Learn more about the difference between Wyoming and Delaware LLCs.
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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.
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.
Here are a few pros of starting an LLC in Wyoming.
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.
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.
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.
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.
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.
If you plan to start an LLC in Wyoming, you’ll also have to weigh the cons.
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.
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.
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.
As with a Wyoming LLC, let’s take a look at Delaware LLC pros and cons.
Here are a few pros of starting an LLC in Delaware.
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.
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.
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.
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.
Here are some cons to consider before starting your Delaware LLC.
Your Delaware LLC will be required by the state to have a business license. This will incur associated fees.
Delaware requires all LLCs to draft an Operating Agreement. This can result in lengthy paperwork.
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 are an important factor for entrepreneurs, and deciding which state’s LLC taxes are more appealing is something to consider:
We encourage you to speak with a licensed tax professional for more information about the taxes concerning LLCs in these two states.
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:
Whether you plan to start an LLC in Wyoming or Delaware, we’re here to help. We offer many business formation services for all 50 states and Washington, D.C. We can also help you grow your business. Let’s get started today!
Disclaimer: The content on this page is for informational purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.