Wyoming's Close Corporation

The Wyoming Close Corporation

Close Corporations


The Wyoming Close Corporation is intended for corps with a limited number of shareholders. This typically means those who are “close" through family relationships, friendships, or small business partnerships. The unique relationship among shareholders means that Close Corporations are allowed to operate with fewer regulations - like partnerships. Wyoming laws on close corps allow small corporations to forego many traditional corporate formalities, while still enjoying the benefits.

A departure from regular business corporations, Close Corporations do not require a board of directors, this means ongoing operations generate less paperwork. If you opt for a close company, then you must inform us when ordering, so we can include this in the Articles of Incorporation. Learn more about Wyoming Corporations here.

Close Designation Basics

  • Abbreviated governance: Shareholders may agree (in writing) to treat the corporation as a partnership, operate without a board of directors, dispense with annual meetings, and make a shareholder agreement. (Note: this must appear in the Articles of Incorporation.)

  • Limited shareholders: Close Corporations are limited to 35 shareholders.

  • Special actions may be required: The Close Corporation Law took effect in 1990. This means that if incorporation took place in advance, and you want to modify your company to a Close Corporation, then shareholders must be unanimous. Alternatively, if you were incorporated after January 1, 1990, and you wish to transform your corporation to a close corporation, then 66% of shareholders is the threshold. Ultimately, you become a Close Corporation by so stating in your Articles of Organization, or in an amendment to the Articles.

Close Corporation Benefits

  • Liability Limitations: The law maintains that shareholders do not have personal liability for the company's actions. This is also referred to as the corporate veil.

  • Costs: Reduced bureaucratic hassles mean fewer administrative, and professional expenses paid to accountants and attorneys.

  • Ease of operation: Removing barriers to action make day to day operations easier.

  • Buy-out provisions: Existing shareholders have a right of first refusal in the event of a sale, and a deceased shareholder’s shares are offered to existing shareholders first. This ensures the company remains “close”.

Wyoming Corporation Benefits

  • Privacy: Wyoming corporations are anonymous. Officers and directors are not listed on the formation documents. In future years, you may use our nominee service to further enhance your privacy. Learn more about Wyoming's anonymous corporation here.

  • Taxes: Wyoming has no corporate or personal income tax or tax return to file.

  • Liability Limitations: The law maintains that shareholders do not have personal liability for the company's actions. This is also referred to as the corporate veil.

Drawbacks
The Close Corporation has highly desirable attributes and is popular for small and family businesses. Do be cognizant of possible disadvantages, however, which include:


  • Share Sale Restrictions: You must provide right of first refusal to existing owners. This can make it difficult to find a 3rd party willing to join the company even if existing shareholders assent.

  • Restricted Access to Capital: The 35 person limit circumscribes how much can be raised from shareholders.

  • Reduced Information: The close company assumes you are in constant contact with the company's officers. If you are not, and there are no annual meetings or formal notices sent, then it can be easy to fall out of the loop. Having increased reporting requirements can be a good thing when there is not as much familiarity between share holders.

Tax Implications
The I.R.S. treats Wyoming's Close Corp the same as a regular corporations. The only alternative is to opt for “S” tax treatment. To know more, please refer to IRS Publication 542 along with instructions for IRS Form 2553.

The Wyoming Close Limited Liability Company

Wyoming also allows for the formation of close LLCs. These have fewer immediate advantages compared to traditional LLCs. This is because the LLC was designed to be less burdensome than a c-corp to start. Hence, there are fewer formalities to strip away. Not sure if a Wyoming corp is for you? View our page on incorporating in Wyoming and on Wyoming LLCs for additional information.

Close Corporation Summary

As seen above the benefits of a close corporation over a normal Wyoming corporation are numerous. They are not for everyone however. The lack of annual meetings can be a negative if you lack other ways to obtain information, e.g. speaking to officers regularly or being involved in operations. Note, online the close designation is sometimes called closed, i.e. a "Closed Wyoming Corporation". That is incorrect, however, as it is formally a Close Corporation in Wyoming law. Learn more about Wyoming corporations here.

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203 S Main St #3000 Sheridan, WY 82801


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