Both South Dakota and Wyoming are similar to each other in certain ways, and both of them show excellent results in terms of tax rates for limited liability companies. However, if you dig a little deeper into the subject of Wyoming LLC vs South Dakota LLC, you will see a slightly different picture for both local and foreign companies.
And to leave you in no doubt as to which state to choose for new business formation or expansion, we suggest you read this review all the way to the end to understand which state will be the most beneficial for your business.
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The first thing that catches the eye is that both states compete with each other by offering various loan programs and incentives to help entrepreneurs launch and grow their projects. For example, SD offers low-interest loans through the REDI Fund to new companies that start their business operations in or relocate to the state, while WY offers various grants and loans.
The registration process for LLCs in South Dakota is also similar to the one in Wyoming and includes the following steps:
Once registration is complete and you have your Articles of Organization approved by the Secretary of State, as a business owner of South Dakota or Wyoming LLC, you are strongly advised to prepare an Operating Agreement (OA) and get an EIN for your company.
Similarities can also be found in the favorable tax climate. For example, in SD, as in WY, you don't have to pay income tax. However, there is a low sales tax. By the way, in 2022, both South Dakota and Wyoming rank incredibly high in terms of tax climate.
In addition, the two states share the advantage of privacy. For example, as a business owner, you don't have to indicate your name on the Articles of Organization. Instead, the incorporator(s) and an authorized officer will indicate their own.
The difference between the two states is primarily seen in the registration fees. In WY, the overall LLC formation process appears to be cheaper - the state filing fee is $100, but in SD, it's $150.
In addition, in Wyoming, you will be virtually charged the same fee for all types of filings (by mail, by fax, or online), only that the online option will cost you $2 more. In its turn, if you decide to open a South Dakota LLC, you will need to pay $165 if you decide to apply by mail. Thus, as you can see, in this South Dakota vs Wyoming "battle of registration fees," the latter state wins.
The price range also differs in the filing of the annual report. In SD, if you file through the Secretary of State's website, it will cost you $50; applications by mail cost $65. In WY, the filing procedure costs $60 + $2 for online processing.
Annual report filing deadlines are as follows:
As for foreign LLCs, the pricing policy of the two states is a different story. Thus, SD offers foreign entrepreneurs to register an LLC for $750 online or for $765 by mail, whereas in WY, the cost is only $50 more compared to domestic LLCs ($150).
Next, let's take a closer look at the most prominent pros and cons of these two states for LLCs.
The state's growing economy is causing startups to take notice and encourages experienced entrepreneurs to form LLC in South Dakota. Still, there are certain downsides that make the state not so appealing for everyone.
|Personal protection from business loans/creditors||Cost of registration|
|Low or no tax rates||Shortage of staff|
|Privacy||Developed financial programs|
Before we get to Wyoming's strengths and weaknesses, let's note that WY was the first state to enact LLC legislation. The goal was to raise capital and, therefore, it created the statute specifically for a Texas oil company (W.S. 1977 § 17-15-101 et seq., Laws 1977, ch. 158 § 1). Therefore, Wyoming takes first place in this regard.
Now let's see why you might want to choose/refuse to choose this state.
|Legal protection||Conflicting law regarding foreign LLCs|
|Low registration and annual fees|
Now let's compare the fees and taxes of both states to see who wins in the LLC South Dakota vs Wyoming battle.
Check out the table below.
|Registration fee||$150 (online) $165 (by mail);|
$750 and $765 for foreign companies, respectively.
|$100 (by mail or by fax) |
$150 (foreign LLCs).
|Expedited service||Yes||No (at the moment of writing this review)|
|Annual report||$50 (online) and $65 (by mail)||62$ (online) and $60 (by mail)|
|Corporate income tax||No||No|
|Tax on self-employment||15,3%||15,3%|
|Sales tax||4,5%||4-6% (depending on the region)|
As you can see, it's quite difficult to say who wins the race. Each region has its own characteristics, advantages, and disadvantages. However, they are quite similar, which basically makes both states a great option for opening a limited liability company.
When looking at Wyoming or South Dakota LLC registration fees, then WY is definitely the winner, as its registration fees are much lower for both domestic and foreign LLCs. However, there are nuances in legal protection, when it comes to foreign companies. Namely, legal protection laws do not work correctly for every company. Therefore, it's highly recommended to still consider the prospect of forming an LLC in your home state, unless you are expanding your business.