Where you form an LLC will affect the benefits you receive and the day to day operations of the company. Most incorrectly assume that they must start a company in the state they live. Living in Florida, however, does not mean you need to create a Florida LLC. You are within your rights to explore other states whose limited liability companies better fit your situation.
Fortunately, several states aggressively compete for new incorporations and you may choose between them. You may even "mix-and-match". For example, holding shares in a Delaware Corporation with a Wyoming LLC.
The most important factors for our clients are often privacy, price and asset protection. It is on these criteria Secretary of States compete amongst each other. Below we will cover Wyoming, Nevada, Delaware and New Mexico companies according to those criteria. Discover more facts about Wyoming LLC privacy on this page.
This is an executive summary with a more in-depth analysis further down the page:
Wyoming is a well know tax and asset protection haven. Since creating the first LLC, the Wyo legislature has continued to intentionally craft nation-leading laws. Wyoming's anonymous LLC enjoys debtor friendly anti-creditor laws such as charging order protection and reduced windows for contesting transfers.
We also have one of the lowest annual fees at only $50 per year. These protections combined with affordable filing fees have made Wyoming the premier destination for small businesses and asset protection minded individuals. Note, a Wyoming company is often combined with a Wyoming Trust for additional protection.
Delaware has a mythology surrounding it because of the large Fortune 500 companies which make their home there. Large corporations have good reasons for doing business in Delaware and those are covered below. However, what makes sense for a multi-national company does not translate into a wise decision for smaller business owners.
Delaware was made for Corporations, not Limited Liability Companies. The primary difference most of our clients would notice are the Delaware Secretary's significantly higher fees.
Nevada is the state which most directly competes with Wyoming for new LLCs. Nevada's LLC Act was written to mimic the protections available in Wyoming. These protections were combined with an advertising campaign which succeeded in making Nevada companies very well known. This success, though, has led Nevada to continually raise fees as it profits off of its name.
New Mexico is not for everyone, but it can have a spot in some investor's portfolios. New Mexican companies do not go head on against the other players in trying to be an asset protection or tax haven. It does not have friendly trust laws either. What it does have, however, are anonymity and no annual fees outside maintaining a registered agent. For those who aren't interested in asset protection this can be an interesting choice due to the low carrying costs.
Which of these jurisdictions speaks to you depends upon your situation. The creative may even mix and match in order to make their creditor's live's more difficult. For most, the asset protection and privacy minded will end up in Wyoming and the large companies will go to Delaware. Continue reading to see if you agree with our analysis.
You are probably tired of hearing about how Wyoming created the LLC. Just because our State was the first does not mean it remains the best. Fortunately, our Secretary has worked hard to make Wyoming companies competitive. In fact, Wyoming's popularity for doing business is probably how you found this very page. Wyoming companies are popular for holding companies, real estate investments, e-commerce companies and other industries where privacy and asset protection matter.
Start Up & Annual Fees: There is a $100 fee to file your Articles and a $50 annual report fee starting the second year. That is EVERYTHING Wyoming charges you to stay in business. There are no business licenses or other fees.
Anonymity: Wyoming LLCs are anonymous and your information is kept private. WY has the fewest reporting requirements of any state. Your information is not reported to the Secretary of State and, with us, your identity is protected by attorney client privilege. Only real estate owners in Wyoming have information reported to the Internal Revenue Service.
Asset Protection: We are the only state with statues specifically protecting single-member LLCs. This includes charging order protection. Personal creditors cannot seize an LLC assets to satisfy debts. Assets in the company are safe. Learn about Wyoming LLC asset protection here.
Corporate Taxes: Wyoming is the only state of the four to have absolutely no taxes on corporate income.
The above benefits make Wyoming the lead state for forming LLCs. We are also a lead incorporator for smaller corporations, i.e. those not looking to go public. Wyoming's Secretary also allows a unique procedure called a continuance. It enables you to move a company from another state and to maintain the same corporate name, structure, start date, EIN, etc. This was done in light of the large number of companies moving to Wyoming from high fee states such as Nevada. Find more Wyoming LLC benefits here.
Delaware is better known for its Corporation than its Limited Liability Company. The state has intentionally not chased smaller investors interested in asset protection or privacy. Their focus is large multi-national corporations who can pay to play.
Court of Chancery: Delaware is best know for its dedicated business court system. This is called the Court of Chancery and is where business disputes are heard quickly and fairly. However, a quick trial is generally the last thing a debtor wants. In such cases, you want to elongate the litigation to delay a creditor's potential payout to strengthen your hand.
Start Up & Annual Fees: Delaware has several fees to start a company and they total a few hundred dollars. There is also a $300 franchise tax along with a $50 fee just to change registered agents. These fees are not noticeable to JP Morgan Chase, for example, but they are sure to hit your pocketbook.
Anonymity: Delaware does not publicly disclose the owners, managers or officers of a company. They do share information with the IRS, however, and check companies against Treasury databases.
Asset Protection: There are no significant protections for limited liability companies.
Corporate Taxes: Delaware has no income tax, but there is a franchise tax among other things. What is and is not taxed changes every year.
Delaware will remain the go to jurisdictions for large corporations. If you are raising capital or taking your company public, then chances are your investors may even force you to incorporate in Delaware. In such cases you may use a Wyoming LLC to hold your shares in the Delaware corporation. This provides the best of both worlds.
A successful marketing campaign by the Nevada Secretary of State has helped elevate their State in the eyes on many. Nevada competes most directly with Wyoming for new LLC and Corporation formations. They have similar asset protection and tax benefits. They are slightly less anonymous, however, and have higher fees.
Start Up & Annual Fees: The Nevada Secretary of State charges nearly $300 to start and LLC and $500 for a Corporation. These fees are not all disclosed at the time of creation. Yearly fees average just over $200 for an LLC and $500 for a Corporation.
Anonymity: All companies are required to submit an applicable list of members, managers and officers. The Secretary does not currently diclose it. That's not to say they won't change their mind in the future or suffer a data breach.
Asset Protection: There are anti-creditor laws designed to help debtors. However, there are no statutes for single-member LLCs, so it is less than ideal for a holding company.
Corporate Taxes: Nevada has a revenue tax for large companies. There are rumors of them lowering the cap and forcing more companies to pay taxes.
Nevada's time as a haven has largely passed due to the new disclosure requirements and annual fees. Their State's succesfull marketing campaign has led them to maintain a large share of new companies. As Wyoming's benefits become better understood, however, business is shifting towards that State.
New Mexico has quietly carved out a niche space in the incorporation community. They did this through targeting what other states were not, namely a no annual fee LLC. It does not provide a lot of protections, or a dedicated court system, but there is privacy and low maintenance.
Do note New Mexico's Corporations are not broadly appealing. For this reason we will solely cover their limited liability companies.
Start Up & Annual Fees: New Mexico's Secretary only charges $50 to file Articles of Organization. There are no additional start up fees or licenses. There is no annual report. You will only be required to maintain a registered agent in New Mexico. This can save on nominee fees over time.
Anonymity: New Mexico does not require owners or managers to be listed. They do ask whether it is a single-member LLC or manager managed and this is placed on the public Articles of Organization. You do have to create an online account to file an LLC. There is no promise this account won't suffer a data breach.
Asset Protection: There are no significant protections for limited liability companies. Those needing asset protection should consider a Wyoming or Nevada LLC.
Corporate Taxes: There is a corporate income tax. This leads most to avoid their Corporations.
New Mexico presents an opportunity for those who only care about privacy. There is no significant asset protection, but then there are no annual fees either.
The state you choose to form your LLC will depend upon your situation. Some are looking for extra asset protection or anonymity, while others are just looking to avoid high fees. For example, California's LLC has an annual fee of nearly one thousand dollars.
Regardless of where you are it is wise to consider a Wyoming, Nevada, New Mexico or Delaware entity for your next company. You may even use an anonymous company as the owner of an LLC in another state such as Florida. If you decide Wyoming is for you, then we would love to help form your Wyoming LLC.
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