March 9, 2021
Advantages of a Wyoming LLC
Many companies create limited liability corporations (LLCs), C corporations, or other business structures in the state of their principal place of business. Businesses should, however, consider the advantages of creating their business in states which offer unique advantages. One of those states is Wyoming which offers a variety of benefits for creating an LLC in Wyoming.
Wyoming initiated the LLC in 1977 to make oil investments in the state easier. That’s right, while Delaware often gets a lot of love for entity formation, Wyoming created the original and first limited liability company. The limited liability company did and still does allow owners to be taxed like a partnership, which is often a favorable tax status. After Wyoming, many other states followed their lead and began to permit LLCs in their states. However, Wyoming is still often the first choice for many businesses who wish to create an LLC because the laws and business environment are very favorable.
LLCs have the benefit of limiting the owner’s liability. Creditors are generally required to file claims against the company but are not allowed to file claims against the individual owners unless the creditor attempts to pierce the corporate veil. However, unlike corporations, an LLC has a pass-through taxation allowance in which the income from the business can be distributed to the owners who will file the income on their own tax returns – without the need for the LLC to also pay taxes on the LLC profits. This avoids paying a double tax on the income.
Why Do Businesses Choose Wyoming to create their LLC?
Some of the many reasons businesses choose to create an LLC in Wyoming are the following:
Wyoming does not have a state income tax for either individuals or corporations.
Generally, it costs just $100 to file the articles of incorporation for an LLC which is considerably lower than many other states.
Businesses can register their LLC first and then draft their operating agreement later instead of having to prepare their operating agreement before filing the LLC paperwork.
The yearly franchise tax fees are minimal. Smaller companies often just need to file a $50 yearly fee. The rate for larger companies is generally smaller than the rate for other states.
A key advantage is that a Wyoming LLC has strong liability protection through its charging order statute. Through Wyoming’s charging order, creditors generally cannot seize the company assets to satisfy the debt of an individual member. The charging order also prevents creditors generally from compelling the sale of the membership interest and also prohibits creditors from compelling LLC managers
to make a distribution in order to satisfy a member’s debt. In states with a different charging order scheme or lack of one, creditors may be able to seize membership interests or take other actions to satisfy the individual member’s debt that are not helpful to the company.
An LLC in Wyoming keeps the ownership of the LLC anonymous as compared to other states. The identity of the members or managers of an LLC is not kept in a public database. In addition, LLCs in Wyoming can be operated by residents of other countries or states.
Wyoming makes it fairly easy for LLCs from other states to transfer into Wyoming.
There’s no need to visit Wyoming to form the LLC. Everything can be done online.
While there are many benefits to forming an entity in Wyoming, you should still keep jurisdiction and foreign entity registration in mind, among other things. By creating a Wyoming LLC, your business will have personal jurisdiction in Wyoming which means your business can be sued and you can be compelled to come to court in Wyoming.
Another issue to keep in mind is that many states require business entities created in other states to register in the state it is doing business in as a foreign entity. For instance, if you create a Wyoming LLC but operate an ice cream store in California under that Wyoming LLC, California will likely require you to register your Wyoming LLC in California as a foreign entity. Foreign entity registration in California and most other states as well incur a similar process and similar fee to simply creating a California LLC. So if you will be required to register as a foreign entity, it may make sense to simply create your entity in the state you operate your business in.
Starting a new entity is one of the first big steps that many businesses take. Choosing the entity type and where to form the entity comes even before that! Are you confused about what type of entity you should create? Are you not sure where you should file? We can create your entity, take care of all of the filings, and guide you through the whole process, answering your questions along the way. Contact Polymath Legal PC today.