Wyoming Corporate Tax - Everything You Need to Know - When comparing tax friendly States across the US, Wyoming offers significant benefits. According to The Tax Foundation’s State Business Tax Climate Index, which enables business leaders, government policymakers, and taxpayers to gauge how their states’ tax systems compare, Wyoming was once again ranked #1 for 2022.
Starting or moving a company to Wyoming can be a smart idea for business proprietors. With no corporate income tax, many companies are realizing significant savings by locating their business within Wyoming. For more than 10 years, Wyoming has ranked #1 for business-friendly taxation on Tax Foundation’s annual State Business Tax Climate Index.
How Wyoming Businesses Are Taxed
Many Wyoming LLCs are formed purely for the purpose of holding assets. Land, property, intellectual property, even other companies are typical kinds of Wyoming LLC holding company assets. Many holding companies in Wyoming were formed to hold intangible assets, things like IPs, stocks, bonds, and bank accounts. Wyoming does NOT levy a tax on intangible assets, which means holding companies shouldn’t expect to pay tax on intangible property.
Understanding Wyoming Entities
Wyoming is one of very few states that do not have personal or corporate income tax.
Most LLC’s are actually owned by a single member and structured as pass-through or disregarded tax entities, where all income and loss are reported on a personal tax return. Owners of pass-through LLC’s do not have to be concerned about state tax in LLC level whether LLC is in Wyoming or not.
However, if your LLC is taxed as a corporation rather than a pass-through entity, you will pay both federal and state corporate taxes. But even in this case, corporations and LLC’s taxed as corporations do not pay state tax in Wyoming.
Some states, like California, require informational tax returns for all LLC’s, including disregarded single-member LLC’s. Wyoming does not require this.
Wyoming’s business-friendly tax system and lack of income tax makes it easy to run a business with Wyoming LLC.
Holding Companies
A holding company provides benefits which are impossible to provide via a single business entity. Holding companies are created the same way other companies are, and may be either LLCs or Corporations. Instead of engaging in operations, they merely own and control other companies and assets. The company can engage in operations via subsidiaries or sister companies when needed. Assets may also be loaned or leased to third parties. The intent is to isolate liabilities, provide anonymity where possible and minimize taxes when feasible.
Some effort is required to set up the structure. The resulting benefits more than pay for themselves, though.
Wyoming doesn’t have:
• Personal income tax
• Corporate income tax
• Inventory tax
• Gross receipts tax
• Franchise tax
• Burdensome regulations
• Disclosure of shareholders
• Business or “per-capita” tax
• Excise tax
• Sales, property and inheritance taxes are among the lowest in America
Annual Business Fee
Wyoming corporations and Wyoming LLCs are required to pay a fee each year when filing their annual report. This fee is $50 or two-tenths of one million on the dollar ($.0002) of all in-state assets, whichever is greater.
If your total in-state assets have a value of less than $250,000 then you will pay the $50 annual fee (plus a $2 convenience fee if filed online).
If you’re in-state assets are greater in value than $250,000 then you will multiply the value by .0002 and pay the resulting amount.
Advantages and Disadvantages of a Wyoming Company
Wyoming is considered one of the friendliest states regarding taxes. With the smaller percentages for sales tax and lighter burdens for businesses compared to many other states, Wyoming is an ideal state to set up a new business.
Advantages
• No Corporate Taxes: That’s right. Corporations are not charged an entity tax in Wyoming. Which means that in Wyoming, you avoid the burden of double taxation.
• No Personal Income Taxes: You read that correctly. In Wyoming, you will pay no personal income tax. Your money is your money. You earned it.
• No Inheritance or Estate Taxes: In Wyoming, when you leave an estate to your children or family members, there are no estate taxes charged on their inheritance.
• No Out-of-State Retirement Taxes: Do you have a second home in Wyoming you intend to retire to? There are no taxes on retirement income earned in other states.
• No Excise Taxes: Every time you buy food and gas in Wyoming, you are not paying state taxes on those items.
• No Intangible Taxes: Wyoming imposes no taxes upon intangible assets like stocks and bonds.
Disadvantages
• A lot of people get really excited when they hear that “Wyoming has no corporate income tax!”
• Unless your LLC is taxed as a C-Corp, this won’t even apply. And this is the case for 99% of LLCs. Said another way, most LLCs don’t pay corporate taxes since LLCs are pass-through entities.
• Meaning, in their default tax classification, LLCs don’t pay any corporate income taxes. The profits from the LLC “flow through” to the owner’s personal income tax return and are paid on the individual level (not at the corporate level).
• So that fact that Wyoming doesn’t have state corporate income tax doesn’t matter.
• Furthermore, you pay state income taxes where the money is made. Not where the LLC is formed.
Conclusion
In its 2020 report, the nonprofit Tax Foundation said Wyoming had the most pro-business tax system for the fifth year in a row. North Dakota, Alaska, Florida and Nevada were also in the top five. None of these states have individual income taxes. And several have no corporate tax, either. “The absence of a major tax is a common factor among many of the top ten states,” the foundation reported.
At Yondaa, Inc. our position is that the best State for non-resident business owners to form a company is largely based on the type of business you operate, where services are performed and what types of products or services you offer. There is no singular definitive answer and all State offer benefits. To discuss your options with us, feel reach to reach out and contact us here.
