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Form a Delaware LLC if you intend to go public
with an initial offering. Large companies are best served by
Delaware because of their Chancery Court.
On the contrary, a Wyoming LLC is the best option
for the small and family run business considering a limited liability
company as their entity of choice.
In 1977, Wyoming was the first state to pass a Limited Liability Act.
This was the first time the Limited Liability Company (LLC) was
introduced to American business. Once the IRS recognized the LLC can be
taxed as a partnership (that is, as a pass-through entity), all 50
states passed statutes creating their own version of the LLC.
Why a Wyoming LLC?
Wyoming LLC Statute 17‑15‑145. Rights
of creditor.
“…The charging
order is the exclusive remedy by which a judgment creditor of the member
or transferee may satisfy a judgment against the member's interest in a
limited liability company.”
The Wyoming LLC: The Assets Are
Made Unattractive To The Creditor
The manager of the
Wyoming LLC can refuse to distribute the earnings. (If the operating agreement
so allows.) What is the advantage of withholding the distribution from
the hostile creditor?
This means that the
creditor is now liable for income taxes on those Wyoming LLC earnings, whether
or not they’re distributed. The hostile creditor is now liable for
taxes on earnings not yet received or for what is typically referred to
as “phantom income.” This places the member in a stronger position to
negotiate a favorable settlement. Hostile creditors don't want to pay
taxes on earned income that's out of reach.
For this charging
order protection to be most effective, the Wyoming LLC must
·
Have at
least two (2) members [Important!] in the Wyoming LLC
Managers can be people
or another business.
·
The
Wyoming LLC is taxed
as a partnership
·
The
Wyoming LLC is
managed by a manager, not the members. [Important!]
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