Delaware vs Wyoming LLC - which state is actually better?

I keep seeing people debate Delaware vs Wyoming for LLCs. I'm launching a SaaS product and want to incorporate properly.

Delaware seems like the "default" choice but Wyoming keeps getting mentioned as a privacy haven with lower fees. What's the real story here? Does it even matter if I'm just a solo founder?

Unless you're raising VC money, incorporating in Delaware is usually overkill. Delaware makes sense for C-corps raising institutional funding because VCs prefer Delaware's well-established corporate law.

For LLCs, especially if you're bootstrapping, Delaware doesn't offer much advantage over your home state. The annual franchise tax is $300/year minimum + registered agent fees.

Wyoming doesn't list member names in public filings which is amazing for privacy. Delaware requires you to list members.

Wyoming also has no corporate income tax, no franchise tax, and cheaper annual fees ($60 vs Delaware's $300). If you care about privacy and saving money, Wyoming wins.

Let's clear up some common misconceptions here:

Delaware's reputation is mostly about C-corps, not LLCs. Delaware has 200+ years of corporate case law and the Court of Chancery which is crucial for complex corporate disputes. This matters for corporations with boards and shareholders. For LLCs? Not really relevant.

The privacy argument for Wyoming is overblown. Yes, Wyoming doesn't publish member names, but if you're doing business in other states (which you will be), you'll likely need to register as a foreign LLC in those states - and THOSE states might require disclosure. Plus your bank, payment processors, customers, etc. will all know who you are.

Asset protection myths: Both Delaware and Wyoming offer the same basic LLC liability protection. Wyoming has slightly stronger charging order protection statutes, but this matters more for multi-member LLCs. For single-member LLCs, the differences are minimal.

So what's the actual cost breakdown? Everyone talks about Wyoming being cheaper but then I read you need a registered agent in Wyoming, and if you're not physically there, that's another expense.

Here's the annual cost comparison for an out-of-state owner:

Delaware LLC:

• Annual franchise tax: $300
• Registered agent: $50-150/year
• Total: ~$350-450/year

Wyoming LLC:

• Annual report fee: $60
• Registered agent: $50-100/year
• Total: ~$110-160/year

BUT if you're doing business in California where you live, you ALSO need to register as a foreign LLC in California and pay their $800/year franchise tax anyway. So you'd be paying Wyoming fees + California fees.

@Derek_LLC_Pro nailed the foreign LLC issue. This is the #1 thing people miss.

If you form in Wyoming but you live in Texas and your office is in Texas, Texas will say "hey you're actually doing business here, you need to register as a foreign LLC and pay our fees too." You don't escape your home state's requirements by incorporating elsewhere.

The only scenario where Wyoming/Delaware makes sense for most small LLCs is if:

1. You're a holding company not doing active business anywhere, OR
2. You're truly location-independent with no physical presence anywhere, OR
3. You're in a state with terrible LLC laws (rare)

Otherwise: just incorporate in your home state. It's simpler and cheaper.

This is super helpful. I'm in Colorado and my SaaS will have customers nationwide but I'll be working from home. Sounds like Colorado LLC is the way to go?

Yeah Colorado is fine. I formed my SaaS LLC in Colorado 3 years ago, never had issues. Annual report is like $10.

The whole Delaware/Wyoming thing is mostly marketing by formation services trying to upsell you. They make it sound exotic and sophisticated but for 95% of small businesses it's just extra paperwork and fees.

One more thing worth mentioning: if you plan to raise venture capital in the future, you'll likely need to convert to a Delaware C-corp anyway.

Most VCs have standard term sheets that assume Delaware corporations. They don't want to deal with Wyoming LLC operating agreements or non-standard entity structures. So if your Wyoming LLC takes off and you want VC funding, you'll convert to Delaware C-corp and pay for that conversion process.

My advice: start where you are now (Colorado for OP). If you grow to the point where you're raising institutional funding, convert to Delaware C-corp at that time. Don't prematurely optimize your entity structure.

Perfect, that settles it. Going with Colorado LLC. Thanks everyone for the reality check - saved me from making this way more complicated than it needs to be.

Just wanted to add my experience here - I went against the advice in this thread and formed in Wyoming (I'm based in Texas). It's been 8 months and honestly it's been more hassle than it's worth.

I had to register as a foreign LLC in Texas anyway since that's where I operate. So now I'm paying Wyoming's $60 annual fee PLUS Texas's $800 franchise tax. Would have been cheaper to just form in Texas from the start.

The "privacy" benefit is basically useless - my bank, payment processors, and Apple's App Store all know exactly who I am anyway. And Texas's public records show me as the foreign LLC registrant, so the privacy thing is kind of a myth.

Lesson learned: listen to the attorneys in threads like this. Form in your home state unless you have a very specific reason not to.