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A limited liability structure is by far the most popular legal framework now favored by aspiring startuppers and experienced entrepreneurs alike. And for a good reason. This structure takes the best of disregarded and incorporated entities and combines it in the most efficient way.
In an LLC, liability protection of corporations is coupled with pass-through taxation of disregarded entities. As a result, an LLC perfectly matches multiple business scenarios and offers the ultimate taxation flexibility to smaller and bigger businesses alike. It can catch up with ambitious growth potential and consistently maintain a privately owned venture.
In the meantime, existing as an independent legal entity, an LLC securely protects its owners from the company's liabilities. Personal assets of the members cannot be used to settle or compensate for any of the company's debts or overdue commitments.
Similar to corporations, LLCs need to be registered with the state, and LLC laws are state-specific. While basic formation procedures are pretty much similar, post-formation regulations, compliance requirements, and taxation charges are different across the states.
Thus, some states prove to create a more favorable business atmosphere and look more attractive to starting a new enterprise. Delaware used to be on the top of the “Best Business State” rankings, yet, now, Wyoming snaps at its heels and pushes it out from the leaders.
Below, we are going to figure out how Delaware performs vs Wyoming and which state is a better option to open your new LLC. Let’s start the Delaware vs Wyoming LLC battle and see who will win.
Wyoming vs Delaware LLC Formation: How They Stack up
Delaware has been already selected by multiple corporations and LLCs for now. Being smaller than many other US states in the area, it abounds in businesses registered in it. Widely popular for its Chancery Court, impressive business privacy regulations, and flexible LLC laws, Delaware is committed to the business.
Recently, though, Wyoming has kept gaining pace and even outcompetes Delaware at the moment. What gives Wyoming an edge over all other states is its unique taxation system ensuring limited tax liabilities for businesses.
By and large, these two states have a lot in common but they are still not the same. Let’s see how they compare by looking into the aspects they share and those where they differ.
Delaware vs Wyoming LLC: Similarities
Wyoming and Delaware have a lot in common in the sphere of basic rules and regulations that are to be taken into account when forming an LLC:
Anonymity: Both states allow LLC owners and corporate stockholders to stay anonymous and don’t require them to reveal their names in organizational documents. It’s a great legal shield for those who have multiple ownerships, don’t want to show up, and prefer to keep a low profile;
Secure asset protection: While an LLC structure ensures default liability protection, Delaware and Wyoming state laws further enhance this safety screen bringing even more peace of mind to the company owners. Both states apply charging order protection that prevents creditors from seizing the members’ and owners’ property to offset the company's debts. Issued by the court, the charging order allows creditors to compensate for their losses at the expense of the distributed business dividends and profits, without involving company assets or personal member funds;
Flexible governance rules: None of the states has any restrictions on holding the company meetings solely inside the formation state. Officers, directors, and shareholders are free to gather in any US state or even abroad if they wish. The meeting location won’t impact the validity and legitimacy of decisions they make;
No minimum capital requirements: Both states have no capital requirements for LLCs and corporations, it’s up to you and your partners to decide on this;
No general business license required: Licensing issues are a flimsy ground for most entrepreneurs. And most states have strict licensing rules requiring a general business license to start and operate an LLC. In Wyoming and Delaware, though you don’t have to get that license and pay for it annually.
Wyoming vs Delaware LLC: Differences
While having many regulatory similarities, Delaware and Wyoming are still different in many aspects that mostly relate to post-registration requirements and day-to-day business operation:
Tax benefits: Tax incentives you’ll get as a small business owner in Wyoming are really hard to beat. The state has no corporate income tax, personal income tax, and franchise tax, not to mention that it boasts by far the lowest sales tax rate across the US. In Delaware, on the other hand, LLCs will be open to all those types of taxes. However, Delaware doesn’t impose a sales tax at all;
Privacy gaps: In contrast to Wyoming, opening an LLC in Delaware, you’ll have to submit an initial list of LLC directors and officers to the Secretary of State thus piercing the initial anonymity screen in a way;
Sharing info with the IRS: Delaware shares data on corporate income taxes collected with the IRS while Wyoming doesn’t do that;
Filing fees: Overall, state fees for Wyoming LLC formation are lower than those in Delaware. Besides, Wyoming provides some crucial services free of charge while Delaware will make you pay for them;
Litigation: Delaware stands out for its famous Chancery Court dedicated to addressing business disputes in a quick and efficient manner. Normally, all cases are handled by expert judges specialized in corporate and business law, without involving juries. There is no such thing in Wyoming;
Annual reporting: While Wyoming calls for the state report to be filed in a year of the company’s operation, Delaware is one of the states that has no annual report requirements. Instead, it has an annual LLC tax to be paid.
Creating an LLC in Delaware vs Wyoming: Pluses and Minuses to Consider
At a glance, both Wyoming and Delaware have a lot of good going for them. Yet, is it really that good? Or are there any tricks and nuances you need to know? Before making a serious decision like starting a new venture, you should be skeptical and closely check all the details that don’t lie on the surface.
Though widely advertised as the most business-friendly states, Delaware and Wyoming still have some downsides. And we are going to reveal them to you against the benefits they offer.
Delaware LLC Pluses and Minuses
First, take a look at the benefits and flaws summarized in a quick table, and then delve deeper and consider what hides behind each point.
Delaware LLC Pluses
Delaware LLC Minuses
Business-friendly and fair LLC laws
Compulsory annual LLC tax
Solid LLC asset protection
Dual registration for foreign filers
Higher formation cost
Advanced legal system
Straightforward LLC formation
Delaware LLC Pros
Business-friendly and fair LLC laws: Delaware's dedication to the business is impressive. There are more companies in the state than people which is easy to explain since the state has by far the fairest and most supportive business laws. DE values the business owners' anonymity and ensures the ultimate privacy for them by not requiring them to disclose their identities to the state. There are no restrictions on the personnel as well. Thus, LLC members, managers, and officers don’t have to be Delaware residents to manage and run a company. Besides, Delaware is one of the states that legally call for LLCs to compile an Operating Agreement. It might seem like a bureaucratic move, however, it shows Delaware respect for the freedom of contract and gives even more responsibility to your LLC. Thus, Operating Agreement provisions are always taken into account by Delaware courts;
Solid LLC asset protection: A Delaware LLC structure will securely protect not only your personal property and funds but also the LLC assets. Should any of your LLC members be a part of a lawsuit, contractors are not entitled to simply seize the LLC assets. There should be a separate charging order that will regulate creditors’ rights in each case;
Tax incentives: Delaware will release you from paying an income tax in the state if you are doing business beyond the state which allows avoiding dual taxation when expanding your activity to other states. More than that, Delaware charges no sales tax and doesn’t levy profits from intangible assets such as trademarks, patents, copyrights, and other intellectual property rights;
Advanced legal system: Not only Delaware laws but also its judicial system is designed to maintain businesses by all means. As stated above, the Delaware Chancery Court is one of the biggest points of attraction for entrepreneurs. A dedicated business court makes litigation on business disputes much easier and more efficient. All cases are settled by experienced judges in the quickest possible manner;
Straighforward LLC formation: Filing requirements in DE are very simple, and forming an LLC will be as easy as one, two, three. You just need to provide minimum company info, with no voting or meeting requirements in force.
Delaware LLC Cons
Compulsory annual LLC tax: While Delaware has no strict requirements on annual reports, it does have an annual tax requirement for LLCs. An annual LLC tax or franchise tax is charged at a flat rate of $300, which is at the higher price end as compared to other states that have a similar requirement in place;
Dual registration for foreign filers: If you want to register an LLC in Delaware but plan to live and run business in another state, get ready to register in your domestic state too and pay dual filing fees as well as incur other additional business-related costs and expenses;
Higher formation cost: Though an LLC filing fee in DE is quite low, the rest of the state fees and compulsory payments will sum up into a considerable amount. Note also that some of those payments will need to be made on a regular basis even after the formation process is over.
Wyoming LLC Pluses and Minuses
Here, again, we’ll split major Wyoming LLC features into attractive and offputting ones and then, describe each of them in more detail.
Wyoming LLC Pros
Wyoming LLC Cons
Excellent tax advantages
High privacy standards
Imperfect asset protection
No strict regulations and formalities
Added costs for non-resident filers
Wyoming LLC Pros
Excellent tax advantages: The tax benefits you’ll enjoy in Wyoming give this state a confident edge over other states. With 0% personal and corporate income tax rates, your LLC will be literally free from paying any levies on profits. Besides, the state has no gross receipt tax, inventory tax, franchise tax, excise tax, and “per-capita” tax in place, thus, allowing you to further minimize the tax burden. Though Wyoming does charge sales and property taxes, the rates are among the lowest in the US and won’t hit your tax budget too much;
High privacy standards: Wyoming LLCs offer the highest degree of privacy to their owners. They don’t have to make their personal data publicly available and can omit their names and addresses from the LLC statute. Following a “lifetime proxy” right valid in the state, you can appoint a third party to represent your share in the equity on a lifetime basis. A registered agent in Wyoming is allowed for that role as well. To further strengthen the anonymity shield, you can even avoid mentioning your registered address by using a mail forwarding address;
No strict regulations and formalities: Wyoming has cut down all unnecessary and restricting formalities to make the LLC formation and maintenance as easy and convenient as possible. Registering an LLC is just about filing the Articles of Organization, with no added documents, lists, or forms required;
Flexible governance: WY has no restrictions on the LLC members, managers, and officers' residence. Likewise, company meetings can be held anywhere outside the state, with all decisions remaining in full force. To add more, a single person could perform different functions inside the company which makes business management much easier and ensures opportunities for better and closer control;
Affordable formation: Wyoming filing fees are quite low, and there are not so many filing requirements you’ll have to pay for on a regular basis. All fees are clear and fixed and won’t add too much to your annual business expenses.
Wyoming LLC Cons
Anonymity chink: In Wyoming, LLC owners don’t have to disclose their names and personal info to the Secretary of State, that’s true. However, since 2015, all LLC member data should be provided to the registered agent. As a result, a state regulator can legally request that info and make it available to anyone he or she deems necessary;
Imperfect asset protection: Creditors' activity in WY is regulated by the charging order law that prevents the unauthorized seizure of LLC and owner assets and ensures controlled collection of any overdues. However, this protection is only effective within the state and is not valid should a dispute involving a non-resident occur that might be adjudicated in another state;
Added costs for non-resident filers: Though Wyoming sets no limits on LLC owner residence, you should know that doing business in Wyoming and living in any other state, most likely than not, you’ll have to pay compulsory registration and maintenance fees in both states, not to mention an increased tax burden.
Delaware LLC vs Wyoming LLC: Taxes and Fees
Needless to say that there are compulsory state fees and charges you’ll have to pay to maintain your business in any US state. In the table below, we’ve outlined the main LLC-related charges in Delaware and Wyoming along with the rates that are usually state-specific.
Fees and Taxes
LLC Filing Fee
$50 for $250K worth of assets
Certificate of Good Standing
Registered Agent change
Sales tax rate
Taking into account privacy and taxation benefits, currently, Wyoming looks like a more welcoming place for LLCs. Meanwhile, Delaware used to create better business conditions for corporations, and this hasn’t changed. The state is widely favored by angel investors and venture capitalists, yet, they more eagerly invest in corporate enterprises.
Delaware might be still a good option if you seek the ultimate privacy as a business owner and if your business involves high litigation potential and permanent risk of court disputes.
At the same time, you’ll be able to reap all the benefits offered by each of the states only if you run your business and live there. For non-residents, there will be quite a few pitfalls to tackle that might be not worth the hype.