The majority of new businesses fail. This is one of the harsh realities of opening a new business. The harsh competitive landscape demands a response that tilts the odds in your favour. Starting a business in the right ecosystem gives you better odds of surviving the first difficult years of your new business’ life. I believe one of the best ecosystems you can start a business in, is Wyoming.
It’s the Most Tax Friendly State in the Country
According to the Tax Foundation’s 2021 State Business Tax Climate Index, Wyoming is the most tax-friendly state in the country. The state does not have any individual income tax and is one of just two states that do not levy either corporate income tax or gross receipts tax. These taxes are a burden on businesses and even when they are marginal, demand a lot of resources in order to ensure that the right calculation is made and the appropriate tax paid.
Therefore, a business saves money, not just in terms of taxes, but also in terms of the regulatory burden those taxes imply.
The state does not also levy any franchise tax, or stock tax.
The absence of individual income tax is a great benefit to the members of limited liability companies (LLCs). This is because the income of LLCs are passed through to its members and taxes charged to them. Members therefore do not pay taxes on income derived from LLCs.
In many states, state and federal taxes average at around 45-54%. If your business entity type will be an LLC, in which case the tax burden passes through to the members, this is an important consideration. The individual income tax burden is an important component of the total tax rate. Because LLCs are flow-through entities, non-resident LLC members will have to pay taxes where they live, but they will not face any additional taxes in Wyoming.
Wyoming Cares About Your Privacy
The names of LLC members, shareholders of companies, and CEOs and non-registered officers, are not part of the public record. This level of privacy is hard to beat and important for many business owners who want to shield their assets or just avoid the spotlight.
Wyoming allows you to have a “Nominee manager” or “Nominee Director”, who will be the face of the business and appear on public records.
Wyoming law does require that the names of managers be a part of the public record, but the use of nominees is a legal way to get around this. These nominees do not have any control over the affairs of the company. So if, for instance, you are afraid that a contingency fee attorney will be after your assets, you can be safe in the knowledge that they will not find your name among the public records.
The nominee need not have any meaningful position in the company. They provide an extra layer of privacy for the managers of businesses in Wyoming.
The owners of privately held businesses are protected from having to have their names on the public records. This protects shareholders from lawsuits because their ownership is essentially a state-protected secret.
No Information Sharing Agreements
Wyoming does not share any personal or business records with outside agencies because it does not have any information sharing agreements with them. So for instance, it cannot share information with the Internal Revenue Service (IRS), so that there can never be conflicts between state and federal data sets, creating red flags for your business.
It’s Perfect for Non-Residents
You do not need to live in Wyoming in order to own an LLC there. Apart from being over-18, there are a few basic regulations around who can own an LLC in Wyoming. So if you want to form an LLC in the state in order to protect your assets, you can do so regardless of where you live.
In Wyoming, it is not possible to “pierce the corporate veil” and be held personally liable for the liabilities of a corporation or LLC. Wyoming business owners or members are granted full immunity from the acts of their businesses. An individual enjoys personal liability in their capacity as an LLC-member, so long as there is no breach of fiduciary duties or any fraud. Managers are protected too. So the idea that at some point an individual will face the wrath of the law for a business decision, does not exist in Wyoming.
Single-Member LLCs Enjoy Charging Order Protection
Charging order protection means that members can be protected, in the event of a lawsuit, from losing their company or company assets.
You Don’t Need Cash to Run the Business
Corporations and LLCs can exchange their company stock or LLC membership for cash, services, real estate, work and much more. In other words, as an LLC member, you can receive or offer services and/or some asset, rather than cash. Not all LLC types offer this option, but it is an advantage worth considering, especially if you anticipate that you will be short of cash.
Light Regulatory Touch
Wyoming does not have a heavy regulatory hand. LLCs enjoy an absence of many of the formal managerial regulations that corporations must adhere to. Corporations have to be overseen by directors, who look after the broader interests of the corporation and keep management in check. Corporations must also have officers who run the business.
LLCs, on the other hand, are not obliged to have such formal structures. Because it does not have any shareholders, it does not have to have shareholder meetings. Because most do not have directors, there is no need for directors’ meetings. You just need a registered agent. This is why LLCs are so much easier to run.
Profits Can Be Distributed in Different Ways
Wyoming offers various options for distributing options. LLCs do not have a limit on the number of members they can have. Furthermore, LLCs are not subject to any regulations regarding how profits must be distributed. A person can own 10% of a business and enjoy 80% of the profits, with 100% of the control, so long as that was stipulated in the operating agreement. What matters is that everything is agreed to, beyond that, the state allows businesses flexibility in determining how profits will be distributed.
You can learn more about starting a business in Wyoming on this page.