Several decisions are involved when starting a business and forming a limited liability company (LLC), one of which is location. Some states, like Wyoming, have more LLC-friendly laws in place.
But Is Wyoming the best choice for you and your business? This handy guide details the benefits of forming an LLC in Wyoming, and the relevant concerns, to help you make an informed decision.
Wyoming LLC Benefits
Wyoming is among the best states to form an LLC. It has no state income or corporate tax and no franchise taxes.
In addition, forming an LLC in Wyoming is simple, and no operating agreement is required.
Wyoming is among the few states that recognize nonprofit LLCs and Series LLCs. A Series LLC allows for separating members’ interests, assets, and operations into independent series. Each series is its entity and can have its record-keeping and finances.
Wyoming also offers more liability protection for the LLC and its members. Creditors in Wyoming cannot seize LLC assets or an LLC member’s ownership interest. Wyoming laws also make it more difficult for creditors to take members’ assets in cases where personal liability protection is threatened.
Wyoming laws also provide limited fiduciary duties for LLC members. Finally, LLC formation documents do not require the names of members or managers and offer added privacy.
But Is It Best to Form Your LLC in Wyoming?
However, unless you’re planning to relocate to Wyoming, forming your LLC may not be advantageous because of the foreign LLC rule. A foreign LLC is an LLC doing business in a state other than the one originally registered.
States have different definitions for doing business in the state; review the secretary of state’s guidelines. Generally, you’re considered to be doing business in the state if:
- You have a physical presence of any kind in that state, including owning property in your business name
- You have employees in that state
- You regularly meet with clients, managers, investors, or business partners in that state.
- You’re licensed to do business in that state.
If you do business in your home state but register your LLC in Wyoming, you’ll also need to register as a foreign LLC in your home state. This means you’ll have to do twice the paperwork and abide by all regulations and tax laws in both states.
If you form an LLC in Wyoming, for instance, yet mainly do business in Florida, you’ll have to register as a foreign LLC in Florida and abide by both states’ laws and tax regulations.
Wyoming has favorable laws for LLCs, but forming an LLC in Wyoming may not be your best option unless you’re planning to relocate. Again, your tax advisor can help you weigh the pros and cons to make the right decision for your business.
Getting your business off on the right foot is a crucial step on the road to entrepreneurial success!