannot identify their landlord, pension trustees cannot assess portfolio risks, and elected officials cannot understand who controls critical infrastructure, democratic accountability breaks down. Without knowing who controls the institutions that shape their lives, Texans cannot hold anyone accountable for how those institutions are managed.

Background and Context

How Opacity Enables Value Extraction

When a private equity firm acquires an apartment complex, grocery store, or healthcare facility, it typically employs a leveraged buyout, borrowing heavily and loading the acquired target company with substantial debt. The firm then generates returns through management fees and dividend recapitalizations, in which the portfolio company itself serves as collateral to borrow additional capital, which is then distributed to investors, regardless of the company’s financial health. In fact, loading companies with debt while extracting value often leads them to failure. A 2025 NBER working paper finds that dividend recapitalizations increase the likelihood of financial distress by 2.4 times (Bhardwaj, Gupta, and Howell 2025). For workers and customers, the consequences are immediate, with staff reductions, service quality cuts, deferred maintenance, and price increases all undertaken to service debt and generate returns for investors who may never set foot in the community.

The aforementioned failure rate is a story in itself. In 2023, private equity-backed company debt defaults totaled $50.5 billion, accounting for 55 percent of all corporate defaults (Rothman 2024). This trend has only accelerated, with PE-backed companies representing 65 percent of all corporate defaults in Q1 2025 (Moody’s Analytics 2026). According to Moody’s, PE-backed companies defaulted at a rate of 17 percent between January 2022 and August 2024, which is twice the rate for non-PE-backed companies (Private Equity Wire 2024). In Texas healthcare, nursing facilities under private equity ownership have been associated with approximately 10 percent higher mortality rates despite higher per-patient Medicare spending (Gupta et al. 2021). When a beloved grocery store closes, or an apartment complex falls into disrepair, it is often because the business was structured to prioritize debt service and fee extraction over operational viability, and after private capital practices had extracted their projected value from the target company in the process.

Unfortunately, these individual organizational failures impact more than just the fabric of communities. The same financial dynamics shape the alternative-asset portfolios that public pension funds increasingly rely on to meet their obligations. The US private credit market has grown to approximately $1.7 trillion, with pension funds among its largest allocators (IMF 2024). Private credit funds lend directly to entities, many of which are shell companies and special-purpose vehicles (independent legal entities that isolate financial risk so that, in the case of business failure, their liabilities would not affect their parent companies’ assets), whose beneficial owners are unidentifiable. A single Texas pension fund may simultaneously commit capital to a private credit manager, allocate to a private equity sponsor, and hold CLO tranches built on leveraged loans to that same sponsor’s portfolio companies, creating triple exposure to a single beneficial owner across nominally diversified asset classes with no way to see it. The Teacher Retirement System of Texas alone manages over $200 billion for 1.9 million beneficiaries. A state beneficial ownership database would let fiduciaries map cross-vehicle concentration, verify counterparty track records across entities, and exercise the prudence their duties require.

Let us be crystal clear: The connection between the financial and tangible harms caused and the degree of financial opacity is specifically structural. Shell companies and layered subsidiaries serve specific functions in enabling certain extractive practices, such as frustrating “service of process” procedures to evade legal code enforcement, obscuring assets to escape litigation, masking patterns of violations across properties to avoid reputational consequences, and blocking consumer research into ownership histories to prevent market discipline. As a 2023 ProPublica investigation documented, apartment complex ownership is “typically obscured by layers of limited liability corporations,” making consolidation “almost impossible” to track (Vogell 2023). Transparency makes all of these activities substantially more difficult. When beneficial ownership is disclosed, tenants can research landlords before signing leases, journalists can connect patterns across nominally separate entities, regulators can trace violations to responsible parties, and pension fiduciaries can assess portfolio risks. The idea that transparency alone prevents harm is a misplaced sentiment. Rather, the important question is whether opacity is a necessary condition for systematic harm to persist at scale, and the evidence corroborates this.

Why Texas and Why Now

Texas is not merely one state among many experiencing these dynamics. It is, by several measures, the epicenter of the problem and uniquely positioned to lead on the solution.

Scale of exposure. Texas has the largest absolute number of private equity–controlled apartment units in the nation: 440,000 units across nearly 1,500 properties, with 192,431 units in Dallas and 102,052 in Houston alone (Salmonsen 2025; Ash 2026). The state’s massive real estate market, rapid population growth, and historically minimal regulatory environment have made it the country’s most attractive target for leveraged housing acquisitions. Similar consolidation patterns are emerging across Texas’s healthcare, retail, and essential services sectors.

Existing institutional infrastructure. Texas already administers business registrations through the secretary of state, collects franchise taxes through the comptroller’s office (requiring some ownership information for combined reporting groups), and maintains banking oversight through the Texas Department of Banking. A beneficial ownership database would not require the creation of new bureaucratic institutions from scratch. Rather, it would layer disclosure onto existing administrative touchpoints that businesses already interact with annually.

Federal delay can create a state necessity. The Corporate Transparency Act (CTA), passed by Congress in 2021, required companies to report beneficial ownership information to FinCEN. The CTA represented a significant bipartisan achievement, but it will not be implemented to its full domestic capacity in the foreseeable future. In March 2025, the Treasury Department announced it would not enforce penalties for US reporting companies, and FinCEN revised its regulations to apply the CTA only to foreign entities (FinCEN 2025). The CTA remains a dormant federal authority that future administrations could activate, but Texas communities cannot afford to wait for that possibility. Independent state action with definitions and enforcement mechanisms that do not depend on federal political will is now essential.

Existing state frameworks fall short. Texas’s current business registration process collects minimal ownership information. The franchise tax filings administered by the comptroller require some combined-group reporting, but this is designed for tax purposes, not community accountability, and the information is not publicly accessible in a form that enables tenants, journalists, pension fiduciaries, or municipal officials to identify beneficial owners. No existing Texas framework provides the transparency necessary to connect opaque corporate actors to their real-world community impacts.

A proven model to build on. New York’s LLC Transparency Act, signed by Governor Kathy Hochul in March 2024 and taking effect January 1, 2026, provides a tested legislative template. The law requires all LLCs formed or authorized to do business in New York to report beneficial ownership information, including each beneficial owner’s full legal name, date of birth, address, and identification number, to the New York Department of State. The law was motivated by documented community harm during the COVID-19 pandemic, in which tenants could not identify landlords to apply for emergency rental assistance because shell companies obscured ownership. New York’s law includes annual reporting requirements and graduated penalties for noncompliance (Feldman 2026). Critically, however, New York’s database is accessible only to government agencies under certain circumstances and is not publicly available (Skinner and Granwell 2024). Texas can and should go further.

Policy Proposal: A Texas Beneficial Ownership

Texas should establish a beneficial ownership database through legislation administered jointly by the Texas secretary of state, the Texas comptroller, and the Texas Department of Banking. The proposal that follows builds on the New York model in three important respects: It adopts universal front-end disclosure for all LLCs, provides broader access to the resulting information, and creates a private right of action that gives the transparency requirement real enforcement weight.

Universal Disclosure

Every LLC formed in Texas or authorized to do business in Texas should be required to disclose its beneficial owners. This approach follows New York’s model and is preferable to a complex trigger-based system for several reasons. First, sector-specific triggers create compliance complexity that increases costs for all businesses while providing sophisticated actors with road maps for evasion. Second, private equity’s reach extends across virtually every industry; sector-specific triggers will inevitably fail to capture emerging patterns of opaque consolidation. Third, a universal requirement is simpler to administer, comply with, and enforce. The goal is not to burden small businesses but to establish a baseline norm that beneficial ownership of entities operating in Texas is a matter of public record. Small businesses with straightforward ownership structures face minimal burden in disclosing information they already provide to the IRS and their banks.

To address the concern that geographic concentration of ownership poses distinct risks, the database should flag entities that cross defined concentration thresholds. Some working examples would be controlling 20 percent or more of residential units in any census tract, or operating 30 percent or more of healthcare facilities or grocery stores in any county. In specific cases, these triggers should automatically notify relevant municipal officials when these thresholds are crossed. This is an informational overlay on universal disclosure, not a substitute for it.

Broad Public Access

The database should be accessible to the public, not restricted to government agencies. This is the most significant departure from the New York model, and the argument for it follows directly from the problem this policy addresses. If the core harm is that tenants cannot identify their landlord, that pension fiduciaries cannot map cross-vehicle concentration risk, that journalists cannot connect patterns across entities, and that community organizations cannot organize effectively, then, frankly, restricting access to government agencies addresses only a fraction of the problem. A database accessible only to regulators does not help Esmeralda Nolasco identify the people evicting her, nor does it help a retirement financial advisor assess what a client’s pension fund is actually exposed to. It also does not help a local journalist connect a pattern of code violations across nominally separate properties. The strongest version of this proposal provides tiered access. Law enforcement and regulators would receive full, unrestricted access. Institutional fiduciaries, such as pension fund trustees, bank loan officers, and insurance companies, would access the database upon written certification of fiduciary duty. Community banks, which supply a disproportionate share of the nation’s small business and agricultural lending despite holding a small fraction of total industry assets (FDIC 2020), depend on accurate ownership information to assess borrower risk and concentration exposure. Journalists, community organizations, tenant associations, and individual residents would access the database through a public portal, with the ability to query specific entities and review their disclosed ownership structures. Owners would receive notice of queries and retain the ability to challenge disclosure under the privacy exemption process described below.

In no way is this policy proposal, or its public visibility, a niche, novel, or radical idea. The United Kingdom’s Companies House has maintained a publicly accessible beneficial ownership register since 2016. Open Ownership, the leading international authority on beneficial ownership transparency, has documented that public access serves as a force multiplier: It enables civil society, journalists, and market participants to verify and supplement government enforcement in ways that closed registries cannot replicate (Open Ownership 2019).

Private Right of Action

This proposal’s most unique enforcement mechanism is a private right of action for community members harmed by nondisclosure. If an entity fails to disclose its beneficial ownership as required, and a tenant, community organization, pension beneficiary, or other affected party is harmed by that failure, then that party should have standing to bring a civil action for injunctive relief and statutory damages, with fee-shifting provisions that enable plaintiffs’ attorneys to take these cases.

This is critical because government enforcement alone is insufficient. State regulators face resource constraints and political pressures that limit consistent enforcement. A private right of action transforms every affected Texan into a potential enforcer of the disclosure requirement, dramatically increasing the probability that noncompliance is detected and penalized. Without this framework providing not just a public option but a private option for accountability, this database would essentially be a formality. With this framework, the database becomes far more effective in the status quo.

Implementation Through Integration with Existing Systems

Texas should integrate beneficial ownership disclosure with existing business processes to minimize compliance burden while maximizing participation (Hartmann 2024). Specifically, the system would incorporate disclosure into the initial LLC formation process on the Secretary of State’s website, add ownership fields to foreign entity registration, synchronize disclosure updates with annual franchise tax reports that businesses already file with the comptroller, and provide an online portal for ownership updates between annual filings. Existing filing fees would fund database operations.

Professional verification would enable law firms and accountants to certify beneficial ownership information on behalf of their clients, requiring reasonable due diligence and imposing professional liability for knowingly or recklessly false certifications. This addresses data quality while reducing the burden on small businesses that may not have the administrative capacity to navigate the system directly.

Enforcement beyond the private right of action would include graduated civil penalties with a cure period: Entities that fail to disclose would receive notice and a defined window to cure the deficiency before penalties attach. Penalty revenue would be directed to database operations and community legal services. This graduated approach reduces anxiety among small business owners while maintaining accountability for deliberate noncompliance.

Privacy Protections

Privacy concerns are a worthy talking point, but must be carefully distinguished from corporate actors’ preference for anonymity. The overwhelming majority of LLC owners have no privacy interest that outweighs the public’s interest in knowing who controls the businesses operating in their communities. The UK’s experience exemplifies this, as of the millions of registered beneficial owners, approximately 300 exemption applications were received, and roughly 30 were granted (Open Ownership 2019). Privacy claims can be real, but they are rare in practice and even rarer in terms of legitimacy.

Automatic exemptions should apply to individuals subject to active protective orders for domestic violence or stalking, witnesses in ongoing criminal prosecutions facing demonstrated threats, individuals with documented threat assessments from law enforcement, and individuals whose addresses are protected under Texas’s Address Confidentiality Program. These precautions seem out of place, but are recommended as physical safety concerns deserve far more care and attention, including in cases of financial ownership.

Case-by-case exemptions, reviewed by administrative law judges, would be available to individuals who demonstrate specific, credible threats exacerbated by disclosure. Claims based on “competitive harm,” proprietary investment strategies, or general privacy preferences without demonstrated risk of physical harm would not qualify. A private equity firm’s desire to conceal its portfolio is a business interest in avoiding accountability, not a personal privacy interest warranting constitutional protection. This distinction, along with the proposed framework, must account for both possibilities.

This framework also accounts for the constitutional landscape. In Americans for Prosperity Foundation v. Bonta (2021), the Supreme Court applied “exacting scrutiny” to compelled disclosure of nonprofit donors, requiring a substantial relation between the disclosure requirement and a sufficiently important governmental interest, with narrow tailoring. That case concerned compelled disclosure of charitable donors in an expressive-associational context. A beneficial ownership database for commercial entities operating in Texas communities is distinguishable on several grounds: The context is commercial rather than expressive, access is tiered rather than blanket, and the tailoring is built into the exemption structure. Proponents of a Texas database should anticipate this litigation and design the statute to meet the exacting-scrutiny standard from the outset.

Conclusion

Beneficial ownership transparency is not and should not be perceived as an end in itself. Rather, it is a precondition for every other accountability mechanism Texas communities need. Without knowing who controls the LLCs that own their apartment buildings, Texans cannot sue the right defendants for habitability violations. Without knowing who controls the entities that operate their nursing homes and grocery stores, municipal officials cannot apply pressure, plan for closures, or design effective regulatory responses. Moreover, without knowing who controls the entities underlying their alternative-asset allocations, pension fiduciaries cannot map concentration risk or verify counterparty track records as their duties require. Transparency is not a checkbox for general good governance, but a prerequisite for litigation, regulation, enforcement, organizing, and informed market participation across sectors beyond public financial markets.

Implementing a state-level beneficial ownership database would represent a fundamental shift in how information is used and organized in regulatory frameworks, especially given the current bias toward anonymous capital over Texas communities. It would allow tenant organizers to identify ownership patterns. It would enable pension trustees to fulfill their fiduciary duties. It would permit community banks and financial institutions to compete fairly and allocate capital responsibly. Furthermore, it would help municipal officials recognize systemic risks before they metastasize into threats to the community.

Building this database requires assembling a coalition that spans traditional political divides, and that coalition is possible because opacity harms constituencies across the ideological spectrum. Progressive community organizations see transparency as essential to combating displacement. Municipal officials need it to protect their constituents. Small business owners benefit from a level playing field against well-capitalized actors who currently exploit anonymity. Property rights advocates should recognize that opacity undermines the property rights of communities that cannot identify who controls their neighborhoods.

Critics will argue that disclosure will reduce investment in Texas. But if “investment” means leveraged buyouts that load businesses with debt while extracting wealth, apartment acquisitions followed by maintenance cuts and mass evictions, and capital deployed through private credit and CLO structures whose underlying ownership pension fiduciaries cannot trace, then Texas communities are better served by transparency that enables them to distinguish between investment that builds capacity and extraction that degrades it. Requiring beneficial ownership disclosure does not prevent anyone from owning property or earning profits. It requires that those who wield significant power over Texas communities do so openly.

Esmeralda Nolasco and hundreds of thousands of Texas families have been failed time and time again. A beneficial ownership database will not undo the harm already done. But it will ensure that the next time a corporate entity makes decisions that reshape a community, the people affected will at least know whom to hold responsible. As US Supreme Court Justice and transparency advocate Louis Brandeis famously said, “Sunlight is said to be the best of disinfectants.” That is where accountability begins. It begins out in the open for all to bear witness.