Pros and Cons of Forming an LLC in Wyoming
An LLC, or a Limited Liability Company, is a business structure used in the United States for running a business. Compared to an unregistered business such as a sole proprietorship, registering a business as an LLC can have some benefits enjoyed by corporations. However, regulations surrounding LLCs are highly dependent on the state and things can be significantly different from one state to another. Looking at the different factors involved, there are certain pros and cons associated with forming an LLC in Wyoming.
Wyoming is a state that gives importance to business and encourages people to establish their LLCs in the state. The state has a relatively simple and straightforward registration process and a very competitive annual fee. The state is also considered to be among the best when it comes to foreign operations for people based out of state. Wyoming is also very appealing to those who want privacy in their business. However, that veil of privacy can be dropped at any time and foreign operations do not have asset protection as comprehensive as a locally operated LLC.
Advantages of Forming an LLC in Wyoming
Government processes are typically considered to be bureaucratic, tedious, and long. Thus, the thought of registering a business with the state would not seem like an easy task. However, the state of Wyoming makes it easy for new business owners to form an LLC in the state. The process of forming an LLC and registration is now even easier as it can be done entirely online.
To keep LLCs compliant and in good standing with the state, they are usually required to pay annual fees. The demand and the schedule depend on the state – some states require annual fees every year while some require them every two years. These fees are not dependent on the profits of the LLC which means that LLCs are required to pay these fees regardless of activity as long as they are operational.
Different states require different annual fees, and they can be quite competitive. These fees can vary so much that they can become a factor to consider when deciding which state to establish an LLC in. LLCs in Alaska have annual fees of $100. In contrast, annual fees for LLCs in California can be at least $800. In this regard, Wyoming can be quite appealing to business owners as the annual fees for LLCs in the state are only $50.
By nature, LLCs are typically established, operated, and regulated at the state level. This is the reason why the office of the secretary of state oversees LLCs. However, there are ways to operate LLCs established in a state that is different from where the people managing are based. In fact, there are some states that make it even easier for these foreign LLCs to operate.
Wyoming is one state that is highly appealing for foreign operations for a few reasons. For one, Wyoming makes it easy for individuals to operate in the state even though they are based in another state. All they need to apply for is a certificate of authority of an out-of-state LLC.
Second, Wyoming can even accept international citizens to form an LLC in the state. This means that Wyoming would accept an LLC run by people who are not even US citizens. That LLC would not even require a US mailing address as long as the registered agent and the registered office are in the state and available during normal work hours.
People would opt to form an LLC to gain the benefits of a business structure that is registered with the state. These benefits include limited liability protection for the members (owners) of the LLC which means that debt and other financial burdens that the LLC might be obligated to would not risk the personal assets of the members such as cars, property, and bank accounts.
Another benefit LLC owners have is pass-through taxation, a taxation scheme where the taxes generated by the LLC passes through on to their own personal tax. This means the owners of the LLC would not have to pay tax twice. In contrast, the owners of a corporation would have to pay the taxes of the corporation separately from their own.
While the benefits of the LLC are highly sought after, some people feel that one major disadvantage with having a registered business is that they would be compromising their privacy and personal information. Some states that require the names of the owners would then have their personal information on public record. Fortunately, there are indeed some states that allow the operation of anonymous LLCs.
Anonymous LLCs are LLCs where the ownership information is not made publicly available by the state where the LLC is registered. In this setup, the state may know who the owners of the LLC are, but they keep the information confidential. While this may be acceptable for some, others would not consider this to be truly anonymous.
True anonymity should be when even the state does not know who the owners or managers of the LLC are; This is the case for Wyoming. The only names that the state are concerned with are the organizer and the registered agent as they serve as the points of contact between the state and the LLC.
Disadvantages of Forming an LLC in Wyoming
As mentioned above, privacy is an important factor for many business owners and many of them find Wyoming to be an ideal state for their LLC because the state does not require a list of the owners and managers of the LLC. The only individual or entity that would require a complete list of names and personal information of the people involved with the LLC is the registered agent.
However, some cite that Wyoming has incomplete anonymity because of new statutes passed that allow the state to demand the list of names and personal information of the owners and managers of the LLC from the registered agent.
Asset Protection for Foreign Operations
LLCs by nature have a degree of limited liability protection for the members. This is one of the main reasons why people are driven to form an LLC for their business in the first place. Wyoming may not have significantly different policies involved when it comes to asset protection, but things can get complicated when it comes to foreign operations.
Unfortunately, people who are running an LLC in Wyoming from a different state might run into conflicting laws. Thus, anyone running a Wyoming LLC out of state could possibly lose the asset protection laws that are present in Wyoming.