This post is part one of a series on dark donations from LLCs and their undisclosed or beneficial owners, and the state laws that permit this problematic practice.

As the 2014 midterm elections approach, watching out for anonymous political donations via LLCs — as well as pushing for more transparent corporate registries among the states, complete with the names of members, managers, and beneficial owners of entities like LLCs — will only become more critical. LLCs are already playing an increasingly large role in political donations. Just this March, the conservative super PAC American Crossroads received donations up to $100,000 from LLCs with undisclosed owners. Following accusations of the IRS scrutinizing conservative social welfare groups and nonprofits, conservative political actors have also claimed that LLCs are a convenient alternative for political action and spending.

The case of W Spann LLC in 2012 provides a useful illustration of how this method of anonymous giving is enabled through lax disclosure requirements. Like over 900,000 other companies before it, W Spann LLC formed in Delaware. And as for many of those Delaware companies before, founding members and managers need not be disclosed. Unlike a usual company, however, W Spann existed for a mere 4 months before dissolving in July of 2012, and performed no business operations. Its only activity? A $1 million donation to the Restore Our Future PAC, a pro-Romney super PAC active in that year’s presidential election. Shielded by Delaware’s LLC registration laws that call for little information or disclosure, the owners of the LLC could perform questionable activities — including anonymous political donations — with relative impunity.

What’s in the Acronym?

LLCs, or limited liability companies, are distinguished by their direct ownership and partner structure. Those who found an LLC may fully participate in governing and managing the entity. In contrast to corporations, an LLC is not required to have a corporate board comprised of a CEO and other C-level executives, and LLCs don’t necessarily have to be organized for profit. With direct founder ownership and fewer requirements for corporate structures, LLCs become efficient and useful vectors for concealed political donations.

LLC Disclosure: From Bad to Worse

Glaring information holes in LLC registration have not gone unnoticed. Previously, state laws on the incorporation of limited liability companies (LLCs) have faced criticism from the Treasury’s Financial Crimes Enforcement Network (FinCEN) for their lack of manager and member disclosure. A 2006 report on LLC shell companies and financial crime implicated LLCs — and their lax registration policies — in a spectrum of illicit activities, from credit card bust outs, purchasing fraud, and fraudulent loans to money laundering and terrorist financing. But LLC involvement with dark money in elections remains an underexplored issue. As caps on donations to super PACs, and now, candidates, change the campaign finance landscape, shell corporations — and especially LLCs — have more potential than ever to cloud the sources of massive political donations. The Center for Responsive Politics found that the deregulation of campaign donation limits corresponded with a massive uptick in donations from undisclosed donors.

Despite FinCEN’s concerns, the current state of corporate transparency in the U.S. remains alarmingly opaque. In fact, LLC disclosure has worsened among the most transparent states identified in FinCEN’s 2006 report. Alabama, Alaska, Arizona, and Kansas were once standouts for their required disclosure of LLC member and manager names. Of these four states eight years later, Alabama and Arizona are the only ones that continue to ask for a LLC’s member and manager names in registration forms.

America’s problematically lax corporate transparency is especially prominent when compared to that of other countries. On a global stage, the US ranks 26th in corporate transparency, according to a recently released OpenCorporates ranking of international corporate registries. With a score of 28/100, the U.S. lies behind China and before Armenia in the rankings. The U.S. especially pales in comparison to the U.K., which boasts a rating of 90/100 following its Open Government Plan initiative for a registry of beneficial ownership.

It’s time that dark donations from LLCs face additional scrutiny, as well as the states whose laws call for little corporate disclosure and permit this clouding of campaign finance. Stay tuned for a look into the best and worst LLC and beneficial ownership transparency laws among states, revealing deficiencies in some states and the other standards they could strive to meet.