Wyoming LLC vs. Delaware and New Mexico: Why Wyoming Reigns Supreme for Non-Residents
When choosing the best state to form your Limited Liability Company (LLC) as a non-resident, three states consistently top the list: Wyoming, Delaware, and New Mexico. While each offers distinct advantages, Wyoming LLC formation has emerged as the clear winner for most non-resident entrepreneurs and investors.
The Delaware Franchise Tax Trap: A Cautionary Tale
Before diving into the comparison, understand a common pitfall that catches thousands of non-resident Delaware LLC owners off guard: the annual franchise tax surprise.
Real-World Example: Jennifer, a Texas entrepreneur, formed her Delaware LLC in 2020. Three years later, she received a shocking demand from Delaware: $1,890 in immediate payment for what should have been $900 in franchise taxes:
- 2020-2022 franchise taxes: $900 ($300/year)
- Late penalties: $600
- Interest charges: $390
- Total damage: $1,890
Delaware threatened to dissolve her LLC within 30 days. Why? Delaware doesn't send reminder notices, and penalties compound at 1.5% monthly. This scenario is impossible in Wyoming, which has no franchise tax.
Why Wyoming LLC is the Gold Standard for Non-Residents
Unmatched Privacy Protection
Wyoming doesn't require LLC owners to be listed in public records. Only registered agent information is publicly available, making it ideal for entrepreneurs who value discretion.
Key privacy features:
- No member names in public filings
- No annual reports requiring member disclosure
- Anonymous LLC ownership possible
Zero State Taxes
Wyoming has no state income tax, corporate income tax, franchise tax, or inventory tax. Only a minimal $60 annual license fee.
Business-Friendly Legal Framework
Wyoming created the first LLC legislation in 1977, offering:
- Flexible operating agreements
- Strong charging order protection
- Minimal compliance requirements
Low Costs
- $100 state filing fee
- $60 annual license tax (lowest in the nation)
- No minimum capital requirements
Delaware LLC: Hidden Costs and Complications
Higher Costs
- $90 formation fee
- $300 annual franchise tax (5x Wyoming's fee)
- Potential attorney fees for compliance issues
- Interest and penalties for missed deadlines
New Mexico LLC: Budget Option with Limitations
Privacy Concerns
- Public Information Access requests can expose business information
- Less comprehensive privacy protection than Wyoming
Administrative Burden
- Detailed annual reporting requirements
- Limited legal precedent compared to Wyoming
Head-to-Head Comparison
|
Feature |
Wyoming |
Delaware |
New Mexico |
|
Formation Cost |
$100 |
$110 |
$50 |
|
Annual Cost |
$60 |
$300 |
$0 |
|
Privacy Protection |
Excellent |
Good |
Limited |
|
State Income Tax |
None |
None |
Yes |
|
Franchise Tax |
None |
$300 |
None |
|
Legal Precedent |
Strong |
Strong |
Limited |
When Delaware or New Mexico Might Make Sense
Delaware: If seeking venture capital funding or forming complex multi-member LLCs New Mexico: If cost is your only concern and you don't need privacy protection
Additional Wyoming Advantages
- Strong Asset Protection: Best-in-class charging order protection
- No Residency Requirements: Operate from anywhere
- Efficient Online Services: Streamlined filing systems
How to Form Your Wyoming LLC
- Choose a unique LLC name
- Select a Wyoming registered agent
- File Articles of Organization ($100)
- Obtain an EIN from the IRS
- Pay $60 annual license tax each year
Useful Resources
- Wyoming Secretary of State - LLC Formation
- Wyoming Business Division
- IRS EIN Application
- Delaware Division of Corporations
- New Mexico Public Regulation Commission
Professional Formation Services
- Northwest Registered Agent
- LegalZoom
- IncFile
- Rocket Lawyer
The Bottom Line
Wyoming consistently offers the best combination of privacy, tax advantages, low costs, and business-friendly laws for non-resident LLC owners. While Delaware and New Mexico have their place, Wyoming's zero franchise tax, superior privacy protection, and transparent fee structure make it the optimal choice for most entrepreneurs.
The $60 annual fee and strong legal protections provide long-term strategic advantages that far outweigh the minimal cost difference. Don't get caught in Delaware's franchise tax trap – choose Wyoming for peace of mind and maximum benefits.
Disclaimer: This article is for informational purposes only and should not be considered legal or tax advice. Consult qualified professionals regarding your specific situation.