Someone recently asked me about forming a Wyoming LLC to hold an investment connected to a Utah business.
Wyoming may be a perfectly good place to form an LLC. We form and maintain companies in Wyoming, Delaware, Nevada, and other states. But this was a relatively small investment, so my question was: What are you getting for the extra cost?
I often tell clients, “Be where you are.” By this I mean: make decisions for the company you have today. If you’re considering whether to form a business in Wyoming or Delaware, I want to know what your company needs today. An investor may give one company a reason to choose Delaware. Another company may have a reason to choose Wyoming. The question is whether that reason applies to your business at its current stage.
Here are six questions I would ask.
1. Where will the company actually operate?
If you are running a Utah based business, forming an LLC in Wyoming does not make its Utah obligations disappear. You may still need to register and make filings where the business operates.
That does not rule out another state. It means we should understand the whole structure before deciding where to form.
2. What will it cost to maintain?
You have to form the company. You have to maintain it. You may need a registered agent in another state, annual filings, and registration where the business operates.
Those costs may be worthwhile. But put them next to what the company is doing. On a relatively small investment, I would want a clear benefit before adding the expense.
3. What are you hoping another state’s laws will do for you?
Usually, people have heard something attractive about a state’s laws. Delaware has a long history as a home for companies seeking investment. Wyoming appeals to some owners because of its laws and the privacy associated with its public filings.
Those are real considerations. Which of them will make a meaningful difference to form a business in Wyoming or Delaware at this stage?
If another state’s laws solve a problem or support a transaction you are planning, I am happy to help you form there. I just want the decision to follow what the business needs.
4. Does an investor need you in a particular state now?
I had a similar conversation with the founders of a Utah tech company. They asked whether they should form their corporation in Delaware.
Could we do that? Yes. Might an investor eventually want them in Delaware? Yes.
But they did not have that investor yet. Their company needed its money for the business it was building, so my advice was to start in Utah.
If an investor later requires a Delaware corporation, we can evaluate moving the company to Delaware when that investment is on the table. We can move states when it makes sense to move states. We do not have to incur the cost today because someone might ask us to do it someday.
5. Are you counting on privacy for asset protection?
Privacy is another reason owners ask about Wyoming. I understand the appeal of keeping information out of an easy public search. But I would be careful about confusing that with asset protection.
If you are involved in a legal proceeding and are required to disclose what you own, forming an LLC in Wyoming does not give you permission to hide it. So if someone tells you the plan is to protect their assets by making ownership hard to find, I would ask a lot more questions.
Good asset protection should have a legal basis that holds up when ownership is known. For some business owners, that leads to a separate conversation about protecting personal assets, including whether an asset protection trust belongs in the broader plan. The state where you form an LLC cannot answer that question by itself.
6. When should you revisit the decision?
The company you form today may look different in a few years. You may bring in investors, acquire property, expand, or reach a point where another state’s laws justify the added work and cost.
When that happens, we can revisit the structure. I help clients form and maintain companies in other states when doing so serves the business. I just do not want you paying now for a structure you may need later.
Tell me where the company operates, what it owns, how it is financed, who owns it, and what you expect it to become. Then we can decide whether another jurisdiction helps solve a real problem.
If it does, we can form a business in Wyoming or Delaware. If the reason comes later, we can make the change later. But for now, my advice is to be where you are: make the decision based on the company you have today.
