2022 has seen asset protection being almost the single query that I’m dealing with daily. U.S. citizens have discovered that they are facing ever-increasing levels of domestic risk as states look to ramp up their taxes and lawsuits are becoming increasingly toxic. Suddenly, entrepreneurs are now facing the pitchfork from multiple directions and facing the prospect of losing everything due to external risks. Subsequently, a Wyoming LLC Holding Company structure is receiving lots of attention given the protection it can offer.
Let’s dig in and take a look at what sort of Asset Protection a Wyoming LLC can provide.
- Why Setup a Wyoming LLC Holding Company
- Why Choose Wyoming for an LLC Structure?
- How to Setup and Operate a Wyoming LLC Holding Company
- The Operating LLC
- Offshore Ownership of a Wyoming LLC Holding Company
- Final Points
Why Setup a Wyoming LLC Holding Company
If you have spent some time watching my YouTube videos or reading through this website, you will understand that I take asset protection very seriously. The reason is that I have a plethora of experience with vexatious lawsuits, regulatory over-reach, overzealous tax agencies, and governments changing the rules mid-term. The unfortunate reality is that the time to build an ark is before the floods come…not after.
Subsequently, walling off your assets away from prying eyes and those looking to do you harm is smart. The simple idea for an LLC liability shield is to distance your operations away from your actual assets and, in this way, make it significantly harder for anyone to take them away or attach them to a charging order.
In short, the general idea is to put as many “Chinese” walls as possible between the operating LLC, which is exposed to customers and vendors, and the ultimate holding company which retains all the assets.
Why Choose Wyoming for an LLC Structure?
The U.S. political system means that each state is, normally, free to specify its own laws and regulations around companies. Subsequently, not all states are equal when it comes to statute law and case precedent relating to asset protection. Many states do a very poor job at protecting the corporate veil from piercing whilst others provide far too much of your personal information to the world.
No Piercing of the Corporate Veil
Thankfully, Wyoming is the leader in U.S.-based asset protection laws when specifically considering LLCs. 2016 saw Wyoming successfully change its LLC legislation to make it exceedingly hard to pierce the corporate veil and push risk and liabilities onto business owners. Specifically, Wyoming excluded a “failure to observe company formalities” as a reason for piercing a company.
Additionally, Wyoming went out of there way to make it clear that the tax treatment of an LLC as a look-through entity should have no bearing on whether the limited liability aspect of the company remains intact. In short, the state has made it nearly impossible, short of fraud, to pierce the corporate veil.
No Personal Charging Orders Over LLC Assets
In many states, creditors can seek to satisfy your personal obligations by attaching an order to a single member LLC that you happen to own. Wyoming has effectively outlawed this practice and any personal liabilities that you might accrue will not be attached to your LLC assets.
Wyoming Provides Anonymity
One of the most important aspects of any corporate or LLC structure should be anonymity. It’s an unfortunate reality today that everyone from your neighbor to a federal agency can utilize data mining techniques to find out almost anything about you.
Wyoming has made this practice nearly impossible by having no publicly searchable register of LLC managers or members. Even the annual report is only required to be signed by a single individual and, in most cases, this will be your registered agent.
Subsequently, your personal information will not be disclosed publicly, and you can avoid all the background searching that goes on.
How to Setup and Operate a Wyoming LLC Holding Company
LLC formation in Wyoming is a really simple process and just requires the creation of an operating agreement, the appointment of a manager, and the listing of members (similar to shareholders). The process is exceedingly quick, and any registered state agent should be able to form the entity for you.
However, it would probably be prudent to have the provided operating agreement reviewed by an external attorney. The reason is that this is the key document that will be looked at during any sort of legal action against your LLC. Subsequently, it needs to be correctly structured and highlight the fact that this is simply an asset-holding company.
Probably the most important point to note is that an LLC holding company should NEVER be in the position of transacting ANY business. The company is solely there to hold assets and should be doing no business in its own right. Only your operating company will transact business directly.
The Operating LLC
Your operating LLC will typically be a subsidiary of the holding company and this entity will do all of your business and management of the assets that are held within the holding company. Any day-to-day transactions will ALWAYS occur within the holding company. In this way, any lawsuits or legal action will be directed only at your operating LLC which holds no assets of its own.
Through the use of an operating LLC, you have effectively created a liability shield and asset protection vehicle between your business operations and your ultimate holding company. As long as you separate out the operations away from the holding company and ensure that you never mix accounts/records then you are unlikely to see the corporate veil pierced all the way through to your assets.
Offshore Ownership of a Wyoming LLC Holding Company
At any point, you may choose to add an additional layer of protection to your structure by changing the ownership of the asset holding LLC to an offshore trust. The Cook Island’s Trust would be the perfect addition to such a structure and largely provide a judgment-proof setup.
Although this adds to the cost of maintaining such a structure, the additional asset protection benefits are immense and you will find that litigants will be largely looking to settle with you, on massively reduced terms, once it is discovered that a Cook Island’s trust is at the end of the chain.
Setting up an Asset Protection vehicle doesn’t have to be incredibly difficult or time-consuming. Even a single-member LLC can be chained to a corporation to provide immense protection as long as you separate out your operating LLC and holding LLC. Any such structure is easily achievable and worthwhile even for small e-commerce operators.
Given the general domestic mood towards increased tax burdens, reductions in privacy, and increases in lawsuits and regulation, you would be crazy not to consider your legal options for making yourself fireproof to a legal judgment.
Please feel free to reach out to me if you have any questions regarding Asset Protection.