Incorporate LLC in Wyoming Vs Michigan?

6 Replies

Hi BP members,

I'm wondering if anyone can provide some real world practical advice on the pros and cons of registering my LLC in Wyoming (for charging order protection) versus registering my LLC in Michigan (my home state and the place I will be buying properties). My lawyer said that he has had clients with out of state LLCs that had issues getting approved for loans because "they were seen as a suspicious outside company buying up local assets". Thank you for the insights.

-Kevin 

Hi @Kevin Cooper . I happen to be researching the same exact thing. I don't have a direct answer for you, but I can stir the pot with what I've seen so far (I haven't actually executed anything yet).

I had an initial consultation with an out of state lawyer who recommended that I form an LLC in Wyoming and have it be the controlling member of my Michigan LLC. As in your case, this was recommended to control/set/protect the charging order. I have an immediate family member who is a (non-real estate) lawyer and I asked her about this. She seemed puzzled and, after a quick disclaimer, said that it seemed like an odd and unnecessarily complicated thing to do, because "The corporate veil in Michigan is already difficult to pierce.".

Funnily enough, we happen to have another family member who works at a title company. I had told this family member about my initial consultation and she told me that she has a real estate investor client who has dozens of properties under a Wyoming LLC. I told my lawyer relative about this, and she said that she would look into it for me.

And that's where I'm at currently!

It seems odd to me that a company would have a hard time finding a loan if they're from out of state. If the deal is good and the company's financials are on order, I wouldn't think that that would matter too much. Of course I'm just speculating.

I look forward to hearing what other folks have to say!

If I understand what I'm reading here about MICHIGAN law correctly: 1) the court can charge my LLC with paying the damages awarded a plaintiff. 2) the plaintiff is only entitled to distributions from the LLC. 3) this does not deprive me of any exemptions the LLC enjoys. 4) the plaintiff does not gain membership to my LLC or deprive me of membership and my rights therein. 5) the charging order is a lien that cannot be foreclosed on. 6) this is the exclusive means a plaintiff has of satisfying a judgement against my LLC.

Sounds like the same protection you would enjoy from Wyoming.

Originally posted by @Kevin Cooper :

Hi BP members,

I'm wondering if anyone can provide some real world practical advice on the pros and cons of registering my LLC in Wyoming (for charging order protection) versus registering my LLC in Michigan (my home state and the place I will be buying properties). My lawyer said that he has had clients with out of state LLCs that had issues getting approved for loans because "they were seen as a suspicious outside company buying up local assets". Thank you for the insights.

-Kevin 

One of the major benefits of establishing an LLC in Wyoming is that is introduces a level of anonymity within the entity itself. This means that your name is not going to be listed on public record for that LLC, which can deter lawsuits before they even take place because potential plaintiffs and opposing counsel will need to invest in discovery before even being able to prove you own the entity. The same function can also often be accomplished through using a land trust with a regular LLC with the assistance of an attorney, as described in this article. The land trusts also offer a few additional benefits above the Wyoming LLC, but the anonymity would likely be the reason it was recommended to you.

This isn't legal advice, just my opinion as a real estate investor.