As the most important business structure in the American economy, it is important to be aware of the general benefits in the company’s owner’s mind that motivate their decision to elect this structure. Put briefly, LLCs do not pay tax on their profits as the income ‘flows through’ the company to its owners, who then pay personal income tax on their earnings. Additionally, the business owner benefits from personal protection for its assets due to the way in which LLCs limit personal liability.
That being said, there are several other major factors that play in the decision to form an LLC. One of the most important is the state in which a company decides to establish its business, as this can directly influence its LLC’s performance. Different states are conducive for the good performance of LLCs for a number of reasons, such as a low level of taxation or a strong workforce. This article compares Wyoming to other top states for LLCs, such as Delaware and Nevada.
Top States For LLCs
Your Home State
There is a huge convenience advantage for business owners to form their LLCs in their home state. Not only because they should already be familiar with the local business laws and regulations, but because the government offices they will have to send off their company’s formation documents to will be within your state already.
It is also worth considering whether your business will have a physical presence, it is easier to operate it in the state where you already live as you may have an insufficient business to establish it in a foreign one. Additionally, registering your LLC in a state you are not present in will incur the additional cost of a registered agent, who is needed to act for your company in the other state.
Delaware is an extremely popular choice for businesses looking to establish themselves as LLC. Not only is it exceedingly friendly towards businesses, but its filing fees and franchise taxes associated with LLC formation are also far lower than most other states, and its taxation does not extend to income that originates from outside the state.
Another key factor is that business cases are typically resolved far quicker here than in other states because Delaware has a separate court specifically for hearing business cases. This leads naturally into the additional benefit of judges handling business cases who are experienced in such matters rather than those that have little to no background in it.
As another popular state for LLCs to establish themselves in, Nevada is definitely another state worth considering for small businesses looking to incorporate themselves. Nevada is particularly attractive to business owners because of the money that can be saved due to its lowered levels of taxation; the state has completely eliminated taxes on business income, inheritances, franchises, and capital gains.
Additionally, running a business is made far simpler in Nevada from the business owner’s perspective since operating agreements and annual company meetings are optional. Nevada is also extremely alluring to those who value their privacy as it is not in an information-sharing agreement with the IRS.
Wyoming is a recent dark horse in the perennial competition between the best states for an LLC to incorporate in; it has rapidly built up a reputation in recent years that arguably challenges the two aforementioned states. It offers similar tax incentives to the other two, as well as the ability for business owners to remain completely anonymous.
Due to ‘lifetime proxy’, business owners can nominate another party to act as a representative for their stocks and shares. It is important for businesses to be aware of the benefits and disadvantages of all these states (as well as the convenience of their own) before making the decision as to where to incorporate.
Why Wyoming Is Superior
Saving on Filing Fees
Businesses revolve around money – it is their lifeline, especially so for SMEs. For most cases, it is generally better for a business to cut down on its costs wherever it can. It is in this regard that Wyoming should be preferential over its competitors. Wyoming allows businesses to save on the costs of incorporation in two ways.
Firstly, companies are required to submit fewer documents on an annual basis, hence saving money on the costs associated with the printing and filing of such official documents. This is coupled with the filing fees being far greater in other states.
For instance, Nevada’s filing fees are nearly 85% more expensive than those in Wyoming, and to add salt to the wound, Nevada also includes an “invisible cost” of $125 business owners are liable to pay within 30 days after incorporating.
The level of privacy offered to businesses in Wyoming is just a cut above that in Nevada; it’s so high that it reaches almost pure anonymity. This would be the case even if companies were only able to benefit from anonymity. Instead, Wyoming does not maintain a public history of LLC ownership and businesses are subject to trivially negligible Reporting and Disclosure obligations.
All of this results in a state that offers the highest level of privacy and anonymity in the country, one that beats out even Nevada and Delaware.
How To Establish Your LLC In Wyoming
Forming an LLC in Wyoming can be broken down into six simple steps: selecting it as the state you wish to incorporate in; choosing a unique name for your LLC; choosing a registered agent; filing an article of organization for your LLC; creating an LLC operating agreement; and getting an Employee Identification Number (EIN).
These are the general steps for forming an LLC in most states. There are slight nuances to these steps that vary on a state-by-state basis and thus require individual research to expound your state’s specific regulations. For example, the naming requirements of each state are normally different, though there are some commonalities present across all.
If these steps do seem overly complicated or time-consuming, which is completely understandable given how busy a business owner is, you can always opt for a professional to handle this on your behalf. Such online services can help you form an LLC in Wyoming with minimal stress or effort on your part.
On balance, there are evident pros and cons for a business to incorporate in any of these states. Delaware, Nevada and Wyoming are all extremely favorable for their low business tax, but beyond that, the individual benefits they each bring to the table will bring differing amounts of value to businesses on an individual basis.