Why A Delaware LLC?

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

  • Managers can be people or another business.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!]


First country to form an LLC type entity: Germany (1892)

Countries that followed:

  • Portugal (1917) Brazil (1919)
  • Chile (1923)
  • France (1925) (“Societes de responsabilite limitee”)

  • Turkey (1926)
  • Cuba (1929)
  • Argentina (1932)
  • Uruguay (1933)
  • Mexico (1934)
  • Belgium (1935)
  • Switzerland (1936)
  • Italy ( 1936)
  • Peru (1936)
  • Columbia (1937)
  • Costa Rica (1942)
  • Guatemala (1942)
  • Honduras (1950)

USA (1977 In Wyoming)

Eder, Limited Liability Firms Abroad, 13 Univ Pitt L Rev 193 (1952).

See this link for more information.