Are you looking to introduce your novel business idea to the market in Wisconsin? You are in the right place! The first step in your journey to start your own business is to decide on a structure. A limited liability company (LLC) can be the ideal choice for your planned business. You can think of an LLC as a hybrid between a corporation and a partnership. It enjoys a great deal of operational flexibility and also opens the door to tax savings.
Wisconsin is a good choice for your business. The State has good infrastructure and provides easy business funding access. The tax policies of the State are also helped at promoting new and small businesses. However, the procedure for setting up an LLC in the State may seem cumbersome and complicated. We are here to break it down and guide you through each step involved in the process.
Name Your Wisconsin LLC
Naming your LLC is the first step in its formation procedure. The name you select for your business becomes its identity. It is how customers get to know your business. A good name will help your LLC to have brand value in the market. So you must make sure that the name of your LLC is unique and something that customers can recall easily.
The name you select must comply with all the naming requirements that the State of Wisconsin mandates.
Section 183.0103 of the Wisconsin Code lists the guidelines you must follow while naming your L.L.C.
The name of your business, as stated in the incorporation document, should contain the words “limited liability company” or “limited liability co.” or one of its abbreviations (L.L.C. or L.L.C.). Also, ensure that the name you selected does not imply any purpose for which you do not have permission. For example, you cannot name your L.L.C. “A.B.C. Bank” unless you have a banking license.
Your L.L.C.’s name must be unique. Your L.L.C. cannot have a name already used by any other limited liability company, a corporation, a nonstock corporation, a limited partnership, a limited liability partnership, a cooperative association, or an unincorporated cooperative association in the State.
In addition to not being identical, the name should not be similar to the name of another entity in Wisconsin. This means that the name you select should not be such that it can be confused with the name of another business.
For example, the name “Googal” has a different spelling and can be easily confused with the name “Google.” Therefore, you cannot simply use suffixes, conjunctions, singular/plural forms, abbreviations or punctuations to distinguish a name from another name already registered with the State.
Your L.L.C.’s name cannot have words that can confuse your L.L.C. with a government agency. Words like ‘F.B.I.,’ ‘State Department,’ and ‘Revenue Service’ can cause people to confuse your L.L.C. with a government agency. Using such words in the L.L.C.’s name is not allowed.
You must first file for additional paperwork and permissions if you want to include words like ‘Bank,’ ‘Attorney,’ ‘Academy,’ or any other word suggesting the line of work your L.L.C. is related to.
For a better understanding of all the naming guidelines, please read W.I. Stat § 183.0103 (2021).
Does Your Business Require a DBA?
A “Doing Business As Certificate,” or DBA, enables you to operate your LLC under a different name. You may have chosen a name for your LLC and incorporated it. Later, you may feel differently about the name you have selected, or you may want to operate under a different name on account of your business venturing into a new market. An assumed name allows you to run the LLC under another name.
Creating and registering a DBA in Wisconsin does not protect your assets. To avail of the protection of limited liability, you need to form an LLC. You must apply to obtain a DBA name Online or in Person With the Wisconsin Department of Financial Institutions. Once registered, it is valid for ten years, after which you will need to renew it. You may also choose to cancel your DBA anytime you wish.
Option 1: Apply for a DBA OnlineApply Online – OR –
Option 2: Apply for a DBA by Mail or through FaxDownload Form
4822 Madison Yards Way
Madison, WI 53705
Doing a Name Search and Name Reservation
You must ensure that the name you have chosen is unique and is not identical or similar to any other business entity. Otherwise, you risk having your application rejected by the State. You may use the State’s Business Entity Search to make sure that the name you have is genuinely unique.
Wisconsin allows you to reserve a valid name for 120 days. You must apply to the Division of Corporate and Consumer Services for this purpose.
Reserve Your Name by MailDownload Form
Wisconsin Department of Financial Institutions
4822 Madison Yards Way, North Tower
600 E Boulevard Ave Dept. 108
Madison, WI 53705
Fee: $15 (additional $25 for expedited service)
Registering Your Business Domain
Customers increasingly prefer businesses that have an online setup. With the increasing popularity of the internet, every business will need to set up an online presence to thrive. Even if you do not wish to have a website for your business immediately, you should get your preferred domain name registered.
Having a website is advisable because it adds professional credibility to a business. It ensures that the domain is reserved for the future when you want a website.
You can register a domain name for your LLC if you wish to have a website. It is always a good idea to check available domain names and register one while selecting a name for your LLC. Doing so would ensure that domain names relating to the LLC’s name are available.
Choose a Registered Agent in Wisconsin
A Registered Agent is an individual or another business entity responsible for receiving all official communication on behalf of the LLC. You must select a registered agent before your company can start functioning.
The main job of a registered agent is to be a point of contact for all official correspondence from the State. This may include certificates of good standing, service of process in any lawsuit, etc. You have to name your registered agent in the incorporation documents of your LLC.
Who Can Be A Resident Agent?
The State of Wisconsin provides specific requirements that your registered agent must comply with. These provisions are laid down in WI Stat § 183.0105 (2021) of the Wisconsin Statutes & Annotations. While appointing an agent for your LLC, you have to keep in mind the following points:
- The registered agent can be either a natural person or an artificial entity.
- If the registered agent is a natural person, they must be over the age of 18.
- If the registered agent is an artificial person, it is required that it be permitted to conduct business in the State of Wisconsin.
- The registered agent should have a registered office at an address in Wisconsin.
- The registered agent must be available to accept official correspondence at the registered office during business hours.
Individual v. Registered Agent Service
A registered agent can be either an individual (like a friend, a family member, any member of the LLC, etc. ), or it can be a registered agent service that you can hire. You may appoint yourself as the registered agent.
Hiring a registered agent service comes with a lot of benefits. They remind you when your returns and other filings are due and help ensure you don’t miss any deadlines. A professional registered agent service ensures that you don’t fail to duly respond to any notice or other communication that may be sent to your LLC.
Additionally, if you are someone who works out of your home or a private office, having a professional registered agent service will help you maintain privacy, as it will be their address that is made available in the public domain.
Also, hiring a registered agent service lets you focus your energy and time on core areas needed to grow your business.
File the Articles of Organization with Wisconsin
Articles of Organization is a legal document to be filed with the Secretary of State’s office to incorporate your LLC. This is by far the most important step in the process of setting up your business. Once this is completed, your LLC is registered and is recognized in the eyes of the law.
You must provide important details about your LLC, such as:
- The name that you have selected for the LLC
- The registered agent’s name, address as well as contact details.
- Governing Authority Type
- Organizer Information
Option 1: File Your Articles of Organization OnlineFile Online – OR –
Option 2: File Your Articles of Organization by MailDownload Form
State of WI – Dept. of Financial Institutions
P.O. Box 93348
Milwaukee, WI 53293
Fee: $130 Online, $170 By Mail
The State of Wisconsin allows you to file for expedited service for an additional fee. You can opt to pay an extra fee of $25 to have your application processed by the close of business on the first business day following the date of receipt.
Publish Notice of Formation
Wisconsin does not require its newly formed LLCs to publish a notice declaring their formation.
Create the Operating Agreement for your Wisconsin LLC
An Operating Agreement can be explained as a basic agreement between the managers and members of the LLC. It lays down the rules of your LLC’s internal operation and functioning. It usually covers things such as the initial members of the LLC, the allocated profits, capital contributions, management structure, and liabilities.
Most States, including Wisconsin, do not make having an Operating Agreement mandatory. Despite that, it is advisable that you draft an Operating Agreement for your LLC. Having an Operating Agreement is good because it ensures that the members, as well as the managers, have no confusion about how your LLC is to be run.
An Operating Agreement reduces disagreements or clashes in the future. An operating agreement acts as a guiding force in matters of the day-to-day functioning of the LLC. It offers credibility to your enterprise. You will need an operating agreement for opening an account with the bank.
There are no prescribed templates for an operating agreement in Wisconsin, and you may draft one according to the needs of your business. However, irrespective of the nature of your business, it shall be advisable for your operating agreement to cover the following matters:
- Organization Details
- Duties of Members and Managers
- Management and Voting
- Capital Contributions
- Division of Profit and Losses
- Bookkeeping Procedures
- Procedure for adding new members
- Requirements concerning Meetings and Procedures thereof
Writing The Operating Agreement Yourself v. Hiring a Service
There are multiple options for you to get an operating agreement drafted. If you wish to do it yourself, you may call for a meeting of all the members and negotiate a mutually agreeable draft. Or, you may purchase a template online and modify it to suit your business structure.
Alternatively, you may choose to hire the services of a professional like an attorney. Most registered agent services also provide drafting services at a reasonable price. Experts in the laws of Wisconsin, these attorneys or professionals will help you draft an operating agreement that suits the needs specific to your business model.
Limits of Operating Agreement
There is no fixed format for this agreement. You have all the freedom to include the terms of the agreement you feel are necessary for your LLC. However, the terms are limited to the law.
Your Operating Agreement cannot preclude your LLC, its members, or its employees from the laws of Wisconsin.
Obtaining an EIN for your Wisconsin LLC
EIN is short for ‘Employee Identification Number.’ It is issued to LLCs by the Internal Revenue Service. An EIN for an LLC can be best explained as a social security number for a legal entity. Its job is to serve as an identification number for a business so that it is easy for the IRS to identify it for filing and tax purposes.
An EIN is required by your LLC for things like applying for licenses & permits, opening a separate bank account for your LLC, and obtaining business loans.
You should only apply for an EIN only once the State approves your LLC. If the LLC does not get approved, then you will end up possessing an EIN for a non-existent business. The IRS issues an EIN, and you can apply for it online or through the mail.
Option 1: Request an EIN from the IRSApply online – OR –
Option 2: Apply for an EIN by Mail or FaxDownload form
Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999
Fax: (855) 641-6935
File Annual Reports in Wisconsin
Wisconsin requires all LLCs in the State to file a legal document called the Annual Report with the State authorities annually. These reports are a way for the State to keep a record of all businesses in the State.
Your LLC will have to file this report annually with the Wisconsin Department of Financial Institutions. You can do the filing online. The filing fee is $25.
The report is due by the quarter ending you formed your LLC. If you miss your deadline and continually fail to file the report for more than a year, you risk the State shutting down your business.
Tax Liability For Your Wisconsin LLC
Filing taxes is mandated by law, and not doing so can be fatal for your LLC. Therefore, it is important to get a decent idea of the taxes that would be levied after your LLC has been established. Your LLC can be taxed in four ways:
- Sole proprietorship: a single-member LLC
- Partnership: a multiple-member LLC
- A C-Corporation: the LLC and its members are taxed separately
- An S-Corporation: the members of the LLC are taxed separately
Federal Tax Liability
By default, an LLC is treated as a ‘pass-through entity,’ meaning it does not pay any tax directly. However, the members are liable to pay taxes on the income they earn from the LLC.
You must pay Federal self-employment tax (presently 15.3%) on the profits you take from your LLC. You are eligible for certain deductions in the nature of business expenses. You are also liable to pay Federal Income Tax. The income tax you have to pay will vary depending on your income, filing status, deductions, etc. However, federal corporate taxes must be paid if you treat your LLC as a corporation for tax purposes.
To have your LLC taxed as a sole proprietorship, you’ll have to file your taxes with the IRS under Schedule C, Schedule E and/or Schedule F of Form 1040.
For your LLC to be taxed as a partnership, along with filing Form 1040, you’ll have to file your taxes under Form 1065 and provide information in the K-1 form of each partner.
To have your LLC taxed as a C-Corp or S-Corp, file your taxes under Form 8832 and Form 2553, respectively.
State Tax Liability
If you treat your LLC as a corporation for taxation purposes, it will have to pay a State Corporate Tax. Currently, the tax rate is 7.9% of the net income of your LLC. Additionally, if you plan on selling certain specified products or services through your LLC, you will have to collect and pay sales tax. For this purpose, you will first have to procure a seller’s permit from the State.
Miscellaneous Tax Liability
Your LLC must pay certain other taxes, depending on its business. For example, importing and exporting companies have to pay import/export duties, fuel sellers pay taxes on the sale of fuel, etc.
Additionally, if your LLC has hired employees, you must sign up for Unemployment Insurance Tax and Employee Withholding Tax.
Permits & Licenses
Your LLC would need permits and licenses according to the type of business that it conducts. Accordingly, your business will be subject to three licensing jurisdictions: Federal, State, and Local.
Federal Licensing requirements will depend on the business activity carried on by your LLC. If your company is engaged in any area of business regulated by the Federal Government, you will be required to obtain relevant Federal Licenses and Permits.
Some business activities requiring Federal Licenses and Permits are:
- Alcoholic beverages
- Firearms, ammunition, and explosives
- Fish and wildlife
- Commercial fisheries
- Maritime transportation
- Mining and drilling
- Nuclear energy
- Radio and television broadcasting
- Transportation and logistics
Most businesses in Wisconsin will need to do a Business Tax Registration. Once completed, you may register for different tax permits, including a seller’s permit. You may visit the Department of Revenue website to know more about the licensing requirement for your LLC.
Depending on where you are located, you may also need to get local permits and licenses. For example, most businesses would require a city business license in Milwaukee. Get in touch with your local county or town government to know more.
For more information regarding;
- Department of Safety and Professional Services
- Department of Health Services
- Federal Permits and License
Business Bank Account & Phone Number
You will need a separate bank account for your LLC. This is important because a separate account would make it convenient to file tax returns, manage cash balances, and deduct expenses for your LLC. A separate bank account would also protect your personal assets from the LLC’s liabilities.
To get a new bank account for your LLC, you would need to provide the bank of your choice with your LLC’s EIN and other documentation, depending on the bank.
Using your phone number for your LLC can prove to be very inconvenient. Therefore, it is best either get a separate phone number for your business or hire a phone answering service. Doing this would protect your privacy, look professional and reduce the risk of missing important calls.
There are a lot of advantages of forming an LLC in Wisconsin. In addition to having a great business environment, the State also provides various business incentives such as the Development Opportunity Zone Tax Credit (DOZ), the Wisconsin Enterprise Zones program etc.
Get in touch with your local county or city government office to determine if your LLC is eligible for any of these incentives.
On completing the above steps, your LLC is legally incorporated and ready to do business. We wish you and your new business the very best!