If you’re considering starting a new business in Wisconsin, there are a lot of reasons why this is a great option. Wisconsin offers a robust business ecosystem with a skilled workforce, business-friendly policies, and a central location in the U.S. It provides a high quality of life, support from local organizations, access to research and innovation, and proximity to major markets. The state’s industry clusters, access to capital, and economic development incentives make it an attractive choice for entrepreneurs.
Start-up businesses are core to my heart and our services here at CorpNet. In today’s article, I’d like to walk through the milestones Wisconsin entrepreneurs should consider as they launch a new company.
Validate Your Idea and Create a Business Plan
Increase your potential for success by conducting a feasibility study and seeking advice from experienced advisors such as SCORE mentors, business consultants, accountants, and attorneys. This will help you determine if your business idea can be converted into a successful business.
Creating a well-structured business plan will help you flesh out your idea and validate key components are in place. While a business plan will have consistent components like a market and competitor analysis, the amount of detail in your business plan varies based on the complexity of your business.
In general, business plans include an executive summary, a company overview, product and service descriptions, a market analysis, a competitive analysis, a sales and marketing plan, a description of management and operations, and financial projections. You’ll want to include as many of these items as possible, so you can vet your idea and set yourself up for future success.
You can create your business plan using online templates or seek the assistance of a professional business consultant or SCORE mentor.
Choose a Marketable Business Name
It’s important that you select a marketable and legally available business name. Before you finalize your preferred business name, it’s critical to make sure that another similar business has not already claimed it at the state or federal level. Infringing on a name that’s already in use could create legal problems for your company.
To verify that your proposed company name is available, perform the following actions:
- Check for name availability using tools like CorpNet’s free Corporate Name Search or through the Wisconsin Department of Financial Institutions (DFI) portal. This will help you make sure your name isn’t already in use in the state.
- Carefully check state-specific regulations regarding business names, such as the use of “LLC” for Limited Liability Companies.
- Review existing trademarks at the federal level to verify your business name isn’t already in use and protected.
Want to reserve a business name? In Wisconsin, the cost is $10-15, and the name can be reserved for 120 days.
Select Your Business Structure
Wisconsin offers various business structures, including Sole Proprietorships, General Partnerships, Limited Partnerships (LPs), C Corporations, S Corporations, Limited Liability Companies (LLCs), Limited Liability Partnerships (LLPs), Cooperative Associations, and more. Consider factors like liability protection and tax implications when choosing your business entity. To help with your entity selection, below are some important features of each to consider.
In Wisconsin, formal registration for Sole Proprietorships is not required. This business structure involves shared personal liability for both the owner and the business, offering operational advantages alongside certain drawbacks:
- Business debts and legal actions can hold the owner personally responsible, risking their personal finances and assets.
- Unlike other business types, Sole Proprietorships lack easy transferability or restructuring options upon the owner’s death.
- Attracting investors can be challenging due to the inability to issue stock and the absence of separate liability protections.
- Sole proprietors report business income and losses on their individual federal tax returns. This requires them to make quarterly estimated tax payments, including a 15.3% self-employment tax. Some sole proprietors opt to explore other business structures to reduce self-employment tax in specific cases.
Wisconsin’s business owners should carefully consider these factors and assess their needs when forming their new company as a Sole Proprietorship.
A General Partnership in Wisconsin is a company owned by two or more partners. Some key points to consider when setting up a General Partnership in Wisconsin:
- General Partnerships provide a simple and cost-effective structure for businesses with multiple owners.
- For both legal and tax purposes, general partners and the company are treated as a single entity.
- Unless otherwise indicated in the partnership agreement, the partners have equal ownership.
- Unlike some business entities, setting up a General Partnership in Wisconsin doesn’t require formal state, federal, or local registration.
- Owning a General Partnership has some disadvantages, including limited financing options, a relatively high self-employment tax burden, and the possibility of the business dissolving if a partner leaves unless the partnership agreement addresses this situation.
Limited Liability Company (LLC)
A Limited Liability Company (LLC) is a business structure that is very popular among new business owners. Here are some important details to know about forming an LLC:
- The LLC is a business structure that separates its owners, known as members, and its financial and legal operations. This separation offers significant peace of mind to business owners who want to safeguard their personal assets from being used to settle business debts or legal matters.
- LLCs are treated as a single entity for tax purposes. Members report the profits and losses of the business on their tax returns.
- Single-member LLCs are taxed similarly to sole proprietorships, while multi-member LLCs are treated as partnerships for tax purposes.
- One of the notable advantages of the LLC structure is its taxation flexibility. Depending on eligibility requirements set by the IRS, an LLC can elect to be taxed as a C Corporation or an S Corporation offering appealing tax planning options.
- To establish an LLC in Wisconsin, you must file Articles of Organization with the Secretary of State and pay a registration fee of $100. Additionally, the state mandates that all registered businesses submit an annual report and pay a $300 fee.
- Establishing an LLC in Wisconsin involves filing Articles of Organization with the Department of Financial Institutions (DFI) and paying a $130 registration fee.
- Registered businesses must also submit an annual report and pay a $25 fee.
Limited Partnerships (LP)
Forming a Limited Partnership is yet another option to consider in Wisconsin. Here are the key data points to know about forming one:
- A Limited Partnership is comprised of both general partners (responsible for managing the company) and limited partners.
- Limited Partnerships lack a clear separation between the business and the individuals involved, making them vulnerable to personal liability risks akin to a General Partnership.
- Limited partners don’t participate in management. They provide funding, limiting liability to their investment.
- Operating a Limited Partnership can be complex from an accounting standpoint, with limited partners exerting minimal influence after they invest.
- Establishing a Limited Partnership in Wisconsin involves paying a $70 filing fee.
- Ongoing compliance includes filing an annual report ($25) with the DFI.
For businesses that need a bit more structure, a C Corporation might be a great option. Here is an overview of what you need to know about this entity type:
- Operating as a C Corporation offers its shareholders the highest level of personal liability protection.
- C Corporations are separate legal entities, both legally and for tax purposes, reporting profits independently and paying federal income tax on those earnings.
- C Corporations must establish a board of directors to ensure the best interests of shareholders and stakeholders are being served.
- C Corporations have diverse financing options, including issuing stock to attract investors.
- The potential “double taxation” of dividends may deter some entrepreneurs from selecting a C Corporation, as they are taxed both at the corporate and individual shareholder levels. C Corporations can elect S Corporation status to mitigate this issue, provided they meet IRS eligibility requirements.
- In addition, operating as a C Corporation may involve higher formation costs and increased ongoing compliance, including annual reports and shareholder and board meetings. In Wisconsin, C Corporations must register, pay a $100 registration fee, and file an annual report ($40), while nonstock corporations (nonprofits) register by paying a $35 fee and a $25 annual report fee.
Another entity option is an S Corporation, however, an S Corporation is a tax election choice, not a distinct business entity. Here are some highlights to consider:
- LLCs or C Corporations that meet the criteria can request S Corporation status by submitting IRS Form 2553.
- When any C Corporation elects S Corporation status, it gains pass-through tax treatment, eliminating double taxation concerns.
- If an LLC chooses the S Corporation election, it can maintain its original legal structure, minimizing compliance requirements. This option also ensures pass-through tax treatment, shielding some business earnings from self-employment taxes. Under this structure, only the wages and salaries of S Corporation owners are subject to Social Security and Medicare taxes, while income from profit distributions remains exempt.
Appoint a Registered Agent in Wisconsin
When a Wisconsin business is formed, the new company must appoint a registered agent and office within the formation documents for most foreign or domestic businesses. Failure to appoint and maintain a registered agent risks having your business suspended or terminated in the state of Wisconsin.
A registered agent must be available to accept “service of process” (official government documents, legal papers, etc.) for the company during regular business hours. The agent must be an individual resident or existing business entity within Wisconsin that has a physical address in the state.
CorpNet offers Registered Agent services throughout the United States and can serve as your commercial registered agent in Wisconsin.
Register Your Business Entity
The Wisconsin DFI suggests filing all the necessary paperwork and fees through the Wisconsin One-Stop Business Portal. Here’s a summary of the initial paperwork required when starting a business in Wisconsin:
- Sole Proprietorships – Sole Proprietorships in Wisconsin do not require formal organizational paperwork, but if the business name differs from the owner’s name, a trade name filing is necessary. Sole proprietors must also obtain the required permits and licenses at the state and local levels.
- General Partnerships – General Partnerships are not mandated to register in Wisconsin. However, if they use a business name different from the partners’ legal names, a “Doing Business As” (DBA) filing is needed. Creating a partnership agreement is advisable, even though it’s not required by state law.
- Limited Partnerships (LP) – LPs are formed by filing a Certificate of Limited Partnership and naming a Registered Agent.
- Limited Liability Partnerships – Limited Liability Partnerships (LLPs) can be formed by filing a “Statement of Partnership Authority General or Limited Liability Partnership” with the state.
- Limited Liability Companies – Limited Liability Companies (LLCs) must file Articles of Organization and pay a $130 fee (online). Although the state doesn’t mandate it, LLC members should consider creating an LLC operating agreement. Operating agreements are critical in defining how the LLC should operate and be managed.
- C Corporations – Wisconsin requires filing Articles of Incorporation with a $100 fee for C Corporations.
The exact form you use to register your business depends on your entity selection. Here is a list of the forms you might use for new domestic or foreign entities in Wisconsin:
- Articles of Incorporation Business Corporation (Form 2)
- Articles of Incorporation Nonstock Corporation (Form 102)
- Articles of Incorporation Cooperative (Form 202)
- Articles of Incorporation – Statutory Close Corporation (Online Only)
- Articles of Organization Limited Liability Company (Form 502)
- Student Entrepreneur Articles of Organization Limited Liability Company (Form 502SE)
- Articles of Organization Unincorporated Cooperative Association (Form 252)
- Statement of Partnership Authority Limited Partnership (Form 301)
- Certificate of Limited Partnership (Form 302)
- Foreign Registration Statement Limited Partnership (Form 321)
- Foreign Registration Statement Limited Liability Company (Form 521)
- Statement of Authority Limited Liability Company (Form 501)
- Statement of Qualification Limited Liability Partnership (Form 602)
- Foreign Registration Statement Limited Liability Partnership (Form 621)
Obtain a Federal ID Number
A Federal ID Number is also referred to as an Employer Identification Number (EIN) or Tax ID Number (TIN). It is a nine-digit number mandated by the IRS to report taxes and it’s often provided to banks when establishing a business account. Furthermore, many official documents may request a business’s EIN, so it becomes an important step for new Wisconsin businesses.
The IRS provides these identification numbers at no charge. CorpNet simplifies the EIN application process by managing the completion and submission of Form SS-4 on behalf of the company.
Open a Business Bank Account
Both accounting and legal guidelines mandate that a business entity must uphold a distinct separation between its financial accounts, documentation, and records and those of its owners. Mixing personal and business expenses and income can undermine the liability protection of owners in entities like LLCs, LPs, C Corporations, or other registered companies.
We’ve covered this topic in depth in 4 Real Reasons Why You Need a Dedicated Business Bank Account.
Understand Wisconsin’s Business Taxes
All businesses must obtain a tax certificate from the Wisconsin Department of Revenue before engaging in any business activity in the state. Below are important taxes to be aware of:
- Corporate Tax – Wisconsin has a flat 7.9% corporate income tax rate.
- State and Local Sales Tax – Wisconsin’s sales tax rate is currently 5%, and an additional local sales tax of a maximum of 1.75% may be charged.
- Employer Taxes – Wisconsin manages state payroll taxes through the Department of Revenue.
- Income taxes – Wisconsin has an income tax of 3.5% to 7.65%.
- Unemployment Insurance (UI) – Wisconsin State Unemployment Insurance (SUI) varies by calendar year. The 2023 standard rate is 0-12%. New employers pay a rate of 3.05% or 3.25%.
Obtain Business Licenses and Permits
Some businesses may require licenses, permits, or government authorizations from federal, state, or local governments. Wisconsin breaks down business license and permit requirements into groupings for 200+ professions, 5 business types, and 50 rules and statutes.
Examples of these buckets are:
- Types – Business, health, manufactured home, trades, and unarmed combat sports.
- Rules and Statues – Accounting, architects, athletic agents, auctioneers, barbering, cemetery, chiropractors, cosmetology, dentists and hygienists, dietitians, firearm certifiers, funeral directors and funeral establishments, genetic counselors, geologists, hearing and speech, home inspectors, medicine, nursing, pharmacies, real estate appraisers, substance abuse professionals, and therapists.
You can see the full list of professional licensing requirements at the state’s A-Z Professionals List. To save time, you can also turn to CorpNet to help you identify and apply for the business licenses and permits required in the area where you plan to operate your business.
Research Other Business Essentials
- Adhering to zoning regulations is essential for Wisconsin-based businesses with physical locations.
- Investigate industry-specific insurance requirements to protect your business from unforeseen setbacks.
- Develop a capital acquisition strategy, whether through loans, investor attraction, or alternative funding methods.
- If your business plans to hire employees, ensure compliance with human resource-related regulations and obligations. Learn more about registering for payroll taxes in Wisconsin to help get you started with your new staff.
Stay in Compliance
To maintain legal operations and good standing in Wisconsin, businesses must consistently meet their annual report and tax filing commitments. If you are unsure about your specific compliance needs, seeking guidance from a legal and tax expert is recommended.
CorpNet offers a convenient service through its Compliance Portal, which assists in tracking approaching deadlines for license renewals and annual reports, and it’s available for free online, simplifying the compliance process.
Additional State and Federal Resources
You don’t have to navigate the challenges of starting and managing a business by yourself. Keep a resource list handy for valuable information and insights. Here are some useful options:
- Wisconsin Secretary of State
- Wisconsin One-Stop Business Portal
- Wisconsin Department of Revenue
- Wisconsin Economic Development Corporation (WEDC)
- Wisconsin Department of Financial Institutions
- Wisconsin Small Business Development Center
- NAWBO (National Association of Women Business Owners)
- IRS Website
- Wisconsin Department of Workforce Development
- US Patent and Trademark Office
- SCORE Mentors
- (DFI) Corporate Name Search Portal
- Wisconsin U.S. Small Business Administration
After consulting with your legal and accounting advisors to create your plan, consider enlisting CorpNet for assistance with your business registration and compliance submissions. Our services can save you time, cut legal costs, and guarantee precise and timely filing submissions.