Sole Proprietorship Wisconsin: Everything You Need to Know
To form a sole proprietorship Wisconsin requires no particular formalities. Certain steps are needed if you operate under a trade name or hire employees.3 min read
To form a sole proprietorship Wisconsin requires no particular formalities. You will have to take certain steps if you operate under a trade name or hire employees.
How to Establish a Sole Proprietorship in Wisconsin
If you operate a sole proprietorship, there's no legal separation between your business and you. You receive all of the profits, and you also take on all obligations and liabilities.
In Wisconsin, you can use your own name for your sole proprietorship business, or you can use a trade name. If you decide to use a trade name — or assumed business name — the state requires that you choose a distinguishable name from existing companies. You should also make sure your business name is unique because you don't want to infringe on anyone's trademark.
It's your option to use a trade name. If you do, you can register the name by filing with the Register of Deeds in the county where you run your business. This isn't mandatory , but if you take this step, complete a Registration of Firm Names form and submit it with a $30 filing fee.
Depending on your business and the activities it engages in, you may need certain professional or business licenses. You may also have to adhere to certain local regulations, which may include obtaining zoning clearances or building permits. If you're unsure which apply to you, check with your county and city governments to find out more.
If you plan to hire employees, you'll need to obtain an Employer Identification Number — or EIN — from the IRS. This is a nine-digit number used by businesses for tax reporting purposes. If your business has employees, you must report wages to the government, using your EIN.
You can easily obtain your EIN at the IRS website. It's free of charge. You can also apply via fax, by mail, or by phone. However, online application is faster because you'll get your number immediately.
If you don't have employees, you're not required to have an EIN. You can use your Social Security Number to report business taxes. However, it's often advisable to have an EIN because some banks require it if you wish to open a business account. An EIN also helps cut down on the risk of identity theft.
After you establish a sole proprietorship, make sure you do the following:
- Open a bank account for your business: Although your business isn't a separate legal entity, you may still want to use your EIN and assumed business name to set up a business account. This helps keep your personal finances separate from your business finances.
- Obtain general liability insurance: Due to being personally liable for all of your business debts and obligations, you may find business liability insurance important. It could be the only way to protect yourself in case of unforeseen events.
- Report and pay your taxes: In addition to federal taxes, you may have additional taxes to pay, such as use tax and sales tax. Refer to the state Department of Revenue to find out more.
Basics of a Sole Proprietorship
A sole proprietorship is the easiest and quickest business structure to form. You're automatically a sole proprietor if you don't have a partner and you don't incorporate. From a legal standpoint, you and your business are one entity.
You'll be personally liable for business debts and losses, and you'll pay personal income taxes on your net profits. You may not want to go through the hassle of incorporating yourself if you're happy with running a one-person business. Some individuals who form startups may prefer sole proprietorships because there are so few legal requirements involved.
The advantages of sole proprietorships include the following:
- It's the least complicated, least expensive business type to start.
- It's good for startup businesses that want to see how they'll evolve.
Disadvantages include no liability protection for owners, so they're personally responsible for business debts.
Starting a sole proprietorship is incredibly simple, since Wisconsin doesn't have any formalities for forming one. However, due to liability issues, you should take steps to protect yourself as much as possible. You don't want legal and financial problems to cause you significant losses.
If you need help with sole proprietorships in Wisconsin or another state, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.