Should you use a Delaware LLC, Wyoming LLC, or offshore structure? We walk through the decision tree with your attorney and CPA—considering liability protection, tax treatment, and administrative burden.
When you're structuring holdings across multiple jurisdictions—domestic real estate, foreign operating companies, investment portfolios, or specialty credit positions—entity selection matters enormously. The wrong structure creates unnecessary tax friction, administrative complexity, or liability exposure. The right structure provides asset protection, tax efficiency, and operational simplicity.
But there's no universal "best" entity. The optimal choice depends on what assets you're holding, where they're located, who the investors are, and what you're trying to accomplish. Here's how we work through the decision tree with your attorney and CPA.
The first decision is whether you need an offshore entity at all. Many investors assume offshore structures are automatically better for asset protection or tax efficiency—but that's often not true, particularly for U.S. persons.
Offshore entities make sense when: you're holding non-U.S. assets (real estate, operating businesses, or securities in foreign countries), you're partnering with non-U.S. investors who want to avoid U.S. tax filing requirements, or you need specific legal or regulatory features not available in U.S. jurisdictions.
They generally don't make sense when: you're only holding U.S. assets, all investors are U.S. taxpayers, or your primary goal is "privacy" or "asset protection" (both of which are limited for U.S. persons regardless of entity location).
For U.S. persons, offshore entities holding U.S. assets create reporting obligations (FBAR, Form 5471/8865, Form 8938) and potential PFIC issues with no offsetting benefit. Start with the presumption of domestic entities unless there's a specific reason to go offshore.
Delaware LLCs are the default entity for most sophisticated holding structures—and for good reason. Delaware has the most developed body of entity law, predictable court decisions, and well-understood procedures. Most attorneys are familiar with Delaware LLCs, which means fewer surprises and lower legal costs.
For federal tax purposes, Delaware LLCs can be treated as partnerships (pass-through taxation), C corporations, or disregarded entities (treated as part of the owner for tax purposes). This flexibility lets you choose the tax treatment that makes sense for your situation.
Delaware LLCs provide strong liability protection—members and managers are generally not personally liable for LLC debts, assuming you maintain proper corporate formalities and don't commingle personal and entity assets. They also have flexible operating agreements that can accommodate complex governance, profit-sharing, and liquidity provisions.
The downsides are minimal: an annual franchise tax ($300), a registered agent requirement (typically $50-200/year), and some public disclosure (the entity name and registered agent are public record, but member/manager names are not unless you file them).
Wyoming LLCs offer slightly better privacy than Delaware—manager and member names don't appear in public filings, and Wyoming has stronger statutory protections against disclosure. For individuals who prioritize privacy, this matters.
Wyoming also has no state income tax (neither does Delaware for out-of-state income, but Wyoming's tax treatment is clearer). And Wyoming's charging order protection is among the strongest in the U.S.—if a creditor obtains a judgment against you personally, they typically can only get a charging order against your LLC interest (receiving distributions if/when made) rather than seizing the interest or forcing liquidation.
The trade-off: Wyoming law is less developed than Delaware law, so there are fewer court precedents for unusual situations. Most attorneys default to Delaware because it's what they know. And if you're raising capital from institutional investors or plan to eventually take a company public, Delaware is the standard—Wyoming LLCs may need to be converted later.
Our typical recommendation: use Delaware for entities that might eventually have outside investors, go public, or involve complex governance. Use Wyoming for personal holding companies, family investment entities, or situations where privacy is a primary concern.
Delaware and several other states allow "series LLCs"—a single LLC that creates multiple internal "series," each with separate assets, liabilities, and members. Think of it as sub-entities within a master LLC.
Series LLCs are useful when you want to hold multiple investments with liability separation. For example, you might create a master LLC with separate series for different real estate properties—if one property faces litigation, the liability doesn't cross to other series.
The benefits: you file one entity formation, pay one franchise tax, and maintain simpler governance. Each series can have different members, profit allocations, and investment terms, but all operate under the master LLC's umbrella.
The risks: series LLC law is relatively new, and it's unclear how courts in other states will respect the liability separation. If you're doing business nationwide, a court in Texas or California might not honor the Delaware series structure, treating all assets as part of one entity for liability purposes.
We use series LLCs selectively—typically for real estate holdings where properties are all in states that respect series LLCs, or for private investment funds where sophisticated investors understand the structure. But we're cautious about using them where liability protection is critical and assets are exposed to multi-state creditors.
When offshore entities make sense, the most common jurisdictions are: Cayman Islands (for investment funds), British Virgin Islands (for holding companies), Singapore (for operating businesses in Asia), and Switzerland (for family offices with international operations).
Cayman Islands entities are standard for private equity and hedge funds with international investors. Cayman has no corporate income tax, well-developed fund administration infrastructure, and regulatory familiarity. Non-U.S. investors can invest through Cayman funds without U.S. tax filing requirements.
But for U.S. investors, Cayman entities don't avoid U.S. tax—you're still taxed on your worldwide income. And you have extensive reporting: Form 5471 for controlled foreign corporations, Form 8865 for foreign partnerships, FBAR for foreign financial accounts, and potentially PFIC reporting if the entity is investment-focused.
BVI entities are popular for holding non-U.S. assets—real estate in Europe or Asia, foreign operating businesses, or international IP. They're simpler and cheaper than Cayman entities (lower formation and annual costs), but with less developed regulatory infrastructure.
Singapore entities make sense for operating businesses in Asia or for structures where you need a respected Asian jurisdiction with strong rule of law. Singapore has corporate income tax (17%) but extensive tax treaty network and favorable treatment for certain activities.
Once you've chosen entity jurisdiction, you need to elect tax treatment. For LLCs, the default is partnership taxation (if multiple members) or disregarded entity taxation (if single member). But you can elect to be taxed as a C corporation or S corporation by filing Form 8832 or Form 2553.
Partnership taxation (pass-through) is the default for most holding entities: income and losses pass through to members annually, avoiding entity-level tax. This is efficient for investment holdings, real estate, or operating businesses where you want immediate tax benefits of losses or depreciation.
C corporation taxation makes sense when: you want to retain earnings in the entity (no pass-through requirement), you plan to eventually go public (public companies must be C corps), or you're in a business with qualified small business stock (QSBS) benefits that require C corp status.
S corporation taxation (pass-through but with restrictions) is useful for operating businesses where you want pass-through treatment but need the structure of a corporation rather than LLC. But S corps have limitations: no more than 100 shareholders, only individual U.S. citizen/resident shareholders (no entities, foreigners, or trusts with limited exceptions), and only one class of stock.
Disregarded entity taxation (single-member LLC treated as sole proprietorship) is useful for simplicity when you're the only owner and don't need liability separation for tax purposes—though you still get liability protection for legal purposes.
Sophisticated structures often involve multiple entities in layers: a Wyoming LLC owned by a Delaware LLC, which is owned by a trust. Or a Delaware LP that owns Cayman SPVs holding international assets.
The goal is separating different functions: liability protection, tax efficiency, governance control, and estate planning. But more entities means more complexity, more filings, more administrative costs, and more potential for mistakes.
We design entity structures by working backward from goals: What assets are you holding? What liability risks do they present? What tax treatment do you want? Who are the owners? What governance do you need? What's your administrative tolerance?
A simple structure that accomplishes your goals is better than a complex structure that's "optimal" but impossible to maintain. We've seen elaborate entity chains that no one can explain, annual filings that get missed, and tax returns that cost $50k+ to prepare—all for structures that don't provide material benefits over simpler approaches.
Process note
Entity selection requires coordination between your attorney (who focuses on legal structure and liability protection), your CPA (who focuses on tax treatment and reporting), and your wealth advisor (who focuses on how entities fit into overall wealth strategy). We facilitate this coordination—ensuring the entity structure works legally, tax-efficiently, and practically for your situation. The goal is not the "perfect" structure, but the right structure that you'll actually maintain.
There's no universal answer to "what entity should I use?" But there is a process: clarify what you're holding and why, understand the liability and tax implications, consider administrative burden, and choose the simplest structure that accomplishes your goals. We work through this process with your attorney and CPA before you form entities—because changing entity structures after the fact is expensive and often triggers tax consequences.