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Starting a limited liability company (LLC) in the state of Wisconsin provides a number of benefits for business owners, including simplifying the tax filing process.
It is just as beneficial that business owners looking to start an LLC in Wisconsin can often do the work themselves for a reasonable cost. Here are the steps to follow in Wisconsin to create an LLC business structure.
Why Starting an LLC in Wisconsin Is Worth It
A limited liability company is a type of business structure that allows for pass-through taxation with minimal requirements for governmental oversight. It is a popular choice among small businesses throughout the United States and in Wisconsin.
It does not require a lot of work to set up or maintain. Small business owners using an LLC can focus their time and effort on operating the company rather than worrying about paperwork related to managing the business structure.
Here are some of the primary benefits of starting an LLC in Wisconsin.
Limiting Personal Liability
The business owner has a limited amount of personal liability with the LLC structure versus other business structures.
Any debts the business accumulates or legal issues the business faces will remain separate from the owner’s financial and legal obligations when an LLC is in place.
When another entity is trying to collect on business debts for the LLC, it cannot take finances from your personal holdings. If someone sues the LLC business, your personal assets remain safe.
Gaining Tax Advantages
With a corporation, the business must pay taxes on its profits, and stakeholders then must pay taxes on the dividends they receive. With an LLC’s profits, tax entities only tax the profits one time.
The profits in the LLC business pass through to the owner’s personal income, which they then claim on an individual tax return. This means the owner only pays taxes on the profits one time.
Allowing Flexibility in Ownership and Management
Versus other types of business structures, the LLC will have fewer restrictions on the ownership and management of the business.
With an LLC, any number of owners or types of owners are available. Corporations may have certain limitations on both of these items.
In terms of management, the corporation must have a board of directors that oversees the company’s management team. LLCs do not need a board of directors.
The corporation must have an annual meeting of stakeholders to elect members of the board of directors. Depending on the type of corporation in use, it may need to follow several laws regarding operation and create many documents to file with government oversight entities. LLCs do not face any of these requirements.
Whereas a corporation must distribute profits in a certain way to meet their rules, LLCs don’t have limitations on how they distribute profits.
If more than one person has an ownership stake in the LLC, the distribution of profits does not have to follow each person’s ownership stake percentage. The owners can agree to whatever share of profits they want to use.
Keeping Things Simple
Ultimately, the most significant advantage of using an LLC business structure is how easy it is to set up and maintain. For a small business with one employee or a few employees, this simplistic design is highly beneficial.
A corporation, meanwhile, may need to hire several people to oversee all of the rules and documentation this type of business structure requires.
Corporations may need to file annual reports or maintain highly detailed records about finances. Wisconsin-based LLCs will need to file an annual report with the state along with a small fee. However, creating this report is far easier than what a corporation must do each year.
The Investment Needed to Start an LLC in Wisconsin
The costs needed to start and maintain an LLC in Wisconsin are slightly higher than in some other states. They still are reasonable compared to other types of business structures, however.
We will walk through the various basic costs needed to start the LLC in the state. We’ll also list some optional and business-specific costs that the Wisconsin LLC may incur.
Initial Filing Fee
In Wisconsin, business owners hoping to start an LLC can perform the setup process online or use written paper forms for the Articles of Organization.
- Online: Business owners looking to file their LLC information in Wisconsin can complete the entire process online through the Wisconsin Department of Financial Institutions (WDFI) for $130.
- By postal mail: Business owners also have the option of filing the WDFI Form 502 on paper by mail. This process carries a fee of $170.
When filing, business owners have the option of paying for expedited processing for another $25. This means that the WDFI will decide on the filing by the first business day after receiving the online or printed form.
Without the expedited fee, the WDFI will process an online filing for the LLC within a few days. For printed forms, the process usually requires at least five business days.
Annual Report Fee
LLCs in Wisconsin must file an annual report with the state. Businesses can file this report online, but they will need to pay a $25 fee. Wisconsin LLCs also have the option of filing a paper copy by postal mail for the same fee.
The annual report primarily updates or verifies the information on file for the LLC with the state government. It’s not a complex document.
Optional LLC Costs in Wisconsin
As part of starting an LLC in Wisconsin, the business owner may want to employ a few other services that the state offers. These services are optional, and they provide a few extra benefits for the LLC.
- Reserve an LLC name: If the business owner isn’t quite ready to complete the LLC filing yet, they can still reserve a business name. Wisconsin allows this through the Name Reservation Application form. It costs $15 to hold the name for up to 120 days (or $40 for expedited service).
- Hiring a registered agent service: Each LLC in Wisconsin must have a registered agent, as we’ll discuss in the next section. A business owner can serve as their own registered agent or hire a third party specializing in serving in this capacity. Most services like this cost $40 to $100 per year.
- Hiring an LLC management service: The process of starting an LLC in Wisconsin is relatively easy to complete. Still, some business owners don’t have the time or inclination to do the work themselves. They can hire third-party entities to take care of all of the filing and management work for the LLC. These services can cost anywhere from around $50 to several hundred dollars per year.
- Permits and licenses: Some LLCs will need to carry city, county, state, or federal permits and licenses. Depending on the type of business, these could be anywhere from $20 to several hundred dollars per year.
- Certified copies of certificates: LLCs sometimes need various certificates to show they’re in good standing with the state of Wisconsin. The WDFI offers official copies of these certificates, usually for around $10 each (or $35 for expedited service). The LLC may need certificates to obtain loans or insurance coverage, for example.
7 Steps to Starting an LLC in Wisconsin
Having studied the above information, any business owner should be ready to take the steps needed to start an LLC in Wisconsin. This will involve filing the Articles of Organization found in Chapter 183. These steps are not difficult to complete.
Business owners can complete the entire process online or fill out paper forms and mail them to the Wisconsin Department of Financial Institutions. We’ll go through the steps required for completing the Articles of Organization online.
#1 – Picking a Name
Selecting a business name for your LLC is an essential first step. The name sets up the branding of the company and sets the business apart from its competitors.
When selecting a name, you’ll want to look for a website domain and social media handles that match.
To determine whether the name you want for your LLC is available in Wisconsin, use the WDFI corporate name search function. If you submit a filing with an incorrect or taken name, your filing fee is nonrefundable.
Additionally, the name must contain either “LLC” or “Limited Liability Company” or some similar version of these items.
If you come up with a great business name, but you’re not yet ready to complete the filing of the Articles of Organization, you can submit a form to the WDFI to reserve the name for up to 120 days, as mentioned earlier. If you want to match your business name to the domain name, reserving both names simultaneously and filing the LLC paperwork later is a smart idea.
#2 – Picking a Registered Agent
Wisconsin requires LLCs to select a registered agent. This person or entity serves as the legal contact point for those trying to send critical legal notices to small businesses. These may include things like documents related to taxes or legal matters.
As mentioned earlier, the business owner can serve as the registered agent for the business. The owner could appoint someone else associated with the company to serve as the registered agent. Or the owner could hire a third-party entity to handle the duties of the registered agent.
The registered agent will need to have a physical address in the state of Wisconsin that serves as the contact point. This address and the name of the registered agent will be part of the public record in the state of Wisconsin.
The agent should be available at that physical address to accept the delivery of documents during regular business hours. This address does not have to be the same one the business operates from, but it can be. If hiring a third-party entity to serve as the registered agent, the address would be the entity’s business location, for example, rather than the LLC’s address.
We do not recommend you be your own registered agent. If you are not there when someone drops by to serve important paperwork, it can be disastrous.
One service we highly recommend is Northwest Registered Agent. In addition to acting as your registered agent and forwarding mail, you can also use their services to form your LLC and access many business and legal form templates.
Their registered agent services start at $125. Click here for Wisconsin-specific registered agent information from Northwest Registered Agent.
#3 – Picking the Type of Management
In Wisconsin, LLCs can use one of two options for determining the management of the company.
- Member: Selecting a member-managed LLC means the members of the business handle the management.
- Manager: Selecting a manager-managed LLC means the members of the LLC hire someone to manage the business. The members serve in a passive capacity rather than helping to actively manage the LLC.
The majority of LLCs use a member-managed format.
#4 – Picking the Organizer and the Drafter
Those involved with completing the Articles of Organization forms for the LLC will need to enter their name and address on this area of the form.
The organizer is anyone in the LLC who helped draw up how the Articles of Organization will work for the LLC. This can involve multiple people, including the business owners, an attorney, or a business mentor.
The drafter is the person who actually enters the information into the form. Again, this could be the business owner, an attorney, or a mentor. Only one person’s information should appear in the drafter part of the form.
#5 – Picking the Effective Date for the LLC’s Formation
Those completing the Articles of Organization can use this section of the form to determine the date the LLC should become active.
This is an optional section. The person completing the form can also pick a date in the future. But the date selected must be within 90 days of the date you are submitting this form.
Or, if the business owner just wants the LLC to become active at the earliest possible date, do not pick an effective date. The LLC then will become active when the WDFI accepts the filing, usually within a few days after filing.
#6 – Signing and Verifying the Form
For Wisconsin’s online form, the person completing it only has to check a box to submit a signature. The paper form will need an actual signature.
Next, the person or entity completing the Articles of Organization will need to enter contact information. This allows the WDFI to send a notification if it needs additional information or finds an error.
Then review the information on the form. If anything looks incorrect, click the Edit button to make any changes.
Otherwise, click the Next button to submit the form. You will need to submit a payment of $130 for the online form. The Wisconsin Department of Financial Institutions accepts credit card or e-check payments when using the online form.
#7 – Separating Personal and Business Finances
After receiving notification that the state of Wisconsin accepts your LLC filing, you will want to start the process of separating the business assets from your personal finances and legal obligations. After all, one of the most significant benefits of the LLC is that your personal assets receive protection from the business’s debts and legal issues.
Always open a bank account in the business’s name that is entirely separate from your personal bank account. You may also want to apply for a credit card in the name of the company. Apply for insurance or loans in the name of the business rather than in your name.
The more separation you can place between your personal finances and the workings of the LLC, the greater protection your personal assets will receive.
We recommend waiting to do these things until you receive notification from the WDFI that your LLC application is successful. If you make a mistake in the name or encounter another issue in the LLC filing, you may have to start over with a new name. You don’t want to open bank accounts and loans early in the incorrect name.
Many financial institutions will require proof of your LLC’s existence before allowing you to open accounts as well. You may have to order some of the certificates of certification we mentioned earlier to take this step.
Wisconsin statutes use Chapter 183 to outline all of the aspects of starting and operating an LLC. We listed the fundamental aspects of forming an LLC in Wisconsin here, but business owners who want to delve into the statute can find any detailed information they’re seeking.
We have a few more articles devoted to helping business owners take advantage of the benefits of starting and managing an LLC.
For prospective business owners who want to learn more about how LLCs can take advantage of tax benefits, we have you covered. We put together a guide to LLC taxes article that explains the key things to understand about paying taxes as an LLC.
We also created a Guide to Maintaining Your LLC article for those who need greater detail about the benefits of operating an LLC in the United States and in Wisconsin.