A limited liability company (LLC) is a legal arrangement for a firm. It blends a corporation’s limited liability with the independence and absence of formalities offered by a company or sole proprietorship. Any business owner who wants to restrict his or her legal responsibility for company defaults and claims should think about creating an LLC.
EIN (Employer Identification Number)
You can receive an Employer Identification Number (EIN) by filling out a PDF Document (Form SS-4) from the Internal Revenue Service (IRS) or by applying for one on the IRS website. Any LLC that hires people involves an Employer Identification Number in order to pay withheld taxes on such jobs, open bank accounts, register for credit cards, and otherwise function separately as a corporate organization.
Operating agreements are not necessary when establishing a Wisconsin LLC, but these operating agreements are highly essential. By forming an operating agreement to form an LLC, you are creating a guideline on how the Wisconsin LLC will operate; basically, a model about how the business’s corporate relations will be organized.
Creating such an operating agreement has been seen to prevent disagreements between staff and owners.
Secretary of State
As the director of the United States Department of Revenue, the secretary of state conducts international strategy with the United States administration. The Cabinet rank, founded in 1789, is comparable to that of a foreign minister in other countries.
The state is nominated by the president of the United States and confirmed by the United States Senate during a nomination hearing before the Senate Committee on International Affairs.
Because of the significance of their specific offices, the state, the secretary of the Treasury, the secretary of Justice, and the Attorney General are commonly recognized as the four most powerful Cabinet members.
The State is a Class I rank on the Executive Calendar and therefore collects the salary recommended for that level (US$221,400 in January 2021).
The specified duties of the state are to supervise US foreign service and immigration policies, as well as to manage the Department of Revenue. The secretary may also counsel the president on U.S. foreign policy concerns, such as the recruitment of diplomats and ambassadors, as well as the firing and recall of certain people.
The secretary of state has the authority to negotiate, interpret, and cancel international security arrangements. The secretary of state can also serve the United States at foreign conventions, associations, and agencies.
Renewal of LLC
Both corporate companies shall preserve their good reputation by sending an annual report to the Secretary of State. Renewals may be done electronically in a matter of seconds by utilizing the record identifier or ID search feature (found linked in the heading of this paragraph).
In the state of Wisconsin, state authorities only need the registered agent information, the principal office address, and a few other bits of specific information. Both filers must request a $10 filing charge for their periodic report, but this fee will escalate if the renewal is late.
Filer Contact Cover Letter
A filer contact cover letter will accompany the name reservation form as will a check/credit card voucher to pay the $20 filing fee. A name reservation will allow you to reserve the rights to your current name while ensuring that it is unique to you in the state of Wisconsin (if the application is accepted).
Steps to Starting an LLC in Wisconsin in 2021
1. Choose a Name for Your LLC
An LLC name must include the words “Limited Liability Company” or “Limited Liability Co.” or end with the abbreviation “LLC” or “L.L.C.” under Wisconsin law.
The name of your LLC must be distinct from the names of other business organizations on file with the Wisconsin Department of Financial Institutions. The Wisconsin Department of Financial Institutions’ business name database can be used to verify the availability of names.
By submitting a Name Reservation Application (Form 1) to the Wisconsin DFI, you can reserve a name for 120 days. The reservation must be submitted by mail.
When doing business in the real world, you are not required to use the official legal name registered in your Articles of Organization. You may instead use a trading name, often known as a fictitious business name, “DBA” (short for doing business as), or an assumed name. In Wisconsin, you must first register your trade name with the Wisconsin DFI.
This does not establish ownership rights in the name, but it does notify the public that it is being used. Fill out an application for Trade Name/Trademark Registration online or by mail.
2. Appoint a Registered Agent Service
Any Wisconsin LLC and Foreign LLC doing business in Wisconsin must have a registered agent in the state for service of process. This is a person or business company that offers to sign legal documents on behalf of the LLC if it is sued.
A Wisconsin citizen or a business organization approved to do business in Wisconsin may serve as the registered agent. A physical street address in Wisconsin is needed for the registered agent.
3. File Articles of Organization
A Wisconsin LLC is created by filing Articles of Organization (Form 502) with the Wisconsin DFI. The articles must include:
- the LLC’s name
- the name and address of the LLC’s registered agent
- whether the LLC in Wisconsin will be member-managed or manager-managed
- the name and address of each organizer
- the LLC’s email address and phone number,
- the signature of the LLC’s organizer, and
- the name of the drafter of the articles of organization.
The articles may be filed online at the Wisconsin DFI website or by postal mail. The filing fee is $170 for filing by mail and $130 for filing online.
4. Prepare an Operating Agreement
In Wisconsin, an LLC operating agreement is not necessary, but it is strongly recommended. The Operating Agreement is the main document that specifies the members’ rights, powers, responsibilities, liabilities, and obligations to one another and to the Wisconsin LLC.
The Operating Agreement is only for internal use and is not filed with the Secretary of State. If an established or newly formed LLC in Wisconsin does not follow an operating agreement, its existing articles of incorporation, bylaws, or operating agreements, as well as its member control or limited liability company agreement, will serve as the operating agreement.
5. Comply With Tax and Regulatory Requirements
Your Wisconsin LLC may be subject to additional tax and regulatory requirements. This may include:
EIN: Even if your LLC has no workers, it must receive its own IRS Employer Identification Number (EIN) if it has more than one member. If you form a one-member LLC, you must receive an EIN only if it would have employees or if you want to tax it as a company rather than a sole proprietorship (disregarded entity).
You can get an EIN by filling out an online EIN application on the IRS website. There is no filing charge.
Business Licenses: Depending on the nature of your LLC’s operations and where it is located, you can need to obtain additional local and state business licenses. Check with the clerk of the city where the LLC’s primary place of business is located for local licenses (or county if it is in an unincorporated area).
The Wisconsin Department of Safety and Professional Services website has details on state licenses.
Wisconsin Department of Revenue: Whether you have employees or will be selling products and collecting sales tax, you will be required to register with the Wisconsin Department of Revenue (DOR). You can register either online (via the DOR’s Taxpayer Access Point (TAP)) or in-person (using Form BTR-101, Application for Business Tax Registration).
6. Open a business bank account
Keeping your personal and corporate accounts apart allows your accountant to prepare your taxes more efficiently. It may also be used to show that the organization is a different agency from you. If your accounts are intertwined, you may lose your personal money as well as your company profits in a dispute.
Well, the limited liability company feature of your Wisconsin LLC covers you, but how can anybody tell what money is yours and what belongs to the company if the finances are all merged into the same bank account?
Many banks would need evidence that the Wisconsin LLC is licensed by a registered agent with the State of Wisconsin in order to open an account. Expect to be sent the following forms:
- A stamped—or official—copy of your Articles of Organization
- A Certificate of Good Standing indicating that the organization is duly licensed by a registered agent as a Wisconsin LLC.
- A duplicate of your EIN (unless you are a single-member LLC without any employees)
The first two papers are available for free printing from the Secretary of State website. Simply browse their company database for your Wisconsin LLC.
7. Get a business license
A general business license is not needed to create an LLC inside Wisconsin, however, you will need an occupational license to work in some controlled industries. Among the regulated occupations are:
- Psychologists, psychiatrists, alcohol educators, and social services are also examples of professionals.
- Engineers, developers, and landscape architects
- Cosmetologists, barbers, nail designers, and estheticians are also examples of beauty professionals.
- Electricians and plumbers
Check out the city-specific criteria for the cities in which you would be working. There may be general business licenses or industry-specific licenses. Denver, for example, does not require general licensing but does require permits for food peddlers, dry cleaners, child care centres, and other companies.
8. Open a wage withholding account
Do you plan to recruit staff and deduct taxes from their pay? The state of Wisconsin then allows you to open a salary withholding account, which you can do for free online. If you’re recruiting W-2 workers or withholding taxes from 1099 contractors, you’ll need this. You will use this account to administer and reimburse deferred income tax.
9. Annual Report
Any domestic and international LLC that does business in Wisconsin is required to file an annual report with the Wisconsin DFI. The report must be submitted online at the website of the DFI. The annual report is due at the end of the calendar quarter of the LLC’s anniversary month.
For example, if an LLC is created on July 15, the report must be filed by September 30. March 31st, June 30th, September 30th, and December 31st are the deadlines. The Department will notify your LLC’s registered agent and include guidance for completing the online filing. The filing fee for a domestic LLC is $25 and $80 for an international LLC.
Benefits of Forming an LLC
Personal responsibility insurance and pass-through taxes are the two primary advantages of creating an LLC in Wisconsin. We’ll proceed with the most significant. Personal responsibility insurance is a privilege provided by all businesses and limited liability partnerships.
It creates a “security shield” between the personal assets and the assets of the company. If the company is prosecuted, you cannot use your personal assets to pay off any loans or obligations. The second advantage is that pass-through taxation is available to LLC, sole proprietorships, and partnerships.
Your corporation is not taxed on its own under this principle. Instead, all corporate gains or expenses are reported in an annual report on a personal tax return. You escape the downside that Corporations face: double taxation. Paying taxes at both the business and personal levels is referred to as double taxation.
Wisconsin LLC vs Corporation
An LLC is Cheaper to Create and Maintain
Unlike a corporation, managing and forming an LLC does not cost a lot of money. The Wisconsin Secretary of State charges a one-time filing fee of $50 when forming an LLC. The Periodic Initial Annual Report, which is due once a year, costs just $10. It is therefore less costly to manage an LLC than it is to maintain a corporation.
An LLC has Less “Red Tape”
An LLC, unlike a corporation, is not burdened by strict organizational laws. It is not necessary to appoint a board of directors, employ corporate officers, or schedule corporate meetings. A company is liable for this.
An LLC is Not Subject to Double Taxation
As previously said, the gains and expenses of an LLC “pass in” on your personal federal tax return. That is not the case for a corporation, since its earnings are taxed twice. This ensures that earnings are levied at the corporation level, and then dividends are taxed again at the shareholder level.
A limited liability company (LLC) is a “pass-through” organization. This ensures that the earnings are charged at the same pace as your own. The LLC does not file income taxes with the IRS. This is not to say that a Corporation has little potential for development.
This isn’t the case. They are simply more difficult to manage and are best fit for businesses that need to attract capital from outside investors. Consider technology and startup firms to start an LLC.
To start an LLC could be a safer choice for business owners (especially those just starting out) who want to escape the hassle of operating a complicated corporate structure (but also want personal asset protection).
Wisconsin LLC vs a Sole Proprietorship/Partnership
An LLC Member Enjoys Personal Liability Protection
An LLC provides a “shield of security” between your personal assets and the assets of your company. When the corporation is prosecuted, only the company’s funds will be used to compensate for the LLC’s debts. In brief, your personal belongings (bank account, home, vehicle, etc.) are safeguarded and secure in the event that the company is sued.
There is no other precaution for a single proprietorship. Since the law considers you and your company to be the same thing, your personal properties will be included if your business is prosecuted. The same holds true with a Partnership.
There is no different agency formed in this situation. When the business is prosecuted, your and your partner’s personal properties will be used to pay off its debts.
Get Business Insurance For Your Wisconsin LLC
Company insurance enables you to control costs while concentrating on the success of your LLC. The below are the most popular forms of company insurance:
- General Liability Insurance: This is a large insurance scheme that covers the corporation against claims. The majority of small companies obtain general liability protection.
- Professional Liability Insurance (PLI) is a form of company insurance that protects cases of malpractice and other business negligence for professional service suppliers (consultants, accountants, and so on).
- Workers’ Compensation Insurance: A form of insurance that protects staff who are sick, disabled, or killed on the job. Workers’ compensation policy is required by statute in Wisconsin for companies with one or more staff, except officers and LLC registered agent.
Create Your Business Website
Creating a website is a significant move toward legitimizing the business. Any organization requires a website. And if you believe the company is too limited or in an offline market, if you do not have a website, you are losing out on a significant portion of future clients and sales.
Some people may believe that designing a company website is out of their control because they lack website-building expertise. Although this was a legitimate problem in 2015, online technology has seen substantial strides in recent years, rendering the lives of small business owners even easier.
The below are the key explanations why you can not put off creating your website:
- Any legal company has a website, period. When it comes to bringing your company online, it doesn’t matter what size or sector it is.
- Social networking accounts, such as Facebook pages or LinkedIn company profiles, are not a substitute for a business website that you own and manage.
- Website builder software, such as the GoDaddy Website Builder, has made it incredibly easy to create a basic website. You don’t need to employ a web developer or designer to build a website you’re proud of.
Send Out a Press Release
Press releases are one of the simplest and most effective ways to advertise the business. They are still one of the least expensive tactics since they:
- Gives advertising
- Establish your brand’s online presence Boost your website’s search engine optimization (SEO), drawing more customers
- Are a one-off commitment in terms of time and resources
- Have long-term advantages
Wisconsin LLC Tax Filing Requirements
If you’re selling a physical item, you’ll usually need to apply for a seller’s permit online at the State of Wisconsin’s website. This credential entitles a corporation to receive income tax on taxable sales.
The sales tax, commonly known as the “Sales and Use Tax,” is a fee imposed by governments, cities, and towns on commercial purchases including the exchange of such taxable products or services.
If you have workers in Wisconsin, you must apply with the Unemployment Insurance Tax and the Employee Withholding Tax electronically at the State of Wisconsin’s website.
Federal LLC Formation Tax Filing Requirements
Most of the LLC formation must file Form 1065 Partnership Return (most multi-member LLC use this form) and Form 1040 Schedule C with the IRS each year (most single-member llc use this form). Your federal taxes would be affected by how you pay yourself as an owner.
Avoid Automatic Dissolution
When an LLC fails to file one or more state reports, it can face penalties and even automatic dissolution. When this occurs, LLC shareholders run the risk of losing their LLC limited liability rights. A good licensed registered agent service will help you avoid this by informing you of impending filing deadlines and sending information on your behalf.
If you want to recruit staff for your business, take these measures to keep in compliance with the law:
- Confirm the prospective employers are qualified to serve in the United States.
- Employees can be reported to the state as “recent recruits.”
- Employees can be equipped with employees’ compensation benefits.
- Employee taxes should be withheld.
- Print workplace compliance posters and display them in high-traffic parts of the workplace.
The minimum wage in Wisconsin
The Wisconsin minimum wage stands at 7.25 USD per hour.
Frequently Asked Questions (FAQ)
Should I form an LLC?
If you are just starting out or have been working as a sole proprietor, you should think about creating an LLC. LLC restricts an owner’s personal responsibility for business debts and claims and provides a great deal of flexibility in terms of business ownership, management, and taxation.
How do I know if my LLC name is available?
It is critical that the name of your LLC be distinct from the names of other existing companies on file with the Wisconsin DFI. To ensure that your proposed name is available, you can perform a free name search on the Department of Financial Institution’s website.
How much does it cost to form an LLC in Wisconsin?
The Department of Financial Institutions charges $170 to mail the Articles of Organization and $130 to file them online. If you want to reserve your LLC name before filing the Articles of Organization, it will cost $15 to file a name reservation application.
Filing on your own is frequently the most cost-effective alternative, but completing all of the forms and filing them on your own can be difficult. Hiring a lawyer is another choice, but it will usually cost you hundreds, if not thousands, of dollars.
Do I need an operating agreement for my Wisconsin LLC?
Operating agreements are not required in Wisconsin for LLCs, but they are strongly recommended. An operating agreement will help protect your limited liability status, avoid financial and managerial misunderstandings, and ensure that you choose the laws that govern your company rather than state law by default.
Can a foreign LLC do business in Wisconsin?
All LLCs formed outside of Wisconsin must register with the Wisconsin Department of Financial Institutions in order to conduct business in the state. For service of process, foreign LLCs must appoint a registered agent. The registered agent may be a Wisconsin citizen or a business company registered in Wisconsin.
Fill out a Foreign Limited Liability Company Certificate of Registration Application (Form 521) and send it to the Wisconsin Department of Financial Institutions. The application must be submitted electronically. The filing fee is one hundred dollars.
Until filing, search the state’s business name database to see if the LLC’s name is accessible in Wisconsin. If the name is not available in Wisconsin, you can file under a fictitious business name. To do so, send to the Department of Financial Institutions a Name Registration Application-Foreign Corporation or Foreign Limited Liability Company (Annual) (Form 1-R). There is a $50 filing fee. The form must be mailed in.
Every year, a Foreign LLC must file a new name registration application. Every year, on December 31st, all international LLC name registrations expire. Between October 1 and December 31, a renewal application must be submitted. The process and filing fee for a renewal are the same as for an initial application, except that it is labelled as a renewal.
Can I form a single-member LLC in Wisconsin?
A Wisconsin single-member LLC is treated the same as a multi-member LLC for most purposes of creation. The procedures for forming a single-member LLC in Wisconsin are the same as those outlined above.
When it comes to filing a tax return, single-member LLCs have more leeway.
Can I form a professional LLC in Wisconsin?
If you wish to form an LLC in Wisconsin and provide a licensed professional service by a registered agent, you must first form a professional limited liability company (PLLC). Architects, lawyers, dentists, certified public accountants, and other professionals are examples of professional services. In general, if you offer a service that necessitates obtaining a Wisconsin state license before practising, you are providing a skilled service. To form a PLLC, each member of the corporation must be approved.
Can I dissolve my Wisconsin LLC when I’m done?
If you decide to shutter the company and end all activities, you can properly disband your LLC to reduce your responsibility for claims and government fines.
If you want an easy, low-cost company that covers your personal properties in the event of litigation, then forming an LLC is definitely the best choice for you. If you want a company that is easy, affordable and protects your personal belongings, an LLC is a right choice for you.
Starting a business correctly doesn’t have to be difficult. With over 15 years of experience consulting new businesses and start ups, Matthew is probably the best person to help you set a strong foundation for your business.