The benefits of starting a business in Wyoming have attracted entrepreneurs to form their LLCs and incorporate their companies in the state. Currently, there is no state income tax for individuals or corporations, and managers, directors, and elected officers can maintain privacy because the state doesn’t require that information for its public records. Also, filing fees to register a business in Wyoming are quite affordable.
If you’ve been thinking about forming a business in Wyoming to take advantage of the entrepreneurial-friendly benefits, then you’ve come to the right place. In this article, I’ll step you through many of the things business owners should know and address when starting a business in Wyoming.
A quick disclaimer before we begin: The information in this article is not meant to be nor is a substitute for professional legal, accounting, or tax advice. Seek the advice of licensed and credentialed experts who can give you direction on those matters.
Critical Steps for Starting a Business in Wyoming
1. Fine-tune your business idea
Before spending time and money on starting a business in Wyoming, entrepreneurs should do their due diligence to ensure their business concept has the potential to succeed. Doing a feasibility study can help reach an informed “go” or “no go” decision. Also consider bouncing your idea by trusted advisors like SCORE mentors, business consultants, accountants, and attorneys who can help you identify red flags.
2. Choose a business entity type
Some of the business structure types in Wyoming include:
- Sole Proprietorship
- General Partnership
- Limited Liability Company
- Limited Partnership
- Profit Corporation (C Corporation)
Other examples of business entities in Wyoming include the Close Corporation, Nonprofit Corporation, Statutory Trust, Registered Limited Liability Partnership.
Which entity type will work best for your business? You’ll need to consider a variety of factors including:
- Desire for personal liability protection
- Tax ramifications
- Ownership and management flexibility
- Business compliance requirements
Let’s take a look at a few of the business entities and their characteristics:
In a Wyoming Sole Proprietorship, the business and its owner are considered the same entity. Therefore the assets and liabilities of the business are those of the owner, as well. While this creates simplicity operationally and from a tax perspective, it can be a disadvantage, as well. If someone sues the business or the business can’t pay its bills, the owner risks losing their personal money and property. Another potential disadvantage of a Sole Proprietorship is that if the owner dies, the business can only be transferred to the owner’s heirs to be continued, restructured, or dissolved. Also, Sole Proprietorships have limited funding options—often, investors are hesitant to finance businesses that not formally registered as a statutory entity.
Sole Proprietors report their business income and losses on their individual federal tax returns. Because the business owner doesn’t receive a company paycheck that withholds federal income tax and Social Security and Medicare taxes, they must submit quarterly estimated federal income tax payments, which include 15.3 percent in self-employment taxes (similar to FICA taxes on employees’ paychecks). In some situations, that self-employment tax burden can become lofty and prompt a sole proprietor to look at business structures that can minimize those costs.
A General Partnership is a non-registered business co-owned by two or more “partners.” Like Sole Proprietors, General Partners and their business are the same entity for legal and tax purposes. A General Partnership is a simple and inexpensive way to form a multi-owner business. There are no state, federal, or local filings to formally register a partnership, and partners can make decisions with ease without the meeting formalities required of corporations
A few potential disadvantages include personal liability risk to the business owners, limited funding possibilities, a heavy self-employment tax burden, and no continuity of the business’s life if a partner leaves (unless the partnership agreement has provisions to remedy that).
Limited Liability Company (LLC)
An LLC provides legal and financial separation between owners (known as “members”) and the business. Therefore, the structure offers peace of mind to business owners who don’t want to risk having their personal belongings, bank accounts, retirement savings, etc. from being used to settle the debts or legal problems of their company. From a tax perspective, however, the LLC and its members are viewed as single tax-paying entity. Therefore—unless members elect for S Corporation tax treatment (more on that below)—the LLC’s profits and losses get reported through its owners’ federal personal tax returns. Single-member LLCs (“disregarded entities”) get taxed as sole proprietorships, and multi-member LLCs get taxed as partnerships.
Federal income tax flexibility is one of the attractive features of the LLC structure. An LLC (if it meets all IRS eligibility requirements) can elect to be taxed as an S Corporation or a C Corporation. An LLC that opts for S Corp election retains its underlying legal structure, so compliance requirements remain minimal. It also maintains pass-through tax treatment, but unlike with the default LLC taxation, not all business profits are subject to self-employment taxes. Only an S Corp’s owners’ wages and salaries are subject to Social Security and Medicare taxes; owner income that comes from company profit distributions are not subject to those taxes.
LLCs in Wyoming must submit an annual report every year on the first day of the anniversary month of their formation. According to the Wyoming Secretary of State website, “To remain in good standing each business entity, domestic and foreign (with the exception of Statutory Trusts), are required to file an annual report and pay a fee based on its assets located and employed in Wyoming.”
Wyoming is one of only several states to allow registration of Series LLCs, which is a variation of the LLC structure, that provides for each series to have its own membership interests, assets, and operations. In a Series LLC, each series has its own name and operates independently with its own bank account and financial records.
Limited Partnership (LP)
A Limited Partnership has “general” partners and “limited” partners. The general partners are owners that manage the company. They have the same personal liability risks as in a General Partnership (because there’s no separation between the individuals and the business). Limited partners do not manage the company, and their role is to supply capital to the business. Their personal liability is limited to their investment in the company.
Some potential disadvantages to an LP are that it can get complicated from an accounting standpoint, limited partners have no real say in how the company is run after they make their investments, and it can become costly to form and operate.
C Corporation (Profit Corporation)
Wyoming businesses that operate as C Corporations offer the highest degree of personal liability protection of their owners (“shareholders”). The Profit Corporation is a separate entity legally and for tax purposes. The C Corp reports and pays federal income tax on its profits on its own tax return. C Corps must appoint a board of directors to oversee the company’s affairs and ensure the business is managed in tune with the interests of its shareholders and stakeholders.
C Corporations have more financing options, too. They can sell stock to raise capital, and investors generally show more interest and confidence in funding businesses registered as Profit Corporations.
The “double taxation” on C Corporations sometimes dissuades entrepreneurs from choosing this entity type. That term refers to how company profits that get distributed to shareholders as dividends are taxed twice: 1) to the corporation at the corporate tax rate; and 2) again to the individual shareholder at the applicable individual tax rate.
Corporations that the IRS’s eligibility requirements can opt for S Corporation tax treatment to avoid double taxation. With S Corp election, the Corporation gets pass-through tax treatment, whereby its profits get taxed at the shareholder level only.
Other potential disadvantages of the C Corp structure include its higher formation costs and more extensive ongoing compliance responsibilities (such as submitting annual reports, holding shareholder and board of directors meetings, and other requirements).
As I discussed in the LLC and Profit Corporation overviews, an S Corp is a tax election option rather than an entity type. LLCs or C Corporations that qualify can file for S Corporation election by submitting IRS Form 2553.
3. Name your business
Besides choosing a business name that will work well for marketing and branding purposes, it’s also important to make sure the desired name is available to use in Wyoming. To find out if any other Wyoming companies are using a name, you can use CorpNet’s free Corporate Name Search tool. When registering an LLC or corporation in Wyoming, the business name becomes protected against another similar business from using the name. Registering for a state trademark can offer additional peace of mind. When forming a legal business entity, a company must comply with the entity-specific name requirements (e.g., a Limited Liability Company, must use an acceptable form of “LLC” behind it).
Sole Proprietorships and General Partnerships do not have to register their companies, but if they use a name that doesn’t include the legal names of the business owners, they must file a Registration for Application of Trade Name. When forming a legal business entity, a company must comply with the entity-specific name requirements (e.g., a Limited Liability Company, must use an acceptable form of “LLC” behind it).
Keep in mind that registering a business protects a name only within the state. Therefore, entrepreneurs that have goals to expand their business or that otherwise want to make sure their business name is protected in all 50 states can benefit from doing a trademark search. Conducting a trademark search can help identify if the desired name is available throughout the U.S. Moreover, applying for a trademark on a business name, will, if granted, ensure no other similar businesses use the name in other states.
4. Write a business plan
With so many moving parts involved in starting a business in Wyoming, a business plan can help you stay focused on your business objectives and the strategies for achieving them. A business plan is a document that outlines goals and describes the efforts you will make to accomplish them. Some business plans need to be very in-depth and detailed while others can be rather short and sweet. The complexity depends on the nature of the business and whether the plan will be used to attract outside investors. Within a formal business plan, you can often find the following sections:
- Executive Summary
- Company Overview
- Products and Services Descriptions
- Market Analysis
- Competitive Analysis
- Sales and Marketing Plan
- Management and Operations Description
- Financial Projections
You can find business plan templates online that you can use as a starting point for creating your own.
5. Find and appoint a Registered Agent in Wyoming
Businesses registered in Wyoming must designate a Registered Agent in the state. The Registered Agent must have a physical address in Wyoming and be available to accept “service of process” (official government documents, legal papers, etc.) for the business Monday through Friday from 9 a.m. to 5 p.m.
The ramifications are serious if an LLC, corporation, or other registered business entity fails to maintain a Registered Agent. According to the Wyoming Secretary of State Office, “All business entities filed in Wyoming shall have and continuously maintain in this state a registered agent to accept service of process. Failure to maintain a registered agent results in the dissolution or revocation of the business entity.”
CorpNet offers Registered Agent services in Wyoming and everywhere else in the U.S., which saves businesses that may want to expand into other states the trouble of looking for a Registered Agent in each state.
6. Register your business entity in Wyoming
Here’s a run-down of some of the initial paperwork required when starting a business in Wyoming:
- Sole proprietorship – To operate as a sole proprietor in Wyoming, business owners do not have to file any organization documents. Note that a trade name (sometimes called “doing business as” or “fictitious name”) filing is a must if the business will go by a name other than the owner’s first and last name. Also, just like formally registered businesses, sole proprietorships must obtain the required licenses and permits to operate legally in the state and local jurisdictions.
- General Partnership – The state does not require general partnerships to register their businesses formally. If using a business name that does not reflect the legal names of the business partners, the partnership must file a DBA. Also, although not required by state law, partners should consider having a written partnership agreement to document all of the responsibilities and rights of the business’s partners. General Partnerships must obtain whatever licenses and permits are required for them to operate legally in the state, county, and local municipality.
- Limited Partnership – Forming a Limited Partnership in Wyoming requires filing a Certificate of Limited Partnership and paying a filing fee of $100. With the Certificate of Limited Partnership form, the entity must also file a Consent to Appointment by Registered Agent form signed by its registered agent. LPs may elect to (but is not required to) submit a Notice of Entity Election form that provides the names and addresses of key individuals (such as managing partners) and a communications contact at the LP. As with a General Partnership, a partnership agreement isn’t mandated by the state, but it can help ensure all partners know their responsibilities and rights.
- LLC – To form an LLC in Wyoming, Articles of Organization must be filed, along with a Consent to Appointment by Registered Agent form, which must be signed by the entity’s registered agent. To file Articles of Organization in Wyoming, an LLC must pay a filing fee of $100.00. Wyoming gives LLCs the option of submitting a Notice of Entity Election form that provides the names and addresses of key individuals (such as LLC managers) and a communications contact at the LLC; it is not a requirement, though. LLC members should consider creating an operating agreement. The state doesn’t mandate an operating agreement, but it serves a critical role in defining how the LLC should be run and describing the responsibilities of LLC members (and managers).
- C Corporation (Profit Corporation) – For a business to incorporate in Wyoming, the state requires filing Articles of Incorporation, along with a Consent to Appointment by Registered Agent form, and pay a filing fee of $100. Profit Corporations in Wyoming must also appoint a Board of Directors and adopt bylaws. Wyoming corporations have the option of submitting a Notice of Entity Election form that provides the names and addresses of key individuals (such as members of the board of directors) and a communications contact at the corporation.
7. Obtain an EIN (Employer Identification Number)
Any business that hires employees must get an EIN (a 9-digit ID number) from the IRS. This is also referred to as a Federal Tax ID Number.
Often, a bank will require that a company have an EIN before the institution will open a business bank account. Other official paperwork may ask for a business’s EIN, as well. The IRS issues EINs for free, and CorpNet can help companies by completing and submitting the application (Form SS-4) for them. Note that the IRS recently announced that it has revised its EIN application process to enhance security.
8. Open a business bank account
Keeping a business entity’s financial accounts and records separate from those of the business owners is imperative for accurate bookkeeping and legal reasons. Setting up bank accounts, credit card accounts, etc. exclusively for company use helps ensure that separation exists. If an LLC, LP, corporation, or other registered company commingles personal and business expenses and income, the owners jeopardize their personal liability protection, and other penalties could occur, as well.
9. Understand Wyoming’s business taxes
While Wyoming does not levy income taxes at the time of this writing, proposed state legislation exists that might change that for large corporations and individuals and some companies with income over $200,000.
Other taxes that businesses avoid in Wyoming include gross receipts tax and inventory tax.
What taxes and fees do businesses need to remit in Wyoming? Below is a list of several that may apply:
- Annual License Tax – When an LLC, LP, or corporation submits its annual report, it must also pay an “annual license tax” on the business assets of registered entities in the state. The amount that a business pays depends on the value of those assets.
- State Sales Tax –Wyoming’s state sales tax rate is 4 percent.
- County General Purpose Tax – This tax is levied for general funding in most counties within Wyoming. It can range between .5 percent and 2 percent.
- County Specific Purpose Tax – This tax is levied in certain counties to fund specific county government projects. It can range from .5 percent to 2 percent.
- County Economic Development Tax – Currently, this tax (in increments of .25 percent, not to exceed a total of 1 percent) is only levied in Goshen County (at the time of this writing). It is collected to provide for economic development within the county.
- Unemployment Insurance Tax – Businesses with employees pay this tax, which funds a state account that compensates eligible workers for a portion of wages lost if they lose their jobs due to no fault of their own.
- Workers’ Compensation Insurance – All businesses with employees must pay this tax to provide benefits to workers who become injured or ill on the job.
- Employer Income Withholding Taxes – Businesses with employees must register with the Wyoming Department of Revenue to withhold federal, state, and local income tax and Social Security and Medicare taxes from their workers’ wages and salaries.
- Lodging Tax – This tax is applied by most local governments in Wyoming to fund local travel and tourism promotion. Hotels, motels, and other lodging businesses are required to pay the tax when renting out rooms or property. It is applied in 1 percent increments, with a maximum possible tax of 4 percent.
The Wyoming Department of Revenue can advise business owners on which taxes they must pay and how to go about paying them. An accountant or tax advisor is also a helpful resource for identifying tax obligations.
10. Get the necessary licenses and permits you need to operate a business in Wyoming
Depending on their industry, businesses may need to have licenses, permits, or other authorizations from the federal, state or local governments.
The Wyoming Business Council has created a comprehensive guide to business permitting and licensing. It’s a helpful resource to help you understand the various requirements that might apply to your business.
You can also turn to CorpNet to help you identify and apply for the necessary business licenses and permits required in the area where you will operate your business.
11. Research what other business essentials you’ll need to get your business off the ground
For example, businesses physically located in Wyoming must comply with local municipality’s zoning regulations. Also, look into what types of insurance you might either be required or want to have to protect your business in the event of unforeseen and unfortunate circumstances. Another consideration is funding needs for your business. Will you need to apply for loans, seek investors, or get additional money some other way to launch your business?
And remember, there are many human resource-related responsibilities to tackle and regulations to follow if your business will hire employees.
12. Stay in compliance with all ongoing requirements after starting a business in Wyoming
To stay in good standing and to operate legally in the state of Wyoming, businesses must stay up to date on their report and tax filing requirements. Business owners should ask their attorneys and tax professionals if they are unsure of the obligations they need to fulfill to maintain corporate compliance. One convenient way to keep track of future filings by using CorpNet’s Compliance Portal. The free online portal makes it easy to track deadlines for license renewals, annual reports, and more.
13. Keep a resource list handy
When starting and running a business, you don’t have to go it alone. Keep a list nearby of resources you can reach out to for information and insight along the way. A few that I believe you’ll find helpful include:
Last but not least, CorpNet is here to help you with all of your business registration and compliance filings after you’ve consulted with legal and accounting experts to determine what you need to do. We’ll save you time and legal costs while ensuring your filings are done accurately and on time. Ready to get started? Contact us today!
Want to do more research? Download out free guide to starting your business in Wyoming.