The state in which you choose from LLC may impact company's operations and the benefits your LLC is able to enjoy. Many people assume that the state in which they reside must be the state in which they form their LLC. However, this is misconception. Individuals can take advantage of the benefits that other states offer when forming an LLC. In fact, choosing to from a different state might be the best choice for your company.
When we assist our client in the formation of their LLCs, we've found that the main benefits they are hoping to achieve are privacy, asset protection, and low fees. Here, we’ll compare the states of Wyoming, Delaware, and New Mexico on these benefits and others to help you determine which state might best suit your needs.
Creator of the LLC, the state of Wyoming is known for strong asset protection and has a reputation as a tax haven. It is a popular choice for holding companies, e-commerce companies, real estate investors and more. Wyoming has charging order protection and a reduced window for transfer contesting to protect against creditors. When it comes to privacy, it also has the fewest reporting requirements with the state and allows for complete anonymity. Also noteworthy is the fact that Wyoming has no tax on corporate income.
Wyoming has a $100 fee associated with filing your Articles of Organization. There is also a $50 fee with your annual report that starts in the second year. Apart from this, there are no other fees or license requirements. Another unique aspect to Wyoming is that it allows for continuance. This means that companies can move to Wyoming while maintaining the same corporate name, start date, Employer Identification Number, and more.
Delaware is best known for its long history with corporations rather than LLCs. In fact, due to its large fee structure it is clear that the state is seeking to attract larger companies compared to smaller ones looking for the benefits that an LLC can provide. The state of Delaware has thoroughly defined corporate case law to help settle business disputes. It even has a dedicated business court system known as the Court of Chancery. These aspects are very important to corporations, however, not as relevant to small businesses that favor low fees and simplicity.
When you start a company in the state of Delaware, there are several fees to be aware of that can total in hundreds of dollars. This includes a $300 franchise tax and a $50 fee simply for changing registered agents. While these fees are likely not even noticeable for large companies, they may hit smaller companies a bit harder. Additionally, there is no income tax in Delaware or any requirements for disclosing company owners. However, Delaware does share certain information with the IRS and review companies against the Treasury database.
The state of New Mexico allows you to take advantage of all LLC benefits at a comparably lower cost. New Mexico is a great fit for small businesses, real estate investors, and other entrepreneurs and investors that are cost-conscious and privacy-minded. New Mexico LLCs do not require you to list your owners in the Articles of Organization, only whether your LLC is a single-member or manager-managed. Additionally, New Mexico offers the same limited liability protection as other states.
A big draw of the New Mexico LLC is its no annual report or annual fee. While other states require this periodic reporting and fee collection, New Mexico skips it altogether to help you save your resources. Your only charge will consist of the $50 filing fee for your Articles of Organization. This makes forming an LLC in New Mexico the cheapest option available in the US. Your only requirement after formation is to maintain a registered agent.
While this choice can vary depending on your specific needs, the state of New Mexico is often the smart choice to form an LLC for many reasons. The most commonly sought LLC benefits, such as privacy and low fees, are easily achievable with a New Mexico LLC. Once you have set up your New Mexico LLC, the only responsibility you have to keep it in good standing with the state is to maintain a qualifying registered agent. This mix of privacy, asset protection, low fees, and low maintenance, makes New Mexico a great state in which to form your LLC.