Should new business owners set up their business as a Wyoming LLC?

Previously, I have written about the advantages and disadvantages of incorporating in Delaware or Nevada as a small business owner. With regards to Delaware, my conclusion was that, for most small companies, the disadvantages outweigh any advantages. With regards to Nevada, my view was that it is highly uncertain that many of the advertised benefits of incorporation in Nevada, such as greater asset protection and greater liability protection, would actually materialize. In this piece, I’ll cover my thoughts on another state that is frequently pitched as a good place for forming your business: Wyoming.

Wyoming limited liability companies are heavily marketed on the internet as a great option to form a new business. Wyoming has the distinction of being the first state to have a limited liability company statute, which apparently was created as special interest legislation for an oil company. Because of Wyoming’s long history with LLCs, Wyoming LLCs are highly promoted as being superior to the LLCs of other states (usually by companies that offer to do the formation for you…for a fee). The fact that Wyoming was the first state to have an LLC statute doesn’t really benefit a business owner, of course. The three major substantive selling points that are used to promote Wyoming LLCs are: (1) superior asset protection, (2) lower taxes, and (3) lower fees. For the reasons described below, it is highly unlikely that a business owner would actually realize any of these benefits if they were to organize their business as a Wyoming LLC.

The first major substantive selling point is that Wyoming LLCs supposedly have superior asset protections. Wyoming law provides that the sole remedy available to creditors of owners of LLCs is a charging order. A charging order is an order by the court directed to the company ordering the company to send all distributions that would have gone to the owner/debtor to the judgment holder instead. This limitation can make it more difficult for a creditor to collect on their judgment because the creditor will not be able to force the debtor to sell his ownership interest in the company. Usually, after a creditor obtains a judgment against a debtor, the creditor is entitled to sell the debtor’s personal property to satisfy that judgment. However, if the creditor’s sole remedy is a charging order, then the creditor is entitled to whatever distributions are produced from the ownership interest (if any at all), but the creditor cannot transfer or sell that ownership interest. Having this protection can give a debtor more leverage in negotiating a settlement. However, the charging order limitation is not unique to Wyoming. Most states’ LLC statutes provide that the sole remedy to a creditor of a member is a charging order. It is true that Wyoming has extended the charging order limitation to single member LLCs, whereas many other states do not provide such a protection in the case where an LLC has only one owner. However, it is important to note that if a lawsuit takes place in your home state or in some other state besides Wyoming, conflicts of laws principles may cause the law of a state other than Wyoming to control whether a creditor may be able to obtain a lien on or a forced sale of a debtor’s interest in a Wyoming single member LLC. In other words, judges often have a lot of discretion as to which state’s laws apply in multi-state cases and often begin with the assumption that the law of the forum applies, unless a party can show that another state’s laws have greater contacts or interests in the case. Therefore, you cannot be sure that your own home state won’t go ahead and apply its own law to the situation, notwithstanding whatever Wyoming law states. Therefore, for people interested in asset protection, I’d recommend taking steps other than forming a Wyoming LLC. See my post on Nevada corporations and LLCs for links to more information on what steps your should take for asset protection.

Another major selling point that is used in promoting Wyoming LLCs is that Wyoming has no income tax. Unfortunately, since most LLCs are pass through entities, which pay no taxes themselves, this is of limited benefit. For instance, if you live in another state that has a personal income tax, and form a Wyoming LLC, all the income would be passed through to you and you would still end up paying state income taxes. Therefore, forming an LLC in Wyoming is not an effective tax avoidance method. In addition, if your state does impose an income tax on LLCs at the entity level (which for instance my own state of Tennessee does), and your LLC operates a business in your state, then your LLC would still end up paying the state income tax regardless of Wyoming’s income tax, because it is the entity’s presence in a state which controls whether it is taxed there, not its state of incorporation.

The final major selling point that is used to promote Wyoming LLCs is that the fees to organize them and the ongoing annual fees are lower than other states. This is certainly true. But if you live outside of Wyoming, and organize your business as a Wyoming LLC, your business will almost certainly be doing business in your home state. In that case, your LLC will be required to qualify to do business in your state, which usually involves paying a fee equal to what your company would have paid had it simply been organized in your own home state. Therefore, you are unlikely to realize any cost savings from organizing your LLC in Wyoming (Nevada and Delaware entities present this same issue as well).

As with Delaware and Nevada entities, I don’t think there is much advantage to using a Wyoming LLC, as opposed to an entity formed in your home state (unless of course, your home state is Wyoming). You will end up incurring double the fees, because you will have to pay Wyoming’s fees and then pay your own state’s fees to obtain authorization for your Wyoming LLC to do business in your own state. Despite this additional cost and complication, it is uncertain whether you will see any of the benefits, such as greater asset protection, that are often promised in connection with incorporation in Wyoming, nor are you likely to see any tax savings. In addition, if there were ever litigation among the owners, you may be forced to conduct that litigation in Wyoming, which could end up being highly inconvenient and expensive. Therefore, unless there is some specific reason to set up your company in Wyoming, I’d avoid using a Wyoming LLC.

As always, your final choice in entity selection should be based on your own specific situation. Therefore, before making any final decisions on your form of business, you should speak with your attorney.


© 2011 Alexander J. Davie — This article is for general information only. The information presented should not be construed to be formal legal advice nor the formation of a lawyer/client relationship.

About Alexander Davie

Alexander Davie is a corporate and securities attorney based in Nashville, Tennessee. Businesses of many varieties rely on his counsel and judgment throughout all stages of their growth. In particular, fund managers and investment management professionals seek the expertise Alex gained when he served as general counsel to a private investment fund. Alex also has significant experience and enjoys working with companies and entrepreneurial ventures, especially within the technology industry. As a believer in technology's ability to enrich people's lives and allowing people to connect with each other in new ways, he is passionate about helping tech startups achieve success. He is active in Nashville's startup community as a mentor at the Nashville Entrepreneur Center and participates in numerous other events geared towards making Nashville a nationally ranked location for starting a business.

You can read more about Alex here.


  1. Janeiro Cathey says:

    I enjoyed your article regarding Wyoming. One thing that I have noticed is that not many people discuss internet companies that do not do business in a particular state. For example an all internet company that solely relies on monthly or yearly membership fees from people around the globe. It seems that this type of company could benefit from a Nevada, Delaware or Wyoming.

  2. Janeiro,

    I’m not really following you on your question. Even web companies are still doing business somewhere (even if it’s the state that contains the basement which the founder is working out of). You would not be able to escape paying state taxes that way (well, you could possibly evade them due to lax enforcement, but you would absolutely owe the taxes).

    Perhaps I’m missing something in your question.


  3. Thanks for your insights, Alex. I’m in the process of deiciding which state to set up my LLC. However, my situation is that I am living outside the US full time, and (perhaps similar to Janeiro’s comment) my income will come from all around the globe. In this case, I’m getting closer to the conclusion that I should find the state with the lowest annual fees since I want an LLC entity for the credibility of doing business with other companies. And should I ever move back to the US I can re-register/move the LLC in my home state. Would you agree or are there additional points I should consider? Of course I understand I should consult a personal attorney, but simply want to know the right questions to ask.

  4. Frank, The difference in the annual fees between the states is pretty minor in the scheme of things, so it really isn’t really much of an issue (a few states like California are significantly more expensive). That said, I guess there are no reasons why you shouldn’t consider it as one of your factors. You many also want to explore forming an entity in your country of residence. You may find that to be an easier option, with less international tax issues.

  5. I appreciate the opportunity to make a comment or question. My question: I was told that Wyoming allows the stated business of the LLC can have more than one source. I’m located in Wisconsin and want to have the LLC to be able to have a variety of sources. For example, fees that are charged for professional services, i.e. the administration of a Sec. 105 Medical Expense Reimbursement Plan for “micro-sized” employers. In addition there are fees charged by my spouse for housse cleaning & nanny/baby sitting services. We want these fees to be chanelled into TLC Plan Services, LLC which is a one-member LLC filing a Schedule C for tax purposes. Thanks for your help.

  6. Tom,

    I’m not aware of a single state LLC statute that prevents an LLC from having more than one line of business (unless of coure, the owners have agreed to this limitation in their operating agreement or in its articles of formation). So that feature is not in anyway unique to Wyoming.

    There are a lot of online companies that make claims about the benefits of an LLC from X state (implying somehow that LLCs from that state have some advantage others don’t). We see this most often with companies offering services to form LLCs in Nevada or Wyoming. While some of these claims may be partially true, they are rarely the whole truth and rarely will you find much advantage to incorporating outside of your state. (There are a number of exceptions, which I talk about in my articles about Delaware, Nevada, and Wyoming).

  7. Caleb Greenburg says:


    Thank you for the insightful post. We organized as an LLC in Wyoming, and the partners are located in 2 different states, with contributors around the country.

    Our business is an internet based blog, where we don’t sell anything. Our earnings are barley $75/month from Google Adsense.

    We organized in Wyoming because we thought it was the easiest due to the low organization and renewal costs. Since we are an LLC taxed as a partnership, our state income tax will still pass through and be reported to and taxed by our respective states.

    Would each partner still need to file organization documents in each state that a partner resides? We are all 20 something and have no idea where we are going be living 3 months from now. We travel so often that it doesn’t make sense to have articles in each state we live in.

    Would organizing in Wyoming not work for our situation? Thank you so much for your time in reading through this.

    • Caleb,

      Each state has its own standard for determining what qualifies as “doing business” within the state; sometimes having an active LLC member within the state would trigger it (CA comes to mind), but other states are more lax. Generally, you should be qualified to do business in the state where the company is run out of. Given the small amount of revenue involved, I don’t think that obtaining qualifications to do business where each partner resides is very cost effective. You should though ask your accountant to make sure your company is complying with all the tax requirements of each state where is has a “nexus.”


  8. Matthew Fitzpatrick says:

    Hi Alex,

    Thank you for the informative post. I recently started an internet business, which I run from my home in Nevada. I originally planned on forming a single member LLC here in Nevada, given the tax benefits and my business’s location. However, Nevada requires the publication of one of the LLC’s managers (which would be me) on its Secretary of State website. This is obviously a huge privacy concern. Do you know if Wyoming has a similar requirement? As far as I can tell, this would be the only real difference between Wyoming and Nevada, at least for me. I fortunately get to enjoy the benefit of no state tax either way.

    Thanks in advance for your help.

    • I’m not surety what extent Wyoming will keep information from at least being accessible to the general public (regardless of what appears on their website). One thing you need to keep in mind is that if you are operating a business out of Nevada, the state of Nevada is likely to take the position that you must qualify to do business in Nevada and file all of the same annual reports as a Nevada LLC. I do know that Delaware’s privacy is pretty good for LLCs though the qualification to do business issue is still present.

  9. marianne says:

    Which state has a veil to hide the names in the corporation? is that not nevada and wyoming ?

  10. Can an employee who is based in Los Angeles sue a company with a LLC in Wyoming for not submitting W-2 and a 1099? This company’s LLC is formed in Wyoming however, they do business from California.
    Also, can they be sued for misclassification of employee if they were hired on as consultants but were really working as employees? How does that affect the tax situation for the employer?

    • The state of formation is not really relevant to whether could can sue the company. Misclassifying an employee as an independent contractor can result in the employee having a private right of action against the employer. In addition they could be subject to fines and penalties from certain governmental agencies. I’d urge you to consult litigation counsel if you believe you may have a claim.

  11. I have LLC in California . and makes about $100,000 in grosses and nets $15,000 . so i am living in poverty but i still have to $800 in Annul LLC. Tax. over $1,000 for CPA.
    my dept are claiming and i am estimating that i will fall soon and i need to protect some of may assets so i will not end up holding signs says work for food or need shelter.

    so Can Wyoming help? or any suggestions.

    • If your business is ran out of California, your LLC owes the $800 tax, regardless of where it is formed. Reorganizing in Wyoming is only going to make it more expensive because you’ll have to pay Wyoming fees as well.

  12. Wolfgang says:

    Hi Alex, I am also living outside the US and would like to sell products in the US through the internet. There are fulfillment centers that can store and ship the orders coming in. A US based company can promote their products much easier with online stores like Amazon etc. Is a Wyoming based LLC a good solutions for a scenario like that (no income and sales tax)?

  13. Hello Alexander,

    I would like to start a company that either 1) serves as an agent for export sales or 2) buy US product and export.

    Any ideas or suggestions on the best way to do this?

    • David,

      We can’t really give specific legal advice to your situation on a blog post board. If you are planning on doing business in the US, you should retain US legal counsel and an accountant here. That will help you navigate through all of the various issues you’ll deal with, including corporate law and entity issues, tax issues, and export/international trade issues.

  14. john d says:


    if I plan on having an online business. not really selling anything in my home state.

    Would an wyoming llc make sense for me.

    Fyi: I live IL and would sell informational products like ebooks

    • Generally no. You can’t escape your state’s tax burden simply by forming your entity out of state. If you live in Illinois and operate the business out of your home, it’s an Illinois business for just about every purpose except for internal organizational governance purposes.

      I’d recommend you retain an accountant or tax attorney to advise you on the most tax efficient means of setting up your business (which in all likelihood will not involve incorporating out of state).

  15. Hi Alex,

    I’ve been looking into forming an LLC (or two) in Wyoming off and on for a couple of months. I currently live in Kansas but will be moving back to Florida in a few months. I’ve recently acquired a domain name, personally built Android and iOS based applications, and filed a utility patent that covers the software aspects of said applications. The business will only have an internet/app store presence.

    The only issue I’m concerned about is privacy – specifically separating my name from the business and its assets. This is a concern for me because the domain name and mobile applications directly relate to marijuana and the greater marijuana culture. It would be nice if I can avoid any awkward questions from future employers or medical schools (in the middle of the application process). And it would be even better if the drug cartels, wannabe gang members, and stoners with too much time on their hands didn’t know my name or where I lived.

    Is the following scenario possible?

    With the use of Registered Agents, I’d create two LLCs – Random Name, LLC and MJ Business, LLC. I’d set it up so that Random Name is the full owner of MJ Business and I’d use MJ Business everywhere on my website, mobile applications, in advertising, and when registering with Apple and Google to sale my applications. As the owner of Random Name (which will own a Wyoming business), I know I’ll have to file as a foreign entity in Florida for tax purposes – this doesn’t bother me.

    My big question is: Would I also have to file a FL foreign entity status for MJ Business as well?

    I do intend on contacting a business attorney in Wyoming once I have a better picture of what I can and can’t do.

    Thank you for your time,

    • I have 2 thoughts for you:
      1. I think you need a business lawyer in Florida, not Wyoming. The issue is how to maintain your privacy while doing business in Florida. Delaware LLCs also offer a high degree of privacy as well, so this is not a Wyoming issue per se.
      2. You should probably refrain from posting detailed information on websites asking for advice. Remember, there is no attorney-client privilege in a public place and no (good) attorney would give legal advice over a public website.

      Good luck in your venture.

  16. Thomas says:

    Dear Alex
    I am not an American and living in Europe. I need to form an LLC in Wyoming. But before I start forming I wished I confirmed an LLC’s (or my) possible tax duties in connection with the IRS or Dep. of State to set up things right from the very beginning.
    My target for this moment is just to form an LLC in Wyoming, keep it active but run and manage the business outside the US, which seems to be the clue.

    I surfed a lot on the Internet looking for a proper information and I found the following one:

    “In case an LLC generates revenues exclusively outside the United States, and the sole owner is non a US resident for US tax purposes, the tax pass through nature of an LLC means in practice that an LLC does not pay any federal income tax in the United States.”

    Simultaneously, I found some opinions of the CPAs that do not confirm the above or at least are ambigous, so my first question is if you can help or advice on it?
    Moreover, what about the EIN or ITIN? Do I have to apply for them if I plan neither operate nor employ in the US?
    And how about filing a return, minutes of meetings, book-keeping, recirds, etc? Am I obliged to do all these?

    Thank you from advance

    • If you set up an entity in the US you will have a number of filing, tax, and other administrative duties, including but not limited to the ones you mentioned. I do recommend that you have US counsel and an accountant to help you with these.

      If retained, my firm can advise you on some of these items (those to do with entity formation). Tax issues would require a CPA. We don’t answer specific legal questions on a public blog comments section. If you are interested, please contact me via email at the link provided on this blog.

      • Alex, this is what I received meanwile from one of Wyoming’s tax lawyers. This is quite opposite to what you claim. I’m a bit confused now. Can you please help me understand?

        “A single-member LLC is considered a “pass through entity” which means that its income passes through and is reported by and taxes paid by the single owner. Because you are a foreign person, you only pay US tax on US source income. So long as the LLC has no US source income and you remain a non-resident, non-citizen of the US, the income of the LLC will not be taxable by the US. Because no tax filing will need to be made, there will be no need for you to get an ITIN or for the LLC to get an EIN”

        • I can’t give people individualized legal advice on an online blog post. Generally there are administrative and tax requirements that apply to US entities, though some of them may not apply to certain limited circumstances.

          My main piece of advice remains that you need to retain a tax advisor (either a CPA or tax attorney) if you are planning to have an entity in the US or are planning to do business in the US.

          It sounds like you’ve done that and if after describing your situation in detail, he has advised you that you will not be required to do some of the items you described, then certainly follow that advice.

  17. hellO, I am in California, I have my wyoming llc, and planning to open another LLC here in California, since I have my wyoming llc already, how do you see naming my wyoming llc as the manager or member? this new llc will be manager managed. Basically, what I want is my name not be be public on secretary website or in the articles. Suggestions are welcome, how can I merge these 2 llc with wyoming being the manager or member, thanks?

    • Kris,

      We can’t really give specific legal advice to your situation on a blog post board.

      I can tell you generally that an LLC an be the manager of another LLC. In order to figure out how to best may to execute what you are doing, I’d recommend hiring California counsel.

  18. Mike & Holly says:

    When it comes to setting up LLC’s, S-Corp, C-Corp, always deal with CPA’s or ACCOUNTANTS as attorneys generally do NOT understand anything about compliance ($$$$) that your company will pay on a federal/state/local/international level.

    My attorney didn’t even understand international tax treaties (exemption/credits) which my accountant talked to me in layman’s term.

    This entire subject is an accountant’s field at half the cost of an attorney. I will keep my attorney for real estate closings. For else else, my accountant has been priceless (at half the price).

  19. I am on the board of a Canadian company registered in Ontario. We operate under a registered charitable number.
    Our mandate is to raise donations to cover expenses for providing clean drinking water, building schools & homes along with facilitating medical and dental services. All of these services are provided free to the indigenous people of Guatemala. (As a point of interest according to the WHO) Guatemala has the highest incidence of malnutrition in the Americas, including Haiti.
    We have been doing this for 10 years and the need is growing. We have a solid reputation where our overhead is minimal and the officers of the company paying there own expenses. Recently we have attracted a number of US charity groups that hire our services to drill wells and build schools. Our thought is to form a US company to solicit donations in the USA. We were thinking of forming an LLC company in Wyoming and applying for charity status. Are we thinking in the right direction. We have no idea how long it would take to get the charitable status and what if any the agreements and treaties are between Canada and the USA or even the individual States.

  20. Hey Alexander, as a commercial registered agent in all three of those states, I could tell you why most people that actually go through with any of those do it… Privacy and Licensing IP fees charged to themselves.

    On the Privacy note, Wyoming is the most private. You don’t have to list members, managers, officers, or directors, and anyone can file the annual report. In Delaware, the Officers and Directors don’t show up online, but an officer or director is supposed to file the franchise tax, putting that person out there on a permanent public record. Nevada has literally zero privacy anymore and now it’s $325 a year to keep the entity going. So the real private states left are WY, NM, DE, and CO.

    A bigger thing to note about the privacy also. Your commercial registered agent is legally required to keep and maintain in Wyoming:
    A member, manager, officer, or director and contact details for someone in charge of the entity.
    In Delaware:
    Just a contact person and details of how to get a hold of them.
    In both states, the registered agent cannot just have a lawyer in the home state of their client also as the contact. So the state does not really allow for complete privacy. So any state worker or agency getting a court order can come into our office and we have to produce these contact details on the fly, while they are waiting or we could lose our ability to even be a registered agent. So while they’re private to the public eye, it’s definitely not bullet proof.

    But the bigger reason is royalties and IP. A company can battle a lot of tax scenarios with a Wyoming holding company. Let’s say there’s a gross receipt tax or franchise tax on property owned in TN or something. A lot of the “value” could be help in IP holding companies in WY, reducing taxes. If you’re paying a net income tax rate, a lot of your income could be “paid” to a Wyoming holding company that is taxed as a C corporation.
    TN has a relatively low personal income tax rate, so not much help. But a lot of states have rates hovering around 10% plus. But even bigger than that is companies doing business in multiple states can wipe out most of their income through a holding company, thus paying the IRS and the state they live in, instead of a lot of different states. It’s really the only real loop hole the massive companies use in Delaware. But eventually you’d think all the states will close this loophole…forcing you to disclose subsidiaries income and expenses also…

    We also get a lot of Wyoming or Delaware companies for small businesses that do work for bigger companies like Amazon. Amazon won’t hire affiliate marketers in a lot of states like North Carolina, so people are forced to get paid through companies formed in tax free states.

    Also, I believe the single member LLC you’re talking about has to be designated as a “close” LLC. Here’s some more info: but you would think that if you’re doing business in TN, and a TN business sues you, the court there is going to want to try it in TN regardless of a close llc or whatever you have and care less about your fancy charging order don’t you think??

    Cool blog!

    • Drake,

      Thanks for sharing your practical “on the ground” knowledge.

      I think anyone looking for “bullet proof” privacy simply isn’t going to find it. The true owners of a company can just about always be tracked down with a court order. The privacy shield is only useful in a few contexts. For example, if someone has a full time job but is planning to start a new business but does not want to tipoff their current employer plans, a DE or WY company may be helpful. The Amazon example is another good one, though I’m not exactly sure that it would stand up to scrutiny (because of requirements to qualify as a foreign LLC or corporation).

      It’s possible that a Wyoming LLC could be helpful in reducing tax burdens, but only when used as part of a larger tax plan (like, as you discussed, licensing IP) which takes advantage of the intricacies of state apportionment formulas. Simply forming an LLC in Wyoming is not a tax planning strategy; it’s really just a plan to hope that their own state doesn’t catch onto the fact that aren’t reporting their earnings.

      • I totally agree! One of the things our owner is always frustrated with is people thinking they are just going to form a Wyoming or Delaware LLC and not pay taxes, have no liability, and no one is ever going to find them. He’s always preaching to the staff here that this is all a theory. When things hit the fan and you have a court order to produce every single detail about everything… It’s typically hard to justify a lot of this stuff to an angry judge, and you end up looking dodgy. Heck you’re only a couple filings into discovery in a lawsuit and it won’t take very long for all the great theories to start unraveling. Delaware attorneys are really expensive too. I think by the time you’d get to discovery, you’d be begging to have it moved to Tennessee if you somehow got it to stick in Delaware!! lol.

        I don’t know why, but we get a lot of people out of TN coming up with some goofy ideas. Will try to send some of them your way if possible before they go off on a 5 LLC asset protection strategy to protect their new Taco stand idea :)

  21. I believe IRS can treat LLC as sole/partner or C corp when you choose it. C-corp no pass down.
    I believe those corp service inc advertising PRIVACY for
    One dummy name in a public access info.
    The rest share holders info is inside corp.

    If you want a court order for a company regarding a share holder,
    you will need to find the company first and then you will need some kind of proof of connection for a judge.

    Now for total privacy, the share holders have to clear all connection/contact with the corporation.
    No bank transfer, no mailing, no phone calling, no nothing, certainly no check….

    IMHO, the only connection that can possibly be traced I can think of is the Power of attorney in the bank.
    SInce no one want to give away the control of the money, I am sure no one will use a dummy person.
    So one better use a tiny bank in another corner of the state(vs register company).

    What good is of this kind of company?
    Holding company of equity/bond which can be done on-line.

    I believe there was a case California Franchise Board vs cal resident-sole-share holder of a Nevada company.
    The person has no privacy concern, but tax concern.
    Google it for the detail.

  22. Hello Alex, My name is Armando and I just by happenstance stumbled on to your blog becuase I’m doing research about starting up my own business in the form of an LLC and I have to say that once I read your blog that now I’m having second thoughts about how to move forward. Im a Wisconsin resident and the business that I’m starting is more of a nonconventional nature because its in music and entertainment e.g. albums, dvds, digital downloads etc, and I had wanted to start the company in Wyoming and function the dba here to, in the future, operate more dba’s as I start to grown, within that same industry. If what you are saying is correct then there would be virtually no possible way in hindsight to avoid the potential double taxation that Wyoming claims to offer by setting up an LLC there? And not really sure if under the circumstances it would make a difference but would the fact that I was seeking to elect the S Corp status be any help to my intentions or should I just abandon the thought of setting up in Wyoming all together, what’s your take?

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