Wyoming is built for business formation. Wyoming offers excellent asset protection benefits and no state taxation. The corporate and LLC laws in Wyoming are business friendly, and company decision makers and stakeholders (i.e. directors, officers, shareholders, managers and/or members) do not have to live or hold meetings in Wyoming.
Wyoming protects even single member LLCs via the charging order procedure, a key asset protection strategy.
The Benefits of a Wyoming LLC
Cost Effective
Wyoming fees are significantly lower than other states. The state renewal fee is only $50 per year, and there are no business license fees or officer registration fees. There are also no state taxes in Wyoming.
The Best Asset Protection
Wyoming LLCs offer owners the best protection from lawsuits issued by creditors and plaintiff attorneys. Unlike other states, Wyoming’s law protects even single member (or owner) LLCs.
Maintain Privacy
The state of Wyoming does not require LLCs to share the names of the managers or members on any state public database. Your privacy is respected in Wyoming.
Can Out-of-State Courts Apply, For Example, California Law to an LLC Created in Wyoming?
The protections you have with your LLC depend on the state you incorporate in. In California, for example, state law allows for a court order to sell an LLC’s assets to benefit the creditor. This results in a judicial dissolution -- sometimes called “the corporate death penalty” -- and the LLC’s termination.
But what if you set up your LLC in a protection-friendly state like Wyoming? All you would need to do is register to do business in California.
Let’s address this question within the context of judicial dissolution. In California, the court orders that the LLC’s assets are sold for the benefit of the judgment creditor. Therefore, the business or investment entity is essentially dissolved. Fortunately, there is a strong argument that the California court does not have that power over a Wyoming LLC. Wyoming law must apply to LLCs formed in Wyoming.
Wyoming LLCs operate under laws that will protect you. We highly recommend setting up your LLC in Wyoming before doing business in the less friendly states.
Further Research
If you and your lawyer ever face this issue, be sure to read an excellent article entitled: “Judicial Dissolution: Are the Courts of the State that Brought You In the Only Courts that Can Take You Out?” by Peter B. Ladig and Kyle Evans Gay (Business Lawyer, Vol. 70, page 1059-1082, Fall, 2015). Their review of over a century of cases indicates that the law of the incorporation state (Wyoming, in our example) must be used and not the law of the forum state (California).
Ladig and Evans state:
“Just as a state regulates the birth of an entity under its own laws without interference or participation of its sister states, so too should judicial dissolution be determined by the laws of the state of birth… For instance, no one would argue that you can go to State A to form an entity pursuant to the laws of State B. How then should State A be able to terminate an entity formed pursuant to the laws of state B?”
The article cites numerous cases for this proposition, including Valone v. Valone ((2010 WL 7373698 (Va. Cir. Court. Jan. 20, 2010)):
“The existence of a corporation cannot be involuntarily dissolved except by the act of a sovereign power by which it was created. Accordingly, the courts of one state do not have the power to dissolve a corporation created by the laws of another state.”
The cases apply to Corporations, LLCs and LPs. Interestingly, it is well settled in Delaware that: “The superior court, and even the state of Delaware itself, cannot forfeit the charter of a foreign Corporation.” (Swift v. State 6 A. 856 (Del. 1886)).
However, the authors also state that a forum state may make orders to leave the entity with no assets. This procedure would be similar to California’s pro-creditor laws, which result in judicial dissolution. To avoid this, you must have a properly formed Wyoming LLC (or Nevada corporation) and be prepared to assert that state’s stronger charging order protections must apply. By forming in Wyoming (or Nevada) and arguing for their ongoing protections, you will prevent the improper dissolution of your entity by an out-of-state court.
Wyoming vs Delaware
Not sure whether to form an LLC in Wyoming or Delaware? Entrepreneurs can make a more informed decision after comparing the advantages and disadvantages of incorporating in Wyoming vs Delaware.
Forming an LLC: Wyoming or Delaware
What to Consider
From a bird’s eye view, both Wyoming and Delaware are business-friendly states. But as you look more closely, each state presents advantages and disadvantages depending on your business needs.
For small business owners, forming an LLC is Wyoming is the natural choice. The filing fee is small and the annual renewal fee is only $50. Additionally, Wyoming LLCs don’t have to pay state income or franchise taxes, which is a major advantage for small business.
Delaware, on the other hand, recently increased various fees that could impact your decision to incorporate there. Learn all about these new fees before you decide.
Ready to Form an LLC in Wyoming?
View our resources for incorporating in Wyoming.