Wyoming is an attractive state in which to form an LLC. Not only is there no state income tax, but the laws governing Wyoming LLC formation provide substantial privacy and limited liability for LLC members.
Advantage of Privacy
Unlike many other states, Wyoming LLC formation does not require managers or members to be publicly identified. Other states maintain a publicly accessible database which lists the identity of members and managers. The minimal reporting and disclosure requirements in Wyoming ensure the privacy of LLC members and managers.
Not only are the personal assets of individual members of an LLC protected against creditors of the LLC, but the LLC and its members are also protected against creditors of individual members. In other states, personal debts of LLC owners could be satisfied by foreclosing on the owner’s LLC interest or by getting an order to dissolve the LLC and sell its assets. Not so in Wyoming.
Wyoming LLC formation provides superior asset protection since the exclusive remedy for creditors of an owner’s personal debts is a charging order. This means that the LLC could be ordered by the court to pay the creditor any distribution which would be paid to the LLC member. The creditor cannot force a distribution, participate in the LLC’s management, or force a dissolution of the LLC and sale of its assets. Indeed, the limited rights afforded the creditor by a charging order means that, often, creditors cannot collect the debt.
This significant liability protection also extends to single-member LLCs. Unlike many states, which treat single-member and multi-member LLCs differently regarding the personal creditors of members, Wyoming does not make any such distinction. Therefore, even though the creditors of single-member LLCs in other states may have an easier time collecting debts, Wyoming specifically extends the exclusive charging order remedy to LLCs with one member and, again, ensures that Wyoming is a superior choice to many other states when forming an LLC.
For Legal Assistance
Call The Sutton Law Center to discuss the liability protection of Wyoming LLCs.
An advantage to forming an LLC in Nevada is that there is no state
income tax, only federal income tax to consider. The LLC is particularly useful since, for tax purposes, it has a lot of flexibility. Members can choose how they wish to be taxed.
When a single member is forming an LLC in Nevada, the member can choose to be treated as a sole proprietor for income tax purposes. This is known as a disregarded entity. The LLC retains its ability to protect the member from liability, but for tax purposes the business is treated as though the member were a sole proprietor.
Choosing to be Taxed as a Partnership
An LLC with multiple members can choose to be taxed as a partnership. A partnership means that each member will be taxed on his/her share of partnership income (or loss) whether or not the member received any distribution.
Choosing to be Taxed as a Corporation
Members forming an LLC in Nevada can also choose to be taxed as a corporation. This may be useful for a variety of reasons. Firstly, the income tax rate on corporations for the first $75,000 of income is probably less than that for the members, individually. For the first $50,000, the corporate tax rate is 15%. For corporate income up to $75,000 the federal income tax is $7,500 + 25%. This means the members could potentially keep some retained earnings in the corporation at a tax rate lower than their individual tax rates, and the remainder could be distributed to the members as income, bonus, or dividend. Remember, though, that dividends paid to members are taxable as income to the member but not deductible by the corporation (the double taxation dilemma).
Another advantage to choosing taxation as a corporation may be to allow members to save self-employment taxes, or to establish tax-free fringe benefits.
How a Lawyer Can Help
It is important to consult with your attorney when forming an LLC in Nevada to understand the tax ramifications, so call the Sutton Law Center with your LLC formation questions.
The State of Nevada provides for three kinds of LLCs: (1) for companies formed in Nevada, (2) for professional businesses (doctor, accountant or any other profession for which a professional license is required), and (3) for companies formed outside Nevada.
For each of these LLCs, an organizer must file articles of organization to establish the entity and provide information as to who the members and managers are. Additionally, the organizer must designate an agent for service of process who must have a physical address in Nevada.
When forming an LLC in Nevada, you must pick a name which is distinct from any existing Nevada LLC. The name must include “LLC” or some form of that designation. Names can be checked and reserved through the secretary of state, and the Sutton Law Center can assist you with this process. Be advised that simply having a domain name, or a fictitious business name, or a trademark, does not mean that you will automatically be entitled to that name when forming an LLC in Nevada.
If there will be multiple members when forming an LLC in Nevada, you must get a taxpayer ID for the LLC, even if you have no employees. Likewise, if you are forming a single member LLC in Nevada, and either have employees or choose to be taxed as a corporation (instead of as a sole proprietor), then you will need to obtain a taxpayer ID for the LLC.
LLC formation in Nevada does not require an Operating Agreement, although it is highly advisable that the LLC has one. The Operating Agreement is the contract between and among Managers and Members which sets forth duties and responsibilities. For example, if the LLC needs additional capital, will all the members contribute amounts in proportion to their ownership interest? What if they don’t? What if one member doesn’t have sufficient capital? How do the members handle this situation? Another example might include how you choose managers and what their roles are within the LLC.
Call the Sutton Law Center for more information and assistance in forming an LLC in Nevada. 775-824-0300.
Are you looking to incorporate your business? If so, a Nevada incorporation attorney advises you on the best state in which to incorporate your business.
Deciding which state to incorporate in is crucial for the success of your new business. The location you decide will affect your business in many ways:
- Where you do your business;
- How much business you will do; and
- How your corporation (and you) will be taxed.
It may be in your best interest to incorporate in the home state, which is where your company will do most of its business. If you have business in other states, then you can apply to do business in that state by becoming a “foreign corporation,” which means you are incorporated in one state but can do business in another. Becoming a “foreign” company is a difficult process, involving many steps:
- Filling out paperwork;
- Paying a fee; and
- Applying for and paying for permits and licenses.
You will also need to consider that you will be paying taxes in multiple states.
The laws of incorporation vary from state to state and can include how you keep records and how many shareholder meetings you need to hold. You will need to consider the following when making your decision:
- Average amount of commercial space rent;
- Price of land;
- Property tax rates;
- Rate reductions, if any, from local or state authorities;
- Other incentive benefits from local or state authorities;
- Construction cost;
- Available transportation options such as railroads, airports and shipment companies;
- Local labor pool; and
- Types and number of permits and/or licenses needed.
The leading state for incorporation for nearly a century is Delaware. Delaware is popular for many reasons:
- A legal system responsive to corporate needs;
- A frequently revised and flexible body of corporate laws;
- A comprehensive body of corporate case law; and
- No corporate income tax for companies that are organized in Delaware but do not do business there.
However, in recent years, other states have become more incorporation friendly, specifically Wyoming and Nevada. Nevada offers the following to attract corporations:
- No corporate income tax;
- No personal income tax; and
- Excellent property rates.
In addition, Nevada does not share corporate tax information with the IRS.
For more information on where you should incorporate, contact Nevada incorporation attorney Garret Sutton at 800-700-1430.