The Wyoming Close LLC is a variation on the traditional Wyoming LLC. It is more restrictive regarding transfers of membership, member rights, and dissolution. The Close LLC is used most typically by family businesses, for estate planning, and for enforcing rigid ownership and management structures.
Features of a Wyoming Close LLC
Company Interest Transfer Limitations
LLC interests cannot be transferred to any other party without the unanimous membership consent (unless otherwise established in your Operating Agreement).
Unlike a traditional LLC, all Wyoming Close LLCs are required by law to have an Operating Agreement. The following clause is required to be included:
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.
Membership certificates must clearly state that the company is a Wyoming Close LLC.
Management responsibilities are assigned according to the division of profits and losses among your members. The member receiving the largest percentage of profits and losses is then also the senior manager with the largest vote (unless otherwise stated in your Operating Agreement).
Withdrawal of Membership
Members can only withdraw from the company if all the other voting members unanimously agree with the withdrawal (unless otherwise stated in your Operating Agreement).
A Wyoming Close LLC can only be dissolved with the unanimous approval of all voting members or if a certain date of dissolution has been designated in your Operating Agreement.
Why Form a Wyoming Close LLC?
At Wyoming Registered Agents, we often get clients interested in forming a Close LLC. It is no surprise then that a question we hear a lot is why would anyone form a Close LLC in the first place?
While we cannot recommend any particular business entity structure over another, we can acknowledge that the Close LLC has certain advantages:
Wyoming LLC law asserts that the sole remedy for creditors is the charging order. With Close LLCs, creditors have little reason to seek even that remedy. In the case of the Close LLC, charging order distributions are made only if the managing member decides to make distributions to the members. If a manager simply elects not to make any distributions, then creditors receive no payments. In certain cases, even though the distribution hasn’t been made, a creditor may still be required to pay taxes on the undistributed payments, a fact that may make creditors even less likely to seek a charging order.
Family Business Control
The Close LLC was designed with family-run businesses in mind. Members of the Close LLC have total control over the entry and exit of members. Ownership can be distributed evenly while management can be retained by a single member. Interest in the company cannot be sold without the consent of other members. Factors like these make the Close LLC an attractive option for family operations.
Wyoming is a premier destination for estate planning, and the Close LLC is a unique estate planning tool. Closely-held assets can be devalued, potentially dropping federal income tax from 40% to less than half that. This is because closely-held assets are non-liquid and have little value since they cannot be bought or sold without the unanimous approval of other members. All estate planning options, however, should be considered with the input of an experienced tax attorney.
How to Form a Wyoming Close LLC
There is no special paperwork for forming a Wyoming Close LLC. All that is needed is to check the box on your Articles of Organization indicating that this is a Close LLC.