Whether you're a seasoned business owner or starting a business, Starting a Limited Liability Company (LLC) in Wisconsin can be an exciting venture. This article guides you through forming an LLC in the Badger State, from choosing a business name to understanding costs and benefits. Knowing how to navigate LLC formation is crucial. Remember, building an LLC means creating a stable and profitable business, not just filing papers and getting it registered.
How to start an LLC in Wisconsin in 7 steps
01. Pick your business name
To start a business in Wisconsin, the first step is selecting a name for your LLC. This isn't just an important creative process, it's a crucial legal one too. Make sure your chosen name ends with "LLC," "L.L.C.," or "Limited Liability Company" to comply with state requirements. Your business name should be unique and different from other names on record with the Wisconsin Secretary of State.
To make sure your business name stands out and meets the necessary legal requirements, follow these steps:
Use the Wisconsin Secretary of State's online database to search for existing business names. These are names you must avoid using.
Avoid restricted words that could confuse your LLC with a government agency (e.g., FBI, Treasury). The same applies to names that are too similar to an existing brand.
Use a domain search tool if you plan to make a website, as ideally your domain and business names should be the same.
Tip: Need help coming up with a unique name for your business? Consider using a business name generator.
02. Choose your registered agent
Every LLC in Wisconsin must have a registered agent, an individual or company that agrees to accept legal papers on behalf of your LLC. Your registered agent must be available during regular business hours and have a physical address in Wisconsin.
Need help setting up your LLC? Wix has partnered with LegalZoom, the No. 1 choice for online business formation to help you start, run and grow your business.
03. Obtain all necessary state business permits
Depending on the nature of your business, you may need specific permits or licenses to operate legally in Wisconsin. These could range from general business licenses to industry-specific permits. The process of registering a business involves checking with local and state agencies to confirm which permits you need, filling out the required paperwork and then paying the required fees.
Let’s say you want to start a tow truck business in the state. First, you’ll need a standard business permit to operate. In addition, tow truck businesses are regulated by the Wisconsin Department of Transportation (WisDOT) and must follow certain rules and guidelines. This includes regulations on rates, fees and responding to emergency calls.
Learn more: How to get a business license
04. File a Certificate of Formation
The Certificate of Formation is a critical document that officially creates your LLC in Wisconsin. You'll file this with the Wisconsin Secretary of State, either online or by mail, along with the required filing fee.
These key steps are included in the filing process:
Gather your business information: You'll need details like your LLC's name, registered agent information and management structure.
Fill out Form CORP 502: This is the specific form used for filing an LLC's Certificate of Formation in Wisconsin.
Submit and pay fees: Complete the submission process by paying the $130 filing fee for online filing or $170 to file the paper form by postal mail.
05. Draft your LLC operating agreement
An operating agreement isn't required in Wisconsin but drafting one is highly recommended. This internal document outlines ownership structures, member roles and operational procedures for your type of business. This is essential for setting clear expectations for members regarding business operations day to day and long time, as well as conflict resolution.
06. Apply for an EIN and pay relevant taxes
An Employer Identification Number (EIN) is essential for running an LLC, including for hiring employees, opening bank accounts and filing taxes.
Apply online or via mail: The IRS provides free EIN registration through their website or via mail submission.
Understand your business tax obligations: Learn about state-specific taxes that apply to your LLC, such as franchise tax or sales tax. In Wisconsin for an LLC owner this includes a 15.3% self-employed tax (12.4% social security, 2.9% Medicare). For more information, visit the Wisconsin Department of Revenue website.
07. Organize your annual reports
Wisconsin requires LLCs to file annual reports to keep their business information up-to-date with the state. These reports include current contact information and details about your business operations over the past year.
To be compliant with this make sure to:
Know due dates: Your Wisconsin Annual Report is required each year by the end of the registration anniversary quarter.
Maintain proper records: Keep accurate records throughout the year to simplify report preparation when due dates approach.
Submit and pay fees: Complete the submission process by paying the filing fee, $25 online or $40 by mail.
How much does it cost to start an LLC in Wisconsin
Starting an LLC in Wisconsin involves various costs, and it's important for you to budget for these expenses. Here's a breakdown of the fees you can expect:
Filing fee for Certificate of Formation: The state of Wisconsin requires a fee when you file your Certificate of Formation. This is a one-time cost that is mandatory for all new LLCs. For an LLC it costs $130.
Registered agent fee: If you choose to hire a professional registered agent service, they will charge an annual fee. Costs vary depending on the service provider.
State business permits and licenses: The cost for permits and licenses can vary widely depending on the type of business you're starting and the specific regulations that apply to your industry.
Annual report filing fee: There is a fee associated with filing your annual report, which is required to keep your LLC registered and running.
Operating agreement: While not required by the state, if you choose to have an attorney draft an operating agreement for your LLC, this will be an additional cost.
Employer Identification Number (EIN): Obtaining an EIN from the IRS is free of charge.
Legal or financial consulting fees: If you seek professional advice during the formation process, these services will add to your startup costs.
Domain registration and website creation: Creating an online presence with a website is crucial in today's market. Potential costs include domain registration and potentially hiring a web designer or using a website builder like Wix.
Business insurance: Depending on your industry, you might need various types of insurance to protect your LLC.
Who can start an LLC in Wisconsin
To form an LLC in Wisconsin, there are specific eligibility criteria that need to be met. It's crucial to understand these before starting the process.
You must be at least 18 years old to form an LLC in Wisconsin.
There's no residency requirement to start an LLC in Wisconsin. You don't have to live in the state, but your LLC must have a registered agent with a physical address within the state.
You must have the legal capacity to enter into contracts. This means that individuals who are barred from doing so, such as certain felons or those with legal restrictions, may not be eligible.
Your LLC must be formed for a lawful business purpose. Wisconsin does not allow LLCs to be formed for illegal activities.
Certain professions may require additional licensing or may not be permitted to form an LLC for their practice (e.g., doctors or lawyers). Check with your industry's regulatory body for specific rules.
Benefits of starting an LLC in Wisconsin
Creating an LLC in Wisconsin has a number of benefits that may appeal to business owners. These advantages include legal safeguards and tax incentives, making it a popular option among enterprises.
A limited liability company—or LLC—is a type of business entity that offers some of the benefits of a corporation with less formality. One key benefit of an LLC is that it can protect a small business owner’s personal assets—like homes, cars, and personal bank accounts—from lawsuits against the business. Additionally, LLCs offer the flexibility of filing taxes as a sole proprietorship, partnership, or corporation. Also, you won’t need to worry about some of the same formalities as corporations, such as keeping minutes at shareholder meetings. Shylene D’Addario VP, associate general counsel at LegalZoom.
Limited liability protection
As the name suggests, an LLC provides its owners, known as members, with protection from personal liability for business debts and obligations.
Pass-through taxation
LLCs typically benefit from pass-through taxation where profits are taxed on the members' personal tax returns, avoiding the double taxation faced by C Corporations, for example.
Flexibility in management
Unlike corporations, LLCs have fewer formalities and can be managed by the members or appointed managers, providing flexibility in how the business is run.
Credibility with customers and partners
Having 'LLC' after your business name can enhance your credibility with potential customers, suppliers and financial institutions. You can then choose an .llc domain for your website to reinforce this credibility.
Learn more: Benefits of starting an LLC
Potential drawbacks of starting an LLC in Wisconsin
When thinking about starting an LLC in Wisconsin, it's crucial to evaluate the pros and cons. Being aware of these potential drawbacks will help you in making a well-informed choice on whether an LLC suits your business needs. Here are a few hurdles you might face with an LLC in Wisconsin:
Members of an LLC may be subject to self-employment taxes on their share of the profits.
Wisconsin requires LLCs to file annual reports and pay a fee, which is an ongoing cost that must be factored into your budget.
If you plan on seeking outside investors, know that some investors prefer not to invest in LLCs due to the pass-through taxation structure.
Transferring ownership can be more complex compared to a corporation where shares can be easily bought and sold.
Why start an LLC over another business entity in Wisconsin?
Choosing the right business structure is crucial for entrepreneurs. In Wisconsin, forming an LLC is often preferred due to its unique advantages. But it's important to compare it with other types of business structures to understand why an LLC might be the best choice for your situation.
Here's how an LLC stacks up against other business entities:
Sole proprietorship: Unlike a sole proprietorship, an LLC provides personal asset protection, separating your personal liabilities from those of your business.
Partnership: An LLC offers more protection for each member compared to a partnership, where each partner can be personally liable for the debts of the business.
Corporation: While corporations also provide limited liability protection, they’re also subject to double taxation (taxes on both corporate profits and shareholder dividends). An LLC avoids this with pass-through taxation.
You've formed your LLC in Wisconsin, now what?
The process of developing and expanding your company doesn't end with the formation of your LLC in Wisconsin. To make sure that your LLC runs effectively and continues to comply with state rules, there are a few crucial actions you should perform.
Open a business bank account
Keep your personal and business finances separate by opening a bank account solely for your LLC. This simplifies accounting and tax filing and reinforces the liability protection of your LLC.
Set up accounting systems
Implement an accounting system to manage your finances, track expenses, and prepare for tax time. Consider using software or hiring an accountant.
Obtain business insurance
Protect your LLC with the right insurance policies. General liability insurance is a good starting point, and depending on your business, you may need additional coverage.
Be compliant with state laws
Ensure you renew any permits or licenses as required and file your annual report with the state of Wisconsin on time.
How to start an LLC in Wisconsin FAQ
How long does it take to form an LLC in Wisconsin?
The time it takes can vary. Online filings can be processed quickly, sometimes in as little as a few business days, while mailed applications may take several weeks.