A limited liability company is the best business structure, not only for first-time marketers but also for experienced business owners. The fact is that an LLC has combined the advantages of other business structures, providing companies and owners with greater security and allowing entrepreneurs to run their companies in a tax-efficient way.
U.S. states and each individual region do not have the same conditions for opening and operating an LLC. Some offer a more business-friendly environment, making them attractive to entrepreneurs. These include Wyoming and Delaware.
So which state should you choose?
Let’s compare both of the states, their LLC filing requirements, fees, and commission specifics. This way, you will know exactly which state is the most suitable for your future LLC.
Wyoming vs Delaware: General Features
There are several aspects that are equally good for both states, and judging by them, there’s no difference in where to open an LLC. Still, you should realize that this is just the tip of the iceberg.
With that said, let’s discuss the main similarities for LLCs between Wyoming and Delaware:
- Both Wyoming and Delaware guarantee LLC owners’ anonymity. In other words, they don’t have to put their names and other information on the documents;
- Personal assets of the LLC owner will remain safe in case the company goes into debt. The same can be said about each LLC member’s reputation when it comes to litigation;
- There are no special management requirements or rules. You can meet with shareholders in any region, even out of the state/country, and make important decisions about the vision/governance of the company;
Neither Wyoming nor Delaware burdens LLC owners with capital rules – it’s always up to the members.
Check out the table below to understand more for yourself, or read this comparison of Wyoming vs Delaware LLC by llc.services.
| Requirements and Regulations | Wyoming | Delaware |
| Income Tax | – | – |
| Personal Income Tax | – | + |
| Tax on Corporate Shares | – | – |
| Franchise Tax | – | + |
| Initial Fee | + | – |
| Annual Payments | + | – |
| Annual Report after Registration | – | + |
| Submission of Initial Membership Lists | + | + |
| General Business License | – | – |
| General Certificates | – | + |
| Minimum Capital | – | – |
| Legal Exemption from Liability | + | – |
| Corporate Income Tax Information for the IRS | – | + |
Advantages and Disadvantages of Delaware
Delaware has a Court of Chancery, which deals with commercial law and helps businesses resolve corporate conflicts and business issues without involving a jury. So the first and foremost advantage of Delaware is its legal system.
The second advantage is the simple and efficient incorporation process. Thus, Articles of Organization can be filed with the Secretary of State online or by mail. After that, they can be reviewed by the Secretary within a few days or 24 hours if you choose the expedited service.
Delaware also has low fees and taxes. For example, foreign LLC companies are not taxed and can expect low franchise tax.
DE also has its downsides:
- A mandatory annual tax of $300;
- Double registration for foreign companies;
- The necessity of an Operating Agreement;
- More expensive fees (compared to Wyoming).
Advantages and Disadvantages of Wyoming
Wyoming is a favorable state for small businesses. Unlike Delaware, it has fewer taxes and fees. In addition, forming an LLC here is much less expensive and time-consuming for entrepreneurs since less paperwork is required to file Articles of Organization (for example, there’s no mandatory operating agreement to be drawn up). Therefore, we should talk about a simpler registration procedure.
A few more reasons to open an LLC in Wyoming:
- No income tax and franchise tax;
- Simplified management system;
- High standards of privacy.
The disadvantages of Wyoming for LLCs include the following facts:
- Information about LLC owner(s) must be transferred to a registered agent, which reduces the level of anonymity;
- In the event of a dispute with a non-resident state, protection of the state does not apply;
- Double payment for registration and service in both states for non-residents.
Taxes and Fees: from Registration to Administration
Your first expenses will be registration fees – not only the state filing fee but also fees associated with business name registration and registered agent services. Otherwise, the secretary will not approve your Articles of Organization.
In Delaware, for example, filing a business name will cost $75. Whereas, in Wyoming, it’s $50. Name reservations are valid only for 120 days in both states.
An RA will be required to file the Articles of Organization in each state. The agent may cost you from $40 to $500 per year. Changing your resident agent in Wyoming will cost you nothing, in Delaware, the fee is $50.
Registration Fees
The state filing fee in Delaware is $90, processing usually takes 10-15 days. There’s also a way to speed up the process by paying an additional $100 for a quick registration service. LLC registrations for foreign companies cost $200.
In Wyoming, business registration prices start at $100 by mail, and online applications cost $102. Foreign companies will need to pay $100. Meanwhile, the processing time for applications by mail is up to 15 business days, online filing is almost instant. Given the speed of processing applications online, there’s no expedited process in Wyoming.
Note that business registration can be entrusted to third-party services that will collect and file all the necessary documents with the Secretary of State. Even though this implies additional expenses, such a solution will save business owners from all the hassle associated with the paperwork and allow them to file the required forms correctly. Professional services will consider all the necessary requirements of the particular state. Plus, service packages of such agencies will often include registered agent services at no charge (for the first year of service).
Additional Costs
As for filing annual reports, the conditions vary between the states. Thus, in Wyoming, business owners must pay $50 for the procedure every year. In Delaware, there’s no such requirement, but there’s an annual tax at a flat rate of $300. It’s also important to keep in mind that Delaware charges a $200 + % penalty for late payment of your annual tax.
As for a Certificate of Good Standing (AKA a Certificate of Status), in Delaware, you can get one through the Division of Corporations. The fee is $50 for the short form, and a Long Form Certificate of Good Standing will cost you $175. In Wyoming, such a document can also be obtained from the Secretary of State online at no charge. By mail, the processing fee is $10.
Unlike Wyoming, Delaware has its requirements for an Operating Agreement under Section 18-101(7), which will incur additional costs. While it should be noted that an Operating Agreement is a key document that is important for any business in any state, in most cases, it is drafted at will.
Final Thoughts
Both states have favorable environments for LLCs, however, each has many peculiarities and nuances that require careful consideration.
For example, Delaware would be more suitable for business owners who plan to convert from an LLC to a C-corporation, while Wyoming is suitable for small foreign companies, considering your business niche and activities.
Delaware can be your option if your company is associated with a high risk of litigation. The reason is that the state offers a high level of legal protection. In terms of taxes and benefits, Wyoming will be more attractive to small businesses.
With that said, answering the question “Where is it better to open an LLC, in Delaware or Wyoming?” is quite difficult, and in most cases, the answer will require individual research.
Both states provide a high level of privacy, hence, LLC members can be sure that their personal assets will remain safe, even in case of any lawsuits. Wyoming and Delaware do an excellent job in terms of business privacy and provide enough opportunities to attract startups.
Author’s Bio
Dmitriy Kondratiev, chief Editor of LLC.services, associate in Axon Partners.
Experienced lawyer (Intellectual Property, Patenting, Contract law, Labor Law, International Private Law).
Worked with IT-companies Webxloo (Delaware), Autoxloo (Florida), SCC (Delaware)
