CHEYENNE — Somewhere in Lander, an 80-year-old woman started getting mail she couldn’t explain.
A limited liability company she’d never heard of had listed her home address as its registered agent on official Wyoming filings.
The woman wasn’t anyone’s registered agent. She’d never agreed to anything. But there was her address, attached to an unknown business entity, sitting in the records of the Wyoming Secretary of State’s office.
“I can’t tell you how upset she was when she thought everybody was after her because she had some business, and she couldn’t figure it out,” Sen. Cale Case, R-Lander, told his colleagues on the Wyoming Senate floor Wednesday. “It also happened to another friend of mine. It’s not uncommon.
"I bet I can name 10 people in my community who have had this fraud perpetrated on them.”
That woman’s story became the emotional centerpiece of a 40-minute debate over Senate File 82, a bill that would require Wyoming’s registered agents to collect and maintain the names and addresses of every LLC owner they represent.
The bill passed 23-8 and now heads to the Wyoming House, but its passage exposed a divide in the Senate over whether the state’s wildly successful business incorporation industry has become a magnet for fraud.
Wyoming’s Invention
Wednesday’s debate was steeped in nearly five decades of history.
Back in 1977, Wyoming revolutionized how small businesses are formed and operated when it passed a law creating the limited liability company, or LLC.
That head start turned into a juggernaut. Sen. Charlie Scott, R-Casper, who began serving in the Legislature a few years after the LLC’s creation, built on its momentum by sponsoring a comprehensive rewrite of Wyoming’s corporate laws.
“My role in it, I’ve sponsored the redo of the corporate laws, which made us have a modern corporation law that was business-friendly, which was one of the essentials we had to have to have the kind of development we’ve had,” Scott said in an interview after the floor debate. “Which has led to these registered agents and all that.”
That development has been staggering. Wyoming has surpassed Delaware as the top state for business incorporations per capita. Registration fees and related business now bring the state millions in fees every year.
“What we’ve done is structure our corporate laws to be very friendly for people to form their corporations in Wyoming,” Scott said. “That brings the state significant revenue, order of $50 million or $60 million a year, is what I’m told. We’re raising significant money out of it. We’re getting significant amount of business for people who serve as registered agents, attorneys who do incorporation work.”
Fraud Problem
But that success has a shady side.
On the Senate floor, Case described looking at an actual LLC application where his own property — owned through a corporation — had been listed as the address of someone else incorporating in Wyoming.
“Do we want that?” Case asked. “It is not worth it. It is not worth it to facilitate fraud if we can easily, or perhaps — I don’t know — maybe the least restrictive manner, try to prevent fraud and try to give tools.”
The bill’s sponsor, Sen. Barry Crago, R-Buffalo, said registered agents with hundreds of thousands of clients are under no pressure to verify who’s behind the companies they represent.
“We show up, we say we need this information, and they either say we’re not giving it to you, or we are not required to hold that information,” Crago said. “This actually would figure out who’s behind the companies.”
“No matter the dollar amount, our reputation in this state should not be for sale,” Crago added.
Small Step
Several senators framed the bill as an anti-crime measure that wouldn’t undermine Wyoming’s business-friendly reputation.
“This is a business-friendly bill. This is an anti-crime bill,” said Sen. Gary Crum, R-Laramie. “We do business. We do it appropriately in the state of Wyoming. We’re open for people to come here and do business, but we’re not for fraud, and we’re not for crime.”
Sen. Cheri Steinmetz, R-Lingle, said the state has already allowed too much to slide.
“We can’t be so business friendly that we expose our citizens to fraud and abuse in our state,” Steinmetz said. “There are citizens whose addresses have been stolen, whose identities have been compromised because of this, and so we can’t be so concerned about the businesses’ privacy that we abandon our own citizens.”
Sen. Jared Olsen, R-Cheyenne, the Judiciary Committee chairman, argued the bill was a modest extension of what registered agents already do. Under existing law, agents must maintain names and addresses of directors, officers, managers, managing partners, and trustees. The bill simply adds owners to the list.
“I don’t think that the $60 million that our state brings in in LLC money is going to come crashing down because we’re taking one small step further,” Olsen said.
Privacy Erosion
But Sen. Chris Rothfuss, D-Laramie, delivered the sharpest opposition, arguing the bill would erode the privacy rights that made Wyoming attractive in the first place — without doing anything to stop the bad actors.
“At the end of the day, bad actors are going to keep being bad actors with zero change on fraud,” Rothfuss said. “But good actors might look at the state of Wyoming at this point in time moving forward and say, ‘Yeah, I think I’ll choose a different state. Let me look on to one of those states to the west.’ And that’s exactly what we don’t want.”
Rothfuss added, “We shouldn’t just be passing a bill that addresses a problem and fails to solve it that has negative consequences.”
Cowboy Cocktail
The privacy and asset protections that some senators wanted to defend have made Wyoming famous in legal and financial circles nationwide.
Law firms across the country advertise their expertise in what’s known as the “Cowboy Cocktail” — a combination of a Wyoming Domestic Asset Protection Trust and a Wyoming LLC that together provide some of the strongest asset shielding available in the United States.
The Savannah, Georgia, law firm Smith Barid describes the Cowboy Cocktail on its website as “a double-barreled approach to asset protection that may be the best thing since sliced bread.”
“Setting up a Wyoming LLC is relatively easy and inexpensive compared to jurisdictions like Delaware and the ongoing administrative burdens are light,” the firm’s website states. “You do have to hire a Wyoming registered agent, but costs for that are low, generally running under $250 per year.”
It’s that combination of low fees, no income tax, privacy protections, and robust asset shielding that has driven Wyoming’s incorporation numbers past Delaware on a per capita basis. But it’s also what makes the state attractive to those who want to hide behind its corporate veil for less legitimate purposes.
Won’t Work
Despite voting no, Scott said he recognizes the problem is real. In his follow-up interview, Scott pointed to the woman in Lander as a case of something that shouldn’t happen.
“The trouble with the bill, it was trying to fix those problems, but it didn’t fix them at all,” Scott said. “It was just asking the registered agents to accumulate more information, which will be a burden on most of the incorporators, who are basically honest and just looking for some privacy, and won’t do a thing about the bad actors who are concealing who they are.”
Scott suggested more enforcement is necessary, “So the secretary of state needs to look into what the heck is going on that causes that. And maybe dissolves some corporations providing false information.”
The bill now heads to the Wyoming House.
The Roll Call Senate Vote For SF 82:
Ayes: Anderson, Barlow, Boner, Brennan, Case, Cooper, Crago, Dockstader, Crum, Driskill, Hicks, Hutchings, Jones, Kolb, Landen, Love, Nethercott, Olsen, Pappas, Salazar, Schuler, Steinmetz, Biteman
Nays: French, Gierau, Ide, Laursen, McKeown, Pearson, Rothfuss, Scott
David Madison can be reached at david@cowboystatedaily.com.
