Wyoming was the first state to enact LLC legislation in 1977 and it continues to expand the usefulness of the LLC. Under the new Wyoming statutes, a Charging Order is the exclusive remedy that a judgment creditor has against a debtor even in a sole member LLC. The Wyoming statues are the most restrictive and “creditor unfriendly” of any state as they deny a creditor any remedy other than to acquire a charging order and allow a creditor to have distributions only if the manager of the LLC decided to make any distributions. It cannot disrupt the ongoing business of the LLC. That means that if you were subject to a judgment and had your assets within a Wyoming LLC, you could simply not make any distributions and thereby deprive the judgment creditor of the assets in the LLC.Another benefit available under the Wyoming Close LLC statutes is what is known as a valuation discount. A valuation discount is important in estate tax planning. The way it works is because of the restrictions placed on the transfer of the LLC membership interests and other restrictions, the assets inside the LLC are valued at less than their fair market value. So for example if the assets inside the LLC are worth $1,000,000, for estate tax purposes, the assets after applying the valuation discount are worth only $700,000. This would exempt $300,000 of the assets from estate tax. If you have a taxable estate, this can be a great way to reduce the tax bite for your beneficiaries.
One additional benefit of doing business as a Wyoming LLC is that the cost is relatively low compared to other creditor protection and estate planning strategies. Compare the cost of a Wyoming LLC which consists of a filing fee with the Wyoming Secretary of State of $100, a minimal annual fee of $50 or two-tenths of one mill on the dollar of its capital, property and assets located and employed in Wyoming (most LLC’s in Wyoming merely pay the $50 minimum fee each year), an annual registered agent fee of approximately $250 and attorney’s fees in the range of $5,000 to $7,500 for the initial setup to the cost of a Family Limited Partnership, the traditional strategy you would use to achieve the same results, which costs anywhere from $25,000 to $40,000 for the initial setup, involves filing multiple tax returns every year, multiple annual state reporting requirements and multiple checking accounts to maintain. The Wyoming LLC provides greater benefits than the traditional Family Limited Partnership and approximately two tenths the cost.
The Wyoming LLC in short is a great way to protect the money you’ve earned from the reach of predators and provides an easy way to pass those assets on to your family at a discount when you die.