Incorporating a Business in Wisconsin
A corporation is described as a legal entity that is distinct and separate from its owners and it requires many steps when incorporating in Wisconsin.3 min read
2. How Is a Corporation Taxed?
3. How to Incorporate in Wisconsin
Incorporating a business in Wisconsin requires many steps. A corporation is described as a legal entity that is considered distinct and separate from its owners. Corporations possess most of the rights and responsibilities that an individual enjoys: they can borrow and loan money, hire employees, own assets, enter into contracts, and pay taxes.
What Is a Corporation?
Many business owners opt to found a C corporation. There are many advantages of operating a C corporation in the state of Wisconsin. The stockholders of a Wisconsin C corporation have limited debt liability. This includes the liabilities or obligations related to the company's operations, as well as any liabilities that may stem from any potential legal activities.
One of the most significant reasons owners choose to incorporate in Wisconsin is to protect the personal assets of its shareholders. This means that stockholders may not lose more than the total amount invested in the business. In the event that the corporation faces bankruptcy, stockholders will not be held liable for company-related debts. Additionally, if the corporation becomes involved in a lawsuit and is found liable, the company assets and property may be used toward the charges. However, any personal property of the corporation's shareholders will be protected. This includes assets such as cars, homes, property, and bank accounts.
It is important to note that there are exceptions to this rule. For example, a shareholder's limited liability protection may be exempt if the corporation has been used to sustain fraudulent activity or if the business has caused reckless harm to people.
There are many reasons why a Wisconsin C corporation benefits owners, including:
- Offering a more formalistic business structure.
- Allowing easier methods to raise capital.
- Offering limited liability.
- Encouraging ways to accumulate business assets.
- Allowing reduced overall income tax.
Remember, by law, a Wisconsin C corporation is considered an individual entity, which is separate from its owners who are referred to as shareholders. There is no limit in the number of shareholders in a Wisconsin C corporation.
It is often easier for Wisconsin C corporations to generate capital compared to other business structures. This is because Wisconsin C corporations can issue or sell stock to demonstrate interest in the business. Wisconsin C corporations are typically audited less regularly than partnerships or sole proprietorships. Individuals who wish to create a corporation must prepare and file articles of incorporation with the Department of Financial Institutions (DFI).
Two types of corporations exist for tax purposes:
- A subchapter C.
- Subchapter S corporations.
How Is a Corporation Taxed?
Shareholders of a Wisconsin C corporation do not claim any business-related expenses or income on their individual tax returns. The corporation will file a tax return and pay its necessary income tax, whereas the shareholders will report and pay taxes only on the capital paid to them by the corporation.
It is important to note that shareholders are subject to “double taxation.” This means that corporation owners must pay personal income tax on any funds generated by dividends paid by the C corporation, despite the fact that income taxes from the corporation have already been paid.
How to Incorporate in Wisconsin
There are many necessary steps that need to be completed in order to incorporate in the state of Wisconsin. They are as follows:
- Choose the corporate structure of your business.
- Determine the availability of your desired company name.
- Appoint a registered agent.
- Prepare and file the articles of incorporation.
- Establish corporate records and company bylaws.
- Appoint the corporation's initial directors.
- Organize and hold an organizational meeting.
- Issue company stock certificates.
- Obtain a Federal Identification Number (EIN).
- Obtain Wisconsin State Tax Identification accounts and numbers.
- Consider the possibility of electing S-corp taxation.
- Obtain any necessary business permits or licenses.
Basically, incorporating means starting a new corporation. Remember, a thorough name search must be completed in order to check the availability of your desired company name. The business name must also have the word “company,” “limited,” “corporation,” or “incorporated” or the abbreviation of “co.,” “ltd.,” “Corp.,” or “Inc.” in the title. The filing fee for the articles of incorporation is $100 with an option to pay an additional $25 to expedite the process. The corporation should file a Form 5 (where the entire business income is attributable to Wisconsin) with the state and a Form 1120 with the federal government.
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