Steps to Forming an LLC
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Forming an LLC in Wisconsin will help protect your personal assets from lawsuits and judgments against your business. An LLC is a legal structure that separates your business and personal assets. By not having your business in a separate legal structure, you can be held personally liable for certain debts and lawsuits incurred by the company. Forming a Wisconsin Limited Liability Company does not require an attorney and you can save a lot of money if you do it yourself with the six simple steps below.
Before getting into the six steps here are a few things to know about Wisconsin LLCs.
How Much Does It Cost to Get an LLC In Wisconsin?
The filing fee for a Wisconsin Limited Liability Company is $130 online or $170 by mail, payable to the Wisconsin Department of Financial Institutions.
Wisconsin Annual Report and Annual Fees
The Wisconsin Department of Financial Institutions requires all LLCs to file an annual report. The filing fee for a Wisconsin LLC annual report is $25.
Foreign LLCs Operating in Wisconsin
Wisconsin law requires foreign Limited Liability Companies register for a Certificate of Registration to transact business in Wisconsin. The filing form for a foreign limited liability company is called Form 521.
- Minimum Number – one or more
- Members/Managers- at least one is required to be listed in the Articles of Organization
- Residence Requirements – none specified
- Age Requirements – none specified
Business Licenses & Permits
In addition to forming your Wisconsin LLC, you will need to check for business licenses and permits, such as registering for sales taxes through the Wisconsin Department of Revenue.
StartingYourBusiness.com has a list of local, state and federal permits for businesses in Wisconsin.
Steps to Forming a Wisconsin LLC
Step 1. Naming a Wisconsin LLC
Wisconsin LLC Name Search
Before settling on a name, you want to be sure nobody else is using it as each LLC must have a unique name. Here’s how to search available LLC names in Wisconsin.
If you find a business name you want to register, but aren’t ready to form your LLC, the Wisconsin Department of Financial Institutions offers the ability to hold the name.
Your corporate name must end with the words Limited Liability Company or an abbreviation of these words (“LLC,” “L.L.C.,” “Limited,” “LTD.,” “LTD”.). Check out our article on naming your LLC for all of the requirements that you must follow when naming an LLC.
Also there are some words that aren’t allowed to be used in the state, like those that could refer to a state agency or that require licensing from the state.
Step 2. Choosing a Registered Agent in Wisconsin
What is a Registered Agent?
The registered agent must generally be available during normal business hours at a physical street address in Wisconsin to accept service of process. A Post Office Box or personal mailbox is not acceptable. If the registered office includes a suite number, it must be included in the registered office address.
Registered Agent Requirements
A registered agent in Wisconsin must have a physical presence in the state and may be an individual resident, domestic or foreign corporation authorized to transact business in Wisconsin. The registered agent must also have a physical address and be available during normal business hours to accept service of process (delivery of legal notices or other important documents). A Post Office Box or personal mailbox is not acceptable. If the registered office includes a suite number, it must be included in the registered office address.
Who can be a Registered Agent in Wisconsin?
A registered agent can either be a resident of Wisconsin or a corporation authorized to do business in the state.
Provided you as the business owner have a physical presence in Wisconsin, you can be the registered agent, however, there are additional privacy benefits to having a third-party registered agent, such as being able to conceal the owner’s name and address from the public.
Check out our article on why an LLC Registered Agent may be a good choice for your business for more details.
Step 3. Filing the Articles of Organization
The Articles of Organization is the paperwork used to form an LLC with the state. This is the most important step and many people believe that you need an attorney to file. While we don’t discourage having an attorney, filing a Wisconsin LLC can be done by most people.
You can save considerable money over an attorney forming an LLC yourself. If you want help making sure everything is filed correctly but don’t want to hire an attorney, consider using a formation service such as LegalZoom.
Step 4. Creating an Operating Agreement
An LLC operating agreement is not required in Wisconsin but is typically a good idea, especially for an LLC owned by multiple people. The primary function of the operating agreement is to govern the relationship between the owners of the business, but also outlines who makes what decisions, how profits or losses are distributed and the operating procedures of the LLC.
Learn how to create an LLC operating agreement.
Step 5. Getting an EIN
What is an EIN?
The Employer Identification Number (EIN), or Federal Employer Identification Number (FEIN), is used to identify a business entity. It is essentially a social security number for the company.
In addition to the EIN being an identifying number for the LLC it serves a few other purposes such as:
- Opening a business bank account
- Federal and State tax purposes
- The business account to pay payroll taxes for employees paid by the company
How to register an EIN for a Wisconsin LLC
To file an EIN for your LLC, visit the Internal Revenue Service (IRS) or obtain the SS-4 form. They show the steps on how to apply, but here is a video on how to apply for an EIN for more details. In about five minutes, you will have your number free of charge. Be sure to wait until your LLC is approved before applying for your EIN as the name that is registered for the LLC must be the same as the EIN.
Step 6. Selecting the Tax Status of the LLC
In addition to the personal liability protection the Limited Liability Company provides its members, another key benefit of an LLC the four business entities don’t provide is the flexibility in taxation. There are four ways an LLC can be taxed, compared with two ways for a corporation.
- Single Member LLC – An LLC with one member automatically becomes a single-member LLC with the IRS. The owner simply files their Schedule C with their 1040 at the end of the year. Filing as a single-member LLC means the entity does not pay sales tax and goes to the owner which is called pass-through taxation. The owner pays self-employment taxes on the net profit of the LLC, which while simpler to handle taxes, may be more costly.
- Partnership LLC – An LLC with two or more members is automatically considered a Partnership with the IRS and will file Form 1065. Like the sole-proprietorship as a pass-through entity, the LLC taxed as a Partnership pays no income tax and profit and losses flow to each member’s Form 1040s via Schedule K-1 of Form 1065.
- C Corporation LLC – An LLC can elect to be taxed as a C Corporation by filing IRS Form 8832. The major difference as an LLC that is taxed as a C corporation is that now the LLC pays tax on the profits and losses and are not directly passed down to the members. Most, but not all will find filing as a C Corporation will cost more in taxes as now the LLC has double taxation where there is a tax on the profits and dividends.
- S Corporation LLC – To get S Corporation status, you will file Form 2553 with the IRS. What makes the S Corporation attractive unlike the sole proprietorship or partnership is that you can potentially shield some of the profits from being subject to self-employment taxes. Dividends aren’t typically subject to self-employment taxes which is a large potential savings. There will be more work in accounting for an LLC that elected S Corporation status.
Each of the four ways for an LLC to be taxed in Wisconsin can have a major impact on the taxes that are charged depending on the business and the member’s personal finances. It’s a very good idea to work with an accounting professional to see which one is most efficient for the business and members.
Don't want to go it alone but don't want the expense of an attorney? Another alternative is to use an LLC formation service that will do the formation at a low cost. Take a look at our comparison page of popular LLC formation services.
ZenBusiness has a special offer right now to form an LLC for only the cost of the state fees and a free registered agent for the first three months.
Wanting to form an LLC in a state other than Wisconsin to save money on taxes? This doesn’t typically do as much as you may think as you will likely register an LLC in the other state and will also usually need to file as a foreign LLC in your home state of Wisconsin as well. In addition to paying two filing fees to start the LLC and two annual reports each year, there will be multiple tax filings as well. Be sure to do your research as there are a lot of people promoting formation services in other states and weigh all the pros and cons before making this decision as it can be a costly one.