A close LLC is a limited liability company designed for a small, tightly knit ownership group — think families, a couple of business partners, or a handful of co-investors — that wants the liability shield of an LLC without the procedural overhead and without the risk of outsiders buying their way into the business. Wyoming is the only state with a dedicated close LLC statute, found at Wyoming Statutes §§ 17-25-101 through 17-25-108.1Justia. Wyoming Statutes Title 17, Chapter 25 – Close Limited Liability Company Supplement Owners in other states can approximate the same result through a carefully drafted operating agreement, but only Wyoming writes these protections directly into law.
How a Close LLC Differs from a Standard LLC
Both structures protect owners from personal liability for the company’s debts. The difference is governance. A standard LLC is built for flexibility: unlimited members, easy admission of new ones, generic default rules. A close LLC is built for stability. The point is to keep the ownership circle small and keep strangers out.
Under Wyoming’s statute, a close LLC is just an LLC whose articles of organization contain a statement declaring close LLC status.2Justia. Wyoming Statutes 17-25-103 – Definition and Election of Close Limited Liability Company Status There is no statutory cap on the number of members, and the person who files the paperwork does not have to be a member.3Justia. Wyoming Statutes 17-25-104 – Formation In practice, the form works best for groups small enough that every owner knows and trusts the others, because many of its protections turn on unanimous consent.
Management and Formalities
Close LLCs default to member management, meaning the owners run the business directly. If the group would rather hand day-to-day control to one person, they can vest management in one or more managers by saying so in the articles or the operating agreement.4Justia. Wyoming Statutes 17-25-106 – Management A family business, for instance, might designate one sibling to run operations while the others stay passive.
The structure also strips out most ongoing paperwork. A close LLC can operate without formal annual meetings or written resolutions for routine decisions. The close LLC designation itself helps preserve the liability shield, so courts are less inclined to pierce the corporate veil just because the owners skipped the formalities a larger company would observe. The feel is partnership-like; the legal protection is corporate.
The Operating Agreement Still Does the Work
Fewer formalities does not mean fewer documents. The operating agreement is still the instrument that actually controls how the business runs. Wyoming’s default rules on profit splits, voting, and member exits are generic — the legislature’s best guess at what most owners want. The operating agreement overrides those defaults with terms tailored to your group.
A workable operating agreement for a close LLC should address, at minimum: how profits and losses are split, the vote required for major decisions, what triggers a buyout, restrictions on transferring membership interests, and how deadlocks get broken. Skipping it is the single most common mistake small LLC owners make, and in a close LLC — where the whole structure depends on the relationships between a few members — it is especially costly.
Transfer Restrictions and Buyouts
Transfer restrictions are the structural core of a close LLC. Most close LLC operating agreements prohibit a member from selling or assigning their interest to an outsider without the consent of every other member. Many add a right of first refusal, forcing a departing member to offer their stake to the existing owners first. These provisions keep an unwanted stranger from suddenly having a vote.
When a member dies or retires, statutory buyout rules fill in. Under Wyoming’s close LLC supplement, a withdrawing member generally has the right to demand cash equal to their capital contribution, unless the articles say otherwise or all members agree to a different arrangement.5Justia. Wyoming Statutes 17-25-107 – Withdrawal of Members and Return of Members Contributions to Capital A member cannot force dissolution of the company simply because the company has not returned that capital, which keeps one frustrated owner from blowing the business up over a money dispute.
What Happens When Members Deadlock
Small ownership groups deadlock. Two 50-50 members disagree on something important, nobody has a tiebreaker, and the business grinds to a halt. This is the close LLC’s biggest vulnerability.
Prevention is the real answer. A well-drafted operating agreement includes a deadlock-breaking mechanism: mandatory mediation, a buyout right at a formula price, or an auction clause (sometimes called a “Texas Shootout” or “Russian Roulette”) where one member names a price and the other chooses whether to buy or sell at it. Without something like this, the fallback is petitioning a court for judicial dissolution, which requires showing the deadlock threatens irreparable harm and no other reasonable resolution exists. Courts sometimes order a buyout, appoint a temporary custodian, or issue an injunction against waste instead of dissolving the business outright. All of those remedies are slow and expensive compared to a deadlock clause the members wrote for themselves.
Forming a Close LLC in Wyoming
Because Wyoming is the only state with a close LLC statute, formation runs through Wyoming’s process regardless of where the owners live.
What You Need Before Filing
- A company name that includes a standard designation such as “Limited Liability Company,” “LLC,” or “L.L.C.” The name does not have to contain the word “close,” but the articles must state that the company is a close LLC.6Justia. Wyoming Statutes 17-25-105 – Articles of Organization
- A Wyoming registered agent with a street address in the state who has consented to accept legal documents for the company.7Justia. Wyoming Statutes 17-28-101 – Registered Office and Registered Agent
- The close LLC declaration in the articles. Without that specific statement, the entity is just a standard LLC.
Filing and Fees
File the articles of organization through the Wyoming Secretary of State’s online portal or by mail. The filing fee is $100, with a $3.75 convenience fee added for online payments by credit or debit card. Paper filers make checks payable to the Wyoming Secretary of State. Once the filing is approved, online filers can download the filed articles, certificate, and receipt immediately; paper filers receive them by email.8Wyoming Secretary of State. How to Create a Wyoming Company
After the state approves the formation, apply for a federal Employer Identification Number from the IRS. The online tool is free and takes minutes, but file with Wyoming first because the IRS may delay the EIN if the state has not yet recorded the entity.9Internal Revenue Service. Get an Employer Identification Number
How a Close LLC Is Taxed
The IRS does not have a separate tax category for close LLCs. A close LLC is taxed like any other LLC. A single-member close LLC is a disregarded entity, with profits and losses flowing to the owner’s personal return. A multi-member close LLC defaults to partnership taxation, with each member reporting their share on a Schedule K-1.10Internal Revenue Service. Limited Liability Company (LLC)
Active members owe self-employment tax of 15.3% on net earnings above $400, covering Social Security (12.4%) and Medicare (2.9%). The Social Security portion applies only to the first $184,500 of combined wages and self-employment income in 2026.11Social Security Administration. Contribution and Benefit Base All net earnings above that cap still face the 2.9% Medicare tax, and an additional 0.9% Medicare surtax kicks in once income exceeds $200,000 for single filers or $250,000 for married couples filing jointly.12Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes)
If the self-employment tax burden is heavy, members can elect S-corporation treatment by filing Form 2553. Working members then pay themselves a reasonable salary (subject to payroll taxes) and take the rest as distributions not subject to self-employment tax. The election is only available to companies with 100 or fewer owners, all of whom must be U.S. citizens or resident aliens. For a new LLC, the election must be filed within two months and 15 days of formation to be effective for the first tax year.
Keeping the Close LLC Alive
Wyoming requires every LLC, including close LLCs, to file an annual report with the Secretary of State. The report is due on the first day of the anniversary month of formation. The fee is based on a license tax calculation, with most small LLCs paying between $25 and $100, plus a small online convenience fee.
Missing the deadline is not a minor matter. A late company loses good standing, which can block it from signing contracts, getting financing, or registering in other states. Prolonged failure to file lets the state administratively dissolve the LLC, which strips the liability protection the owners formed the entity to get. Reinstatement is possible but requires filing all past-due reports and paying accumulated fees.
Dissolving a Close LLC
A Wyoming close LLC dissolves on any of three events: the duration period in the articles expires, every member signs a written agreement to dissolve, or a triggering event the operating agreement names actually happens.13Justia. Wyoming Statutes 17-25-108 – Dissolution The unanimity requirement cuts both ways. It protects the group from a single member forcing a shutdown, but it also means one holdout can block a dissolution the others want. Yet another reason the operating agreement should spell out exit scenarios in detail.
Once dissolution is triggered, the company files a statement of intent to dissolve with the Secretary of State and begins winding up: settling debts, collecting receivables, distributing remaining assets. The company cannot take on new business during this period. State filing fees are modest; the real cost is almost always the time and negotiation involved in dividing assets, especially when the operating agreement is silent on how to do it.