In this review, I am going to draw a head-to-head comparison of the LLC formation laws and fees in the states of Nevada and Wyoming as some of the best states to form an LLC.
Even if you use a budget-friendly and reliable LLC formation service like that of ZenBusiness, you should still keep in mind some hidden charges like the Nevada Officer Filing Fee of $150.
When you compare Nevada vs. Wyoming limited liability incorporation options, Wyoming offers several advantages. While exploring these, I shall also draw a brief comparison to the LLC formation requirements in another state, Delaware, without going into details.
If you haven’t got the time to read through, let’s just say that Wyoming is the best state for incorporating an LLC because the total price is about 65% lower than in Nevada.
State Filing Fees, Taxes, and Requirements
Nevada and Wyoming both charge state filing fees and have specific taxation requirements that I am going to shed light on in the sections below. As you can see, Wyoming appears to be the cheapest state to form an LLC, but Nevada also boasts certain incorporation advantages.
Nevada vs Wyoming: Corporate Income Tax
Nevada and Wyoming are among the six U.S. states that do not charge a corporate income tax. Moreover, Nevada is one of four U.S. states that have neither a corporate income tax nor a personal income tax. LLCs that have employees and report gross wages to the Nevada Employment Security Division (ESD) have to pay the state’s modified business tax (MBT).
The lack of taxes is another benefit Wyoming LLCs and corporations enjoy. Wyoming LLCs do not have to file tax returns. They are taxed as pass-through entities, which means that there is no double taxation. If your corporation has large retained earnings, you may take advantage of the S-Corp election.
Wyoming vs Nevada: Asset Protection
Many entrepreneurs choose to form LLCs in Wyoming for the purpose of holding assets such as land, immovable or intellectual property. As legal entities, Limited Liability Companies offer a considerable amount of asset protection.
Many business owners in Wyoming form LLCs to protect intangible assets such as IPs, stocks, or bonds. Wyoming does NOT tax intangible assets. This does not mean that the state does not levy a property tax.
If an LLC owns property in Wyoming, the company must pay property taxes of 11.5% for industrial property and 9.5% for commercial, residential, and all other property.
Nevada is one of the best states for forming an LLC, because it is tax-free for business structures, and has few reporting requirements. Besides, Nevada is the only state to provide charging order protection for LLCs. For extra asset protection, LLC owners can set up an Asset Protection Trust.
Nevada vs Wyoming: Annual Report Requirements
In most states, the annual report is required until the anniversary of the business formation date. Wyoming is one of the states where an LLC annual report is required. The report consists of two parts: a Franchise Tax and a Public Information Report.
The annual report fee depends on the assets of the particular LLC located in Wyoming. The tax is either $50 minimum or $.0002 per dollar of business assets. LLCs with $250,000 of Wyoming assets or less pay the $50 minimum fee.
In Nevada, all LLC and corporations must file an annual report and pay yearly business license fees by the end of the month containing their incorporation date. For corporations, the business license fee is $500 a year.
The report again consists of two parts: a Franchise Tax and a Public Information Report. You can use the annual report service of ZenBusiess for just $75 a year plus a state fee with their Pro or Premium packages.
Wyoming vs Nevada: Minimum Capital Requirements
There is no minimum capital requirement to incorporate a business in Nevada. The Secretary of State requires only minimal disclosure of personal information at the time of star and at the time registration that will be used for your annual filings.
Just like Nevada, Wyoming does not require LLCs to make a minimum capital contribution or produce an operating agreement upon formation. Under the provisions of the Wyoming Business Act, a corporation must have a par value of $.001 per share.
Initial Filing Fees
If you are planning to form an LLC in Nevada, You will have to pay initial filing fees along with the current state fees. ZenBusiness currently offers one of the most reasonable initial filing fees in Nevada:
- Name reservation: $25 (only needed if not filing Articles of Organization immediately)
- Articles of Organization: $75
- Annual List of Managers or Managing Members: $150
- Business license: $200
- Total $450
In Wyoming, ZenBusiness charges the following initial filing fees:
- Filing Articles of Organization $100
- Business name reservation $50
- Operating Agreement $35
- Total $185
I highly recommend the LLC formation service of ZenBusiness in both Wyoming and Nevada because they offer a free registered agent service with their basic plan which costs just $39 a year.
Annual Fees
After you set up a company in Nevada or Wyoming, you have to pay recurring annual fees on top of your initial incorporating expenses. A federal tax identification number (EIN) is required for corporations in both states that will have employees. EIN is also necessary to open a business bank account. To pay taxes in Nevada, you must also have a state tax identification number.
Nevada LLC Fees
The annual costs of a Nevada LLC are the Annual List of Managers or Managing Members and State Business License. The annual manager list filing fee is $150 while the annual business license fee is $200. So, an LLC owner must pay a total of $350 to keep its company in good standing with the Nevada Secretary of State.
Wyoming LLC Fees
Wyoming LLCs are required to pay an annual fee of $50 to the Secretary of State beginning the second year. There is also a $2 convenience fee for online payments. The annual report will cost you about $52 to file. You will also have to pay for a registered agent service in both states. I strongly recommend using a free registered agent like the one provided by ZenBubusiness.
Busting the Delaware Incorporation Myth
Until recently Delaware was the “incorporation capital” of America because more than 60% of Fortune 500 companies are incorporated in Delaware. The truth is that few entrepreneurs are lucky enough to own a Fortune 500 company. For the majority of small or medium-sized businesses, Wyoming offers more tax benefits, flexibility, and privacy.
Delaware’s Long tradition in Corporate Laws
Delaware’s attorneys have developed an excellent body of corporate case law spanning 110 years. These laws greatly facilitate mergers and acquisitions, and that’s why the Fortune 500 companies are so attracted to the state of Delaware. Delaware’s case law offers many insights into what Fortune 500 managers can and cannot do. The state has its own business court – The Delaware Court of Chancery the specializes exclusively in business legislation and has appointed judges instead of juries.
More Taxes, Less Privacy
Unfortunately, Delaware levies a corporate income tax as well as personal income tax on LLC and their owners. On top of that, there is a state franchise tax, a bevy of reporting requirements. Compared to businesses in Wyoming and Nevada, Delaware LLC enjoy less privacy.
They have to comply with state regulations compelling disclosure of substantial amounts of corporate information. Corporations and LLCs incorporated in Delaware or Nevada often need to file for a foreign qualification in their home state, if they have an office and employees there.
Even if you have formed an LLC in Delaware, you can now ask your attorney if their services include business relocation. Even if you move your business to Wyoming or Nevada, the original incorporation date will remain the same.
Nevada vs Wyoming: Which state is LLC Friendly?
To begin with, Wyoming state fees are just half of what you will have to pay in Nevada as an LLC owner. The officer filing fee of $125 that I mentioned earlier is due 30 days after you have started your company and that’s why it may surprise you in a negative way.
The state filing fee in Nevada begins at $150. For corporations with thousands or millions of hares, the fee is significantly higher. Corporations are also charged a state business license fee of $500 per year. On top of that, the Business License Renewal fee is $200.
By contrast, the state of Wyoming does not charge business license fees or officer filing fees. There is just a Wyoming state renewal fee is $50 that you have to pay every twelve months. That is why Wyoming is one of the most cost-effective states to incorporate in.
Nevada Is a Taxation Heaven
Many entrepreneurs choose to form their LLC or corporation in Nevada because the state has no corporate income tax, neither does it charge corporate share fees. Sole proprietors may take advantage of the fact that there is no personal income tax.