A record 10 million small businesses opened in the last two years, according to the Small Business Administration. With businesses booming, now’s the perfect time to ride the entrepreneurial wave! If you’re itching to launch your venture in the Badger State, you’re in the right place. This comprehensive guide on how to start an LLC in Wisconsin will outline the eight crucial steps to form an LLC, opening doors to tax advantages, liability protection, and more.
What Is a Wisconsin LLC?
A Limited Liability Company (LLC) is a type of business entity that offers both the liability protection of a corporation and the tax benefits of a partnership. In Wisconsin, forming an LLC has its unique perks, including a simplified filing process and affordable setup fees. Plus, Wisconsin offers an “S” Corporation tax option for LLCs, which allows you to potentially lower your self-employment taxes.
What to Consider Before Forming an LLC in Wisconsin?
Before you dive into forming an LLC in Wisconsin, you’ll need to make some key decisions. First and foremost, identify the kind of business you aim to run. This will guide your business plan and help you conduct market and customer research to assess feasibility and demand.
Carefully consider why an LLC is the right business structure for you. With its ease of formation, limited liability protection, and tax advantages, an LLC is a solid choice for many entrepreneurs—but you should weigh these benefits against your specific business needs and goals.
How to Start an LLC in Wisconsin in 8 Steps
Here’s a roadmap with eight steps to guide you through the LLC formation process:
Step 1: Decide on a Business Name
The name you choose for your LLC sets the tone for your brand. It must be unique and distinguishable from any existing business entities in Wisconsin. You can start with a Google search, check for trademark conflicts, and then verify its availability through the state’s business name database.
Step 2: Choose a Registered Agent
You’ll need a registered agent who will be responsible for receiving important legal and tax documents for your business. This person or entity must have a physical address in Wisconsin and be accessible during standard business hours. Before you make a choice, consider the pros and cons of being your own registered agent versus hiring a professional service.
Step 3: Prepare and File LLC Articles of Organization
To make your LLC official, you’ll need to prepare and submit a document known as the Articles of Organization. This outlines essential information about your business, such as its name, address, and the people involved. Filing this document establishes your LLC as a separate legal entity, which offers the advantage of protecting your personal assets from business-related debts.
Step 4: Draft an LLC Operating Agreement
Though not a strict requirement, it’s highly advisable to create an LLC Operating Agreement. This internal document will spell out the roles, responsibilities, and operational procedures among the LLC members. This can include how profits and losses are distributed, the decision-making process, and even what happens in case of disputes.
What’s Next After Filing an LLC in Wisconsin?
To keep your LLC active and in good standing, compliance is key. This involves a few more steps, so let’s dive into the details.
Step 5: Apply for EIN
After your LLC is officially on the books, the next immediate step is to apply for an Employer Identification Number (EIN). An EIN is crucial for tax reporting and is a requirement if you plan to hire employees or open a business bank account. Make sure you stay compliant with the state’s tax laws by obtaining your EIN in a timely manner. If you’re wondering how to find your EIN number later, the process is quite straightforward.
Step 6: Open a Business Bank Account
Managing your finances effectively is critical for the success of your business. That’s why opening a dedicated business bank account should be high on your priority list. Having a separate account will make it easier to track business expenses, manage invoices, and demonstrate your business’s legitimacy to clients and financial institutions. Additionally, separating your personal and business finances will offer an extra layer of protection for your personal assets.
Step 7: Obtain Licenses or Permits
Depending on what your business does, you may need to secure various permits or licenses. This could mean registering with the Secretary of State, securing a local business license, or even obtaining specialized permits. The types of licenses you’ll need vary depending on your business activities, location, and industry.
Here are some examples:
Secretary of State Registration
If your business falls under a regulated profession like law, medicine, or engineering, you may be required to register with the Secretary of State. This registration often comes with its own set of requirements and fees, which vary by industry.
Local Business Licenses
Businesses typically need a general business license to operate within a city or county. For example, if you plan to open a retail store in Milwaukee, you’ll need to obtain a general business license from the city.
Health and Safety Permits
If your business involves the sale of food or beverages, you’ll need a health permit. Restaurants, cafes, and even food trucks fall under this category. The permit ensures that your business complies with local health and safety standards.
Alcohol and Tobacco Licenses
Selling alcoholic beverages or tobacco products? You’ll need specialized permits for these activities, often both on a state and local level. These licenses usually require a detailed application process and are subject to extensive regulations.
If your business has the potential to affect the environment—such as manufacturing or waste disposal—you may need an environmental permit. This often involves assessments and regular inspections to ensure you’re complying with all environmental laws.
Some industries have specialized licensing requirements. For instance, if you operate a daycare, you’ll need a childcare license. If you’re in construction, you might need permits for building, electrical, and plumbing work.
If your business involves street vending, you may need a vendor permit. This applies to food trucks, pop-up stores, and even some forms of outdoor entertainment.
Step: 8: Get Business Insurance
In Wisconsin, your LLC is expected to carry certain types of insurance. This typically includes general liability insurance and workers’ compensation insurance. Other types of coverage may also be necessary based on your business model. Not sure what insurance your LLC needs? There are various resources available to help you understand your requirements.
5 Types of LLCs to Consider in Wisconsin
Did you know there are different types of LLCs to choose from? Each type comes with its own set of rules and benefits, catering to various business needs and goals. Let’s break down the five main types to help you make an informed decision.
How it Works: This is an LLC with just one member—you. All business assets and liabilities are linked to this single individual.
Best For: Solopreneurs, freelancers, and small business owners who prefer a simple structure.
Advantages: Easy to set up, minimal paperwork, full control of business decisions.
Disadvantages: You bear all financial risk alone, and some lenders may view single-member LLCs as less legitimate than multi-member LLCs.
How it Works: Multiple people share ownership in this type of LLC, each known as a “member.”
Best For: Businesses with multiple founders, family businesses, or small businesses looking to scale.
Advantages: Shared financial risk, more skills and resources, potentially easier to get loans.
Disadvantages: Complex management and decision-making, potential for member conflicts.
How it Works: Allows you to create “sub-LLCs” under a master LLC, each with its own assets, liabilities, and operations.
Best For: Real estate investors and businesses with diverse product lines.
Advantages: Asset protection, flexibility in business operations, administrative efficiency.
Disadvantages: Complex regulatory requirements, not all states recognize series LLCs.
How it Works: Specifically for licensed professionals like doctors, lawyers, and accountants.
Best For: Any business where the owners need professional licenses to operate.
Advantages: Liability protection while maintaining professional credentials, specialized for services.
Disadvantages: More stringent regulatory requirements, often mandated to carry additional insurance.
How it Works: Designed to protect the privacy of the LLC members by not disclosing their identities in public records.
Best For: Individuals and businesses in need of enhanced privacy for various reasons.
Advantages: Increased privacy and confidentiality, protection from frivolous lawsuits.
Disadvantages: Not universally recognized, may face additional scrutiny from financial institutions.
LLC for Your Business Journey
LLCs offer a compelling blend of flexibility, liability protection, and tax advantages, making them a great option for a wide array of businesses—from solo freelancers to multi-member collaborations. Whether you’re driven by social impact or maximizing profits, there’s likely an LLC structure that fits your goals. But with multiple types to choose from, making the right decision for your unique situation can be challenging. That’s where experts come in handy.
doola has the know-how and resources to guide you through every step of your LLC formation process. Our team of experts can help you navigate the complexities of LLC types, ensuring you make an informed decision that sets your business up for success. Trust doola to turn your entrepreneurial dream into a thriving reality.
Why should I file an LLC in Wisconsin?
Filing an LLC in Wisconsin provides you with liability protection, separating your personal assets from your business assets. Wisconsin’s business-friendly policies and straightforward filing process also make it an attractive location for startups and small businesses.
How long does it take to get an LLC in Wisconsin?
The time it takes to get an LLC in Wisconsin can vary depending on your method of filing. Online applications often get approved within a few business days, while mail-in applications can take up to two weeks. After approval, you’ll need additional time to meet other regulatory requirements like obtaining permits.
How much does an LLC cost in Wisconsin?
The cost to file Articles of Organization for an LLC in Wisconsin is $130 if filed online and $170 if filed by mail. These are one-time filing fees, but keep in mind that there could be additional costs for other requirements such as obtaining licenses or permits.
How is an LLC taxed in Wisconsin?
In Wisconsin, an LLC is typically considered a “pass-through” entity for tax purposes, which means that business profits or losses pass through to individual members who report this income on their personal tax returns. However, an LLC can also opt for corporate taxation if that’s more favorable.
Can I change the name of my LLC in Wisconsin after it’s formed?
Yes, you can change the name of your LLC in Wisconsin after formation by filing an Articles of Amendment form with the state. There’s a filing fee associated with this, and you’ll also need to update any licenses, permits, and other business records to reflect the new name.
Can an LLC in Wisconsin be taxed as an S-Corporation?
Yes, an LLC in Wisconsin can elect to be taxed as an S-Corporation by filing IRS Form 2553. This can offer tax advantages under certain conditions but also comes with more strict regulatory requirements.
Do I need to have a physical office for my LLC in Wisconsin?
No, you don’t necessarily need a physical office to have an LLC in Wisconsin, but you do need a registered agent with a physical address in the state. This agent is responsible for receiving legal documents on behalf of your LLC.
Can I dissolve or close my LLC in Wisconsin if I no longer need it?
Yes, you can dissolve your LLC in Wisconsin by filing Articles of Dissolution with the Wisconsin Department of Financial Institutions. You’ll also need to settle any debts, distribute remaining assets among members, and meet any other state requirements for closing a business.