Delaware vs Wyoming LLC: Which State Actually Makes Sense for Your Business

Delaware's reputation is deserved for certain businesses. For most LLCs, it's probably not the right choice. Here's how to decide.

Delaware incorporates more businesses than any other US state. The Court of Chancery, established case law, and corporate-friendly statutes made it the default for generations. But Wyoming pioneered the LLC structure in 1977 and has quietly built advantages that matter more for most small business owners than Delaware's corporate law sophistication.

The Delaware case

Delaware's strengths are real but specific:

Court of Chancery: A dedicated business court with judges (not juries) who specialize in corporate disputes. For companies expecting complex litigation, shareholder disputes, or M&A transactions, this matters. The Court of Chancery provides predictability that other states can't match.

Case law depth: Decades of corporate case law mean most business disputes have precedent. Lawyers know how Delaware courts will rule. That certainty has value.

Investor expectations: Venture capital firms expect Delaware C-Corps. If you're raising institutional money, Delaware is the path of least resistance. Investors know the structure, their lawyers know the documents, everyone saves time.

Franchise tax for LLCs: Delaware charges a flat $300 annual franchise tax for LLCs. That's lower than some states with percentage-based fees.

Where Delaware falls short

For most LLCs, Delaware's advantages don't apply:

Foreign qualification: A Delaware LLC doing business in Texas still needs to register in Texas, pay Texas fees, and comply with Texas requirements. Delaware becomes an additional cost, not a replacement for home-state compliance. If you're operating locally, Delaware adds complexity without benefit.

Privacy: Delaware requires a registered agent but doesn't require public disclosure of members or managers. That sounds private until you realize Wyoming offers the same, plus additional protections Delaware lacks.

Asset protection: Delaware's charging order protection (limiting creditors to distributions, not LLC ownership) is decent but not exceptional. Wyoming's is stronger.

Annual costs: The $300 franchise tax is just the start. Add registered agent fees ($50-150/year), and if you're also registered in your home state, you're paying double.

The Wyoming advantage

Wyoming built its LLC framework with small business owners in mind:

Asset protection: Wyoming provides charging order protection even for single-member LLCs. Wyoming statute explicitly makes the charging order the exclusive remedy for creditors. Delaware and most other states offer weaker protection for single-member structures.

No state income tax: Wyoming has no corporate income tax, no personal income tax, and no franchise tax beyond the $60 annual report fee. For pass-through LLCs, this matters if you're a Wyoming resident. For non-residents, your home state still taxes you.

Privacy: Wyoming doesn't require disclosure of members or managers in formation documents. The same as Delaware, but Wyoming also has a more established culture of privacy-focused business services.

Low fees: Formation costs start around $100. Annual reports cost $60 (or $60 minimum based on assets). Registered agent services run $25-100/year. Total annual cost can be under $100.

Lifetime proxy: Wyoming allows irrevocable proxies, useful for certain estate planning and asset protection structures.

When to choose Delaware

Delaware makes sense if:

• You're forming a C-Corp to raise venture capital
• You expect complex corporate governance disputes
• Your business involves Delaware-specific advantages (statutory trusts, series LLCs with specific structures)
• Your investors or partners specifically require Delaware

If none of these apply, Delaware is probably adding cost without benefit.

When to choose Wyoming

Wyoming makes sense if:

• You want maximum asset protection for an LLC
• You're a single-member LLC wanting charging order protection
• Minimizing annual costs matters
• Privacy is a priority
• You're not raising institutional venture capital

When to choose neither

Here's what the incorporation industry doesn't emphasize: if your business operates in one state, forming in that state is often the simplest answer.

A California consultant forming a Wyoming LLC still needs to register as a foreign LLC in California, pay California's $800 minimum franchise tax, and comply with California requirements. The Wyoming formation adds cost without avoiding California obligations.

The exception: if you're operating a genuinely location-independent business (online, no physical presence anywhere), forming in a favorable state like Wyoming makes sense. But most businesses have a physical presence somewhere.

The practical decision

For most small businesses: form in your home state unless you have specific reasons not to.

For location-independent businesses, holding companies, or asset protection structures: Wyoming offers the best combination of protection, privacy, and low cost.

For venture-backed startups: Delaware C-Corp remains the standard, and fighting that standard costs more than accepting it.

For complex corporate structures with anticipated litigation: Delaware's Court of Chancery justifies the premium.

The incorporation services pushing Delaware for every LLC are optimizing for their commissions, not your situation. Match the state to your actual needs.