There’s a lot of debate among entrepreneurs and small business owners about which state is the best to form an LLC. Some people swear by Wyoming, while others are die-hard Delaware supporters. So, which one is really the best? Let’s take a look at the pros and cons of each.
What is an LLC and how does it work?
First, we’ll start by looking at what an LLC is and how it works, then we’ll take a look at some of the specific differences between Wyoming and Delaware LLCs.
LLC stands for Limited Liability Company. It’s a type of business structure where the company itself is separate from its founders and owners; if something were to go wrong for the company, its owners are not directly responsible.
They also tend to have fewer regulations and reporting requirements, depending on which state they’re formed in. That means that once you’ve set up your LLC and finished incorporating your business, it’s pretty hands-off until you need to file taxes or any other reporting requirement.
What is an LLC used for?
LLCs are used for just about anything, but most often they’re used by small business owners and entrepreneurs to protect themselves from lawsuits and other involvement in the company. For example, if your LLC owns a restaurant and someone gets food poisoning after eating there, they can’t sue you personally; only the LLC itself is liable.
The benefits of forming a Wyoming vs Delaware LLC
There are a lot of benefits to forming an LLC, but one of the biggest is that it gives you limited liability in case something goes wrong with your business. That means you’re protected in most cases; if someone sues you because they got injured on your property or your product caused them harm or damages, they can’t come after you personally.
Another huge benefit is that it requires a lot less paperwork and reporting than a traditional corporation does. You only need to file an annual report every year, which can be done online or faxed in most cases, and then once taxes come around, you need to file a tax return.
Benefits when forming a Wyoming LLC
Taxes are much simpler for an LLC. As long as you’re operating in Wyoming, there isn’t franchise tax and there isn’t income tax subjected to business owners.
Another big advantage with Wyoming is that there is high privacy protection and business owners don’t need to give out their names when forming an LLC.
Benefits when forming a Delaware LLC
Since Delaware is one of the most popular places to form an LLC, you have more resources and guidance available. There are more legal resources in Delaware than there are for Wyoming so it’s easier to find out information about forming a business there.
Delaware also offers many tax benefits. There isn’t sales tax, inventory tax, or value-added tax. There is franchise tax which is a flat rate of $300 a year which is something to keep in mind.
How to form a Wyoming vs Delaware LLC
The process for forming an LLC will vary by state, but there are a few steps you can take to make it go more quickly. Start out with your name and the purpose of the business. If you come up with a name that’s already been taken, it’s going to slow down your process so search for any similar names first. Then once you’ve come up with a name, check for availability at the Secretary of State.
Next, you’ll want to hire a registered agent. You can go through a list of the best registered agents online, Financepond offers a similar list that will help you find an affordable service.
Once that’s done, you can then file to form your LLC. The form necessary is called articles of organization You can file online with the Secretary of State.
Once you finish those steps, you will have an LLC! If you like, you can form an operating agreement to set out rules for your business. It’s not a requirement, but it can help to smooth things over if two or more people are involved in the business.
Then the last step is to simply get an EIN and you are good to go!
The cost of forming a Wyoming vs Delaware LLC
The cost of forming a Wyoming vs Delaware LLC is about the same. The price range is $100-$150 and that’s only to file the articles of organization with your state.
Once you’re done filing, then there are no other expenses or fees for operating that LLC.
Both states require you to hire a registered agent who will take care of handling any legal issues or official correspondence. This is usually around $100-$150 per year, but you can find quality service for as low as $30.
Which state is right for you – Wyoming or Delaware
For small business owners, it’s hard to go wrong with either state. Wyoming is good for privacy since your name doesn’t have to be on public documents when you start out. Delaware is more popular so it has a lot of resources that are available in terms of info about LLCs and forming one.
A major factor in deciding which state you want to go with is taxes. Wyoming doesn’t have sales tax, inventory tax, or even income tax on its LLCs. Delaware has franchise taxes that are $300 a year, but there aren’t any other taxes.
So, which is the better state to form a business? Wyoming or Delaware? The answer really depends on your specific needs and what you’re looking for in a corporate home.