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By choosing a limited liability company as a legal framework for your future venture, you’ve already made the right decision. Yet, many entrepreneurs ask themselves which is the best state to launch an LLC.
While normally, an LLC is to be formed in a domestic state, you are not limited to this option only and can actually pick any state to file your LLC. There is no right answer to the question of which state is the most business-friendly. However, there are a few states that confidently stand out from the crowd by offering more favorable regulatory and tax environments for business. Wyoming and Nevada are among those states.
Wyoming vs Nevada: how do they compare? Where are they similar? How do they differ? What are the pros and cons of Wyoming vs Nevada incorporation? Below, you’ll find detailed responses that will help you decide which state will best match your business needs, plans, and ambitions.
Wyoming vs Nevada LLC Formation: How They Stack Up
Wyoming and Nevada are both very popular among entrepreneurs who seek to optimize their taxes, and business expenses and improve privacy. Recently, more and more startuppers and aspiring businessmen consider these states for launching their projects or moving their already operating businesses to these states to reap the benefits they offer.
Does it matter which state of these two to choose? By and large, they have some things in common, yet, there are a lot of differences too. Let’s consider where they come in touch and where they stand apart.
Wyoming vs Nevada LLC: Similarities
There are several areas and aspects where Wyoming and Nevada are basically similar. Mostly, those are meaningful areas that should be considered when estimating the business atmosphere provided by each of these states.
Privacy Screen: Both states offer a high level of personal privacy to the enterprise owners and shareholders by allowing them to keep their names anonymous. It means LLC members and corporate co-owners can refrain from disclosing their identities when forming LLCs or incorporating. Instead, they can designate a nominee manager who will complete filing procedures and submit annual reports on their behalf;
Excellent Governance Protection: Nevada and Wyoming have no limiting requirements on capital and enable the company owners, directors, and officers to live and hold meetings outside the states;
Corporate Veil Security: By clearly separating company funds, property, and assets from those of their owners, LLC and corporate structures set up a solid liability defense for the business owners keeping their personal assets away from business liabilities. Both Wyoming and Nevada ensure enhanced protection in this sphere and stand on guard of your corporate veil like no other state to prevent it from being pierced;
Favorable Taxes: Finances and tax opportunities are among the most sensitive issues for any business. All entrepreneurs look to optimize charges to minimize the business tax burden in the long run. Wyoming and Nevada truly excel in this concern since neither of these states levy corporate or personal income taxes. Whether you choose your LLC to be taxed as a sole proprietorship or as a corporation, you’ll avoid income taxes anyway.
The best thing is that the above-mentioned features work for smaller and bigger businesses alike. No matter if you form a single- or multi-member Wyoming or Nevada LLC, you’ll make use of those benefits to the full.
Nevada vs Wyoming LLC: Differences
While having quite a number of points in common, Wyoming and Nevada are not the same in state regulations and requirements. So, to understand which state is the best option for your individual business needs, look into their major differences:
Anonymity: Though both states ensure confidentiality for the enterprise owners, in Nevada, you’ll be required to provide a list of company managers and officers to the Secretary of State, thus, making their private data available to the public under request;
State Fees: Overall, Nevada fees and charges for LLCs and corporations are much higher than those valid in Wyoming, thus, making the latter a more affordable state apt for startuppers and businessmen on a budget;
Tax Incentives: With a Nevada or Wyoming LLC, you’ll be free from paying corporate and personal income taxes and franchise taxes, which is a big plus. On the other hand, Wyoming will further diminish the tax burden by coming up with the lowest sales tax rates across the US (4%) leaving Nevada behind;
Business Licenses: Unlike Wyoming, Nevada doesn’t require a general business license to register an LLC. You’ll be only exposed to a local license appropriate for your type of activity;
Special Business Court: Unlike Wyoming, Nevada has a dedicated court presided by an expert in business-related issues and established to settle only business lawsuits. Governance disputes could be adjudicated by the judge of an appropriate jurisdiction without the jury. All of this can play a decisive role should any legal proceeding arise involving the company arise.
Creating an LLC in Nevada vs Wyoming: Pluses and Minuses to Consider
In general, Nevada and Wyoming are among the top choices for many aspiring entrepreneurs today, especially those operating online businesses or running real estate ventures. They all seek to get the most of the regulatory and tax benefits provided by both states for their current business scenarios and build them into their growth perspectives.
However, not everything in the garden is rosy. With a bunch of valuable advantages to them, each state has its own minuses as well. So, now that we’ve already compared the states by major aspects, let’s see how they perform under scrutiny and dig deeper into the pluses and minuses of each state.
Nevada LLC Pluses and Minuses
To figure out if starting an LLC in Nevada is really worth the hype around it, you should compare the benefits it delivers and the drawbacks it features. In the table below, we’ll make a quick overview and then explain what stands behind each point.
Nevada LLC Pluses
Nevada LLC Minuses
High privacy level for LLC owners
High formation costs
Limited privacy protections
Different business disputes litigation
Extended use of charging orders
Serial LLCs formation
Nevada LLC Pros
High privacy level for LLC owners: In Nevada, LLC owners don’t have to disclose their personal info to the state and can stay anonymous. It’s enough to nominate a director or manager who will handle formation formalities and make decisions on future business transactions and operations that will be deemed final and accepted by the state;
Tax-free profits: Nevada is a center of gaming culture that brings a lot of tax profit to the state. At the same time, the state offers limited tax liabilities and great tax incentives to all types of businesses to engage even more entrepreneurs. Thus, your corporate and personal incomes as well as your LLC ownership won’t be taxed in Nevada. Likewise, you’ll be free from franchise levies. All of this allows Nevada not to share your tax info with the IRS at a national level;
Different business dispute litigation: As we’ve already stated, in Nevada, business disputes are addressed differently. In this aspect, Nevada sticks to a Delaware practice and has a separate business court for that purpose. This ensures more comfort for the companies and keeps binding precedents at bay;
Extended use of charging orders: Issued by the court, a charging order is the only effective way for the company creditors to make the business owners indemnify the indebtedness in the account of dividends or distributed profits. In Nevada, this scheme is applied to a lot more business situations than in other states;
Series LLC formation: Nevada is one of a few states that allow for creating a series LLC that activates a limited liability shield for multiple assets. Thus, liabilities incurred to one unit in a series won’t impact the assets belonging to other units.
Nevada LLC Cons
High formation costs: Nevada is among expensive states to start an LLC or incorporate in. With a number of regulations to follow and state fees to pay, it will cost you over $700 to form an LLC. Besides, some regulations are to be followed on an annual basis and the fees will be applied annually too;
Limited privacy protections: The anonymity privileges in Nevada do not apply to the LLC directors and officers since their adat are to be submitted to the Secretary of State as a part of the annual list of officers. Besides, Nevada calls for at least one member to be the company manager. Hence, the info of such a member will be included in the LLC statute and made available to the general public. What’s more, multi-state litigations often run under the laws of other states will further pierce the anonymity screen;
Taxation tricks: For nearly 7 years, all entities with gross receipts over $4 million USD have been taxed in Nevada. Some LLCs are also exposed to industry-specific and sales taxes, not to mention the taxes levied over your majority ownership profit.
Wyoming LLC Pluses and Minuses
Again, we’ll first compile a table with a side-by-side pros and cons comparison for a Wyoming LLC formation and then, explain each of the points in detail.
Wyoming LLC Pros
Wyoming LLC Cons
Impressive tax freedom
Top-of-the-line anonymity standards
Incomplete asset protection
Non-restricting regulations and formalities
Increased expenses for non-residents
Ultimate governance flexibility
Low formation fees
Wyoming LLC Pros
Impressive tax freedom: Wyoming is a state that provides by far the best tax advantages to legal entities. Thus, you’ll be exempt from personal and corporate income taxes, a gross receipt tax (setting no limit on the amount of gross revenue), inventory tax, franchise tax, excise tax, and “per-capita” tax. Besides, the state boasts sales and property levies that are among the lowest in the US;
Top-of-the-line anonymity standards: Wyoming LLCs are anonymous per se. State law doesn’t call for mentioning owner and member names in the statute and allows the Wyoming registered agent to be the company rep in all issues. As an owner, you can even nominate an agent as your lifetime proxy to stay anonymous but still hold efficient control over your company. To further enhance your privacy and keep your address confidential, you can use a mail forwarding address so that no one could trace your ownership;
Non-restricting regulations and formalities: In Wyoming, you won’t face much bureaucracy and multiple restrictions that will limit your business opportunities and set up a lot of requirements to follow. You’ll have just to file an annual report and maintain all the necessary licenses in place, with no added formalities to observe;
Ultimate governance flexibility: Wyoming sets no rules for running the company and director meetings inside the state. You are free to hold them anywhere beyond the state borders and even abroad. All decisions made at such meetings will be fully eligible and enforceable. Besides, in Wyoming, one person can fulfill different functions and take different positions in the company, thus, ensuring much more flexibility in business management;
Low formation fees: Setting up and running an LLC in Wyoming will hardly cost you more than a few hundred dollars per year. With fixed, clear, and relatively low state rates, Wyoming is one of the most affordable states for business formation out there.
Wyoming LLC Cons
Confidentiality loophole: Claiming to keep the LLC owners' data anonymous by all means, Wyoming still has a regulatory catch that allows disclosing the owner's name if necessary. Though members’ and managers’ identities should not be disclosed in the LLC statute, that info is to be submitted to the LLC’s representative agent, thus, making it accessible to the state regulator under request;
Incomplete asset protection: In Wyoming, creditors should abide by charging order laws to collect payments from the company members. Yet, that rule is only effective within the state. Should any member reside in another state where the charging order shield is invalid, their assets will be exposed to creditors;
Increased expenses for non-residents: Many choose Wyoming for running their businesses while living outside the state. In this case, they’ll have to pay all the compulsory annual fees twice, both in Wyoming and in their home state, thus increasing the burden of business expenses.
Wyoming LLC vs Nevada LLC: Taxes and Fees
To polish your impression of the Wyoming vs Nevada LLC perspective, we’ll also compare the taxes and statutory fees your entity will have to pay on a regular basis in each state. This will give you an idea of how it will impact your LLC budget.
Fees and Taxes
LLC Filing Fee
Annual list of members or Annual Report
$50 for $250K worth of assets
Certificate of Good Standing
Filing amendments to the Articles of Organization
Sales tax rate
Effective property tax rate
Both Nevada and Wyoming have something to offer to new filers. However, those benefits are worth the effort and will work to the best if you reside in one of those states. If you live outside Nevada or Wyoming and simply seek to register your business there, think twice since most likely than not, you’ll have to pay compulsory fees in your home state and in a foreign state as well.
If you still want to launch a business in Nevada or Wyoming as a non-resident to make use of the regulatory and tax benefits they offer, we strongly recommend that you consult with an attorney or business expert before making such a serious move.