Wyoming vs Delaware LLC: Where to Form an LLC?

If you’re starting a business and forming a limited liability company (LLC), you may have heard that certain states are more favorable for LLCs, in terms of taxation and legal issues. Delaware and Wyoming are two of those states, and it’s a good idea to examine the differences before you choose one.

	Delaware LLC	Wyoming LLC
Formation Fee	$90 to register your LLC.	$100 to register your LLC.
State Personal Income Tax	Yes, there's a state personal income tax.	No.
State Corporate Income Tax	No.	No.
Franchise Tax	Yes, Delaware requires an annual franchise tax.	No.
Annual Fee/Tax	Minimum annual fee/tax is $300.	Minimum annual fee/tax is $60.
Court System	Has the Chancery Court system, which allows businesses to quickly settle disputes.	Does not have a specialized court system like Delaware's Chancery Court.
Special LLC Types	Does not recognize Series LLCs or Non-profit LLCs.	Recognizes both Series LLCs and Non-profit LLCs.
Liability Protection	Offers strong liability protection for members and reduced fiduciary duties.	Offers strong liability protection for members and limited fiduciary duties.
Ease of Formation	The process is fairly straightforward, but Delaware does tax out-of-state income.	Minimal paperwork, no operating agreement required, and Wyoming does not tax out-of-state income.
Investor Appeal	Delaware is popular for businesses planning to attract investors or go public due to its pro-business laws.	Wyoming is gaining popularity but is less recognized than Delaware in terms of attracting large investments.

Delaware LLC

Delaware is considered a favorable state to form an LLC. Delaware does not tax out-of-state income, so if you do business in other states, there will be no Delaware state tax.

The fee to register your LLC is only $90, and franchise taxes are low. Also, Delaware has the Chancery Court system, which allows businesses to settle disputes quickly.

Finally, Delaware offers the greatest liability protection for members and reduced fiduciary duties and has the most pro-business laws in the US. 

Wyoming LLC

Wyoming is also a top state for LLC formation. Wyoming has no state income or corporate tax, and no franchise taxes. It also has low LLC formation fees. 

Registering your LLC in Wyoming costs $100. The paperwork is minimal, and no operating agreement is required.

Wyoming is one of the few states that recognizes nonprofit LLCs and Series LLCs. A Series LLC allows for the segregation of members’ interests, assets, and operations into independent series. Each series is its own entity and can have its own finances.

Wyoming also offers more liability and limited fiduciary duties for LLC members.

Side By Side Comparison

Filing fees:

• Delaware – $90
• Wyoming – $100

State personal income tax:

• Delaware – Yes
• Wyoming – No

State corporate income tax:

• Delaware – No
• Wyoming – No

Franchise tax:

• Delaware – Yes
• Wyoming – No

Annual fee/tax:

• Delaware – $300 minimum
• Wyoming – $60 minimum

Should You Choose a State Other Than Your Own?

If you’re thinking of forming an LLC in a state that’s not currently your home state, you may only be doubling your paperwork and filing fees. This is because you will likely still need to register as a foreign LLC in your home state and be subject to its laws and taxes as well as those of the state in which you form your LLC.

This is true even if you merely base your business in your home state, but don’t do any sales there. This is because your business headquarters must be in the state where you live, whether you work from your home or not. Most state laws dictate that you must physically move to the state in which you form your LLC in order to avoid registering as a foreign LLC in your original home state.

A foreign LLC is simply an LLC doing business in a state other than the one in which it’s registered. For example, if your LLC is registered in Wyoming but you also do business in Georgia, you’ll need to register a foreign LLC in Georgia.

If you have an LLC in your home state but do business in other states, you need to register as a foreign LLC in all of the states where you do business. Each state has different rules defining what doing business in their state means. Check with the secretary of state in any states where you may be doing business to see if you qualify. Generally, you’re doing business in another state if:

• You have a physical presence of any kind in that state
• You have employees in that state
• You regularly meet with clients, managers, or investors in that state
• You’re licensed to do business in that state

You also may be considered a foreign business if your business has a bank account or property in that state. However, if you’re an online business in one state and happen to make a lot of sales in other states, you’re probably not considered a foreign business and thus not required to register a foreign LLC.

In Closing

Both Delaware and Wyoming offer real advantages to an LLC owner, so it’s important to look closely before making a decision.

Generally, it is not beneficial to register your LLC in a state other than your home state since you’re still subject to the laws of both states. When forming your LLC, it’s best to speak with a tax advisor familiar with the laws of your home state as well as those of Delaware and Wyoming, to advise you on which might be best suited to your business and situation.