Limited Liability Companies or LLCs are particularly popular for their asset protection features. With LLCs, the assets of the owners or members of the company are protected from any business-related liabilities. Generally, LLCs are deemed suitable for e-commerce businesses as it provides protection and flexibility to grow the business and its credibility.
One of the first questions asked about new businesses is what is the best state to incorporate in the US? People often refer to Wyoming, New Mexico, Delaware, and Nevada as the best and friendliest states for new businesses.
However, it is safe to say that not every state offers the same benefits and policies. If you are wondering which is better between famous Wyoming vs. New Mexico LLC, let us help you answer all of your questions.
How to Create a Wyoming LLC
Creating an LLC, in general, is pretty straightforward. Although the process may differ from state to state, forming an LLC is simpler than other business structures. Here are the steps on forming an LLC in Wyoming:
- Choose Your Company Name
Choosing a unique name is crucial in forming an LLC. One of the reporting requirements in creating a name for your company is that it includes an LLC designator, so it would be easier for the state to identify it as a limited liability company. The terms that you can add to your company name as an LLC designator are:
- Limited Liability Company
- Limited Company
- Liability Company
- Ltd. Liability Co.
- Limited Liability Co.
Aside from the LLC designator, Wyoming is strict in ensuring that LLC company names should be unique and distinguishable. This means that no new company should be named the same or too similar to another Wyoming LLC. Check out Wyoming’s register to see the list of existing trademarks.
- Find and Hire a Registered Agent
If you are incorporating in Wyoming, you have a choice to be your company’s registered agent or simply find and hire one operating in the state. A registered agent is an individual or business entity legally allowed to receive official documents and process business registration on your company’s behalf.
Hiring a commercially registered agent is also beneficial as it can help protect your privacy. Wyoming allows commercially registered agents to declare their company’s address as your principal business and mailing address instead of your information.
- File Articles of Organization
To register your LLC in Wyoming, you need to file completed Articles of organization and Consent to appointment by registered agent forms. Generally, accomplishing this step requires a filing fee of $100 and takes roughly 3 to 5 days to complete.
- Establish an LLC Operating Agreement
LLCs can be established as single-member or multi-member companies. Your LLC Operating Agreement is an internal document that identifies the owners/members of your company. It also specifies how ownership is divided among the members.
A single-member LLC means that the company is owned and run by a single person. Despite this, single-member LLCs still need to declare an LLC Operating Agreement as proof that they are the ones running the company.
On the other hand, multi-member LLCs declare an operating agreement and indicate ownership percentages for each company member.
- Acquire an Employer Identification Number (EIN)
The EIN is a type of Federal Tax ID created to identify business entities. The EIN allows business owners to start a business account, pay taxes, and apply for permits and licenses needed to operate.
- Annual Report for Wyoming LLCs
LLCs are required to file an annual report detailing the company’s activities and update information that may have changed since the last filing period. It is crucial to file their report as it keeps you up to date with state regulations.
- Obtain Required Business Licenses and Permits
Wyoming does not have a state-level or universal business license. Instead, there are industry or business type-specific licenses that entrepreneurs should acquire. Check out Wyoming’s business permit booklet for more information.
- Understand Wyoming Taxes
As mentioned above, Wyoming is one of the friendliest states when it comes to new businesses. Aside from its relatively simple forming and registration process, Wyoming does not impose a state income tax or corporate income tax. And since LLCs can be pass-through entities, the tax would be directed as a personal income tax instead of double taxation.
- Create a Business Bank Account and Get a Business Phone Number
One of the last few steps needed to form an LLC in Wyoming is to create a bank account. This business account will be solely used for your company’s financial transactions and separate it from your assets.
Getting a business phone number also helps keep your private life separate from your business activities. Instead of putting your contact information on public record, opt for a virtual number. This type of contact number goes through an operator first before getting forwarded to your number.
How to Create a New Mexico LLC
While forming an LLC in Wyoming is already relatively easy, some say a New Mexico LLC is even easier. The registration process for a New Mexico vs Wyoming LLC is closely similar, but there are some slight differences business owners should be aware of.
Choose a Name for Your New Mexico LLC
Like in Wyoming, registering a name for your LLC in New Mexico requires including an LLC indicator. It should also be unique and distinguishable from any other registered LLC in the state. However, you can reserve an LLC name for your company through an application and keep it yours for 120 days.
Hire a Registered Agent
Unlike Wyoming that provides you with the option to serve as your company’s agent, New Mexico requires all LLCs to have a registered agent to accomplish processes in the state. The registered agent would help as your frontman and handle all necessary paperwork on behalf of the company.
File your Company’s Articles of Organization
New Mexico requires brand new LLCs to file their Articles of organization with the Secretary of State’s Office. The process is done online and includes a small filing fee of $50.
Create your LLC’s Operating Agreement
Although an operating agreement is not required in New Mexico, filing one helps protect your assets by establishing that your company is separate from your personal property. If you do not file an LLC operating agreement, universal state LLC laws will govern your business and dictate how it should and should not operate.
Obtain an EIN
Multi-member LLCs need to obtain an IRS Employer Identification (IEN) even if the business does not have any employees yet. Single-member LLCs have the option to get an EIN only when they have employees or they opt to be taxed as a corporation instead.
Advantages and Disadvantages of Creating a Wyoming LLC
Given the differences in LLC formation between New Mexico LLC vs. Wyoming LLC, some may already conclude which state benefits their business the most. However, there are still crucial differences between the two states other than their registration process:
Advantages of Wyoming LLC
One of the things that makes Wyoming a business-friendly state is that it does not collect state taxes on LLCs. This makes it beneficial for newly established companies as well as small businesses.
Wyoming has relatively lower registration and processing fees compared to other states such as establishing a New Mexico LLC, Delaware LLC, and Nevada LLC.
Establishing an LLC in Wyoming is also open for foreigners worldwide through its no-citizenship requirement. Aspiring entrepreneurs residing in different countries can still form an LLC in Wyoming by simply hiring a registered agent in the state.
Wyoming LLCs are also famous for their LLC privacy and asset protection policies. Wyoming law allows business owners to form an LLC through a registered agent or entity without declaring any personal details to the public.
Asset protection in Wyoming is lauded for its strong charging order laws. The state of Wyoming provides charging protection for LLCs that keeps owners’ and members’ personal assets safe from business-related liabilities. Under the state’s court system, the charging order stops creditors from pursuing personal assets in lieu of company debt or liability.
Disadvantages of Wyoming LLC
Initially, Wyoming allowed business entities to process the registration and declare business-related information through a registered agent. This means that contact information such as a business number and address can be filled out using the registered agent’s details while the owner’s personal information remains confidential.
However, recent changes in Wyoming’s statutes now allow the home state to request the owner’s name and information when needed.
Although Wyoming allows foreign entrepreneurs to incorporate in the state, conflict may arise when implementing asset protection policies. For Wyoming LLC owners out of state, there is a possibility to lose Wyoming’s infamous asset protection laws because of conflicting or inconsistent policies among states.
Advantages and Disadvantages of Creating a New Mexico LLC
Establishing an LLC is incredibly beneficial for new business owners as it protects their assets from business-related liabilities. But what exactly makes New Mexico a prime location for LLCs?
Advantages of New Mexico LLC
One of the advantages of incorporating in New Mexico is that it is relatively cheap compared to other states. Forming an LLC in New Mexico costs less than $300 from start to finish. Even better, the state does not require LLCs to file an annual report and pay yearly fees.
New Mexico also has privacy policies that keep the personal information of business owners from the public through anonymous LLCs. It also has strong asset protection regulations and easy access for foreign entrepreneurs.
Lastly, LLCs are allowed to postpone their start date instead of immediately doing business on the day of filing. Business owners can hold starting as far as 90 days if it is financially advantageous.
Disadvantages of New Mexico LLC
There are still some disadvantages of incorporating in New Mexico despite its notable benefits and advantages.
Although New Mexico LLCs are relatively cheap to form, the state implements a corporate franchise tax that needs to be paid even if your business doesn’t sell anything. As long as your company is set up and registered in New Mexico, you would have to pay a minimum of $50 for the corporate franchise tax.
New Mexico does not require an operating agreement for an LLC to be formed. However, this document is needed for the state’s asset protection to be put into effect. The operating agreement of your LLC identifies your company’s assets and the state needs it to know which ones they are protecting. Business owners that prioritizes privacy may see this as an issue.
Need help with forming an LLC in Wyoming, New Mexico, or any other state in the US? Contact Doola today.
Forming an LLC can be tedious and time-consuming. So, you need to do research first and ask for help, so you can go through the process with less hassle and mistakes.
Confused Between New Mexico LLC vs. Wyoming? Consult Doola now.
Starting a business is a big leap for anyone. Taking this into consideration, aspiring entrepreneurs must do their research about incorporating in such states in the US as Wyoming vs. New Mexico. These states provide LLCs owners the privacy and protection they need to further their business. You can incorporate LLCs in the US with ease through the help of Doola. Contact us now through email@example.com.
Wyoming vs New Mexico LLC FAQs
Which is better, a Wyoming LLC or a New Mexico LLC?
Wyoming and New Mexico offer different advantages and disadvantages for LLC owners. However, the general advice is to incorporate your company in the state where you plan to conduct business.
How much does it cost to form an LLC in Wyoming?
The initial cost of starting a Wyoming LLC is around $100. However, processing costs pile up, starting from hiring a registered agent up to paying local taxes. In total, the estimated cost of incorporating in Wyoming would cost somewhere around $500 to $800.
How much does it cost to form an LLC in New Mexico?
Forming an LLC in New Mexico is notably cheaper compared to Wyoming. There are minimal fees involved throughout the process, and the cost would sum to more or less $300.