Why Form a Wyoming LLC?
You’ve got something other people want to take away from you. And it’s easier to take it away from you than it is for them to go out and earn it themselves.
Maybe you are in the real estate industry, medical industry, business owner or employee. Perhaps you give horseback riding lessons or sell homes or put on magic shows at birthday parties. Maybe you’re a computer technician, serial entrepreneur, or an interior designer. Whatever it is that you have worked hard to obtain, there is some lawyer out there needing to put dinner on his own table, who wants to take it away from you.
The last thing you want to worry about when you are working hard making a living, is keeping your finances secure and protecting your assets. But you must prepare yourself for the future. That’s where forming an LLC comes in. Starting an LLC is an important step in building and maintaining your business. When choosing a state you want the best state for LLC formation, the answer is simple: Wyoming.
What Is an LLC?
The term “LLC” stands for Limited Liability Company. In the book by Nolo, Anthony Mancuso explains that the LLC is a popular alternative to the five more traditional business models. Those models include a sole proprietor, a general partnership, a limited partnership, a C (regular) corporation, and an S corporation.
Unlike the other business structures, the LLC has a particularly unique mix of legal and tax attributes. It is the first business model that allows each individual business owner to achieve two goals quickly and efficiently. First, the owner enjoys “pass-through” tax treatment. Second, he or she gets limited personal liability protection. “Pass-through” tax treatment is something that sole proprietors or the owners of a partnership also enjoy, whereas the limited personal liability protection is something only owners of corporations usually benefit from.
A one-person LLC is perfectly acceptable. While group ownership is also an option, the group should remain relatively small. Large ownership groups can run into difficulty in terms of communication among the owners and reaching a full consensus. An LLC separates the finances within an LLC from the members who own it. So, the owners are not liable for the debts that the company secures, nor the claims that someone makes against it. Members can divide profits and losses however the owners decide. Moreover, you can divide the profits however the members agree to do so. You don’t have to divide profits and losses solely based on how much of the LLC a member owns. Members can also contribute cash, property, services or a promise to deliver any of these in exchange for capital interests in the LLC.
The Wyoming LLC Way
After you’ve weight the pros and cons and decided that forming an LLC is right for you, it seems like the most logical thing to do is to base the LLC in your home state. That’s where you’re conducting your business, right? But unless you live in Wyoming already, you could be missing out on some great benefits by staying at home. You have a lot more options than just your home state – but what makes Wyoming so great?
In an episode of the Real Estate Investing News, as part of the Real Wealth Network, Kathy Fettke discussed the three most popular states for LLCs: Nevada, Delaware, and Wyoming. As the very first state to allow the formation of LLCs in 1977, Wyoming has had a long history with LLCs. Professionals still prize it today for its reputation of high privacy and low costs. In choosing an LLC Wyoming vs Nevada, Wyoming members can enjoy even greater security and anonymity. LLC members and managers don’t have to be disclosed in the articles of organization. Plus, there is also the option of a “lifetime proxy.” A lifetime proxy allows an LLC member to express his or her voice through another person who holds membership interest in the LLC.
Choosing Wyoming to form your LLC is great on your wallet too. In an article for FX Street, Michael Atias compares fees among the most popular states to incorporate in. The comparison finds that with a Wyoming LLC vs Delaware, Wyoming charges only $100 to form an LLC and $50 to renew, while Delaware charges $90 to form and $300 or more to renew every year. Nevada has even worse rates, charging $425 in state fees plus legal fees and registered agent fees to form and $350 plus registered agent fees to renew. That’s an extra $250 or more every year that could stay in your pocket!
Wyoming LLC Asset Protection from Lawsuits
One of the strongest features of the Wyoming LLC is how it protect your assets from lawsuits. First of all, it is one of the only states in the country that protects assets you hold in a single-member LLC. That is, let’s say you hold a bank account or real estate in an LLC in almost any other state. Someone sues you personally. Say, you rear-end someone in their car. The collision injures the other driver. They sue you for much more than your insurance covers. In most states, you would have to have two or more members in that LLC before it protects you from someone seizing the assets in the LLC. With a Wyoming LLC, a one-person LLC protects assets. That is, even if you are the only member the asset protection provisions remain.
Say the lawsuit happens on the other side of the fence. Someone slips and falls on a piece of real estate you hold in a Wyoming LLC. The LLC acts as a barrier, keeping the lawsuit in the company. It can protect your personal assets from seizure. So your house, your car, your bank account are safe from a lawsuit against the company. Only the assets of the company are at risk. Incidentally, we do have other asset protection strategies we can employ for your personal and business assets as well. Just give us a call.
The Wyoming LLC is one of the most effective and cost-effective domestic asset protection tools in the United States. There are far stronger asset protection tools offshore such as the international asset protection trust and the Nevis LLC in the Caribbean. But for US-based asset protection, the Wyoming LLC is one of the strongest.
Running a business doesn’t just take a lot of time and effort – it’s also takes a lot of money. In addition to the daily costs of providing your product or service, you have tax season to consider as well. Being unprepared or unequipped to handle tax season could get you and your company into trouble. You should be able to keep as much of the money you earn as possible, and that’s where the benefits of Wyoming LLC tax can help.
In an article for NOLO, David M. Steingold describes the LLC annual filing requirements. All LLCs – Wyoming included – require a license tax, but not all LLCs get the state tax benefits that Wyoming does. Wyoming is one of the few states that has neither a personal income nor a corporation income tax. In other words, that means that come tax season, absolutely no state income taxes are due. Zero. Zilch.
Because there is no personal income tax, LLCs formed in Wyoming usually don’t have to pay any state taxes on the income their LLC earns. The only tax that Wyoming LLCs are subject to is that annual license tax, which is the lowest rate you’ll find in the country. The fee is either $50 or a small percentage of the value of your LLCs assets in Wyoming.
All that means that you’ll have a lot left in your account at the end of the year – money that can go toward running and growing your business.
The Best Choice for Selling Real Estate
If real estate is your business, choosing the right state to incorporate your company within is an important consideration. The Real Estate Asset Protection Blog compares the states of Wyoming, Delaware, and Nevada for incorporating.
If you’re planning to flip properties in any state, choosing a Wyoming LLC for real estate might be your best choice. If a business has regular, continuous contact with a state, it must register to conduct that business with the state in which the business is occurring. This would be the case for rental properties, for example. However, flipping properties is a single occurrence. You can buy the property in your Wyoming LLC, flip it, and then dissolve the LLC. This wouldn’t be the best choice if you plan on flipping multiple additional properties though, as that could count as continuing activity.
If you’ve already incorporated in another state, it’s not too late to switch. With Wyoming law, there is a continuance process where the state creates a legal fiction that the LLC has always been maintained in Wyoming. The original incorporation date remains intact through that process, which allows you to continue to enjoy the benefits of an establishment with a long history. Wyoming also doesn’t require a general business license and protects the anonymity of its LLC owners.
The Rules to Follow
Once you’ve made the decision that incorporating in Wyoming in the right move for you, you want to make sure it’s done right. Justia US Law lays out the entire verbiage of the Wyoming Limited Liability Company Act, which is quite the extensive read. Since you probably don’t have time to read through the whole thing – you have a business to run, remember? – we will help you to understand some of the basics of Wyoming LLC laws.
An LLC is an entity that is separate from its members, which is where it provides protection for members. One or more persons can form it. It can operate for any lawful purpose. One can use the business for profit or use it as a non-profit. It has a perpetual duration. This means that it doesn’t have an expiration date if renewals are kept up to date. The name registered for the LLC is reserved for exclusive use by that LLC and its rights are thus protected.
The articles of organization detail the initial statements required to form the LLC. This should be should be paired with written consent to appointment by the registered agent. The LLC is considered formed when the articles of organization become effective, unless a delayed date is set. An operating agreement is required to help guide business dealings within the LLC, and the agreement is protected by the Wyoming Limited Liability Company Act.
Taking the Next Step
The world needs what you have, but you don’t have to be alone in your business journey. If you want to be able to provide your product or service for years to come, talk to one of our financial advisors today. You can get your Wyoming LLC set up today so that you can start enjoying the benefits of it tomorrow. With our help, you’ll be protected and financially prepared for whatever comes your way.
Trust our experienced consultants to ensure that you’re making the right decision for your business. Then, you can focus on what’s really important – the difference you’re making in the world.