Over the years, Wyoming has pioneered tweaking business structures in order to better serve entrepreneurs. One of the finest examples is the creation of the Wyoming Close Corporation, a distinctly different version of the corporate structure crafted specifically for family-owned businesses.
If you intend to open a small business and keep it entirely within your family, a Wyoming Close Corporation will likely suit your lifestyle better than a normal corporation.
Distinctions of a Wyoming Close Corporation
Lack of Formality
When you think of Corporate America, you probably envision a Board of Directors delivering a solemn address during an annual shareholder meeting. Suits. Ties. Thick folders of financial reports. Well, a Wyoming Close Corporation does away with nearly all of this.
A Wyoming Close Corporation does not need a Board of Directors, doesn’t have to hold annual meetings, and can elect to operate as a partnership. This makes running a Close Corporation easier, less stringent, and less complicated than a general corporation.
A Wyoming Close Corporation can only have 35 shareholders. Ownership shares come with stringent restrictions on transferability. For example, a shareholder cannot sell their shares to a party outside the corporation without first offering them to other shareholders. Nor can a creditor force the sale of an owner’s shares to a third-party.
While the 35-member cap puts certain limits on a Close Corporation’s ability to raise capital, it also works to keep a Close Corporation in the hands of a family. Shareholder restrictions allow for parents to include their children in the ownership of the company while also controlling their child’s ability to dilute company ownership.
A Wyoming Close Corporation allows for a range of shareholder agreements that greatly impact the way your company is run.
For example, you can greatly restrict the powers of your Board of Directors, or you can eliminate the Board altogether.
Voting rights can be weighted, allowing parents to control the company while also allowing children to own shares in the company.
Buy-out provisions can ensure that a shareholders interests can be purchased by other shareholders in the event of death.
In a regular Corporation, liability protection depends upon the company’s adherence to all the legal corporate formalities. In a Wyoming Close Corporation, there are far fewer formalities to maintain. With fewer formalities, there are also fewer ways in which mistakes can be made.
Wyoming laws are also very clear about the liability protection afforded Close Corporation shareholders. Wyoming statutes state specifically that the relaxation of corporate formalities “is not ground for imposing personal liability on the shareholders for liabilities of the corporation.”
Lower Corporate Costs
Removing a Board of Directors, annual meetings, and other formal requirements translates into less paperwork, less accounting, and generally less cost. A Wyoming Close Corporation is simply easier to operate and cheaper to run.