When you think of Wyoming, you probably think of incredible landscapes of unspoiled natural beauty with a few buffalo wandering about. And while that’s not far off from reality, Wyoming is also a great state to establish an LLC. This article will describe the benefits of a Wyoming LLC.
6 Benefits of a Wyoming LLC
- Strong Asset Protection Laws
- Low Cost
- No State Income Tax
- No Citizenship Requirements
If you have any kind of business assets generating income you’re at a higher risk of a lawsuit. Sometimes there’s a valid reason for these lawsuits, perhaps a tenant perceives negligence on the part of the landlord. But other times they can be frivolous ventures from unrelated parties. They were able to look your assets up in public records and bring litigation against you.
You are probably familiar with the concept of an LLC or limited liability company. This is a type of business entity you can form in most states. It legally separates your personal assets (primary residence, checking account, retirement portfolio) from your business enterprises and any of its assets (like rental properties). In the event of a lawsuit where a plaintiff sues for real or perceived damages, an LLC may protect you. An LLC obscures your identity from the get go—discouraging a plaintiff’s attorney from pursuing a settlement.
Contrary to popular belief, you do not need to form your business entity in the same state where your business resides. There are exceptions to this rule—particularly when the business you practice involves rendering professional services that require accreditation. If your business manages some type of asset, like real estate, you can form an LLC in a different state.
Many investors do this to enjoy lower tax rates; creating corporations in states with no little to no income tax. In this case, however, we want to specifically highlight the advantages of creating an LLC in Wyoming.
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6 Benefits of a Wyoming LLC
Wyoming is one of the most advantageous states to form an LLC. Here are six reasons why:
1. Strong Asset Protection Laws
Wyoming has some of the tightest requirements of any state for lenders seeking repayment of a defaulted loan from LLC members. They cannot target you for the defaulted loans of other LLC members. Nor can they seize or foreclose on a Wyoming LLC asset.
They do, however, have recourse to a charging order whereby all profit-related distributions a defaulting member is set to receive will need to be paid to the creditor. There are also instances of piercing the corporate veil. This is when a creditor can convince the court the LLC is nothing more than a paper screen meant to obfuscate unethical business practices. This can happen in instances where the State’s formalities required of a business are not observed. Items such as filing the proper annual paperwork or keeping business and personal assets separate are examples.
Another related benefit is that Wyoming has lifetime proxy laws. This allows you to nominate another individual or party to be a proxy. This proxy will hold your assets while you retain control. In most states, proxies have to be renewed every six to seven years, but that’s not the case in Wyoming.
Another benefit of a WY LLC is that it provides a great measure of anonymity. This is because, unlike most states, Wyoming does not require the LLC to disclose the identity of its members and managers.
You can use this to your advantage by creating an LLC in Wyoming and using that LLC to create other LLCs or a DBA (“doing business as” arrangement) in different states where you may be holding property, making it extremely difficult for a potential litigant to follow the trail of ownership back to you.
You may be wondering if an LLC can become totally anonymous. Providing there is one owner it is a disregarded entity. This means that profits and losses go onto your personal tax return. In a C corporation or an S corporation, profits are taxed separately. Keep in mind that financial records, bank account, tax returns, and correspondence with the IRS are not public records. Nobody can legally find your assets or your personal information in this way. That said, your anonymity can be excellently maintained by forming a Wyoming LLC.
3. Low Cost
Wyoming’s LLC anonymity benefits are paired with low maintenance costs as well. You will need to have a registered agent, which often costs no more than a few hundred per year.
As for the expenses related to forming and maintaining the LLC itself, Wyoming has some of the lowest fees in the nation—around $50 minimum and only $200 per every million of assets.
Another benefit to forming an LLC in Wyoming is that the Wyoming LLC articles allow a business owner to incorporate with no minimum. This is not the case in every state. In The Cowboy State, however, you can fund your Wyoming Corporation (or in this case, your LLC) with one dollar. This is great news for business owners who don’t have sufficient amounts of capital but want to enjoy the many benefits of forming a business entity in Wyoming.
There are also no additional costs to issue as many shares of the LLC as you’d like, which is good news if you decide you ever want to turn your LLC into a corporation that issues shares.
4. No State Income Tax
Wyoming does not have a personal income tax, nor do they tax businesses at the corporate level. This is great news for you and your Wyoming LLC—even if you will still have to pay federal taxes and property taxes where applicable. Keep in mind that if your business is operating with other LLCs in place or your Wyoming LLC owns property in a different state, there may be local or state taxes that you need to pay.
A few other fun facts about Wyoming and taxation. There is no inventory tax, gross receipts tax, franchise tax, excise tax, or per-capita tax. These are some of the many reasons an increasing number of business owners and investors are choosing Wyoming. When compared to traditional favorites like a Delaware LLC or New Mexico LLC, Wyoming is a clear winner. Wyoming sales and property taxes are among the lowest in the country, making it an attractive place to live.
5. No Citizenship Requirements
You do not need to be a resident of Wyoming or even a citizen of the United States in order to form an LLC in Wyoming and enjoy the business benefits thereof. If you are a U.S. citizen and wondering why that might matter, consider whether or not you will ever have foreign investors, managers, or members involved in your LLC.
On a related note, the opportunity to form a domestic LLC may become more complicated if you are going to own significant assets outside of the United States, such as vacation rental properties. If you don’t want to form a foreign LLC, a Wyoming limited liability company may be of assistance. If this situation applies to you, we highly recommend consulting with an entity formation expert to ensure everything is structured properly.
But while the Wyoming Secretary of State does not care if you ever set foot in Wyoming, it’s a beautiful place to visit. You won’t regret exploring Yellowstone National Park or skiing Jackson Hole Mountain Resort.
6. Increased Flexibility
Another benefit incorporating a limited company in Wyoming is that it can be set up as a series LLC. This type of limited liability co. allows business owners to segregate assets and liabilities into different categories—for instance, you can allow each LLC member to have different assets and liabilities associated with them, or even create a single member LLC with different, separate assets.
This type of arrangement is great for an LLC that owns several different pieces of real estate, especially if those assets are in different states. Wyoming law also allows nonprofits to form an LLC instead of an S corporation, which can make things easier for directors and officers in regards to paperwork and fees.
Wyoming also allows you to accept any form of tangible payment in return for shares of a company, so long as it is considered goods and services of value. This is beneficial if you are wanting to issue shares in exchange for real estate (or even livestock).
How to Form a Wyoming LLC
Wyoming has some of the easiest requirements for filing an LLC. All you need are five simple pieces of information: the LLC name, its mailing address, the street address of its main office, the name of its registered agent, and their address. A registered agent service specializing in entity management can facilitate all this for you in a way that continues to obscure your personal identity. Moreover, you do not need a written LLC operating agreement for a Wyoming LLC, which makes the filing process easier.
For small business owners, there is an additional type of LLC that can be formed called the Wyoming Close LLC. This does have some key differences, one of which is being limited to 35 members, but the governance requirements are even more simplified. The reason they are called “closed” LLCs is that members have the first right of refusal to assets or membership interests in fellow members who leave the LLC or pass away. For this reason, a closed LLC or Wyoming Close LLC is a great vehicle for a family business.
Wyoming is an Excellent Place for LLC Incorporation
You’ve probably heard of businesses and investors incorporated in Delaware or Nevada, but now that you know that forming an LLC in Wyoming is also a smart move, especially if you want to reap the benefits of avoiding income taxation while obscuring your identity in terms of asset ownership.
Additionally, Wyoming makes it very easy to form an LLC, and it’s cost effective to maintain as well. And then of course there is the Wyoming Close LLC, which is especially beneficial for family-owned businesses that you want to pass on to future generations.
Keep in mind that questions about where to incorporate or what to incorporate as (LLC, corporation, partnership) often have tax and regulatory implications far beyond the immediate act of setting up your business. Learn more about the ins and outs of getting yourself set up for success by signing up for our Structure Implementation Workshop.
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