Starting a business is a complicated endeavor, but when it comes to different types of business entities such as LLCs the plethora of information can feel even more complex. Most people don’t know a lot about Limited Liability Company formation, or how formation times work but we intend to clear up any confusion with this comprehensive guide. We’ll tell you what it’s like to do business in the state of Wisconsin, which business types and industries are thriving in the state, how to start an LLC in Wisconsin, and what formation times you can expect.
Discovering Wisconsin
Wisconsin is centered in the Midwest and shares borders with Illinois, Minnesota, Michigan, Lake Superior and Lake Michigan.
You may have heard that Minnesota is called the Land of 10,000 Lakes, but Wisconsin actually has more than 15,000 lakes. You can also find the following types of geographical features in the state: woodlands, hills, fertile plains, sandstone, buttes (which are flattop hills), mesas, beaches and bluffs. There’s also the Wisconsin River, and the state’s highest point, Timms Hill.
The soil in the prairies is super fertile, and the top crop in the state is corn, with green beans coming in a close second. The thousands of lakes in the state are not only an important resource, but they also feed the tourism industry in the state.
Manufacturing is a major industry in the state, with 35 of the biggest enterprises in the state being mostly manufacturing companies. Not surprisingly, dairy is another is another industry that booms in Wisconsin. It’s known for its cheese, so the state’s dairy industry rakes in billions of dollars per year.
Economic Overview of Wisconsin
Wisconsin has a Gross State Product (GSP) is $306.5b with a growth rate between 2017-2022 of 1.0%. The top-performing industries in the state according to revenue are Live Insurance & Annuities, Property, Casualty & Direct Insurance, Health & Medical Insurance, Hospitals, and New Car Dealers. The companies that employ the most workers in the state are Walmart Inc., Kwik Trip, Inc., University of Wisconsin Hospitals & Clinics Authority, University of Wisconsin and Amazon.Com, Inc. And the top-contributing sectors to the state’s Gross Domestic Product are Manufacturing, Real Estate & Rental & Leasing, Healthcare & Social Assistance, Finance & Insurance, and Wholesale Trade.
Business Environment in Wisconsin
Usnews.com rated Wisconsin’s economy #25 in the nation, it’s employment #22, and growth #39. It’s rated #17 for long-term fiscal stability and #16 for short-term fiscal stability.
It was ranked #20 for affordability and #17 for economic opportunity. The median household income in the state is $70,996 which is just under then national average of $74,755. The cost of living index in Wisconsin is 92.3 which is considerably lower than the national number which is 100.0. And the poverty rate in the state is 10.7% while the national average is 12.6%.
When it comes to the infrastructure in the state, internet access in the state is rated #34 and transportation is rated #31. 25.7% of the state’s roads are in poor condition, while the national average is 18.3%.
State Specific Regulations and Incentives for Forming an LLC in Wisconsin
Here’s a look at the regulations and incentives designed to help business owners in Wisconsin.
- Business Development Tax Credit (BTC) Program: This program provides tax credits to businesses that are creating jobs, making capital investments, locating or retaining a headquarters facility in the state, or investing in employee training. These credits are only claimable during the tax year the company increases employment in the state. Here are the tax credits it offers:
–Job Creation: A credit for as much as 10% of the annual wages paid to employees that earn a minimum of 150% of the federal minimum wage is paid for up to three years. Businesses in economically distressed areas can receive an additional 5% for employees. Credits can’t be earned for wages over $100,000.
–Job Training: A credit to cover as much as 50% of training costs.
–Capital Investment: A credit to cover as much as 3% of capital investments in business personal property and up to 5% of capital investments in real property. The investment requirements are at least $1,000,000, or an investment equal to $10,000 per employee.
–Corporate Headquarters: A credit for as much as 10% of annual wages paid for positions that were created or retained at a headquarters facility in the state can be claimed for 3 years. You can’t earn credits on wages over $100,000.
- Enterprise Zone Jobs Tax Credit: These credits are available for qualifying projects in designated Enterprise Zones. These credits are available for up to 12 years:
–Job Creation: Credits for as much as 7% of annual wages
–Job Retention: Credits for up to 7% of annual wages if a significant capital investment requirement is met over 5 years
–Capital Investment: Credits for as much as 10% of all capital expenditures
–Job Training: Credits for as much as 100% of training costs
–Supply Chain: Credits for as much as 1% of supply chain utilization
- Manufacturing and Agriculture Credit: This credit equals 7.5% of income from production activities and it can be used to offset franchise taxes or state income taxes. The annual tax credit cuts the state corporate income tax rate down to 0.4% for qualifying companies.
- Qualified New Business Venture: These are credits for angel and venture fund investors that make investments in early-stage businesses. The credits are equal to 25% of the investment made.
- Tax Exemptions and Abatements: The following are exempt from property tax: machinery and equipment for manufacturing, computer equipment, as well as inventories from manufacturing, farm and merchant businesses. Exemptions for the sales and use tax are available for biotechnology and manufacturing research, manufacturing machinery, equipment and materials, production fuel and electricity, and alternative energy used for manufacturing.
- Industrial Revenue Bonds: These bonds are provided as an incentive to expand manufacturing facilities in the state. They also stimulate investments and job creation in the state because they provide private borrowers with access to finances with interest rates lower than traditional finance institutions like banks typically offer.
- Wisconsin Fund: Also called the Badger Fund of Funds, it was created back in 2013 and it’s currently $25 million. It’s leveraged around $3.30 for each dollar invested in the state. A $100 million venture capital fund of funds has been proposed, as well as a 2:1 match of both private funds and state funds. The legislature is currently considering the proposal.
- Global Business Development Program: This program provides grants to reimburse business owners for part of the cost associated with their export growth activities, like attending trade shows and creating new marketing materials for new target markets. A company can attend global trade shows and export education programs at a reduced rate.
- Wisconsin Fast Forward Training Grants: This is a program to reimburse businesses who offer customized occupational training for people who are unemployed, underemployed or incumbent employees. The training should qualify the workers for full-time employment, increased wages or higher-level employment. A company can apply for these grants regardless of their size or industry. Grant awards range from $5,000- $400,000 and a 50% match of the grant funds is required.
- Wisconsin Supplier Network: This ia a platform that provides an online directory to help suppliers in the state to connect with companies needing the components and parts they make. It’s also a resource for new companies locating in Wisconsin to make connections quickly.
- Focus on Energy: This is a program for energy efficiency and renewable resources and helps businesses install energy efficient and renewable energy projects in a cost-effective way. Both rebates and incentives are available for energy-efficient products, and the rebates and incentives are customized to meet the needs of the business or organization.
- Research and Development Tax Credit: This program provides a credit for business activities that further research in the state and is designed to boost research and development spending. The research should be in relation to energy efficient products, as well as internal combustion engines. As much as 15% of the credit is refundable and any credits that go unused can be carried forward for 15 years.
Pros and Cons of Establishing an LLC in Wisconsin
There are both good and bad aspects of forming an LLC. Here’s a real look at the pros and cons of establishing an LLC in Wisconsin.
Pros:
- Forming an LLC in Wisconsin can be cheaper in Wisconsin than in other states. The filing fee is a reasonable $130, which means filing in Wisconsin can be a savvy financial decision.
- Single-owner LLCs enjoy added tax benefits. Ordinarily the LLC doesn’t pay taxes, but the profits of LLC members are taxed through personal income tax. But in Wisconsin, personal income tax one LLC earnings is waived for single-owner LLCs.
- Processing online filings in Wisconsin is immediate, which saves a lot of time.
- Forming a Limited Liability Company is generally a less complicated process than starting a corporation.
Cons:
- In Wisconsin, LLCs with multiple owners are subject to complex tax structures, especially in comparison with single-owner LLCs.
- Every year LLCs must pay a $130 filing fee for their annual report. That expense adds up over the years.
Procedure of Establishing an LLC in Wisconsin
In this section we’ll tell you everything you need to know about the LLC formation process in Wisconsin.
Necessary Documentation for Filing an LLC in Wisconsin
These are the documents you’ll need to file an LLC.
- Name Reservation Application: Choosing a name for your business is no easy task. One of the legal requirements for business names is that they can’t be in use by other businesses in the state, and they can’t be too similar to a name another business is already using. To find out whether you can use the name you’ve chosen, head to the Department of Financial Institutions website and run a search on their Corporate Records Search engine. After you’ve found a name, you can keep other businesses from using it by filing a Name Reservation application with the Department of Financial Institutions.
- Articles of Organization: This is your application for an LLC. It contains information about your business, like its name, address, registered agent, and a list of LLC members along with their contact information.
- Employer Identification Number (EIN): Your company will need an EIN to file tax forms, open a business bank account, or hire employees. An EIN can be obtained from the IRS online for free.
- Operating Agreement: An Operating Agreement isn’t legally required for your LLC, but it’s very much recommended. It includes information on how your business should run, and how LLC members should behave. It contains things like the roles, contributions and ownership shares of members, and information for managers such as how profits and losses should be distributed, member voting rights and meeting schedules. It should also include instructions on what to do if a member dies, or leaves the company.
- Initial Report: Every LLC is required to file an annual report each year. The first one is filed when you submit your Articles of Organization, and is called an initial report.
- Tax Registrations: You must register with the Wisconsin Department of Revenue for tax purposes if your company sells goods or collects sales taxes.
- Business Licenses: Wisconsin doesn’t have a statewide business license. But you will likely need local and county business licenses. To find out more about these licenses and permits, go to the Department of Safety and Professional Services website.
Legal Requirements for Starting an LLC in Wisconsin
Here are the steps to start an LLC in the state of Wisconsin.
- Obtain Articles of Organization Form: The first step on your quest to form an LLC is to get a copy of the Articles of Organization form. It’s available from the Department of Financial Institutions.
- Pick a Business Name: You must choose a business name that you can legally use, that meets all of the legal requirements (like including language that indicates your company is an LLC) and isn’t being used by other businesses. And once you’ve found the right one, you must file a Name Reservation application.
- Choose a Registered Agent: A registered agent is someone who receives government correspondence and accepts service of process for your company. This can be either an individual or a business entity. And this person receives the mail at their address, not at your business. For peace of mind, many business owners choose a professional registered agent service.
- Choose an Address: This is an important choice, too. Your business’s address may seem obvious, but when you list your business address it does become public information. This means that some addresses aren’t a good option, like your home address. But if your business doesn’t have a physical address then it can apply for a virtual address, or you could request to use your registered agent’s address in some situations.
- Sign and Submit Your Articles of Organization: Once you’re sure that all of the information is included and correct, it’s time to sign and submit your Articles of Organization. Signing the document means your name will be listed on public record. To secure your personal information, you can choose to hire an LLC formation service. While they’ll sign and submit the documents on your behalf, they don’t retain any ownership of your company.
Time Frame for Establishing an LLC in Wisconsin
Once you’ve submitted your Articles of Organization, it takes some time for the Wisconsin Department of Financial Institutions to contact you about the approval of your LLC. We’ll tell you how long that will take in this section.
How Long Does the Initial Paperwork Take in the State of Wisconsin?
The approval times, which include processing time and transit time, to file online are immediate, or approximately 2 weeks if you file by mail.
Processing Times in the State of Wisconsin
Processing times for filing online are immediate, or 5 business days for filing by mail.
Common Delays in the LLC Formation Process in Wisconsin
There are a number of factors that could slow your formation times. Here are just a few.
- Document Issues: Every aspect of your formation documents must be in order when you submit them. This means that all of the information must be included with no necessary information left out, you can’t make typos, and the information included must be correct. You’re also required to include two copies of your Articles of Organization because the Wisconsin Department of Financial Institution will send you a copy back upon approval of your LLC. If you miss any of these steps then it could result in your LLC application being rejected.
- When You File: The beginning of the year and the end of the year are when most businesses file for an LLC. The massive volume of filings results in delays because it takes time for employees to process all of the documents and information. Also, the Department of Financial Institution isn’t open on weekends or government holidays, so filing on or just before these days will cause a delay.
- Filing Method: The filing method you choose can have a profound effect on your formation times. Filing online is far faster than filing by mail because there aren’t transit times to account for. Expedited processing is another quick option, which we’ll discuss in the next section.
Expedited Processing for LLC Formation in Wisconsin
Expedited processing can speed up processing times on mail filings. Here’s what you need to know about expedited services in Wisconsin.
What Are the Expedited Options Available?
There aren’t expedited services for online filings. But there is a Next-Day processing option for mail filings. This reduces processing time from 5 days to the next day.
Additional Costs for Expedited Services in Wisconsin
The fee for expedited processing is in addition to the filing fees. It’s $25 extra for expedited processing.
Comparing LLC Formation Time Frame in Wisconsin with Other States
It’s important to know how your state’s formation times compare to other states. It not only gives you a metric to compare those times to, but also can give you valuable information that could help you make the decision to form either a domestic or a foreign LLC.
Brief Comparison with Key States
In Wisconsin, processing times take 5 business days for mail filings and it’s immediate for online filings, and there’s a 1 business day expedited service option.
There are loads of states with slower options. In Washington, online filing takes 12-14 days, It takes 13-15 days in Texas, 2 weeks in Maryland, and 14-16 days in Arizona. Expedited processing takes 5 days in Arizona and 7 days in Maryland. And when it comes to filing by mail, it takes 2-4 weeks in D.C., 3-4 weeks in Missouri and Nevada, 4-6 weeks in Oregon, 6 weeks in Pennsylvania, 4-8 weeks in Texas, 5-6 weeks in Washington and 8 months in New York.
It’s faster in other states, too. California has a 4 hour expedited option, Louisiana has a 2-4 hour option, there’s a 2 hour option in New York, and Delaware, Michigan, Montana, Nevada, Pennsylvania and West Virginia all have 1 hour expedited processing options. And Alabama, Massachusetts and South Dakota process mail filings in 1-2 days, while Ohio and Kentucky get it done in just 1 day.
Why is Wisconsin a Favorable Place for Forming an LLC?
Wisconsin can be a good place to start an LLC because of the quick formation times with online filing. Processing times to file your Articles of Organization are immediate. In Wisconsin, single-owner LLCs don’t pay income tax. Ordinarily, LLCs aren’t taxed but the income that LLC members are taxed through personal income tax, which is waived for owners of single-member LLCs in the state. To form an LLC requires a filing fee of only $130, which is quite low in comparison to some other states, which means you’ll save money filing in Wisconsin and makes it a good option for some business owners looking for a place to set up a foreign LLC.
