Wyoming Limited Liability Company (L.L.C)
In 1977, Wyoming was the first U.S. state to pass a Limited Liability Act. This was the first time the Limited Liability Company (LLC) was introduced to American business. Once the IRS recognized the LLC can be taxed as a partnership (that is, as pass-through entity for taxation purposes), all of 50 states passed statutes creating their own version of the LLC.
LLC Taxation
When an LLC has only one member, the fact that it is an LLC is ignored or disregarded for tax purposes. If the single member is an individual, the single member is essentially treated as a sole proprietor for tax purposes and the LLC income and expenses are reported on the individual's form 1040 (in the U.S.). If, however, the single member is a corporation, the LLC income and expenses are reported on the corporation's return, usually form 1120 or form 1120S (in the U.S.).
Further, Wyoming LLC company can be used by offshore corporation, thus having US company without taxation.
Most multiple member LLCs are treated as partnership and file a partnership tax return form 1065 (in the U.S.).
Partnerships are pass-through entities for U.S. tax purposes. This means that partnership income, deductions and other items passes through the partnership directly to the partners. Accordingly, each partner takes into account his or her share of partnership income, deductions and other items in determining the partner's individual tax liability. Partnerships have partners. Limited Liability Companies have members.
The ownership in the LLC is called the member interest. Someone could take the member interest in an LLC only through a charging order. This means that a hostile creditor will take your place in receiving earnings and distributions from the LLC until a court judgment is satisfied. If a judgment is awarded against the LLC itself, it may be levied and LLC's property seized or sold in payment. If, however, a judgment is awarded against a member, to the extent that the operating agreement so states, distribution usually cannot be compelled to satisfy a member's judgment debt. Creditors have to satisfy themselves with a charging order. This gives them the rights to any distributions made by the LLC to that particular member, but little else.
The LLC offers the pass-through taxation of a partnership and the limited liability of a corporation.
Wyoming Statute 17 15 145. Rights of creditor.
"... The charging order is the exclusive remedy by which a judgment creditor of the member or transferee may satisfy a judgment against the member's interest in a limited liability company."
The asset protection is utilized by the fact that the manager of LLC can refuse to distribute the earnings, if the operating agreement so allows. The advantage of withholding the distribution from the Hostile creditor is that the creditor becomes liable for income taxes on those LLC earnings, whether or not they are distributed. The hostile creditor is now liable for taxes on earnings not yet received or for what is typically referred to as phantom income. This places the member in a stronger position to negotiate a favorable settlement. Hostile creditors don't want to pay taxes on earned income that is out of reach.
For this charging order protection to be most effective, the LLC must have at least two members. Managers can be other individuals or other business. The LLC must be taxed as partnership and be managed by managers and not the members.
The Limited Liability Company is further the perfect U.S. business tool for non U.S. citizens wishing to make sales in U.S., to establish U.S. presence and to open U.S. bank account.
Thetaworld Corporation establishes Wyoming Limited Liability Companies in just few days for the initial fee of US $300 and annual maintenance fee of US $200, while making sure that none of customer's data is being registered with the public registry in Wyoming.
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