Wyoming, the least populated state in the US, has quietly emerged as the country’s top destination for corporate registrations, surpassing Delaware, a state long known as a tax and incorporation haven, Wyo File reports.
New data from OpenCorporates, a corporate data firm, reveals that Wyoming experienced a 30% increase in company registrations in 2023, outpacing Delaware’s more modest growth. This shift has solidified Wyoming’s reputation as a hub for financial secrecy, drawing attention from both advocates of financial privacy and critics concerned about the potential for abuse.
For years, Delaware held the title of the most popular state for corporate registrations, thanks to its business-friendly courts and regulatory environment. But Wyoming has carved out its own niche by offering an even higher degree of corporate anonymity. Wyoming’s business laws allow for the formation of anonymous Limited Liability Companies (LLCs) and trusts that obscure the identities of their true owners.
One unique feature of Wyoming’s corporate system is known as the “cowboy cocktail,” a structure that allows an LLC — rather than an individual — to control a trust. When paired with other Wyoming-based entities, this system creates a labyrinth of financial secrecy that makes it difficult to trace ownership.
The state’s financial privacy laws have drawn the attention of ultrawealthy individuals from around the globe. The 2021 “Pandora Papers” leak revealed that numerous high-profile figures, including Russian billionaire Igor Makarov and Kalil Haché Malkún, a former estate manager for a Dominican Republic dictator, had used Wyoming-based trusts to shelter assets.
According to OpenCorporates, Wyoming now has the highest rate of company registrations per capita in the US. The boom in registrations has also created a sharp geographic focus within the state. Two buildings in the small town of Sheridan — home to fewer than 20,000 residents — are listed as the official address for 40% of the state’s LLC registrations.
These buildings house Registered Agents Inc. and Cloud Peak Law, two firms responsible for registering 55% of all Wyoming incorporations in 2023. Registered Agents Inc., which has offices nationwide, has faced scrutiny for allegedly listing fake names on registration forms for hundreds of companies.
The flood of new incorporations has been a financial boon for the state. Wyoming reportedly earned $42 million in revenue from business filings alone in 2023. But as the financial benefits flow in, so do concerns about potential misuse of the system.
Critics argue that Wyoming’s rise as a secrecy haven could invite exploitation by bad actors, including those seeking to obscure the origins of illicit wealth. Chuck Gray, Wyoming’s secretary of state, has called for stricter regulations to address the surge in anonymous companies.
“It is critical we take legislative action to add teeth to our enforcement procedures to stop fraud and abuse of corporate filings, especially by foreign adversaries,” Gray said.
However, reform efforts have faced resistance. In 2022, a proposal to increase oversight and transparency of trusts failed to pass the Wyoming legislature. Curt Meier, the state’s treasurer, suggested that pushback from lawyers and others in the corporate services industry played a significant role in the rejection of the bill.
“They don’t want to have us interfere with their business opportunities,” Meier said.
Despite these challenges, Wyoming’s legislature is set to consider three new bills aimed at increasing oversight of corporate registrations. These measures are expected to be discussed in the state’s 2024 legislative session.
Efforts to address financial secrecy are also happening at the federal level. The 2021 Corporate Transparency Act requires most US companies to report their true ownership to the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN). The goal is to make it harder for criminal enterprises, tax evaders, and corrupt actors to hide behind anonymous corporations.
However, the impact of the Corporate Transparency Act on Wyoming’s secrecy-driven business model remains uncertain. While the law requires firms to disclose ownership, access to the data is limited to law enforcement and certain financial sector officials. Critics argue that this limited access fails to provide the level of transparency needed to deter abuse.
Gary Kalman, director of Transparency International’s US office, said that Wyoming’s rise as a secrecy haven is part of a larger problem.
“Secrecy is a national problem,” Kalman noted.
He pointed out that every US state allows for anonymous company formations. New York recently took steps to increase transparency by creating an ownership database for its registered companies, but most other states have yet to follow suit.
Wyoming’s rise as the US leader in corporate secrecy is a double-edged sword. While the boom in business registrations has generated significant revenue for the state, it has also drawn scrutiny from law enforcement, financial regulators, and advocacy groups. Critics warn that the state’s opaque registration process could allow bad actors to shield illicit wealth or engage in financial crimes.
