Business Entities – Wyoming LLC’s Compared to Other Entities

By Jeff Van Fleet

In 1977, Wyoming was the first State to institute Limited Liability Corporation (LLC) statutes. As a result, Wyoming has the oldest case law supporting LLC’s. An LLC provides the user the benefits of a Corporation for asset protection, but without the complex requirements and tax implications of a Corporation.  For those that want a LLC with more control, Wyoming statutes offer a Close LLC, which LLC is useful for small, family businesses. The Close LLC is formed with a tightly-controlled structure. Members must first make their shares available to the remaining members of the LLC before the shares may be sold on the open market.

  Sole Proprietor Partnership C Corporation S Corporation Limited Liability Corporation Close Limited Liability Corporation
Creation No requirement for written documents May be created by oral or written agreement Requires Articles of Incorporation which are filed with the State Requires Articles of Incorporation which are filed with the State Requires Articles of Incorporation and Registered Agent which are filed with the State Requires Articles of Incorporation and Registered Agent which are filed with the State
Life Span Life of Sole Proprietor Life of Partners Perpetual Perpetual Perpetual or as designated in Operating Agreement Perpetual or as designated in Operating Agreement
Management Responsibility Sole Proprietor Partners Board of Directors elected by shareholders Board of Directors elected by shareholders Member-Managed or Manger-Managed Member-Managed or Manger-Managed
Liability Personally responsible for debts and liabilities Partners  responsible for debts and liabilities Corporation assets carry liability, no liability to shareholders Corporation assets carry liability, no liability to shareholders LLC assets carry liability, no liability to members LLC assets carry liability, no liability to members
Income Taxes Reported to sole proprietor Taxable to partners Corporation pays tax on net income. Employees pay tax on salary. Information tax return filed by Corporation. Actual income taxed to shareholders Information tax return filed by LLC. Actual income taxed to members Information tax return filed by LLC. Actual income taxed to members
Sales/Transfer During Lifetime No restrictions Causes a dissolution of partnership unless Partners have agreement Easy  to transfer, unless restrictions in place through entity documents Limited transfer. Restricted to 100 US resident shareholders with only one class of stock Regulated by Operating Agreement, but generally easy to transfer Limited transfers as regulated by Operating Agreement, but generally must offer to other members first, then sale to outside party with unanimous approval
Sales/Transfer at Death Dissolved Dissolved, unless agreement states otherwise May transfer to heirs or sold, unless Buy-Sell Agreement states otherwise The Estate may hold, then sell as guided by lifetime transfers Estate/Heir generally eligible transfer as guided by Operating Agreement or Buy-Sell Agreement Estate/Heir generally eligible transfer as guided by Operating Agreement or Buy-Sell Agreement

The above are general characteristics of the most common types of business entities.  The information contained herein is provided for discussion and education purposes only and should not be relied on as a substitute for legal advice provided by a qualified attorney or as accounting/tax advice provided by a qualified accountant.

Our Attorneys have helped many business clients in Cheyenne and the State of Wyoming, as well as across the United States get their business started. When you engage with our Firm, a Lawyer will advise you of the benefits of each business type and help you select the best entity type for your new or expanding venture.

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