Comparing LLCs in Wyoming and Delaware

If you’re an entrepreneur looking to adopt a limited liability company (LLC) structure to make your idea into a booming business, then you’ll have to do plenty of research. Learning how an LLC works and what types of incentives it comes with should be top priority. 

On the other hand, the state where you plan to start this LLC is also important. If you’ve come down to deciding between Wyoming and Delaware, then you’re in luck. Now, both states are very business friendly, so choosing which you should go with can be tough. In this article, we’ll be going over a comparison of LLCs in Wyoming and Delaware. 

Wyoming LLC Pros and Cons

Starting an LLC in Wyoming can be an exciting thing for any entrepreneur. Like with all major decisions, some things will need to be weighed and considered, like the pros and cons of starting a Wyoming LLC. 

Pros of Starting a Wyoming LLC

Here are a few pros of starting an LLC in Wyoming.

No Operating Agreement Required

In Wyoming, an Operating Agreement isn’t required. This document allows the owner(s) to list how the company will be run. Although one isn’t required, the owner(s) can still draft one. 

Liability Protection

A Wyoming LLC offers a high degree of liability protection, specifically from lawsuits. Operating as an LLC in this state also allows business owners to maintain a high level of privacy with asset protection. 

No State Income Tax

A Wyoming LLC will not have to worry about state income taxes. Wyoming is one of the few states that forgoes collecting this type of tax, making it a great location for business. 

Privacy for Owners

Another great thing about owning a Wyoming LLC is that owners are given a high level of privacy and security. For example, reporting obligations are low, LLCs are not maintained in public records, and members won’t need to be listed. 

Perpetual Life

In Wyoming, LLCs are considered separate legal entities, meaning that they have their own existence and perpetual life. To make things clear, if the owner(s)/manager(s) leave the company or die, the company won’t be dissolved and will continue operating under new management. 

Cons of Starting a Wyoming LLC

If you plan to start an LLC in Wyoming, you’ll also have to weigh the cons. 

Limited Privacy with a Registered Agent

Although earlier we mentioned that LLC members aren’t required to disclose their identity, the state requires members and managers to provide their identification and contact information to a registered agent. The Secretary of State can then request this information from this agent. 

Limited Asset Protection 

Wyoming’s charging order protection laws (which protect owners from legal obligations) do not apply outside of the state. Members that reside outside of Wyoming will have different sets of laws when it comes to protecting their company assets from creditors. 

Additional Costs for Out-of-State Owners

Wyoming LLC owners that live in another state will more than likely incur additional costs. If an owner resides out-of-state, then the LLC will need to be registered in their own state as a foreign LLC. Filing and annual fees will have to be paid for both states. 

Delaware LLC Pros and Cons

As with a Wyoming LLC, let’s take a look at Delaware LLC pros and cons. 

Pros of Starting a Delaware LLC

Here are a few pros of starting an LLC in Delaware. 

Custom Rules and Structure 

The Delaware LLC’s rules and structure can be laid out in its Operating Agreement. This allows the owner(s) to dictate how the LLC will be run. 

Liability Protection

Delaware LLCs also have liability protection, meaning that if the company is sued or is investigated by creditors, the owner’s personal assets will be protected. 

Tax Benefits

LLCs are known as “pass-through” entities, meaning that taxes are passed down to the members, thereby the company doesn’t pay federal or state income taxes. Delaware LLCs are no different and are also granted this benefit. 

Privacy for Owners

A Delaware LLC also grants privacy for owners in that they aren’t required to disclose information to the state. This offers a high level of privacy. 

Cons of Starting a Delaware LLC

Here are some cons to consider before starting your Delaware LLC.

A Business License is Required

Your Delaware LLC will be required by the state to have a business license. This will incur associated fees. 

Operating Agreements are Required

Delaware requires all LLCs to draft an Operating Agreement. This can result in lengthy paperwork.

Potentially Higher Filing Fees

Fees for certain filing requirements, like for Articles of Organization, and reserving a business name are higher in Delaware than in most other states. 

Taxes: Wyoming LLC vs. Delaware LLC

Taxes are an important factor for entrepreneurs, and deciding which state’s LLC taxes are more appealing is something to consider:

• Wyoming doesn’t collect corporate income tax information to share with the IRS, Delaware does. 
• Wyoming has no franchise tax, Delaware does. 

We encourage you to speak with a licensed tax professional for more information about the taxes concerning LLCs in these two states. 

Forming an LLC in Wyoming and Delaware

Both Wyoming and Delaware offer business-friendly climates, but both offer different formation opportunities. For the most part, forming an LLC is the same for both states. We have detailed guides on starting an LLC in Wyoming and starting an LLC in Delaware. 

One thing to know is that the LLC legal entity was started in Wyoming, making it a haven for LLCs. A few other things to know include:

• In Wyoming, in most cases, you’ll only be liable to pay for the LLC’s filing fee and its annual report. 
• Like we mentioned above, Wyoming has no state income tax or franchise tax. 
• Delaware is a more corporation-friendly state due its legal protections for directors and shareholders. However, this doesn’t mean that an LLC won’t find success in this state.