WY Close LLC
The Wyoming Close LLC is a special kind of LLC, available only in Wyoming, that has strict rules designed to protect assets and reduce tax penalties. A Wyoming Close LLC costs $100 to form, and is limited to 35 members (owners). Often used by families to plan for the future transfer of real estate or other assets, a Close LLC allows senior family members to avoid or reduce tax penalties by passing ownership of a business or estate to their children over time through a series of distributions. Here’s how it works.
Differences Between a Close LLC and Wyoming LLC?
The main difference between a regular Wyoming LLC and a Wyoming Close LLC is that a Close LLC is governed by certain rules, defined in Wyoming’s state statutes, that restrict how:
- a member can withdraw from the LLC
- the LLC can be dissolved
- profits are distributed
- how membership can be transferred
- the number of members allowed in the LLC
Below, we’ll go over the major differences between a traditional Wyoming LLC and the Close LLC.
Wyoming Close LLC vs Traditional LLC
| Wyoming LLC | Wyoming Close LLC | |
| Number of LLC Members | Unless outlined in the operating agreement, a Wyoming LLC can have as many members as it wants. | Wyoming Close LLCs are limited to 35 members. |
| Membership Transfer | In most cases, an LLC member can sell their share of the LLC to anyone they want, as long as a majority of membership agrees to the transfer. | All members must agree on transfer of ownership in a Close LLC. This prevents a minority member from selling off part of the family business to an outside party. |
| Leaving the LLC | Members can leave a Wyoming LLC whenever they want. | Unless the operating agreement says otherwise, a Close LLC member can only leave the LLC if all other members agree. |
| Dissolving the LLC | LLC members can choose when they want to dissolve their LLC. | Unless a specific time frame has been outlined in the LLC’s operating agreement, a Close LLC can only be dissolved if all members agree to the dissolution. |
| Management | In general, management responsibilities are outlined in the operating agreement, and can be divided anyway the members want. | Management responsibilities in a Close LLC fall on the member or members who own the largest interest in the LLC. This allows older family members to control the LLC until the younger generation is ready to manage the family business or estate. |
| Distributions | Unless otherwise listed in the LLC’s operating agreement, LLC members share profits based on their membership interest. | Distributions do not have to be equal to a member’s share in the LLC, and are completely at the discretion of the manager. |
What are the benefits of a Wyoming Close LLC?
Like a regular LLC, a Wyoming Close LLC is a separate legal entity from its owners, which means that if the LLC gets sued or goes bankrupt, a judgment can generally only be made to go after the LLC’s assets, and not those of the members. However, a Close LLC is defined by additional rules that can prove beneficial in the right circumstances.
Control of the LLC
Membership interest in a Close LLC must be approved by all other members of the LLC. This allows older family members to manage the family business as they see fit, and then transfer ownership in the LLC to their children and grandchildren without risking part of the LLC being sold to outside interests.
Transferring Family Wealth
A Wyoming Close LLC can be used by parents to pass on the family business to their children. For example, the parents can hold 80% of the LLC, and hand 20% to their children. Each person gets voting rights in the LLC, but since the parents control the majority of LLC ownership, they can slowly divest themselves of ownership over time.
Potential Tax Savings
Gifts of LLC membership interest to family members can be tax free as long as the gift is valued at no more than the IRS gift tax limit ($18,000 for 2024). If, for example, a parent wants to pass down assets to a child, they can do so by gradually transferring membership interest every year. This can potentially allow the gradual transfer of assets without triggering a taxable event. Of course, we’re not tax professionals, so you’ll want to consult a CPA to find out of this will work for your situation.
How to Form a Wyoming Close LLC
A Wyoming Close LLC is formed in the same manner as a regular Wyoming LLC. Simply appoint a Wyoming registered agent and fill out the Wyoming LLC Articles of Organization. The only difference is that you’ll need to check the box on the articles that says “This entity elects to be a close limited liability company.” Checking the box alerts Wyoming that you plan to form a Close LLC, and will abide by the statutes outlined in WY Stat § 17-25-101 to 17-25-109.
Note: While Wyoming doesn’t require an LLCs owners or managers to be listed on the Articles of Organization, you will need to list a registered agent and address. If you act as your own registered agent for your Close LLC, your name and address will end up on public record. If you don’t want that to happen, hire a Wyoming registered agent like us. We’ll list our name and Wyoming address on your articles, keeping yours away from prying eyes.
Once you’ve completed your articles, you’ll submit it to the Secretary of State by mail or online. Online filings cost $102 and are processed immediately. Mailed filings cost $100 and take about 15 days for the state to make your Close LLC official.
Online:
Wyoming Secretary of State Business Center
Mail:
Wyoming Secretary of State
Herschler Building East
122 W 25th Street
Suites 100 and 101
Cheyenne, WY 82002-0020
Wyoming Close LLC Requirements
In accordance with WY Stat § 17-25-103, the text below needs to be featured, relatively unchanged, on both the LLC’s membership certificates and in its operating agreement:
“NOTICE OF RESTRICTIONS ON TRANSFERS AND WITHDRAWALS
The rights of members in a Close limited liability company may differ materially from the rights of members in other limited liability companies. The Close Limited Liability Company Supplement, articles of organization, and operating agreement of a Close limited liability company may restrict transfer of ownership interests, withdrawal or resignation from the company, return of capital contributions and dissolution of the company.”
Wyoming Annual Report
While Close LLCs generally have fewer internal reporting requirements and meetings, they’ll still need to file a Wyoming Annual Report every year. The report is due based on the date of the Close LLC’s formation. The fee to file your annual report is determined by the Close LLC’s total Wyoming assets. The minimum payment is $60 or $0.0002 for every dollar of your in-state assets, whichever is greater. For example, if your Close LLC holds a million dollars in assets, the annual report filing fee will be $200.
Form Your Wyoming Close LLC Today!
