How to Form an LLC in Wisconsin!

Forming an LLC in Wisconsin can provide a number of legal benefits.

Freedom of Contract

The Wisconsin LLC Act expressly states its purpose is to give “maximum effect to the principle of freedom of contract and to the enforceability of operating agreements.”

The Act gives LLC members contractual freedom to customize their capital contributions and their shares of profits and losses.  An LLC’s members can specify a method for allocating profits and losses in an LLC agreement that is greater or lesser than their portion of capital contributions.  Section 183.0503 states: “The profits and losses of a limited liability company shall be allocated among the members in the manner provided in an operating agreement.”  This gives members contractual flexibility to tailor their income and risks of loss to further their big-picture asset management plans.

In addition, an LLC agreement may establish classes of membership interests with different rights, powers, and duties, including voting and non-voting interests.  Under section 17-7687, “[a]n operating agreement may provide for classes or groups of members having such relative rights, powers and duties as the operating agreement may provide, and may make provision for the future creation in the manner provided in the operating agreement of additional classes or groups of members having such relative rights, powers and duties as may from time to time be established, including rights, powers and duties senior to existing classes and groups of members.”  This facilitates everything from complex, multi-million dollar business deals to succession planning in family businesses and estate planning by gifts of non-voting interests.

Protections Against Unwanted Parties

The Wisconsin LLC Act allows members to protect their control of an LLC.  An LLC agreement may prohibit members from assigning their membership interests.  But if an LLC agreement does not prohibit it, an assignment does not dissolve the LLC or entitle the assignee to participate in management or to become a member.  Instead, the assignee may receive only the distributions and allocations of profit and loss to which the assignor would have been entitled, and all the non-assigning members must consent to the assignee becoming a member.

Creditors Cannot Obtain Controlling Rights

Section 183.0705 provides that if a judgment creditor of a member obtains a charging order against the member’s interest, “the judgment creditor has only the rights of an assignee.”  That is, a charging order requires the LLC to pay the judgment creditor any distribution that would otherwise be paid to the judgment debtor.  But the judgment creditor does not have a right to participate in management.

In addition, the Act states that unless an LLC agreement provides otherwise or all members give written consent, a person ceases to be a member of an LLC when the person makes an assignment for the benefit of creditors, files a voluntary petition in bankruptcy, is adjudicated insolvent or bankrupt, or fails to contest a petition seeking his or her reorganization, liquidation, dissolution, or similar relief.  These events are considered “events of bankruptcy.”

Here are the steps you will need to follow to successfully set up a Wisconsin LLC.

Step 1. Choose a Name

The name of every Wisconsin LLC must contain the corporate designator “Limited liability company”, although it can be abbreviated using single letters, “ltd.,” or “co.” The name you choose must be distinguishable from every other business name that is registered with the Department of Financial Institutions.

Step 2. Appoint a Registered Agent in Wisconsin

A Wisconsin LLC must continuously maintain an agent for service of process in the state.  A commercial registered agent service may act as a Wisconsin registered agent.

Step 3. File Articles of Organization

A Wisconsin LLC is formed by filing Articles of Organization and a $130 fee with the Department of Financial Institutions. The Articles of Organization for your LLC must ONLY include a statement that the LLC is organized under Chapter 183 of Wisconsin Law, the name of the LLC, the name and address of the registered agent, the name and address of the organizer(s), and whether the company will be managed by managers.

Step 4. Prepare an Operating Agreement

Wisconsin LLCs use operating agreements to govern themselves. These set out how members enter and exit the LLC, management, and a variety of other business components. Wisconsin requires that any Operating Agreement be in writing and executed by all members. While Wisconsin does not require an Operating Agreement, we would recommend having one that satisfies the statutory requirements.

There are some additional steps you will need to take after you form your Wisconsin LLC to finish setting up and maintaining your business.

Get an EIN Number

Any tax returns filed by employees or one of multiple members will need an EIN, which the LLC can obtain from the I.R.S.

File Annual Reports

In Wisconsin, LLCs must file annual reports every year to maintain their status. This report contains the name of the LLC, the name and address of the registered agent, the address of the principal office, and the names and addresses of managers (if any) with a $25 fee. Foreign companies must include the names and addresses of all members and pay a $65 filing fee.