Why Florida Residents Should Use Wyoming LLC with Caution

Why Florida Residents Should Use Wyoming LLC with Caution

By: Jacqueline R. Bowden Gold, Miami Business Law Attorney

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When forming a Limited Liability Company (LLC), many business owners are drawn to states like Wyoming due to its strong asset protection laws, privacy advantages, and business-friendly tax structure. However, for Florida residents who operate businesses primarily within Florida, using a Wyoming LLC requires careful consideration. While Wyoming offers distinct advantages, these benefits might not fully extend to Florida-based operations, and failing to understand this distinction can lead to unexpected challenges. In this article, we’ll explore the pros and cons of forming a Wyoming LLC as a Florida resident and why it’s essential to proceed with caution.

Wyoming LLC’s have become popular due to its strong asset protection laws, privacy, low fees and easy maintenance. While these benefits make Wyoming LLCs attractive, Florida residents must carefully weigh these advantages against the complexities of operating a business primarily in Florida. Here are several key issues that Florida business owners need to consider:

1. Foreign LLC Registration Requirements: If your business operates primarily in Florida but is owned by a Wyoming LLC, Florida law requires that you register the Wyoming LLC as a “foreign LLC” in Florida. This means that even though the LLC is incorporated in Wyoming, it must comply with Florida’s registration, tax, and reporting requirements if it conducts business in the state. You’ll need to pay Florida fees and file necessary documents with the state, which can diminish some of the cost and privacy advantages of forming in Wyoming.
2. Enforcement of Florida Judgments: If a creditor obtains a judgment against your business in Florida, they may enforce that judgment within Florida, regardless of the business’s Wyoming LLC status. Because the business operates in Florida, the creditor can target Florida-based assets (such as bank accounts, property, or revenue) for collection. Florida’s legal system, rather than Wyoming’s, will govern how a creditor can pursue the judgment.
3. Piercing the Corporate Veil: A significant risk for business owners who form out-of-state LLCs is the possibility of creditors or courts “piercing the corporate veil.” This legal concept allows courts to hold individual LLC owners personally liable for business debts if the LLC is found to be a shell company, undercapitalized, or used for fraudulent purposes. If a Florida court determines that a Wyoming LLC is being used improperly to shield assets while operating primarily in Florida, the court may disregard the LLC’s separate legal status and pursue the owner’s personal assets.
4. Dual State Compliance: Managing a Wyoming LLC that operates in Florida requires adhering to the laws of both states. This includes filing annual reports and paying fees in both Wyoming and Florida, maintaining registered agents in each state, and potentially dealing with tax filings for both states. The added administrative burden and cost can diminish some of the benefits of forming a Wyoming LLC.

 

Domesticating a Florida Judgment in Wyoming

If a Florida judgment is obtained against you or your business and the creditor wants to pursue assets in Wyoming, they can domesticate the judgment under the Full Faith and Credit Clause of the U.S. Constitution. This process allows a creditor to transfer a judgment from one state to another, so a Florida judgment can be enforced in Wyoming through the state’s legal system. However, even if the judgment is domesticated in Wyoming, the state’s asset protection laws, such as charging order protections, may limit the creditor’s ability to seize Wyoming-based assets or force the sale of LLC assets. However, as previously mentioned it is possible that a creditor may pursue Florida-based assets first if the business operates primarily in Florida.

 

When should a Florida Resident Consider a Wyoming LLC?

Despite the potential complexities, there are still situations where forming a Wyoming LLC could be beneficial for Florida residents:

• Multiple Locations or National Operations: If your business operates in multiple states, including Wyoming, forming a Wyoming LLC might make sense. The stronger asset protection laws and lack of state income tax could outweigh the cost of foreign LLC registration in Florida.
• Investment or Holding Companies: If the Wyoming LLC is used primarily as a holding company for assets located in Wyoming (or other favorable jurisdictions), you may still benefit from Wyoming’s legal protections and privacy laws.
• Enhanced Privacy Needs: For individuals seeking anonymity in business ownership, Wyoming’s privacy protections can be valuable. However, keep in mind that Florida’s foreign LLC registration may still require disclosure of certain information.

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Conclusion

While Wyoming offers several attractive benefits for LLC formation, Florida residents must approach the decision with caution. For Florida residents, forming a Wyoming LLC may still be advantageous in certain situations, but it’s important to fully understand the implications and potential downsides. Consult a business attorney to ensure you make the best decision for your unique situation. For more information on asset protection or forming your new business, contact attorney Jacqueline R. Bowden Gold at (305) 556-5209 or by email at JBowden@raricklaw.com.