The State of Wisconsin has specific requirements for the LLC formation. To complete the registration process, you will need to file several documents before your business can be recognized as a limited liability company (LLC).
Setting up a business can be a confusing process for those who have never done it before. This article should provide information about what it takes to create an LLC in Wisconsin and how you can go about doing it successfully.
What is a Wisconsin LLC?
A limited liability company in Wisconsin represents a business structure that is separate from business owners.
This business structure has specific requirements for how it must be set up and maintained in the state of Wisconsin.
Still, it also provides LLC owners with personal liability protection as well as pass-through taxation.
Wisconsin LLCs are an excellent choice for new business ventures since they offer tax benefits to their members while maintaining a sense of legal separation between each member's investment or interest in the business venture itself.
In addition, most people who form LLC companies prefer this type of business entity because it can simplify income taxes when filing personal federal income taxes at the end of every year. The convenience is not as prominent compared in other financial institutions.
Wisconsin LLC members are individuals or other business entities that own a part of the company. They are not personally liable for the LLC's debts or liabilities.
Wisconsin LLCs have more rules to follow than partnerships and sole proprietorships, but they offer some protection from personal liability, which may be worth it, depending on your needs.
What Are the Advantages of Wisconsin LLCs?
The benefits of forming an LLC in Wisconsin include personal asset protection, business assets, and business owner liability.
Personal assets are separated from business assets when an LLC is formed in Wisconsin.
This means that if your company was sued or there were debts to be paid, your personal bank accounts would not have to be used for paying them off.
You also won't risk losing any property owned prior to forming the LLC because it will stay separate from what you own after creating this type of business entity.
The only thing at risk here will be money earned by your company while being operated under a Wisconsin limited liability company structure - but even then, creditors cannot access personal savings or other financial resources outside of operating funds within the LLC itself.
LLCs offer a flexible business structure which means you can grow your company with less risk of personal liability.
For example, you can add or remove business partners at any time without worrying about legal actions that might affect the personal assets owned by other LLC members.
Wisconsin is an ideal place for forming this type of business because it offers one of the most flexible and comprehensive set-up processes in the country - especially when compared to states offering limited personal protection for LLC owners who create a new firm under their own name (in what's called a sole proprietorship).
Incorporating in Wisconsin also makes good financial sense, thanks to the low costs of starting up and keeping an LLC running.
How to Form an LLC in Wisconsin?
The LLC formation process requires several steps before the state of Wisconsin can officially recognize your new company. You need to make sure everything is done correctly and according to state law, or you'll have to start from scratch all over again.
LLC's formation documents are extremely important, so make sure you do everything by the books before submitting to the Department of Financial Institutions.
Step 1: Apply for a Business Name
The first step is applying for a business name through the Wisconsin Department of Financial Institutions Division of Corporate & Consumer Services. This requires filing an application with your local county clerk's office, where you are located, at least 24 hours before submitting it to the state agency.
Your LLC name has to end with "Limited Liability Company" or the abbreviations "LLC" or "LLC." It can't include words that are misleading, obscene, offensive to public policy/morals, resemble a government agency, professional services restricted by law (such as attorneys), or reserved for another business name in Wisconsin (e.g., bank names).
You can check whether a business name is already taken by browsing the Wisconsin Secretary of State Business Search.
The Department of Financial Institutions reserves the right to reject an LLC name they believe has been taken illegally from someone else already existing in their official records.
You may reserve a business name for a period of 120 days at a $15 filing fee payable to the Wisconsin Department of Financial Institutions.
Expedited processing is also available at an additional $25 filing fee. Keep in mind that You can only make name reservations by mail.
Step 2: Appoint a Registered Agent
A registered agent (or a registered agent service) represents the LLC in the state of Wisconsin.
Foreign (meaning those formed outside of WI) or domestic LLCs must have a registered agent within the state.
The business entity is required by law to maintain a registered office address with that registered agent service for all legal documents such as annual reports or service of process - meaning court summons if you get sued.
The main function here is to be available at this location during normal business hours, so any official paperwork can be received and presented according to statutory deadlines, such as the operating agreement.
Keep in mind that these filings are legally binding contracts once accepted by your company's representative on record.
For example, if someone sues your LLC, they'll serve notice upon their registered agent, who will then deliver it via certified mail back to your primary contact person.
A reliable registered agent service in Wisconsin will provide a physical address, not a PO Box, and will be available during business hours to ensure legal documents are received in a timely manner.
This is why it's important that the company you've hired for this service has an office location within your state where all official correspondence can be accepted by someone on staff as required by law.
There's no fixed rule regarding how much time must pass before you should re-evaluate whether or not your LLC registered agent is providing adequate services for their fee, but it usually becomes necessary after a year.
You may find yourself paying more money under long-term contracts without seeing any real benefits if they're neglecting basic duties like filing annual reports on time, which puts your personal and business assets at risk.
Step 3: File Wisconsin LLC Articles of Organization
To make your LLC official, you will have to file Articles of Organization with the Wisconsin Department of Financial Institutions. You can file online or directly.
Your articles must include:
- Your name and address (physical)
- The street number and name where you will be conducting business
- A description of what kind of business is being conducted, such as a retail store or accounting firm. This needs to match the type on file with your county clerk's office in Wisconsin. If it does not, then there could be an issue later down the road if someone tries to challenge your LLC status.
The Secretary of State's office also needs to know how many members you have and who they are. If the company has only one member, it must be listed by name as a registered agent for process purposes.
The online filing fee for Wisconsin Articles of Organization is $130. If you choose to mail your Articles of Organization, the fee is $170.
This filing fee is paid to file Wisconsin Articles of Organization with the Secretary of State's office in Wisconsin.
You may speed up the processing of your Articles of Organization for an additional $25 expedited service fee.
On the first business day following the date of receipt, the end of the business is when expedited service requests are acted upon. There are no refunds available for either of the fees mentioned above.
Step 4: Make a Wisconsin LLC Operating Agreement
An operating agreement is a document that defines the operating structure of your LLC.
It is very important to have an operating agreement for Wisconsin because it stipulates how business decisions are made and what happens if conflicts arise within the company.
The main function of operating agreements is to outline voting rights, responsibilities, and ownership percentages so there isn't any confusion amongst LLC managers or members alike.
Suppose you don't have an operating agreement in place before filing Articles of Organization with the Secretary of State office. In that case, you risk the possibility of your LLC being declared invalid by the state.
Another important facet of an operating agreement is specifying what happens if someone leaves before allocating equal parts of the profits amongst themselves.
Without this stipulation on the operating agreement, you may face controversy over who gets paid for each individual contribution towards earning income during their tenure with your Wisconsin LLC.
An official document like operating agreements prevents any and all disputes from arising when it comes time to distribute profits by outlining in advance who gets what percentage of the money earned.
You should draft your operating agreement with an experienced Wisconsin business attorney or legal document preparation specialist if you don't feel comfortable writing this up on your own.
Wisconsin law doesn't require LLCs to have operating agreements, but it is highly recommended because it helps to avoid any future problems and disputes.
What to Do When You Form an LLC?
After you complete all the previous steps with the operating agreement, you will need to make sure your Wisconsin LLC stays compliant with the state.
Apart from keeping your company's annual reports up to date, you also need to take care of opening a business credit card or bank account, acquiring necessary licenses, filing all required tax forms, and paying Wisconsin taxes that are due every year.
Opening a Business Bank Account
If you're opening a limited liability company in Wisconsin, make sure the LLC bank account you create serves as a source for all of your company's money.
This ensures that you can keep track of any cash flowing out for expenses or taxes, and it distinguishes these charges from personal ones if there are any disputes among members of the LLC about how profits are shared out.
LLCs must obtain an Employer Identification Number (EIN) from the Internal Revenue Service before establishing accounts under their company name with banks.
If you operate several distinct LLCs underneath the same LLC umbrella, make sure each has its own EIN rather than using a single number for all of your companies.
Obtaining Employer Identification Number
EINs are obtained through the federal government.
The paperwork needed to set up an LLC is done with your Secretary of State, but that federal ID number can be used across state lines for things like opening bank accounts and filing taxes in other states.
Every business must have a Federal Employer Identification Number (EIN) if it has employees or operates as a corporation, partnership, or trust.
This applies even if you do not hire employees immediately, plan on hiring within years or never expect to hire anyone at all: You'll still need this identification from the Internal Revenue Service.
An LLC can get an EIN the moment it files its Articles of Organization with the Secretary of State. However, applying before you have legal status may result in delays in processing your application, potentially causing accounts to be opened without proper documentation.
You can obtain an EIN online or by mail through the IRS website. There is no cost to using this service.
Obtaining Business Licenses and Permits
If you want to conduct business in Wisconsin, but your services include transportation, telecommunications, medical care, accounting, architecture, or other utilities, you will need to obtain a business license.
A business license is generally required to operate a firm on both federal and state levels.
For federal licensing requirements, you may learn more about licensing regulations by visiting the Small Business Administration's website or calling the Department of Safety and Professional Services to inquire about the state business licenses.
Businesses must obtain local licenses from their city or county of operations if they operate there.
The type of industry determines the licensing needs, but some typical examples include a general commercial license, general sales and use tax license, and so on.
If you want to provide professional services in Wisconsin through a professional LLC, you'll need licenses even more than if you wanted to offer similar services through an ordinary LLC. A competent business license is required for a professional limited liability company that intends on providing services such as general contracting, general law, medical care, or legal advice.
Related Article: Dissolution of an LLC in Wisconsin
Wisconsin LLC Taxes
A Wisconsin LLC default tax status is a pass-through entity. This means that income or loss from the LLC passes through to its members' personal taxes, but it does not pay federal taxes at this time.
Federal and state taxes are the most common types of taxes. In Wisconsin, LLCs may be subject to both state and federal income tax on their profits as a business entity.
They are taxed at the same rate as individuals but can reduce taxation by filing deductions for expenses incurred during the year from operations, such as wages paid out to staff members or purchases of equipment used in production processes.
Wisconsin sales tax rates are different depending on whether you are selling tangible goods or intangible services.
The default rate for most of Wisconsin is five percent.
However, there are many other possible scenarios - especially when dealing with professional service providers.
Keep these factors in mind as your company operates and grows so you can avoid any additional business licensing requirements later down the line due to noncompliance issues stemming from improperly filing state returns.
The default tax status for an LLC in Wisconsin is that it will be treated as a sole proprietorship (for single-member business entities) or a partnership (in the case of a multi-member LLC).
If taxed like a corporation, earnings would be subject to double taxation: once at the business level and again on individual returns when distributed as dividends.
Many small businesses elect to have their company classified as either S-corporation or C-Corporation to avoid this issue.
If you operate a Wisconsin LLC with staff, you must report to the Wisconsin Department of Workforce Development on Unemployment Insurance Tax and Employee Withholding Tax.
Individual states charge sales tax, which is collected from the buyer and sent to state coffers; this means you could owe state taxes even if your LLC doesn't pay federal income taxes.
Wisconsin LLC FAQs
Can I Form a Foreign LLC in Wisconsin?
Yes, Wisconsin allows the registration of foreign LLC entity. To form a foreign LLC in Wisconsin, you must file a Wisconsin Certificate of Registration Application with the Department of Financial Institutions. You can file for a foreign LLC online, by fax, or come into their office to complete this form.
Do I Need Business Insurance for Wisconsin LLC?
Yes. The state of Wisconsin requires some form of business insurance for LLCs, depending on the industry of your business.
Generally, LLCs with employees will need to carry workers' compensation insurance, while LLCs with no employees will need to have a general liability policy.
Additionally, some types of businesses may require additional coverage for things like products or professional malpractice insurance.
Do I Need to File an Annual Report for My LLC in Wisconsin?
A domestic LLC must file an annual report with the state. You can file your annual report through the Wisconsin Department of Financial Institutions' website or mail if you are a foreign LLC.
How Do I Find a Registered Agent in Wisconsin?
You can find a registered agent for a Wisconsin LLC by using the state's online system. The Wisconsin Department of Financial Institutions (DFI) website provides an agent search page where you can find registered agent information by name or city. It also allows you to narrow your results by business type, even as a foreign LLC.
How Do I Add a DBA to an LLC in Wisconsin?
A DBA, or fictitious business name, for your Wisconsin LLC, can be obtained by filling out a DBA application form, notarizing it, and submitting it to the Wisconsin Department of Financial Institutions along with the filing fee.
Does Wisconsin Allow LLC Domestication?
Yes, you can domesticate an LLC in Wisconsin by filing a Certificate of Conversion with the Wisconsin Department of Financial Institutions.
How Do I Check the Status of My LLC in Wisconsin?
You can check your Wisconsin LLC status by visiting the Secretary of State website and performing a search by your business name, entity number, or filing date.
How Long Does It Take for LLC in Wisconsin to Get Approved?
It depends on how you submit your paperwork. If you submit it online, the Secretary of State's office will deliver the Articles of Organization to you in one day. If you send it in by mail, you'll wait a few days longer (for around five days).
Registering your Wisconsin LLC is a big decision.
You'll need to do some research and ask for legal advice before you make the final leap, like how to interact with the Department of Financial Institutions. However, it's worth taking the time because forming an LLC in Wisconsin can offer many benefits.
We hope this article helped answer any questions you may have about an LLC and whether it might be right for your small business needs.