The Wyoming Close LLC
And Why It Provides Great Planning Opportunities
© Teton Publishers, LLC
The State of Wyoming is one of the most
attractive states in the country, if not the most
attractive, because of its taxes. Bloomberg Wealth Manager
magazine has declared Wyoming to be the number one
friendliest state for wealthy people. In December 2009,
the Tax Institute, Washington, DC, declared Wyoming to
be the #1 state with the friendliest tax rules regarding
small businesses. For example,
Wyoming has:
Wyoming is also attractive as the state to choose for
the formation of business entities. Choices of business
entity have evolved. Historically, corporations were the
business entity of choice. However, limited partnerships
and limited liability companies have become more popular
as they provide greater tax reduction, greater asset
protection and are more flexible. In July of 2002,
Wyoming’s legislature enhanced their Close Liability
Company legislation. These statutes are unparalleled
when determining a jurisdiction for a business entity
for your clients. These are the reasons why...
1. CREDITOR PROTECTION
Creditor protection is one of the main reasons clients
put their businesses into a statutory entity. However,
many state statutes only give nominal creditor
protection for their business entities. The Wyoming
Close LLC gives maximum protection as it mandates by
statute that a creditor of a member of an LLC only has
the rights of a transferee and that the charging order
is the exclusive remedy by which a
judgment creditor may satisfy a judgment. (W.S.
17-15-122).
Effective 7/1/10, Wyoming has become the first state to
provide asset protection to single member LLCs, the same
as multi member LLCs.
Thus Wyoming statutes now provide the best protection of
any state.
2. VALUATION ADJUSTMENTS & COMPRESSION of VALUE
LLCs (and FLPs) are often used to adjust or compress the
valuation of assets in the entity. These discounts are
available because of the restrictions placed in the
operating agreements on the members of the LLC. These
discounts are helpful both for gift and estate tax
reduction. However, the Internal Revenue Code does not
allow restrictions on withdrawal or dissolution rights
that are more rigid than that of the default law of the
state where the LLC (or FLP) is created. Thus, even if
an operating agreement places severe restrictions on
these rights, when determining the reduction in value,
only the default under state law may be considered.
Thus, discounts may not be as favorable in many other
jurisdictions.
Under the Wyoming Close LLC statutes the default
restrictions are very strict. The default restrictions
are as follows:
A. A member may withdraw from the LLC
only with the consent of all the members. In addition,
the withdrawing member may not have a return of his or
her capital unless all members consent, and irrespective
of his or her capital contribution, only has the right
to demand and receive cash in return for his or her
contribution to capital. (See W.S. 17-25-107).
B. The Wyoming Close LLC may be dissolved
only by unanimous written agreement of all the members.
(See W.S. 17-25-108).
These onerous default restrictions allow greater
discounting or compression of value of the assets within
the LLC, thus generating greater tax savings.
3. SIMPLE to CREATE and EASY to ADMINISTER
FLPs are commonly used as the business entity of choice
for discounting of value and creditor protection. The
main problem with an FLP is that there must be a general
partner who is the manager and a limited partner who is
not a manager. The limited partner has statutory
creditor protection but the general partner has no
creditor protection and may be held personally liable.
Thus all the assets owned by the general partner are
subject to attachment by creditors. To avoid this
potentially disastrous result, practitioners create the
FLP entity and then create another entity to hold the
general partnership interest. Only with the creation of
this other entity can the general partner have
protection from creditors. This second entity often is a
corporation or an LLC. Each entity requires a separate
checking account, a separate tax identification number
and a separate annual tax return. If a client does not
want the administrative burden of two entities, the only
option is for the managing general partner to be an
individual without creditor protection. The Wyoming
Close LLC grants to all members, whether they are
managing members or non-managing members, protection
from creditors. To obtain creditor protection for all
members of a Wyoming Close LLC:
A. Only one entity needs to be
created.
B. Only one checking account
needs be maintained.
C. Only one tax identification number
needs to be requested.
D. Only one annual tax return
needs to be filed.
We have found that our clients truly appreciate
simplifying their lives to the greatest extent possible
and still provide them with the planning tools they want
for their business and estate planning. The Wyoming
Close LLC provides this simplicity. In addition, the
bookkeeping is not as complex, and thus the possibility
of error is substantially reduced.
4. COST EFFECTIVE TO SETUP AND ADMINISTER
The filing fees and the annual fees to be paid to the
Wyoming Secretary of State are very competitive with the
fees of other states. The initial filing fee is $100.
Thereafter the annual fee is only $50 provided the LLC
does not have assets actually located and employed in
the State of Wyoming. (W.S. 17-15-132 and 17-16-1630).
Many of the LLCs filed in Wyoming have their assets
outside of the state, and thus the $50 fee applies. If a
Wyoming registered agent is necessary for service of
process, such an agent may be retained for $250
annually.
For additional
information and forms to help you create
and implement a Wyoming LLC, contact us at
(800) 955-0554
Contact Us
A
list of items in the
Wyoming Close LLC KIT may be downloaded as a PDF
file here. The KIT is a comprehensive package of
explanatory summaries, outlines, documents, forms,
charts, and marketing materials which will allow you to
quickly and easily create Wyoming Close LLCs, and ensure
they are properly registered through Teton Agents, Inc.
Coming soon: Downloadable copies of key KIT
components (registered users only)
Copyright 2006 Teton Agents Inc
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