Has a Wyoming or Delaware LLC ever "Saved" You?

[Chris Seveney]

I keep seeing investors spend real money setting up Wyoming or Delaware LLCs for “extra protection” instead of simply filing in the state where they own property or operate. The marketing pitch is always stronger asset protection, anonymity, better charging-order rules, you name it.

Here’s my question to the BP community:

1. Have you ever had a real-world event—lawsuit, creditor claim, partnership dispute—where your out-of-state LLC structure made a clear, measurable difference?

2. What was the situation, how did the entity help, and (be blunt) what did the whole setup actually cost you in filing fees, registered-agent costs, franchise taxes, and annual reports?

3. Knowing what you know now, would you still register outside your home state—or was it money better spent on insurance and good operating agreements?

I’m not looking for theory or “my attorney says.” I want concrete war stories that justify—or debunk—the hype.

Love for someone to drop their experience, numbers, and lessons learned as I would like to separate marketing myth from reality.

[Chris K.]

@Chris Seveney

Interesting topic. In my experience, the main benefit of a Delaware LLC is the depth of caselaw. That matters because in many states, the honest answer to common membership disputes is "we have no idea."

For example, a client of mine had real concerns about successor liability in a given transaction. Delaware has clear cases on point. In other states, it's not even clear whether courts would recognize the claim, let alone how they'd apply the law. If you're on the plaintiff side, you can drag things out in jurisdictions where the answer isn't settled. For clients, that means more time and money spent litigating.

You see this difference in available resources. For example, many lawyers use Practical Law, a paid repository written by very expensive attorneys. A search for “Limited Liability Company” gives over 300 hits for Delaware, New York, California, Illinois, and Texas. Other jurisdictions may only have less than 30. 

Does this matter for "most" real estate investors? Probably not. But for sophisticated parties, caselaw certainty is a big deal.

For what it's worth, I would typically say most real estate investor should probably just open an LLC in the state they operate.

Disclaimer: While I’m a licensed attorney, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.