Okay, so you have decided to launch your new business idea. Which business structure should you choose? Generally, we recommend that entrepreneurs form or start an LLC in Wisconsin. LLC stands for limited liability company. There are 4 major advantages of starting an LLC in Wisconsin over other entity structures.
1. LimitedPersonal Liability.
Owners of sole proprietorships and partnerships may be held personally liable for business debts. Exposure to personal liability can expose your home, bank accounts, and or wages to liens, attachments, and or garnishments. However, the members of an LLC have limited liability exposure for the business’ debts, which include court judgments and or contractual obligations. If for example an LLC cannot payback a loan, the lender generally cannot hold LLC members personally liable for damages. For LLC members to maintain limited personal liability, the members must not commingle personal and business funds nor make knowingly false statements.
2. Flexible Management Options.
If you start an LLC in Wisconsin, you also have flexible management options for running your business. Unlike corporations, which require a three-level organizational structure consisting of shareholders, a board of directors, and corporate officers, LLCs can be managed with much less formality. For example, LLCs in Wisconsin are not required to have a board of directors, hold annual meetings and take minutes, or issue certificates of ownership (although they may, and sometimes it is advisable to do so).
3. Tax Advantages.
Owners can also choose how their LLC is treated for income tax purposes. The most common choice for those starting an LLC in Wisconsin is to elect for “pass-through” tax liability in which the LLC is treated like a disregarded entity (sole member) or a partnership (multiple members), and the income, gains, losses, deductions, and credits of the LLC pass through to its members for reporting on their personal income tax returns. Corporations are taxed on corporate profits and the owner is also taxed on his or her salary – this is called double taxation. An LLC avoids double taxation and is only taxed once on the profits, which pass-through to the owner’s personal tax return.
4. Ease of Use.
Compared with C-Corporations or S-Corporations, LLCs are very flexible. Establishing and maintaining an LLC is less complex and requires less paperwork than other corporate entities. An LLC registers its existence by filing articles of organization with the Wisconsin Department of Financial Institutions and by paying the required fee of $130.00. With less stringent requirements for compliance and less necessary paperwork, LLCs are easier to form and easier to keep in good legal standing.