Why so much interest in Wyoming LLCs?
When I ran the Attorney General's consumer protection unit in Wyoming, I was involved in many, many investigations and enforcement actions against Wyoming limited liability companies (LLCs) under the Consumer Protection Act. I would estimate that 99% of the Wyoming LLCs that I saw were owned by non-residents of Wyoming. They were owned by residents of California, Arizona, Florida and other states. Many of them were even owned by foreigners. I started to wonder what the big draw was to Wyoming LLCs.
I soon learned that there were several factors making Wyoming LLCs attractive to non-residents. Here are the factors:
1) Secrecy - The Wyoming LLC form provides secrecy for the owners. By operation of the Wyoming statutes and rules, a registered agent can form a Wyoming LLC, as an "organizer" and then transfer it to the purchaser in secret. The registered agent's name will show up on the public records at the Secretary of State's Office, but the purchaser's name will not show up. Unless voluntarily divulged, the Secretary of State's Office will not know the identity of the real purchaser of the LLC.
There is a rule that requires that the registered agent maintain the name and contact information of a natural person associated with the LLC (i.e. a "contact person"). However, that information is not voluntarily provided to the Secretary of State's Office, and never provided to the general public. The Secretary of State can request that information from the registered agent or learn of it through an audit of the registered agent. The information can also be obtained through a subpoena to the registered agent.
[UPDATE: In the past, the "contact person" did not have to be the purchaser, owner or member of the LLC. The "contact person" could be the attorney for the LLC. This created a double layer of secrecy as the attorney may assert the attorney-client privilege if asked to divulge the name of the true owner of the LLC, and keep that information secret even from the Secretary of State's Office. That option has been modified by recent changes to the Wyoming statutes. There is still anonymity, but not as great as in the past.]
2) Tax Implications - Wyoming has no corporate income tax. So, many people assume that if they form a Wyoming LLC no state taxes will be paid for income earned from that LLC. I am not an expert on taxation issues, but I do not think that the tax issue is so straightforward.
3) Ease of formation - Many Wyoming registered agents are very efficient at forming LLCs. They can form a LLC in a matter of just a few days. And they can do everything online, through email communications. This is very attractive to those in a rush to get their business going.
4) Low Ongoing Costs - The formation fee and annual filing fees are relatively low for Wyoming LLCs. For those wanting to maintain a low overhead, this is a very attractive feature.
5) Favorable State Law - Wyoming was the first state to allow for the formation of Wyoming LLCs. It has favorable state law protecting and limiting the liability of the members of a LLC. For those seeking to truly limit their liability, the Wyoming LLC is on the short list of entities to choose from. [UPDATE: This is actually very effective. I recently tried to collect a judgment from several subsidiary limited liability companies of a trust. I found that the LLCs created in Wyoming were more protected from collection than the ones created in Colorado. I was essentially blocked in Wyoming, but allowed to go forward in Colorado.]
6) Office Location - Many registered agents specialize in providing "virtual offices" for their Wyoming LLC clients. When the registered agent forms the LLC, it gives the LLC a street and mailing address in Wyoming. This feature helps those who are engaging in commerce online from their homes. LLC owners can avoid having their home address made a public record. Instead, the registered agent's address is given as the LLC's address.
These seem to be the most common factors that lead people to favor Wyoming LLC's over other states' LLCs. During investigations and interviews I heard many non-resident LLC owners voice these factors as the basis for choosing a Wyoming LLC over their own state's LLC.