Start a Wyoming S Corp

Step 1: Choose a name 

The first step toward forming a Wyoming LLC is selecting a name. Coming up with a distinct name helps your LLC stand out from other companies. This is also an opportunity for you to hone your branding tone and reflect on your mission and vision.

But before you create merchandise with your company name on it, let’s go over some crucial rules about LLC names.

Name Requirements for a Wyoming LLC

The state of Wyoming has a few basic rules for naming your LLC:

• The name needs to be different and distinguishable from other businesses in the state (even if they aren’t LLCs).
• The business name can’t state or imply that it can do something it’s not authorized to do (such as an illegal activity or a profession you’re not licensed to perform).
• The name must end with a “designator” that signifies the business is an LLC. Allowed limited liability company designators include:
  • limited liability company
  • LLC
  • L.L.C.
  • limited company
  • LC
  • L.C.
  • Ltd. liability company
  • Ltd. liability co.
  • Limited liability co.
• The name can’t suggest that it’s formed for a purpose different from what you put in your Articles of Organization.
• The company name can’t contain the word or abbreviation for a different entity type for example, “Candle Corp., LLC” won’t work).

Want to know more about how to name your LLC? Let us help you search Wyoming records to see if your desired name is being used by another business entity in the state. We show you how to check the Wyoming Secretary of State’s database to search for business names that are already in use on our Wyoming business name search page. 

Domain Names

While not a legal requirement, you might want to make sure that your chosen business name is available as a domain name before you take the next step. After all, being available online is a big part of running a successful business. Plus, it’ll be easier for people to remember and interact with your business if the website and company names match. We can help you take care of this with our domain name search and domain name registration service. We can even help you set up your website.

Trademarks

Even if the name you want to use appears to be available after you’ve searched the Secretary of State’s database, there’s no guarantee that someone hasn’t already trademarked it at the state or federal level. While there’s no central place to check for all trademarks (some businesses even consult with trademark-specialized lawyers), you can take some measures yourself.

For instance, you can search for state-level trademarks through the Wyoming Secretary of State. To check for federal trademarks, search the United States Patent and Trademark Office (USPTO) database. 

In addition to checking state and federal databases, it’s a good idea to conduct extensive internet searches for your desired business name, such as checking domain names and social media sites.  

Step 2: Appoint a registered agent

Designate a registered agent for your Wyoming LLC. Every LLC in Wyoming is required by law to have a registered agent. This agent is an individual or business entity that receives official paperwork and important legal notices (such as service of process for lawsuits) on behalf of the company.

Who can serve as a registered agent?

In Wyoming, there are rules about who can act as a registered agent. In order to serve as a registered agent for a Wyoming LLC, an individual or business entity must: 

• Have a physical street address in Wyoming (must be a physical address; P.O. boxes will not suffice)
• Sign a form called Consent to Appointment by Registered Agent. This form must be signed by the registered agent and accompany new entity filings. If filing online, the filer will be asked to certify that they’ve received a similar written consent. 

If an individual serves as your registered agent, they must be at least 18 years of age, reside in Wyoming, and have a physical address in the state. 

Benefits of Hiring a Registered Agent Service

Legally, a business owner can serve as their own registered agent. However, there are drawbacks to serving as your own agent or having a friend or family member do so.

For starters, if your company is sued, being served with the lawsuit notice in front of customers could be embarrassing or even damaging to your business. Furthermore, if your business moves, you’ll need to remember to update your registered agent address on file with the state.

Also, registered agents need to be available during all regular office hours to receive documents and legal notices. This can be inconvenient when you’re trying to run a business and live your life. 

These reasons and more are why many business owners opt to use a professional registered agent service instead. With a professional service, you can: 

• Avoid the embarrassment of being served legal notices in front of others
• Rest assured all notices will be received and passed along in an appropriate manner
• Have peace of mind knowing your registered agent information remains up to date with the state of Wyoming

Our Wyoming registered agent service can match you with a professional service provider.

Step 3: File Wyoming Articles of Organization 

The next step is to file Wyoming Articles of Organization with the state. Your LLC Articles of Organization are the formation documents that officially create your business. So, if you want the personal liability protection you get from an LLC, you’ll need to make sure you fill them out carefully and completely. 

Filing with the Wyoming Secretary of State

You’ll file your Articles of Organization with the Wyoming Secretary of State. Before filing these formation documents, make sure you have all of the necessary information. 

What information do I need for my Articles of Organization? 

The Articles of Organization is like your business’s birth certificate. When the government accepts them, the Articles of Organization proves that your LLC exists and provides basic information about the company.

Here’s what the Secretary of State requires you to put in your Articles of Organization when you create an LLC in Wyoming:

• The name of the Wyoming LLC (which needs to meet the naming rules we talked about before)
• The registered agent and registered office address
  • In Wyoming, you also need to include an attached registered agent consent form signed by the registered agent accepting the appointment to serve in that role. 
• The business address of the LLC
• The mailing address of the LLC
• An email address to receive electronic service of official documents
• Whether the LLC is a “close LLC.” A close LLC is a more restrictive kind of LLC with more restrictions on membership and transferring ownership. It’s often used for family businesses and estate planning.
• LLC organizer signature(s) 

Help ensure that you accurately and quickly file your Articles of Organization with our business formation service. Answer a few questions about your business, and we’ll provide you with a selection of offerings suitable for your needs and situation. Choose your service(s), and your dream business can be born in no time.

Wyoming LLC Cost

Wyoming charges a $102 filing fee for your Articles of Organization, but there may be add-ons and other costs that bump this amount up (such as fees for licenses or permits in your industry). You can opt for the online filing option or file your documents by postal mail. Find out how much it may cost to form your business on our dedicated Wyoming LLC cost page.

Step 4: Create an operating agreement

Creating an LLC operating agreement is the next step. A Wyoming LLC operating agreement is an internal document that contains key information about how your business will be run. A comprehensive operating agreement might include:

• Who manages the LLC
• How ownership in the LLC is divided
• Who can and must vote on important decisions 
• How you calculate how many votes each person has
• What types of things a manager is responsible for
• How to admit new members or managers into the LLC
• What happens when someone leaves the LLC
• How you can transfer ownership in the LLC
• What happens before, during, and after the LLC is dissolved

An operating agreement is where you and your associates can turn if disputes arise (and how you avoid future conflicts in the first place). If the operating agreement doesn’t discuss it, the Secretary of State’s default rules for Wyoming LLCs will apply to your operating procedures.

People starting a company may get so caught up in the formation process that they overlook this critical step. Or they may think that it’s an unnecessary expense. Too often, these same businesses find themselves embroiled in a lawsuit or other disputes that the owners might have avoided if they had written an operating agreement.

Are you unsure as to how to create an operating agreement for your LLC? We offer a customizable template to help get you started.

Step 5:  Apply for an EIN

Get an Employer ID Number (EIN) from the IRS. Many LLCs, including those with employees or more than one owner, are legally required to obtain an EIN, also known as a Federal Tax Identification Number. Most banks require an LLC to have an EIN to open a business bank account. This nine-digit number is used for tax purposes and other financial paperwork.

We can obtain this number for you with our EIN service. 

Step 6:  File form to apply for S corp status

Submit the form to apply for S Corp status. Once your LLC or C corporation formation is approved by the state, you need to file Form 2553, Election by a Small Business Corporation, with the IRS to get S corp status. 

The IRS requires that you complete and file your Form 2553: 

• Within 75 days of the formation of your LLC or C corporation, or no more than 75 days after the beginning of the tax year in which the election is to take effect

OR

• At any time during the tax year preceding the tax year the election is to take effect.

Here’s an additional important note for LLCs wishing to file as an S corp: If your LLC is past the 75-day election deadline, you’ll also need to file Form 8832, Entity Classification Election, to elect to be taxed as a corporation. Then you would file both Form 8832 and Form 2553 together via USPS-certified mail. 

Note that all of the shareholders/members must sign the consent statement portion of the form. For more information on when and how to file Form 2553, visit the IRS website.

Pros and Cons of Filing as an S Corp

While S corp classification does come with a number of benefits for some businesses, making this election isn’t necessarily right for all businesses. So, be sure to carefully weigh the various pros and cons before deciding how you want to move forward. Consult a tax professional about whether the S corp election would be best for your business.

Advantages of S Corp Status for LLCs

The advantages of filing as an S corp for an LLC aren’t exactly the same as they are for C corporations. Let’s first examine the advantages for LLCs.

A traditional LLC already has pass-through taxation by default, so the benefits of S corp election for an LLC have to do with self-employment taxes. This takes some explanation, but for certain LLCs, it could save a lot in taxes.

Explanation of Self-Employment Taxes

The owners of a standard LLC are considered self-employed. They’re compensated by receiving their share of profits from the LLC, but they can’t be employed by the LLC. Being self-employed means paying self-employment taxes (Social Security and Medicare, which add up to about 15.3%) on all profits they receive from the LLC. This is more than the taxes they’d pay when working for someone else because their employer would pay part of them.

Dividing Salary and Profits

When the members make an S corporation election, they can be compensated in two ways, by receiving their share of the profits and by being paid as an employee. Once they do that, they only pay Social Security and Medicare taxes on their salary and not the profits they receive as a business owner. Depending on factors such as how profitable your company is, the savings could add up to a lot. (Of course, the members will still pay tax on income and all other applicable taxes on their share of the profits.) Money paid out as salary is a tax-deductible expense for the business. 

Reasonable Compensation

One caveat to this is that the IRS expects you to pay yourself a “reasonable salary” as an employee. If they didn’t, you could pay yourself an annual salary of nine bucks and avoid contributing anything to Social Security and Medicare. 

So, what is “reasonable compensation” to the IRS? The instructions on Form 1120-S read, “Distributions and other payments by an S corporation to a corporate officer must be treated as wages to the extent the amounts are reasonable compensation for services rendered to the corporation.” While the terms aren’t completely defined, the IRS seems to consider “reasonable” to be something akin to what others in your field are earning for the same work.

If the IRS determines that your salary isn’t reasonable, it can reclassify your non-wage distributions (which are not subject to employment taxes) to wages (which are subject to employment taxes). Several court cases have supported the IRS’s right to do this.

Disadvantages of S Corp Status for LLCs

Having an LLC with S corp status can have some drawbacks over an LLC without S corp election:

Stricter Requirements 

As we listed above, S corps have more qualifications than a standard LLC or C corporation. An S corp can have no more than 100 members, and none of them can be partnerships, corporations, or non-resident aliens. A traditional LLC doesn’t have these limitations.

More IRS Scrutiny

Because of the above restrictions and the requirements about paying yourself a “reasonable salary,” the IRS usually monitors LLCs filing as S corps more closely. That could mean a greater chance of being audited, even if you follow the law to the letter. In fact, S corp owners may want to observe some of the same formalities that C corporations do (such as regular meetings and extensive record keeping), even if they’re not legally required to.

Additional Accounting and Bookkeeping

Having an LLC that files as an S corporation likely means more paperwork. If you don’t already have to do payroll for your business, being an owner-employee means that you’ll have to do so. Your taxes will be more complex, as well.

With these added complications, you’re likely to have higher administrative costs. You may find that you need an accountant, bookkeeper, and/or a payroll service or software.

Advantages of S Corp Status for C Corporations

If you have a C corporation (the default form of corporation), filing as an S corp does have its advantages:

Pass-Through Taxation

One big disadvantage for C corporations is “double taxation.” When the corporation makes a profit, the IRS taxes those profits on the corporate level. But when those profits are ‌distributed to the individual owners (shareholders) as dividends, they’re taxed a second time on the shareholders’ personal tax returns.

But when a C corporation qualifies to be an S corp, those profits are only taxed at the individual level. The business itself isn’t taxed on them. This is called “pass-through taxation,” and it’s how sole proprietorships and general partnerships are taxed. LLCs are also taxed this way unless they choose to be taxed as a corporation.

We need to add here that, since the 2017 Tax Cuts and Jobs Act, the corporate tax rate has been lowered to a flat 21%. So, the disadvantages of double taxation aren’t as severe now as they were. 

Writing Off Losses

Just as business profits pass through to the owners of an S corp, so do the losses. Unlike the shareholders of a C corporation, S corp owners can write off the company’s losses on their personal income tax statements. 

This can help offset their income from other sources and can be helpful if the corporation loses money in its early years. Still, make sure you’re aware of ​​the IRS’s shareholder loss limitations.

Qualified Business Income Deduction

Under the Tax Cuts and Jobs Act, some business owners with S corp election may be able to deduct up to 20% of their qualified business income. This deduction isn’t available to C corporation shareholders.

Qualified business income (QBI) is basically your share of the company’s profits, or, as the IRS puts it, “QBI is the net amount of qualified items of income, gain, deduction and loss from any qualified trade or business, including income from partnerships, S corporations, sole proprietorships, and certain trusts.” The IRS website has a detailed explanation as to what is and is not included in QBI. There’s an income threshold that, if exceeded, may reduce your QBI (see the IRS website for details).  

Disadvantages of S Corp Status for C Corporations

S corp status also has its pitfalls:

Limited Number of Shareholders

As we said, an S corp can’t have more than 100 shareholders, while a C corporation has no such restriction. That limitation could be an issue later if the corporation expands.

Limited Types of Shareholders

All S corp shareholders must be U.S. citizens or certain trusts or estates. That might limit your ability to expand internationally. You also can’t have partnerships or corporations as shareholders. C corporations don’t have these limitations.

One Class of Stock

One way corporations attract investors is to offer preferred stock. C corporations have this option, but the IRS doesn’t allow it for S corps.

More IRS Scrutiny

Because of the extra restrictions S corps have, the IRS watches them more meticulously to see if they’re in compliance. In other words, your corporation is more likely to get audited.

We can’t stress enough how important it is to have tax guidance about your specific situation from a qualified tax professional. An accountant with S corp experience should be able to make sure you stay in compliance with the IRS, and they may also be able to help you find additional tax savings.

Wyoming-Specific Considerations

In an S corp, the business itself doesn’t usually pay taxes on income at the federal level. But what about state income taxes?

Wyoming is an extremely tax-friendly state in that it has no corporate income tax and no personal state income tax. However, other standard taxes, such as sales tax, will still apply.

How We Can Help

Forming a business can be complicated, but we’re here to make it as easy for you as possible.

When you’re ready to make your move into entrepreneurship, we can help you form a Wyoming LLC with an S corporation designation and provide you with valuable support for all of your business needs moving forward. Contact us today to get started.