Starting a Business in Wisconsin
Starting a business in Wisconsin begins with a plan. Preparing a business plan helps you increase the chance of success.3 min read
Starting a business in Wisconsin begins with a plan. Preparing a business plan helps you increase the chance of success. It gives you a chance to flesh out your ideas into a set of guidelines you can follow as you establish your business. A detailed business plan helps you use your existing ideas to the fullest, and it puts you on the lookout for other opportunities that can help your business grow and succeed.
Business Structure Selection
Selecting the type of business entity you want your Wisconsin business structured as is an important step. The business entity establishes how your business is legally set up to do business, and it's also called a business structure. There are four main types of business entities, or structures, for entrepreneurs to consider when starting a new business, they are:
- Sole proprietorship
The Corporate Business Structure
As a legal business entity, a corporation exists separately from its owner or owners. It costs more to set up a corporation than an entrepreneurship or partnership, and it's also more complicated to get started. The reward for the extra effort is an added layer of protection between business debts and owner assets if the corporation is sued.
Corporations also have options of ways to be taxed. Income is delivered to owners as either salary or dividends, so there's no option for self-employment tax with the corporate structure. Articles of Incorporation and a $100 filing fee go to the Wisconsin Department of Financial Institutions when you're forming a corporation.
The LLC Business Entity
A limited liability corporation, or LLC, lets owners protect personal assets and limit their liability related to the business itself. The business becomes a separate entity, so it shields the assets of the owner. It's a business format that's advised for the majority of small businesses.
While your personal assets are protected with this business format, it's taxed as disregarded entity, so when you file your personal tax return, the profit or loss from the LLC passes to your income. You do have some flexibility, though, because you can choose to have it taxed as a C-Corp or S-Corp.
The Partnership Business Structure
Two people, or more, are able to choose the partnership business structure if they want to conduct business together. You don't have to do a formal filing to start a partnership, making it similar to a sole proprietorship. As a partnership, your business also has unlimited liability, meaning if your business is sued, the personal assets of each partner are at risk. Profit or loss from the business are also passed to the income of each owner for tax purposes, so self-employment taxes have to be filed by each partner.
A sole proprietorship is the easiest and least costly business entity to establish, and it's for a single entrepreneur who wants to start a business. All liability for the business falls to the owner if there is a legal issue with the business. The unlimited liability is the main drawback of sole proprietorships because if the business gets sued, the owner's personal assets can be taken to pay a debt. The taxes also all fall to the owner and are filed as personal income under the umbrella os self-employment tax.
Choosing a Business Name
Registering a business name is the next step after choosing a business entity or structure. If you want to use a fictitious name for a sole proprietorship or partnership, you need to file an assumed name or DBA, which means Doing Business As, with the County Clerk. The fee is typically about $30 to file a DBA, but it may vary by county.
You can't use the same name another business is already using, so you need to do a search to determine if your chosen business name is unique. If you want to reserve a corporation or LLC name, that also must be unique, and those names can be searched through the Wisconsin Corporation and Business Entity Search or the Department of Financial Institutions.
Licenses and Permits
In addition to filing your business name and structure, it's also important to make sure your new business is compliant with the law by having the required business licenses and permits. While Wisconsin doesn't have a specific business license that's required, it may be necessary to register with several other agencies to ensure compliance.
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