The Truth About Delaware, Nevada, and Wyoming Business Entities
Should you form your business in Delaware, Nevada, or Wyoming? If you’ve done even a little research, you’ve probably heard bold claims about the advantages of each. Delaware is praised for its corporate law, Nevada for asset protection, and Wyoming for privacy.
But here’s the short answer: Unless your business is going public, form your entity in the state where you actually operate.
Let’s take a closer look at the marketing claims and the legal realities.
Delaware: The Public Company Playbook
Delaware is the default choice for most large public corporations. That’s because Delaware law provides clear rules about the relationship between the company, its shareholders, and third parties who may try to take over the business. Public companies choose Delaware so that internal disputes are resolved under Delaware law, even if they operate elsewhere.
This works because shareholders have agreed in advance to be governed by Delaware law. A Delaware corporation with shareholders across the country can rely on Delaware courts to resolve those disputes predictably and consistently.
But if you’re not issuing stock to outside investors or preparing for an IPO, Delaware's benefits are mostly irrelevant. And if your business operates in a different state, you still have to register there, follow that state’s rules, and pay fees in both jurisdictions.
Nevada: The Asset Protection Myth
In the early 2000s, Nevada began marketing itself as an asset protection haven. One key selling point was charging order protection, which limits what creditors can collect from business owners.
For example, if someone sues an owner of a Nevada LLC or corporation and wins, they cannot take control of the business or its assets. They only receive a lien on profit distributions, called a charging order.
Some claimed you could form a Nevada entity and get those protections, even if your business operated in a different state. That was never true.
Delaware law works for internal governance because shareholders agree to it. Asset protection law, on the other hand, involves outsiders—creditors or plaintiffs—who never agreed to be bound by Nevada statutes. Courts in other states apply their own laws to those disputes.
If your Nevada entity operates in California, for example, it must register there and follow California law. You pay annual fees and maintain registered agents in both states, but you don’t get Nevada’s asset protection.
In short, it’s more paperwork and more expense with no meaningful gain.
Wyoming: The Anonymity Pitch
Wyoming is often promoted as the go-to for anonymity. With growing concerns about privacy and data exposure, the idea of keeping your name off public records is appealing.
Here’s the nuance.
While most states don’t publish ownership details of corporations or LLCs, they often list the business’s officers or managers. In a member-managed LLC, those members are listed because they have legal authority to act on behalf of the company. This disclosure helps banks and other parties verify who can sign documents and open accounts.
Wyoming allows the use of nominee officers, which are placeholder names listed instead of the actual officers. While that may provide an extra layer of privacy, it also creates risk. If a nominee is publicly listed, a bank or vendor may treat that person as having full authority. The real owners could be bound by actions they never approved.
A safer alternative is to use a trust as the manager of the LLC. Unlike corporate officers, LLC managers can be entities. A trust name can be publicly listed, while the trustee’s identity stays private. When opening a bank account, the trustee can present documentation privately to establish authority.
But again, there’s a catch. If your Wyoming business operates in another state, it must register there. That registration usually requires disclosure of officers or managers, defeating the anonymity.
Now you’re paying fees and filing reports in two states for a privacy benefit that doesn’t hold up.
What You Actually Gain by Forming Out of State
More paperwork
Two sets of annual fees
Two registered agents
No real legal or tax advantage
For most businesses, these additional burdens provide no practical benefit. The legal protections and privacy tools only work if the state’s law applies—and that typically means your business must be located there.
The Bottom Line
Unless you are planning to go public or raise outside capital, form your business entity in the state where you operate. The promises of special protections or anonymity from other states often do not hold up under scrutiny. Instead, they lead to unnecessary cost and complexity.
Need Help Making the Right Choice?
Kadian Law works with business owners to choose the right entity and formation strategy based on how and where they operate. If you're weighing options or unsure what applies to your situation, we can help you sort through the noise and make a clear, informed decision.
Schedule a consultation today to get practical legal guidance tailored to your business.
This article was written by a guest contributor and reflects insights on common myths surrounding entity formation. While the analysis is general in nature, it highlights key considerations business owners should keep in mind when choosing where to form their entity.