Wyoming LLC Pros and Cons

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Contributor, Benzinga
March 3, 2023

If you're considering incorporating or forming a business in the U.S., registering as a limited liability company (LLC) is an excellent choice. An LLC is a business structure created by state laws. A business owner is referred to as a member, which may include people, corporations or other LLCs. LLC absorbs some of the best elements of sole proprietorship and corporations. A tax benefit is one such element.

As a state creation, rules guiding the formation of an LLC and the inherent benefits differ from state to state. Some states offer more robust benefits or perks and business-friendly laws, making them a favorite choice for businesses looking for a place to call home. Wyoming is one of the excellent destinations for startups or companies looking to incorporate or form an LLC, thanks to its enhanced privacy and low taxes, among other perks. Wyoming (or the equality state) highly supports LLCs, even for non-U.S. citizens or residents.

However, despite its benefits, Wyoming LLCs have certain disadvantages that you must know before choosing Wyoming as your business home. Benzinga spotlights Wyoming LLC formation, providing a constructive overview of the pros and cons and why it may be a great location to incorporate your business. 

Why Start an LLC in Wyoming?

Besides its business-friendly laws and optimal tax benefits, Wyoming's low filing cost and annual fees make it a cost-efficient option for small-to-medium businesses forming an LLC. The state has a robust economy driven by efficient resource development, especially in the energy sector (oil and gas) and tourism. Investors or entrepreneurs can seamlessly incorporate online or offline and tap into the vast opportunities in diverse sectors, including agriculture, transportation, wholesale and retail.

Suppose you're hoping to base your operations within the state. In that case, you'll appreciate Wyoming's outstanding transportation infrastructure and other core benefits of a Wyoming LLC, including enhanced ownership privacy, flexible corporate regulations and formalities and asset protection. Non-U.S. citizens will also benefit from low entry barriers and maintenance costs and access to the U.S. market and financial services.

As the first state to draft the LLC statutes in 1977 (about 18 years before most states), Wyoming LLCs have the most extensive LLC case law history in the U.S. These laws and regulations guiding LLCs are regularly updated to reflect changing realities in business formation, thereby positioning Wyoming LLC among the strongest LLCs in the U.S.  

Pros of Opening an LLC in Wyoming

A Wyoming LLC offers numerous advantages that appeal to potential investors, entrepreneurs or small business owners looking to register their businesses. Here are some of the benefits.

1. Relatively Low Fees

A Wyoming LLC offers the most affordable and competitive fee structure compared to its peers. The $100 (add $2 convenience fee for online filing) incorporation or filing fee is way below what's obtainable in most states. While a Maryland LLC costs a similar amount for in-person filing, online filing costs over $150. In Tennessee, the fees vary depending on the number of members and may range between $300 and $3,000.

The cost of maintaining Wyoming LLC is equally low, requiring only $60 in annual reports license tax. In contrast, the yearly fee is $300 for Maryland and Delaware LLCs and about $800 for California LLCs. The low fee structure makes Wyoming LLC appealing to startups and small businesses. There's also an annual registered agent fee of between $25 to $100.  

2. Zero Taxes

Wyoming is ranked #1 in the 2023 state business tax climate index, which makes sense since businesses pay zero corporate and personal state income tax. Furthermore, no inventory, franchise, occupation or value-added tax exists, meaning companies can save lots of money. However, you might be subject to the 4% sales tax and 1% general tax imposed by counties. You can take advantage of the manufacturing sales tax exemption and exemption on electricity consumption in manufacturing. Keep in mind that you'll still be eligible for federal income tax. 

3. Asset Protection and Enhanced Privacy 

A Wyoming LLC provides business owners with the traditional corporate veil protecting personal assets from creditors. Furthermore, charging order protection that protects business assets from personal creditors is available even for single-member LLCs. Business assets are well-protected from inherent risks, including lawsuits from creditors or attorneys, damage claims and professional liabilities.

The strict privacy laws shielding the identities of owners, members and shareholders from the public further reinforce the protection of assets. Members' personal information cannot be accessed by the state via tax filings since an LLC in Wyoming doesn't pay corporate income tax. Remember, though, that the state will have the name of the registered agent listed as the LLC manager on the Articles of Organization. However, the agent only acts on behalf of the members, who still retain the actual control except deemed otherwise by general members' consensus. 

 4. Flexible Regulatory and Corporate Formalities 

Besides saving you a significant amount of money, a Wyoming LLC also saves you from bureaucratic hurdles. It is one of the most accessible jurisdictions to incorporate and maintain an LLC. Filing can be in-person or entirely online within or outside the U.S. There's zero restriction on non-residents and how they can operate. Bureaucracy is at a minimum, and you don't have to submit operating agreements to the state. Furthermore, Wyoming LLC doesn't require the owner to visit the state annually. 

5. Other Benefits 

Wyoming LLC offers additional benefits to non-citizens, such as access to the U.S. market and financial services, including payment processing platforms like Stripe and low entry barriers to registering a company in a reputable offshore jurisdiction operating under U.S. law and supervised by U.S. institutions. 

Cons of Opening an LLC in Wyoming

Suppose you hope to register a Wyoming LLC due to its benefits. In that case, you also have to consider some of the disadvantages. These include.

1. Dual Filing or Incorporation 

Suppose you register an LLC in Wyoming but live and operate in another state. In that case, you're required by the law to also register the Wyoming LLC in your home state as a foreign LLC. The implication is that you'll incur another filing and annual reporting fees, which may be higher than what you paid in Wyoming, depending on the state. 

You may also have to pay for a registered agent in your home state. In essence, you're servicing two businesses and paying twice. Imagine being a California resident having a Wyoming LLC; that means you'll spend about $860 in tax annually ($800 in California + $60). When you combine that with the registered agent fees and franchise tax (if applicable), the expenses can add up quickly, making it unappealing.

2. Creditors may Seize Assets 

Asset protection law, specifically the charging order protection, is inapplicable outside Wyoming. So if you're a non-resident, you're subject to a different law regarding protecting your assets. Depending on the state, your assets may be seized by creditors. However, this doesn't extend to non-citizens or owners outside the U.S.

3. Limited Privacy in Certain Situations 

While the strict law guiding Wyoming LLCs protects owners, members and the manager's identity, 100% anonymity isn't guaranteed. Members are mandated to provide their personal information to the registered agents, and the Secretary of State can access the information when needed. 

4. Low Population 

Wyoming has the lowest population among the U.S. states, which can be a turn-off for businesses, considering that the population determines the potential market size. Nevertheless, businesses can leverage the internet, especially social media, to conduct business interstate while remaining strictly within the Wyoming border to avoid incurring fines and additional taxes. 

5. Inability to Pay the Annual Fee may Lead to Permanent Closure 

In most states, you can revive your LLC regardless of how long it lays defunct due to failure to pay the annual reporting fees or tax. However, suppose you can't pay the yearly reporting fees for two consecutive years in Wyoming. In that case, you won't be able to reinstate the LLC. It will automatically close without, and you'll have to file a new LLC.

Compare Wyoming LLC

Benzinga compares and offers insights on the stocks of major Wyoming LLC companies, insurance companies, virtual payment platforms and the best exchanges for investing.

Is Owning an LLC in Wyoming Right for You?

Owning a Limited Liability Company (LLC) in Wyoming can be an attractive option for entrepreneurs looking to manage their finances and protect their personal assets. With its low taxes, business-friendly laws, and competitive costs of operation, Wyoming is one of the best states in the nation for LLC owners.

Frequently Asked Questions

Q

What taxes do LLC pay in Wyoming?

A

Wyoming does not have a personal income tax, meaning LLC members generally will not pay any state taxes on income earned from a Wyoming LLC. The only tax due is the annual license tax of $50 or a small percentage of the value of your LLC’s assets located in Wyoming.

Q

Why is Wyoming best for LLC?

A

The top benefits of forming an LLC in Wyoming is that it there is no corporate income tax, anonymous LLCs are allowed, and it has low formation fees.

Q

How much does it cost to maintain a Wyoming LLC?

A

The cost to maintain a Wyoming LLC depends on a variety of factors, including the size of the company and the type of services needed. Generally speaking, an LLC registered in Wyoming costs between $100 and $1,000 per year to maintain. This includes filing fees, annual report fees, franchise tax fees, and other associated costs.

About Chika Uchendu

Chika Uchendu is an investing writer and investment platform analyst passionate about helping people learn more about managing their finances, making informed investment decisions, and navigating the complex landscape of investment platforms to find the best options for their financial goals and needs. He has over 8 years of experience writing compelling articles for various reputable publishers across diverse topics. When he’s not writing content, he’s wrangling and analyzing data to help businesses make informed decisions.