South Dakota vs Wyoming LLC: Which State is Better to Start Business in 2022?

9 Min Read
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Last updated September 12, 2022
Written by Dmytro Kondratiev
Editor, lawyer
Disclosure: We earn a commission from some partner links. Commissions do not affect our editors' opinions or evaluations.
South Dakota LLC vs Wyoming LLC

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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South Dakota vs Wyoming LLC Formation: What’s in Common?

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: 

  • Choose a unique business name. The states themselves do not have specific requirements for business name search and selection. Thus, as a business owner, you must consider the general laws of the chosen state and country; 
  • Appoint a resident agent. You can’t legally establish your LLC without appointing an RA who will receive legal or tax documents and receive/forward important notifications from the state; 
  • Fill out Articles of Organization. The content of this important formal legal document is almost identical for every state. This is where you will need to specify basic information about your LLC (the name, principal address, registered agent data, management type, managing persons, signatures, etc.).

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.

Wyoming vs South Dakota LLC: What Are the Differences?

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: 

  • Wyoming: no later than the 1st of the LLC’s anniversary month;
  • South Dakota: by the 1st day of the 2nd month of the anniversary year.

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.

South Dakota LLC Formation: Pros and Cons

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.

AdvantagesDisadvantages
Personal protection from business loans/creditorsCost of registration
Low or no tax ratesShortage of staff
PrivacyDeveloped financial programs

South Dakota LLC Advantages:

  • Personal protection. By forming a limited liability company, the business owner is assured that personal money/property is protected from creditors. The protection also works in reverse, your personal creditors will not be able to collect debts from the business;
  • Taxes. Forget about income tax, corporate income tax, and inheritance tax – in South Dakota, they simply don’t exist. However, you will still have to pay sales tax if you sell physical goods and certain types of services. If your firm qualifies, as a business owner, you will have to pay a flat rate of 4.5%. Federal self-employment taxes of 15.3% are also mandatory (you can pay less if you choose to be treated as an S-corporation). Lastly, depending on your LLC profits, you must also pay federal income tax;
  • Privacy. A great opportunity for those who choose to form South Dakota or Wyoming LLC – both states offer incredible privacy levels. When registering your LLC in SD, you may choose to remain anonymous and indicate the contact details of your LLC organizer;
  • Developed financial programs. This aspect helps businesses become sustainable, resulting in the state being ranked number one in small business survival. Thus, South Dakota offers grant programs, reinvestment payments, programs targeting certain business industries with high returns, and more. 

South Dakota LLC Disadvantages:

  • Registration fees. As mentioned earlier, when comparing South Dakota LLC vs Wyoming in terms of registration fee prices, SD is losing out to WY in that the former state has higher fees to set up a legal entity. While the cost to start a domestic LLC is not much different between the two states, you will have to pay much more if you want to form a foreign limited liability company in South Dakota;
  • Shortage of staff. The state cannot boast of a large population, although every year there’s an increase. Due to this fact, there’s a noticeable shortage of personnel in the state. However, is it really a big problem these days? After all, more and more employees work remotely, which means businesses can recruit outside of South Dakota.

Wyoming LLC Forming: Pros and Cons

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.

AdvantagesDisadvantages
Legal protectionConflicting law regarding foreign LLCs
Privacy
Low registration and annual fees

Wyoming LLC Advantages:

  • Legal protection. WY LLC officers, managers, and owners are protected from personal liability to the same extent. However, this protection does not apply if fraud is discovered; 
  • Privacy. It should be noted that in the battle of Wyoming LLC vs South Dakota LLC, both states are actually “in the same boat” – when registering a new company, as the owner of the LLC, you can indicate the name(s) and address(es) of your organizer(s) instead of your contact information. Although, you will still have to provide the latter to your RA, which reduces the power of this advantage;
  • Low fees. Each LLC is obligated to pay only a single state sales tax (if required by law). Consequently, you will not have to pay income and corporate income tax. The 15.3% federal self-employment tax and the employee and employer tax remain mandatory.

Wyoming LLC Disadvantages:

  • Law inconsistency. Perhaps, this is something to consider when talking about Wyoming LLC for foreign companies. While WY state laws work well for domestic firms, things are ambiguous for foreign entities; 
  • Low population. The state of affairs makes it hard for business owners to find qualified experts to join the staff.

South Dakota LLC vs Wyoming LLC: Taxes and 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.

CategorySouth DakotaWyoming
Registration fee$150 (online) $165 (by mail);
$750 and $765 for foreign companies, respectively.
$100 (by mail or by fax) 
$102 (online);
$150 (foreign LLCs).
Expedited serviceYesNo (at the moment of writing this review)
Annual report$50 (online) and $65 (by mail)62$ (online) and $60 (by mail)
Property taxNoNo
Corporate income taxNoNo
Income taxNoNo
Tax on self-employment15,3%15,3%
Sales tax4,5%4-6% (depending on the region)
Franchise taxNoNo

Conclusion

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.

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