Why Form an LLC in Delaware vs. Wyoming?
Making the choice between a Delaware LLC vs. a Wyoming LLC can be a daunting task if you’re not familiar with the laws in each state. However, both Wyoming and Delaware have clear advantages and disadvantages that should be considered while making your decision.
Overall, Delaware has a better legal system. However, Wyoming is less expensive. Despite the differences, there is oftentimes a clear winner between the two states of formation.
Below is a breakdown of the pros and cons of forming with each state to help you make the most of your decision when choosing a place for your LLC.
Maintenance, Fees, and Taxes
Both Delaware and Wyoming have low filing fees, however in accordance with prices, Wyoming barely scratches by with a slightly lower filing fee.
Wyoming’s minimum filing fee is $100. In contrast Delaware’s minimum filing fee is only $10 more at $110.
With regards to initial filing fees, if you want a slightly cheaper option starting out, Wyoming is your best bet, however, that extra $10 for Delaware LLCs offers other benefits that must be taken into consideration before jumping the gun on purchasing a Wyoming LLC.
Wyoming’s annual report fee (franchise tax) is the greater of $60 or $0.0002 per dollar based on the company’s assets located and used in the state of Wyoming. In contrast, Delaware has an annual franchise tax fee of $400.
The fees may be greater for Delaware, but when it comes to liability protection, you get what you pay for. In Delaware, you are more likely to be struck by lightning than have your corporate veil pierced by a business creditor. On the other hand, in Wyoming the owners have less protection because the Wyoming courts recognize multiple theories to pierce a corporate veil, such as under capitalization. This means Delaware has a bulletproof shield for owners of LLCs, where the Wyoming shield has holes like Swiss cheese.
Member and Manager Disclosure
Wyoming and Delaware both allow for privacy regarding their LLC owners’ names and other information. They do not require the disclosure of the manager or members of the LLC. This keeps the full dynamic of the company private and off the public records. Additionally, the Delaware LLC gives you maximum freedom of contract to structure business as you see fit.
The Delaware courts will enforce the operating agreement as written. While Wyoming was the first state to have an LLC law, its legislature does not update its statute as often as Delaware, meaning you will be missing out on cutting edge developments in business organization law. This is why Delaware has about ten times as many LLCs as Wyoming. Also, both the Wyoming courts and Wyoming Division of Corporations cannot hold a candle to Delaware. Both are much faster and competent in Delaware.
Neither state requires LLCs to file of an annual report, only to pay an annual Franchise Tax. In either state, owners are not required to disclose personal information online.
Which Is Better: Delaware LLC or Wyoming LLC?
While Wyoming offers an attractive low-cost model for smaller businesses prioritizing internal privacy, it lacks asset protection and court system should you run into trouble. For a business anticipating cross-border operations, much better asset protections, multiple members, or sophisticated processes, the presence of Delaware’s Court of Chancery offers a premium tier of legal protection and predictability that Wyoming’s standard court systems cannot match.
Ultimately, Wyoming presents itself as a great place for a simple low cost, anonymous LLC structure, but Delaware remains the gold standard for legal security and privacy for just a little higher annual fee.