A limited liability company (or LLC) is a type of business structure that companies in the US can elect to form themselves in order to benefit from specific advantages. Namely, LLCs are subject to reduced taxes as a result of their identification as a ‘passthrough entity’, and the business owner’s personal assets are protected from being pursued for business debts or legal action as they are demarcated from the business’s assets.
However, not all states have been created equally for the purposes of LLC formation, which has instigated the emergence of a small group of states as ideal for this aim. Out of these, Wyoming is often regarded as the ne plus ultra for LLC formation due to its unparalleled benefits. This article outlines why Wyoming is right for your business to establish itself as an LLC and how you can undertake this task.
Benefits of Wyoming for LLCs
Wyoming is widely considered to be the most desirable location for small businesses to establish themselves as an LLC due to its plethora of benefits. These have been outlined, explored and put into context below.
No Income Taxes
LLCs in Wyoming are not liable for any taxation on their income, which simply translates to greater profit for business owners. This advantage in particular is what separates Wyoming from other states considered favourable for the formation of LLCs, such as Nevada for example. Consider what you paid in income tax in the last year to get an idea of how greatly you could benefit from this.
Lower Start-up Fees
Establishing an LLC in Wyoming saves reduces the start-up costs in two ways. Firstly, since there are fewer formalities associated with business formation in this state than others, LLCs require less paper on an annual basis, and secondly, the filing fees themselves are far more affordable here than in other states.
As an example, Wyoming state fees are over 80% less than its competitor Nevada – another very popular location for small businesses to startup as an LLC. On top of this, Wyoming excludes the “invisible” $125 filing fee that business owners must pay 30 days after forming their business in Nevada.
Asset Protection
Once formed, the LLCs themselves (rather than its owners or members) will become liable for the business’s debts, meaning the personal assets of its owners will be safe from pursuit by creditors of legal action to resolve the company’s debts. In Wyoming, the members and owners of an LLC are afforded great protection from legal action; they are able to do business as an LLC yet maintain their privacy and protect their assets at the same time.
Business Anonymity
Businesses in Wyoming benefit from the highest level of privacy and security across the country. Not only are anonymous companies allowed (since managers and members are not required to be listed as such for as long as the company exists), LLC ownership is not even maintained on public records in Wyoming. Additionally, businesses are only subject to minimal Reporting and Disclosure obligations.
Ability To Raise Capital
Given that LLCs are disconnected legal entities, they are required to have an Employer Identification Number (EIN). This is the business equivalent of a social security number and is what entitles businesses to possess their own credit score and improve it in order to borrow money and raise capital.
Furthermore, incorporating as an LLC gives a business more credibility and encourages investors and banks to be more trusting when deciding whether to lend money or not.
Perpetual Life
Unlike sole proprietorships, which typically terminate when the owner dies, LLCs are able to surpass its owners’ lifetimes as it is a distinct legal entity that exists separate from its owners and has the potential to carry on indefinitely until it is dissolved.
No Ownership Restrictions
There are almost no effective restrictions on who can be an owner of an LLC in Wyoming; owners do not have to be a U.S. citizen (and may in fact live anywhere in the world), can be other LLC’s, and there is no limit on the number of owners an LLC can have here.
How To Form An LLC
Do It Yourself
Select A State
Of course, having read the above advantages of establishing an LLC in Wyoming, this state would be selected. To do so, Wyoming’s state-specific rules and regulations for the establishment of new LLCs must be abided by in order to smoothen this process as much as possible.
Choose A Name
Choosing a name is the first step an owner must take in the formation of their business. It is a good idea to search your business name online to check it is sufficiently unique (i.e. there is no similarly registered business). The name must also meet Wyoming’s state-specific naming requirements.
Choose a Registered Agent
Registered agents are responsible for your business’s legal correspondence, such as legal actions and. It is a common requirement for businesses to indicate their registered agent during their formation; who must either be an individual based in Wyoming (if that is where you are establishing your LLC), or a company that is permitted to operate in Wyoming.
File Articles of Organisation
For an LLC’s registration in Wyoming to be officially completed, its formation documents are required to be filed with Wyoming state’s business division. This step can be completed by oneself or with the help of an LLC formation service for a small fee.
Get an EIN
As explored earlier, an EIN is effectively a social security number for businesses. It is required to hire employees and open a bank account for the business. Refer to the IRS website to get your business an EIN online, by mail or fax.
Hire A Solicitor
Alternatively, you can employ a solicitor to form a Wyoming LLC. You might think this option is costly, but some reputable solicitors can perform this service for as low $275 in total. It is definitely worth a consideration given the professionalism of such companies.
Final Note
On balance, there are numerous advantages to establishing an LLC in Wyoming, including but not limited to: its lack of income taxation, low start-up fees and asset protection. Many of these advantages edge it out as the optimal state for LLC formation given there are a number of states preferred merely because of their low levels of taxation.
While the process for forming an LLC is only five steps in length and relatively straightforward when approached intelligently, it might be difficult for busy business owners to complete it unaided. Thankfully there are many reputable and professional services available both online and in person that can set up an LLC in Wyoming for you.