Wyoming Close LLC: Restricted Transfers and Withdrawal

What a close LLC is

A close limited liability company is a Wyoming LLC whose articles of organization say it is one (W.S. 17-25-103(a)). The Close Limited Liability Company Supplement then layers stricter rules on top of the regular LLC Act: transfers of ownership interests, withdrawal of members and return of capital can all be restricted, and the company is managed by its members unless the articles provide for managers.

The idea is a company for a small, stable group: a family business, a group of co-owners of a property, or partners who want to make it hard for anyone to cash out or bring in a stranger without everyone agreeing.

Source: wyoleg.gov

The rules that make it different

A member may withdraw only on the terms in the operating agreement, and if the agreement is silent, only with the consent of all other members (W.S. 17-25-107(a)). A member cannot take back any part of a capital contribution unless all liabilities are paid or covered, all members consent, and either the company is dissolving or the articles or agreement allow it. Unless the articles say otherwise, a member's right on return of capital is cash only, and a member cannot force dissolution because capital was not returned.

The operating agreement and any ownership certificates must print a Notice of Restrictions on Transfers and Withdrawals in substantially the form set out in W.S. 17-25-103(c). If you use membership certificates from a kit, that notice belongs on them.

Source: wyoleg.gov

How to elect close LLC status

New companies check the close LLC election in the Articles of Organization. Existing Wyoming LLCs convert by amending their articles to add the close LLC statement (W.S. 17-25-103(b)), which carries the $60 amendment fee. Either way, the operating agreement should be rewritten so its transfer, withdrawal and buyout terms match what the owners actually want.

Close status is not right for everyone. A company that expects to bring in investors, offer equity to employees, or let members exit freely will find the default restrictions get in the way. That is a conversation for your attorney before you file.

Source: wyoleg.gov

Capital contributions in a close LLC

Unless the articles say otherwise, a close LLC member has the right to receive only cash when capital is returned, and no member can force the company to dissolve because capital was not returned (W.S. 17-25-107). A member cannot take back a contribution unless all liabilities are paid or provided for, all members consent, and either the company is dissolving or the articles or operating agreement allow it.

That makes close LLCs good at keeping capital in the business and bad at letting an unhappy member cash out. Write a buyout clause into the operating agreement that says how a departing member is valued and paid, so the restriction does not become a deadlock.

Source: wyoleg.gov

Who tends to use close LLCs

Families holding a business or land for the next generation, a small group of co-owners in a single property, and partners who want to prevent a stranger from buying in are typical users. They value the predictability of restricted transfers more than the flexibility to exit.

Lenders and buyers will read the transfer restrictions, so expect questions if you later want to borrow against interests or sell the company.

Source: wyoleg.gov

Forming a close LLC step by step

Pick the members and agree on what happens if one dies, divorces or wants out. Check the close LLC election in the articles. Draft the operating agreement with withdrawal, transfer and buyout terms and the statutory notice. Sign it, issue any certificates with the notice printed on them, and record them in the member ledger.

Source: wyoleg.gov