Wyoming vs. Delaware LLC

Some states have more favorable LLC and business laws than others, so in certain circumstances, it may be beneficial to form your LLC in one of those states. Wyoming and Delaware, for instance, have attractive LLC laws, making them a top choice for many entrepreneurs.

But forming an LLC in a state that’s not your home state is not always the best move. Read on to learn about the benefits of Wyoming and Delaware and when these states might not be a good choice.

Wyoming

Wyoming is among the best states to form an LLC. It has no state income or corporate tax and no franchise taxes. Forming an LLC in Wyoming is simple, and no operating agreement is required.  

Wyoming also recognizes nonprofit and series LLCs, giving business owners more options. A series LLC allows for separating members’ interests, assets, and operations. Each series is its entity and can have its record-keeping and finances. 

Wyoming also offers more liability and limited fiduciary duties for LLC members.

Delaware

Delaware has favorable laws for LLCs as well. For example, Delaware does not tax out-of-state income; if you do business in other states, that revenue will not face any Delaware state tax. In addition, the fee to form your LLC is only $90, and franchise taxes are low. 

Delaware also has the Chancery Court system, which allows businesses to settle disputes quickly. In addition, Delaware has the highest liability protection for members, reduced fiduciary duties, and the most favorable business laws in the US.

Comparison of Wyoming and Delaware

Here is a comparison of the highlights for both states.

Filing fees:

• Wyoming – $100
• Delaware – $90

State personal income tax:

• Wyoming – No
• Delaware – Yes

State corporate income tax:

• Wyoming – No
• Delaware – No

Franchise tax:

• Wyoming – No
• Delaware – Yes

Annual fee/tax:

• Wyoming – $60 minimum
• Delaware – $300 minimum

But Is One of Those States Best for Your LLC?

Unless you’re planning to relocate to one of these states, forming your LLC in one of these states may not be advantageous, mainly 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.

Remember that if you do business in your home state but register your LLC in another state, 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 Delaware, for instance, and do business in Florida, you’ll have to register as a foreign LLC in Florida and abide by both states’ laws and tax regulations.  

Considering all this, the wisest option is to form your LLC in your home state.

In Closing

Wyoming and Delaware are great states to form an LLC, but better choices may exist. You should check with your attorney and tax advisor to weigh the pros and cons so that you make the best choice for your business. 

Forming your LLC, and choosing the state in which it’s based, are crucial steps in moving your business toward a successful future.