Incorporate or Form an LLC: Wyoming vs. Delaware

If you’re thinking about incorporating or forming your LLC in Wyoming or Delaware, you might be wondering which state to choose and why. Both offer a “business-friendly” environment but each has different benefits–and drawbacks–depending on factors such as your type of entity, your industry and the size of your company. For example, many larger corporations incorporate in Delaware due to its business-oriented legal system, but a one-person corporation may be more drawn to Wyoming’s low fees and taxes.

Although Wyoming has been in the game for a long time and was in fact, the inventor of the American LLC (currently the entity of choice among our clients), you’ve probably heard more about Delaware because it’s the home of many Fortune 500 companies. Delaware has been an incorporation hub since the early 1900’s. It’s big business. Is your company growing fast with high-profile potential and plans to become publicly-traded? Delaware might be the right choice for you.

For the small business owner, starting a Wyoming company has distinct advantages. Wyoming requires a minimal filing fee and the annual report is only $50 in most cases. You won’t pay a franchise tax in Wyoming and there is no state income tax. If you have an existing corporation that was filed in your home state and you’re tired of the state raising fees and changing its business requirements, you can move your company to Wyoming with little hassle.

For a better look at what each state offers, we’ve created this side-by-side comparison of Wyoming vs. Delaware:

Compare Wyoming Delaware
No corporate income tax X
No state personal income tax X
No franchise tax X
No state tax on corporate shares X X
Low filing fees X
Low annual fees X
One-person corporation is allowed X X
No annual report required until the anniversary of the formation date X
Corporation shareholders are not listed with the state X X
LLC members are not listed with the state X X
Unlimited stock of any par value is allowed X X
No minimum capital requirements X X
Officers, directors, employees and agents are statutorily indemnified X
Can adopt a corporation formed in another state X
Meetings may be held anywhere X X

One important thing to remember in choosing is that companies are only authorized to do business in their state of formation. That means that if you incorporate in Wyoming, but your physical business is located in California, the state of California will require you to file additional paperwork to “foreign qualify” your Wyoming corporation as a California corporation before it can operate as a business at home. Yes, it can be confusing. And expensive. That’s why the majority of small business owners file their companies in their home state, unless they have a very specific reason to incorporate in Wyoming or Delaware.

For more information about which state to choose, please visit our state page.

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