Synopsis
Wyoming is situated in the mid-west of the United States of America forming almost an exact rectangle 360 miles long by 280 miles wide making it the tenth largest of the 50 states but one of the least populated.
Essentially, Wyoming is one big plateau broken by many towering mountain ranges. Wyoming is a state where the Great Plains meets the Rocky Mountains. Its north western corner contains the famouse Yellowstone National Park.
Marked by few regulations and a lack of bureaucracy in arranging its corporate affairs, Wyoming offers the following advantages:
- No state income taxes
- Nominee officers permitted
- Single ownership and control possible
- Strong asset protection characteristics
Wyoming offers three types of corporate entity, the C-Corp, the S-Corp and the Limited Liability Corporation or LLC and it is this last category that generally offers the most benefits.
The concept of the LLC is relatively new and is potentially one of the most interesting developments in international corporate and trust work in recent years. The first LLC statutes in the United States were instituted in Wyoming in 1977. Since Wyoming has had Limited Liability Companies available longer than any other state and has strong laws protecting the members and managers of an LLC, it has become a popular choice for establishing LLCs.
An LLC has corporate form and personality but is categorised as a partnership under the Internal Revenue Code of the USA. As such, the LLC is not separately taxable but rather its income is taken to flow through to its members who are taxed according to US principles as though they had received the income directly. Non US persons are only taxed on US source income or income connected with the conduct of a US trade or business. If the LLC earns only income which falls outside this definition and the members of the LLC are non US persons with no US presence then no tax would be payable either by the LLC or by its members.
Thus, a non taxable structure can be created by having non US individuals or companies as the members of the LLC. If the LLC had individual members, those members would most probably suffer taxation on profits received from the LLC in their country of residence so the recommended structure is to have two offshore companies as the members of the LLC.
The US has signed taxation treaties with most developed countries. The effect of these taxation treaties is to considerably reduce the level of tax which must be withheld on the payment of royalties, dividends and interest to an US individual or corporation. Opinion is split as to whether an LLC falls within the terms of these taxation treaties. The LLC is a relatively new product so there is little precedent available which gives assistance in determining the exact treatment of an LLC by non US countries in relation to the taxation treaties. Thus, although it would appear as though an LLC may be extremely useful in any tax planning exercise, we recommend that care be exercised and that a suitable legal opinion is sought. We can arrange such legal opinion from an expert US tax lawyer upon request.
What is clear is that the US LLC is a low profile zero tax company which enjoys the protection and privileges afforded by the US legal system.
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Last reviewed: Wednesday, May 26, 2010
Whilst every effort has been made to ensure that the details contained herein are correct and up-to-date, it does not constitute legal or other professional advice. We do not accept any responsibility, legal or otherwise, for any error or omission.
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