Forming a Limited Liability Company (LLC) in Wisconsin and receiving a federal employer identification number isn’t tough with the right instructions. Most new business owners can do it themselves without much effort. You’ll likely save a lot of money starting a LLC yourself, and learn more about the process and nuances in the process. Plus, Wisconsin LLCs aren’t very expensive, especially after the first year, and they may provide liability protection that you won’t have operating as a sole proprietor.
I provide so many people with links to the various website portals that I decided to create a post with step-by-step instructions on forming a LLC.
Before deciding to form a LLC, it’s important to consider what your goals and objectives are. For example, if you’re a service provider that doesn’t have much/any general liability, and don’t expect to have company debt, many of the advantages of a LLC may not be there as you expect or have heard. Additionally, if you expect your business to only generate a few thousand dollars worth of profit (or less), the added costs of starting a LLC may not be worth it.
Assuming you’ve considered the above and still want to move forward with creating your new LLC, here’s the steps to follow:
Your new LLC is issued by the state, and you’re required to register with the Wisconsin Department of Financial Institutions, Division of Corporate and Consumer Services, by filing the required forms, then paying the appropriate LLC registration fees, along with meeting the LLC formation requirements and having a unique and distinct name for your new LLC.
Step one. Have a name for your LLC. This is usually an easy task, albeit if your LLC’s name is already taken, you may have to think about coming up with “Plan B” for names. In thinking of your name, you’ll want to consider what’s available for URLs. URLs are web domain names. for example, 1reason.com is a URL that points to 1 Reason. Generally speaking, shorter names are better. Names that include your services are better than not.
For example 1reason-insurance.com is probably better than simply 1reason.com. Dot “COM” is better than “ORG” or “NET.” And if dot COM is available and you take dot NET, you could end up advertising for another business as most people think of dot COM before any other for a business.
Next, go to the Wisconsin LLC registration page called CORPORATION SECTION FILING FORMS to fill out form 502, articles of Organization (for a limited liability company). articles of organization are similar to article of incorporation. Your articles of organization will include the LLC’s name, address, name and address of the registered agent, and the name and address of each organizer.
Your election of if your new LLC will be member-managed or manager-managed, the the name of the drafter of the articles. You can file using old fashioned pen and paper, albeit if you file online, you save the time from mailing the form, and save a few nickels as Wisconsin gives new LLC filers a discount for online application.
If you file using paper, keep in mind that the state requires the articles of organization to be filed in duplicate. And regardless if you file online or with paper, all fees are non-refundable, so make sure you get it right the first time and that you want to create a new LLC before moving forward.
Step Three… Appoint a Registered Agent. Every Wisconsin LLC (and foreign LLCs doing business in Wisconsin) is required to have an agent for service of process in the state. What is service of process? That’s legal papers. For example, if the LLC gets has a lawsuit filed against it, that’s the person who receives the documents. The reason why is your LLC is treated like a separate person, albeit because it’s a legal fiction, some natural person (i.e. real person), must physically receive the papers. Most if not all things your LLC does requires an agent to act of its behalf. Most likely, the agent will be the owner, or someone (or business) close to the owner. So you don’t need to feel like you have to find a separate person as long as you also live in Wisconsin, because the registered agent is required to have a physical street address in Wisconsin.
Step Four… (optionable) Create an operating agreement. Wisconsin doesn’t require new LLCs to have an operating agreement, albeit I think most attorneys recommend one, especially as the size, complexity, and scale of a LLC grows. For small one-person bands, the need for one is greatly diminished relatively speaking. Conversely, new LLCs with more than one owner should have an operating agreement among its members. Having everything spelled out in your LLC among the owners ahead of time is a great way to minimize the risk of disagreements with an LLC’s owners. Officially, I’m not a fan of partnerships. By definition, a partnership is akin to having more than one chief in the kitchen. It’s a challenge for almost all to avoid frustration at some point in time.
I haven’t kept count, albeit off the top of my head, I believe way more new LLC partnerships haven’t made it two years compared to LLCs with only one owner that I’ve insured. That said, some of the best run companies I know have partnerships, and it’s not surprising that many husband-wife partnerships do well when there’s a separation in duties that allows each to focus on their part.
If you don’t go through the motions, the amount of protection from personal liability may be lower, so if you have any questions on your exposure, you’ll want to speak with appropriate legal counsel before doing or deciding anything.
Step Five…Your next step is to receive the equivalent of a “social security” number for your new business, called a Federal Employer Identification Number (EIN). Even if you don’t want to hire employees, you will want an EIN because you will need it for so many things including banking and taxes. You can get an EIN by CLICKING HERE.
Lastly, and maybe most importantly, I want to stress to you that only starting a LLC, LLP, and/or corporation doesn’t mean you’re out of the woods when it comes to personal liability. There are many ways a plaintiff can attack a LLC in order to “piece the corporate veil” and go after the owner(s) directly. The term no limited liability entity owner ever wants to hear is “piercing the corporate veil”. Piercing the corporate veil is a term used to describe the process an attorney uses to get at personal assets because there’s no legal difference between an owner and the limited liability entity created.
A common mistake that many make is not treating the other entity as the separate entity it’s supposed to be. If you co-mingle funds and assets, you can jeopardize the integrity of the liability wall you tried to create to begin with. Co-mingling funds is one of the most common ways to lose your valuable and expensive protection, so don’t do it.
In some states, not having your LLC properly funded can render the liability protection mute. Where this comes into play is I often get asked what’s more important, insurance or LLC for protection. The answer is very simple, the LLC and insurance protect in different ways that don’t always overlap. Choosing one over the other almost certainly means personal liability in some form or another.
As I mentioned earlier, always seek professional advice whenever you’re even slightly unsure of your options or potential ramifications because a few dimes today in legal advice may save you dollars later. Plus, most counties have a free lawyer night at the county library or another location that will allow you to speak with an attorney at no charge.
Robert Weinstein is a husband, dad, stock market junkie, real estate broker, and of course…Insurance agent. Interests include my family, economics, marketing, technology, real estate, finance/investing, history, and Asia.
Robert’s insurance expertise includes having the designation of Certified in Long-Term Care (CLTC) and assist in asset protection for families with members entering retirement.
Robert is also an accomplished syndicated writer whose work can be found in TheStreet, MainStreet, CNBC, Forbes, Yahoo Finance, Seeking Alpha, MSN Money, The Money Show, Stock Saints, Motley Fool, Fidelity, Minyanville, RealMoney Pro, and many national and international newspapers.