Given the recent attacks on single member LLC’s in Florida, Colorado and elsewhere, the best LLC law that was, has recently been updated. On March 5, 2010, when Governor Dave Freudenthal signed into law the 2010 Wyoming Limited Liability Company Act (2010 LLC Act or New Act), a comprehensive update to Wyoming’s LLC laws.
“The state of Wyoming again has the best LLC asset protection law in the nation.”
A single member LLC is protected by charging order
Better asset protection law than any other state
Wyoming law does not allow any room for interpretation
Wyoming Asset Protection Trust can be linked to the LLC for Estate Planning advantages
Wyoming LLC is confidential and private
Zero Wyoming state tax for an LLC
Much lower cost than Nevada
Sole member and multi-member LLC’s protected
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 as to Single Member LLC’s. The charging order is the “exclusive remedy.” This means that you do not have to have 2 or more members in the LLC to get the charging order protection! Other remedies, including foreclosure and a “court order for directions, accounts and inquiries” are not available and may not be ordered by a court.
Why NOT Nevada or California?
Wyoming’s law is better than any of the other popular states.
California allows a court to charge the LLC interest; appoint a receiver; order foreclosure; and make all other orders, directions, accounts and inquiries the judgment debtor might have made or the circumstances require.
Nevada declares charging order to be the exclusive remedy, but gives the creditor rights of an assignee.
Delaware provides for charging order as exclusive remedy, but then also provides that it constitutes a lien on the debtor’s LLC interest. Wyoming does not even allow a lien!
Interpretation Not Required...Or Permitted!
Wyoming Law does not allow any room for interpretation. The law states...
“On application by a judgment creditor of a member or transferee, a court may enter a charging order against the transferable interest of the judgment debtor for the unsatisfied amount of the judgment. A charging order requires the limited liability company to pay over to the person to which the charging order was issued any distribution that would otherwise be paid to the judgment debtor.”
“This section provides the exclusive remedy by which a person seeking to enforce a judgment against a judgment debtor, including any judgment debtor who may be the sole member, dissociated member or transferee, may, in the capacity of the judgment creditor, satisfy the judgment from the judgment debtor’s transferable interest or from the assets of the limited liability company. Other remedies, including foreclosure on the judgment debtor’s limited liability interest and a court order for directions, accounts and inquiries that the judgment debtor might have made are not available to the judgment creditor attempting to satisfy a judgment out of the judgment debtor’s interest in the limited liability company and may not be ordered by the court.“
To avoid having income frozen inside the LLC as a result of a charging order, the Wyoming Close LLC can be owned by a Wyoming Domestic Asset Protection Trust (DAPT), under which a trustee may make discretionary distributions to the debtor’s family and perhaps even directly to the debtor.
This type of planning is best done before it is needed. Significant potential benefit may be realized in terms of leverage against creditors, if ever needed.
If you desire privacy, keep in mind that Wyoming does not require the members or managers to be listed on the public record.
Tax implications for an LLC
Wyoming has no income taxes so a Wyoming LLC is not taxed by the state. An LLC normally passes the taxes through to its owners and if those owners live in a state that taxes income, they would pay state taxes in that state.
Since an LLC normally passes the taxes through to its owners and if those owners are a Wyoming trust, there may be considerable tax advantages for clients who live in a state with state income tax.
Wyoming state fees are some of the lowest in the nation... especially since Nevada raised their fees and added taxes the beginning of June, 2015.
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.
The Wyoming Close LLC “A Wyoming Business Advantage”
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. 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 — operates without pomp and circumstance required in regular LLC's where a large number of members must receive information and vote.
- Cost of operation — relaxed corporate governance means lower legal, accounting and administrative fees for lower total cost of operation.
- Deadlock prevention — provides access to the court when members are deadlocked and harm could befall the LLC through lack of action.
- Buy-out provisions — members may buy out a deceased member’s interest according to member agreements.
Generally we regard the “Close LLC” as a highly advantageous and flexible vehicle for small and medium business. A possible disadvantage might be in cases where raising capital through the sale of membership interest is required.