Guide to Starting an LLC in Wisconsin
Are you considering starting your own business, but don’t know where to start? Or maybe you’ve started a business, but it’s not doing as well as you’d hoped and you’re not sure why. In either case, you might want to consider forming an LLC in Wisconsin.
There are many benefits to forming an LLC, and this article will explain what an LLC is, the benefits of forming one in Tennessee, and how to go about doing it. So if you’re thinking of starting or expanding your business, keep reading!
What is an LLC?
An LLC, or Limited Liability Company, is a type of business entity that provides limited liability to its owners. This means that the personal assets of the LLC’s owners are protected in the event that the business is sued. An LLC can be set up with just a few simple steps, and it can be operated like any other type of business.
Unlike a sole proprietorship or partnership where the small business owner can be personally liable for lawsuits against the business, the LLC is a separate business structure, protecting the LLC owner’s personal assets.
Besides the liability protection, the Limited Liability Company provides several other benefits over the sole proprietorship, general partnership, and corporation because of the multiple tax options, ease of administration, and management flexibility.
Steps to Form a Wisconsin LLC
This guide will provide you with all of the information you need to start an LLC in Wisconsin. The process is relatively simple, and with a little guidance, you can have your LLC up and running in no time. We will walk you through the steps involved in the Wisconsin LLC formation process, from initial filing to ongoing maintenance. So, let’s get started!
Total Time: 10 minutes
Step 1: Choose a Name for the LLC
The first step in forming a Wisconsin Limited Liability Company is to make sure the name you want is available.
It’s critical to do a name search before registering an LLC name, as the name of each LLC must be distinguishable from other entity names registered in the state of Wisconsin. The Wisconsin Department of Financial Institutions makes it easy to search and verify if your LLC name is available. Here is more information on how to search for available Wisconsin LLC names.
In addition to the name being unique, the entity designator (identifier used at the end of the business name) must be either:
– Limited Liability Company
– Limited Company Co.
Pay careful consideration to any periods as a missing period may impact the approval of the Articles of Organization.
A comma may be used after the business name and before the designator. “Cowboy Cleaners LLC” and “Cowboy Cleaners, LLC” are both acceptable.
If there is an LLC name you want to use, but you are not ready to register the LLC, the Name Reservation Application can be filed for $15 and will hold the LLC name for up to 120 days.
If you plan to use a different name from the LLC name that you register (perhaps you want to run multiple businesses under the LLC), you can use a trade name (sometimes referred to as a fictitious business name, assumed name, DBA, or Doing Business As name). To register, file the Trade Name Registration form and filing fee of $25 with the Wisconsin Department of Financial Institutions.
Before settling on a name, you may want to do a domain name search to see if a URL is available that will match your business name.
Step 2: Appoint a Wisconsin Registered Agent
Every LLC in Wisconsin is required to have a Registered Agent. A Registered Agent will act as a central point of contact to receive legal documents, tax notices, summons, subpoenas, etc., on behalf of the LLC.
The basic requirements to be a Registered Agent in Wisconsin include:
– The agent must be a Wisconsin resident at least 18 years of age or a commercial Registered Agent service with a registered office in the state.
– The agent must have a physical address in the state (PO Boxes aren’t allowed).
– The agent must generally be available during normal business hours at the address provided to receive service of process.
Learn more about the requirements for a Registered Agent in Wisconsin
Any individual meeting the requirements can be the agent; however, the agent’s name and address become public record, and with that comes a loss of privacy. This is more important for some entrepreneurs, especially when doing business from home or still employed. Hiring a commercial Registered Agent service like Northwest Registered Agent will help keep the owner’s names from being listed on the state’s website.
Step 3: File the Wisconsin Certificate of Formation
The paperwork to officially create an LLC in Wisconsin is called the Articles of Organization. To submit the paperwork, either file online through the Wisconsin Department of Financial Institutions’ website. If you prefer to fill out and mail the application, download the Certificate of Formation (Form 502).
When filling out the Articles of Organization, a few sections and terms can be confusing. Let’s go over a few of these sections to help get your LLC started right.
Purpose – Generic language stating the LLC is organized under Chapter 183 of the Wisconsin Statutes. This language is needed in order to form an LLC in the state, and no action is needed.
Registered Office Address – The Registered Agent must have a physical address in the state, and PO Boxes are not allowed. This address may be the address of the LLC, but it doesn’t have to be.
Management – This section asks if the LLC is Member-Managed or Manager-Managed.
– Member-Managed LLCs have an active involvement in the management and have the authority to act on behalf of the LLC.
– Manager-Managed LLCs are hired by the members to run the LLC, similar to a CEO of a corporation. This is generally used when there are passive members in the LLC, and the members do not actively manage or operate in the affairs of the business.
Most LLCs are member-managed.
Organizer Information – An LLC Organizer is someone involved in forming the Articles of Organization. The Organizer may or may not become a member, such as a mentor, attorney, or accountant, but any LLC member can be listed as an organizer.
Select the Drafter – The drafter is the person who entered the information into the Articles of Organization, and their name needs to be included in this section. This is likely one of the members, attorney, or entity formation service.
Delayed Effective Date – This is an optional section, but if you want the Limited Liability Company to start on a later date, click the “Declare Delayed Effective Date” button and then enter a date less than 90 days in the future. The main reason for delaying the LLC start date is when the filing is made close to the end of a calendar year, and the business isn’t going to have any activity until the start of the year. You can eliminate the need to file a partial-year business tax return by delaying the start date until the following year.
By not selecting anything, the effective date will be the date when the Department of Financial Institutions files the Articles of Organization.
Estimated Cost: 130 USD
Turnaround Time: LLCs formed online are processed immediately, while mailed-in forms typically take 5-7 days.
IncAuthority and IncFile are currently running a special where you only pay state fees for your LLC formation and they do the rest!
You have a Wisconsin LLC! Now what??
Once the LLC has been formed, there are a few additional steps to take care of. Below is a list of the most common tasks.
Prepare a Wisconsin LLC Operating Agreement
The operating agreement is an internal document that governs the framework of an LLC. This document covers items like ownership rights, member responsibilities, how profits and losses are distributed, and more.
LLCs in Wisconsin are not required to have an operating agreement, but it is still worth considering. Without an operating agreement:
- The LLC could be subject to generic state rules that may be detrimental in the event of a lawsuit.
- Member’s personal liability protection may be diminished.
- Members may not fully understand their roles and responsibilities, which could lead to costly disputes in the future.
Obtain an EIN
The EIN or Employer Identification Number (also called a Federal Employer Identification Number or FEIN) is a unique 9-digit tax identification number assigned to a business by the Internal Revenue Service (IRS). Similar to a social security number for an individual, the EIN identifies business entities for tax purposes. The EIN will be needed to hire employees, open a bank account, build business credit, register for business licenses and permits, file federal and state taxes, and more.
There is no cost for the EIN when registering through the IRS. The number is available immediately when applying through the IRS website; however, you can also register by phone, fax, or mailing IRS Form SS-4.
Related: How to Apply for an EIN
Elect the LLC’s Form of Federal Income Taxation
One of the significant benefits of the Limited Liability Company is the tax flexibility it provides. When applying for the Employer Identification Number, you will choose how the entity will be taxed for federal income tax purposes. While there are some limitations, an LLC may be classified for federal income tax purposes as a:
- Sole proprietorship
While this may sound confusing, this refers to how the LLC is taxed, not the legal structure.
Related: How can an LLC be taxed?
By default, the taxation of an LLC is called pass-through taxation, which means the profits or losses of the LLC flow through to the members.
Single-member LLCs will, by default, be taxed as a sole proprietorship. The members can also elect to change the taxation to a C-corporation or an S-corporation.
Multi-member LLCs will, by default, be taxed as a partnership. The members can also elect to change the taxation to a C-corporation or an S-corporation.
In general, the difference between being taxed as a corporation and being taxed as a sole proprietorship or partnership is that the profits and losses are passed to the member’s federal income tax returns based on their percentage of ownership. As a result, the owner will pay self-employment taxes on all business profits. As an alternative, electing to be taxed as a corporation allows the members to take a reasonable salary and then pay payroll taxes. Any remaining profits are distributed and aren’t subject to payroll taxes, resulting in potential tax savings.
Before electing how your LLC will be taxed, consider talking with an accountant to assess which one will be best for you. Some tax elections, such as the C corporation, may be detrimental for some people due to double taxation.
Open an LLC Bank Account
Opening a bank account for your LLC is important for liability protection as the account separates the business’s funds from the member’s personal funds.
Several documents will be needed to open a business bank account, such as:
- A banking resolution is a document that authorizes the members to open a business bank account on behalf of the LLC.
- Copies of the original LLC formation paperwork from the state showing the creation of the LLC.
- Driver’s licenses of the members.
- Occasionally, the bank will request a Wisconsin Certificate of Good Standing to prove the LLC is active and in good standing with the state.
Apply for Business Licenses and Permits
After forming the LLC, various business licenses and permits will be needed before starting the business. Some common registrations include:
- Business License – Some cities require businesses to obtain licensing before starting.
- Professional License – Certain services such as barbershops, accountants, salons, and others must be licensed. A full list of professions is maintained by the Wisconsin Department of Safety and Professional Services.
- Seller’s Permit – In order to sell products and certain services, sales tax registration with the Wisconsin Department of Revenue will be necessary.
File Annual Reports
LLCs are required to file an annual report with the Wisconsin Secretary of State. The annual report updates ownership information and other details.
Common Questions To Starting An LLC In Wisconsin
How much does it cost to start an LLC in Wisconsin?
To start an LLC in Wisconsin, the state filing fee is $130 for online filings, and $170 for mailed-in forms is charged by the Wisconsin Department of Financial Institutions.
How long does it take to start an LLC in Wisconsin?
Wisconsin LLCs that are formed online are processed immediately, while mailed-in forms typically take 5-7 days for the state to approve.
Is there a yearly fee for an LLC in Wisconsin?
Each year, an annual report and $25 annual fee must be submitted to the Wisconsin Department of Financial Institutions.
Do I have to pay to hire a registered agent?
No. Anyone can act as a registered agent, provided they are at least 18 years old, reside in the state, and are generally available to receive documents during normal business hours.
Does an LLC need a business license in Wisconsin?
It’s sometimes thought that the LLC and business license are the same in Wisconsin, but they aren’t. An LLC is referred to as the business entity, which is how the business is organized to conduct business.
A business license or permit, on the other hand, is approval from a government entity to legally operate. Different types of licenses are required depending on where the business is located and what the business does.
What is a Foreign Limited Liability Company?
A foreign LLC isn’t a special type of LLC. Instead, it’s an LLC that was formed in another state that wants to physically operate in Wisconsin. Physically operating means having a presence, such as having an office or hiring an employee.
Related: What is a foreign LLC?