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Friday, October 7, 2016

Wyoming LLC's Lead The Way Over Nevada and Delaware

For many years Nevada promoters touted Nevada as a tax-free State and "one of the best places to incorporate” because of their privacy and "asset protection" – until now.

On May 31, 2015 the Nevada State legislature passed into law a Gross Receipts Tax and has developed the first ever Nevada Commerce Tax Return.

Every for-profit business in Nevada must file a Nevada State Commerce Tax return by August 15th of each year, starting in 2016.  This includes pass-through entities such as S-Corps, LLC’s, and Partnerships.  This tax return is due even if a company has not previously paid any Nevada state taxes, is not generating a profit, or is a flow through entity. Also, remember this is a tax on your gross income so there are no deductions!

At this time, not all businesses are being required to pay the Gross Receipts Tax, but Nevada's history of fee's over the past ten years may hold a clue to future intent:

  • Nevada has increased its filing fees twice.
  • The “State Business License” (SBL) was re-created. Only specific businesses were required to pay a one time fee, as opposed to a yearly fee.
  • Nevada then started requiring all businesses file a SBL and pay a yearly fee.
  • Nevada then raised this yearly fee 3 times on corporations, over a period of 4 years.
  • SBL fees continue to rise.  It began at $100 then went to $200 for pass-though entities.  Corporation now pay $500.  Additionally, if you file or pay late, you will be assessed a $100 penalty fee.  There is also another $100 penalty fee if you file your Nevada Commerce Tax return late.
Look at what is currently required by Nevada.

Simply go to the Nevada Secretary of State’s website and type in the name of the person(s) you are looking for and all the business entities that person(s) is affiliated with, or has ever been affiliated with, will be listed.

On the State Business License form, you are required to list all officers, directors, shareholders, with their first and last names, home address, home phone, date of birth, SSN and the percentage of the company they own.

And...the new Nevada Commerce Tax Return form requires the total income and the source of that income for all companies, so they can make the determination if a tax is owed.

And...this is required from all Nevada corporations, even if you do not owe any tax, nor have any Nevada sourced income.

Wyoming is your best choice
Wyoming has not raised its fees in many years.  Wyoming has consistently been ranked the most business friendly state in the nation to start or operate a business.  Wyoming has no income tax, no gross receipts tax, and no State Business License.  Wyoming is much more private.  Wyoming does not require the listing of members or managers on the public record.

Reasons to move out of Nevada

In 2016 you will have to file a tax return with Nevada, even if you are under the gross receipts tax limit. This is going to provide Nevada with inside information in regards your company. Information that Wyoming does not ask for.

In 2016 your minimum State fee to Nevada for a corporation, will be at least $650. If you had a Wyoming corporation, in most cases this fee would be $50.

In 2016 you may be required to list owners with Nevada. Wyoming does not ask for this information.

Reasons to move out of Delaware
Wyoming corporate statutes are clear in that Wyoming corporations may engage in stock buy-back programs without any restrictions.  The restrictions that apply to payment of corporate dividends, in Delaware, are not included in the provision of Wyoming law that specifically authorizes stock buy-backs.  The legal certainty provided by Wyoming law on this point is a clear advantage over the present state of Delaware corporate and case law.  Additionally, there are substantial savings on state franchise tax. 

Public companies save over $250,000 per year in state fees, by re-domiciling to Wyoming.
Since Wyoming has had limited liability companies available longer than any other state, has the strongest laws protecting the members and managers of an LLC, Wyoming is the obvious state of choice for establishing LLC corporations.

In 1977 Wyoming became the first state to authorize the limited liability company (LLC). WE INVENTED THE LLC. Other states followed suit by adopting LLC acts of their own, especially after the Internal Revenue Service (IRS) granted LLCs formed pursuant to Wyoming’s original LLC Act (Original LLC Act or Original Act) favorable partnership tax status in 1988.

With its adoption of the 2010 Wyoming Limited Liability Company Act, the Wyoming legislature has chosen an “opportune moment to identify the best elements of the myriad ‘first generation’ LLC statutes and to infuse those elements into a new, ‘second-generation’ uniform act.” On March 5, 2010, Governor Dave Freudenthal signed into law the 2010 Wyoming Limited Liability Company Act.

Wyoming has pioneered a new form of LLC that precludes creditors from any legal or equitable remedy other than a charging order against the LLC interest, even for Single Member LLC’s. The charging order is the “exclusive remedy.”  This means that you do not need to have 2 or more members in the LLC to get the charging order protection!

The Close LLC was created by an act of the Wyoming legislature especially for small LLC's which have a small number of Members, usually having ties to one another through family relationships or friends and business partners. Close LLC's are special classes of regular business limited liability companies electing to operate in a more informal manner likened to partnerships.

Regular business LLC's must conduct member and director meetings and provide members with written proposals for any major action to be voted on in the annual meetings.

So, Family LLC's usually do not hold annual meetings because the family regularly makes decisions around the breakfast table or wherever.

A board of directors also is not required, so there is much less paperwork required for ongoing operations.

The Wyoming Close LLC Law allows small LLC's to forego many traditional corporate formalities.

Limited liability — the law says members don’t have personal liability, even though they relax corporate formalities in operations.

Ease of operation, which operates without pomp and circumstance required in regular LLC's where a large number of members must receive information and vote.

Cost of operation is reduced because relaxed corporate governance means lower legal, accounting and administrative fees for lower total cost of operation.

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