Let’s start in 2011, when Wyoming was rocked by an investigation from the national news agency Reuters entitled, A Little House on the Secrets on the Great Plains.
“When you think of traditional secrecy and tax havens you most likely think of Switzerland, and the Caribbean,” begins the Reuters reporter in the accompanying video. She’s standing under the “Welcome to Wyoming” sign on I-80 outside of Cheyenne.
“The last place you would expect to find a booming business in anonymous corporations would be here--in Wyoming. Well, welcome to the Cayman Islands of the American prairie.”
2011 was the tail end of a few years Wyoming spent in hot water for making it too easy to set up “shell companies.” These are corporations or limited liability companies that don’t do any real business. Shell companies can be used for legitimate reasons, but they’re also a favorite tool of bad actors to hide their identity or stash assets: that Reuter’s investigation found that that a corrupt ex-Prime Minister of Ukraine and a telemarketing scam king both had shell companies based in Cheyenne.
Wyoming officials weren’t particularly impressed by the Reuters investigation, but the heat wasn’t just coming from the media--it was coming from Congress and the FBI too.
“The issue was that federal law enforcement was having a difficult time finding out who was actually behind the company,” says Karen Wheeler, Wyoming’s Deputy Secretary of State.
Wheeler explains that, in many cases, the people behind Wyoming companies didn’t actually live here. Instead, they used “commercial registered agents,” proxies that register the business and act as its legal face. And back then, even those registered agents didn’t need to live in Wyoming. The legislature passed the “Registered Agent Act” in 2009 to change that.
“One of the first aspects [of the law] was that the registered agent have a physical presence in Wyoming.”
The law also requires that Wyoming registered agents have working numbers for their customers on file. Wheeler says the year the law passed the state dissolved more than 60 percent of the limited liability companies--or LLC’s-- based in Wyoming. LLC’s are particularly attractive to bad actors because they are more private and are easier to set up than corporations.
But more recently the business of business formation has been picking up again. Just ask Wyoming registered agent Rebecca Bextel. “We have a lot of export import guys living in Hong Kong,” Bextel told me during a tour of her small office in Jackson. “We have people doing the next Facebook or social media app living in Paris.”
The Mountain Business Center, where Bextel works, is the headquarters for hundreds of businesses operating all around the world, and it's adding more all the time. In 2011, 4,720 LLC’s were formed in Wyoming; in 2014, 13,482 were, according to statistics from the Wyoming Secretary of State’s office. That’s an increase of 185%. By comparison Nevada, a state with which Wyoming competes to attract business formation, saw an increase in LLC registration of only 5% in that same three year period: from 37,284 new LLC’s formed in 2011 to 39,048 in 2014.
Whether you're looking to form a business to actually conduct business, or for another purpose, Wyoming has some strong selling points: your name isn’t public record, there’s no state income tax, and the assets of your business can’t be taken by creditors to pay off personal debts. Plus, forming a business in Wyoming is cheaper than its competitor states of Nevada and Delaware, which Bextel says has given Wyoming an edge.
Current Wyoming Secretary of State Ed Murray says he is pleased with that growth. “My whole platform is to make owning and operating your own business as simple and friendly as possible.”
For Murray, the rapid increase in LLC registration is a sign that Wyoming’s business formation system is healthy. He sees no reason to change it. “You know you comply with the law, of course,” Murray says. “But I think maintaining asset protection and privacy is a very healthy way of doing business.”
Some are more skeptical.
“It’s both the climate and the industry surrounding it that help Wyoming stand out to set up a shell company,” says Mark Hays, Senior Advisor with the anti-corruption advocacy group Global Witness.
In 2014, Global Witness published a report on shell companies called The Great Rip Off. Hays argues that even though Wyoming tightened up its registered agent rules a few years ago, it's aggressive courting of businesses still makes it attractive to people who have something to hide. And although Wyoming commercial registered agents are required to keep certain information on file, the state has audited only 20 of its more than 450 agents since 2009.
Back in Jackson Registered Agent Rebecca Bextel acknowledges there will always be bad actors and even dishonest registered agents. But the vast majority are uninterested in aiding or abetting illegal activity. “If a client of ours commits a clear case of fraud,” she says. “We are not on their side. We are going to cooperate.”
If trends continue Bextel and other Wyoming Registered Agents will have plenty of new clients to sort out in the future. Good ones and bad.