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Editorial 9 MIN READ

Wisconsin in September 2018: forming the cheap-and-quiet LLC

A $130 online filing, a $25 annual report, and a state agency most founders have never heard of

The Editors
Staff, Incorporator.org
9 min read Updated
Contents 7 sections
  1. What makes Wisconsin structurally different
  2. The mechanics
  3. Maintenance
  4. Tax treatment at the state level
  5. The registered-agent market
  6. Who this state actually makes sense for
  7. Sources

Wisconsin LLC costs $130 to form online, $170 if you file on paper, and $25 a year to keep. The filing goes not to the Secretary of State, as in most of the country, but to the Department of Financial Institutions, a detail that trips up about half of first-time filers who arrive here from a checklist written for another jurisdiction.

This is a guide for someone forming a Wisconsin LLC in September 2018. It assumes you already know you want a Wisconsin entity and are trying to get the filing right the first time.

What makes Wisconsin structurally different

Most states house entity formation inside the Secretary of State's office. Wisconsin does not. Chapter 183 of the Wisconsin Statutes, the Wisconsin Limited Liability Company Law, assigns the filing, maintenance, and dissolution of every LLC to the Department of Financial Institutions, specifically the Division of Corporate and Consumer Services within DFI. The Secretary of State in Wisconsin is a constitutional office with a much narrower mandate, and sending a Chapter 183 filing there gets it returned, not forwarded.

That is the first operational fact to internalize. The second is that Wisconsin runs its entity filings through a live portal at www.wdfi.org, which accepts credit-card payment and produces a file-stamped PDF within about one business day for standard service. Paper filings are still accepted and still cost more, a pricing pattern the state has used since it moved to online-preferred filings earlier this decade.

The statute itself, Wis. Stat. Ch. 183, was passed in 1993 and has been amended several times since. The 2018 version controls for anything filed today: member and manager authority (§ 183.0301), fiduciary duty allocation (§ 183.0402), dissociation (§ 183.0802), and the judicial dissolution grounds (§ 183.0902). For most founders, the sections that matter are the ones governing what the Articles of Organization must contain (§ 183.0202) and what the operating agreement may and may not displace (§ 183.0103).

The mechanics

You file Form 502, the Articles of Organization for a domestic limited liability company. The form is short. It asks for the name of the LLC (which must include the words "Limited Liability Company" or an abbreviation per § 183.0103), a Wisconsin registered-agent name and Wisconsin street address, the management structure (member-managed or manager-managed), the name and address of each organizer, and the signature of at least one organizer. There is a drafter's note at the bottom for the person to contact about the filing.

The fee is $170 if you file on paper and $130 if you file through the DFI online portal. Both figures are stated on the DFI fee schedule and have been stable at those numbers through 2018. There is no franchise tax at formation and no separate initial-report fee. The name reservation fee, if you need to lock a name before you are ready to file, is $15 for 120 days.

You will then need an EIN from the IRS, which comes back while you are still on the form, and an operating agreement, which Wisconsin permits but does not require you to file. Chapter 183 gives the operating agreement broad authority to override the default rules, with a short list of items it cannot waive (the member inspection right in § 183.0405, the reasonable-care fiduciary floor, and a few others in § 183.0103(3)).

For federal tax purposes you will decide whether the LLC is a disregarded entity (single-member default), a partnership (multi-member default), an S-corp, or a C-corp. None of those choices is a Wisconsin filing; they are IRS elections, made on Form 8832 or Form 2553, and Wisconsin accepts the federal classification by reference for state income-tax purposes under Wis. Stat. § 71.04.

Expedited processing is available at $25 over the base fee and shortens the turnaround to the same business day when the filing arrives before noon. For most formations this is not worth the extra $25; standard online processing is fast enough that the practical difference is one overnight.

Maintenance

The Wisconsin annual report is $25 for a domestic LLC and $80 for a foreign LLC registered to do business here. That is the entire recurring state cost of an in-state formation. There is no franchise tax on LLCs as such, no annual license tax, and no minimum-tax floor of the kind California imposes under R&TC § 17941 or Massachusetts imposes through the corporate excise minimum.

The report is due on the last day of the anniversary quarter of formation. An LLC formed in September files its annual report by the end of the third calendar quarter each subsequent year, which is September 30 for quarters ending in July, August, or September. DFI mails a reminder postcard, emails a reminder if you gave them an email address on formation, and publishes a delinquency list after the due date passes. The report itself is a five-line confirmation of the entity's current registered agent, principal office, and managers or members with management authority; it is not a financial disclosure.

Late filing incurs no dollar-denominated penalty in the normal case, but an LLC that fails to file for more than one year is administratively dissolved under § 183.0906. Reinstatement requires a reinstatement filing, payment of the back annual reports, and a $100 reinstatement fee. This is one of the lower-friction delinquency regimes in the country and one reason a Wisconsin formation is genuinely cheap to own over time.

Tax treatment at the state level

Wisconsin taxes its residents and its sourced income. For an LLC taxed as a partnership or disregarded entity, the income flows through to the members' individual Wisconsin returns, where the state's 2018 graduated individual income tax applies: four brackets running from 4.00% on the first dollar of taxable income up to 7.65% on income above $247,350 single or $329,810 married filing jointly. The top bracket is the one most founders running a profitable operating LLC eventually sit in, and it is a meaningful figure to plan around; California's top combines with state AMT to higher numbers, but Wisconsin's 7.65% is the second or third highest in the Midwest and above both Minnesota's top bracket rate tiering and Illinois's current 4.95% flat tax.

For an LLC that has made a federal C-corp election, Wisconsin levies its corporate income and franchise tax at 7.9% on apportioned Wisconsin net income (Wis. Stat. § 71.22(9m) and § 71.25 for apportionment). The 7.9% rate is one of the higher state corporate rates nationally and has not moved in the state's 2018 legislative session. An LLC that has elected S-corp treatment federally and has made the corresponding Wisconsin election under § 71.365 passes income through at the individual graduated rates above.

The Section 199A federal pass-through deduction, enacted in the Tax Cuts and Jobs Act last December and elaborated in the proposed regulations issued by Treasury last month, interacts with Wisconsin by reducing federal taxable income before Wisconsin starts its own computation. Wisconsin is a partial-conformity state and has not yet finalized its adoption posture on 199A as of this writing; the legislature's Joint Committee on Finance has flagged the question for the 2019 budget cycle. Until Wisconsin acts, treat the 199A deduction as a federal-only benefit and plan Wisconsin liability off pre-199A adjusted gross income. See the operational walk-through of Section 199A for how the federal deduction itself works.

Wisconsin does not impose a separate gross-receipts tax on LLCs. Sales and use tax applies to taxable transactions at the standard 5% state rate plus up to 0.5% county and 0.1% stadium add-ons in the relevant districts. An LLC selling into Wisconsin from outside the state should watch the post-Wayfair economic-nexus landscape closely; Wisconsin DOR has indicated it will adopt an economic-nexus threshold modeled on the South Dakota rule upheld in June, and the administrative rule is expected before year-end.

The registered-agent market

Every Wisconsin LLC needs a registered agent with a Wisconsin street address, not a P.O. box, available during normal business hours to accept service of process and state correspondence (§ 183.0105). Prices for a commercial Wisconsin registered agent run from roughly $49 a year at the commodity tier to $150 or more at the full-service tier that includes compliance reminders, annual-report filing, and document scanning.

For a founder who lives in Wisconsin and has a business address that meets the agent statute, self-appointment is legal and costs nothing. The case against self-appointment is the same as it is in every other state: your address becomes a public record, your travel schedule becomes a compliance risk, and the first time a process server finds you at dinner you will wish you had spent the $99. For an out-of-state member forming a Wisconsin LLC to hold Wisconsin real estate, a commercial agent is the only sensible option.

Who this state actually makes sense for

Wisconsin is not a privacy jurisdiction and not a tax-haven jurisdiction. It is a cheap, workmanlike state to form in if your business has a Wisconsin nexus you cannot wish away. Three profiles fit cleanly.

The first is any LLC that will own Wisconsin real estate, employ Wisconsin workers, or hold a Wisconsin-regulated license. Forming in Delaware or Wyoming to escape the Wisconsin filing accomplishes nothing except adding a foreign-qualification obligation and a second set of annual reports. The foreign-qualification enforcement landscape has grown more aggressive through 2017 and 2018, and Wisconsin DOR has been active in identifying unregistered foreign LLCs that meet the doing-business threshold of § 183.1001.

The second is an operating business in the Milwaukee or Madison technology corridors whose investors are local or regional. A Wisconsin LLC or Wisconsin C-corp is a comfortable vehicle for a funding round led by a Wisconsin-based firm, and the conversion cost to Delaware if and when an out-of-state institutional round arrives is not punishing. The Madison startup scene in particular, anchored by UW-Madison spinouts and the Madison-area venture network, has produced a steady cadence of Wisconsin-native C-corps that flip to Delaware only at Series A or later. Starting Wisconsin, staying Wisconsin through seed, and flipping on institutional terms is a defensible path. For the mechanics of the eventual flip when it comes, see the Delaware flip timing guide.

The third is a closely held family business or professional practice whose operating life is entirely in Wisconsin. The 7.65% top individual rate and the 7.9% corporate rate are the numbers that matter at scale; for the small operating LLC, the more relevant figures are the $130 formation fee and the $25 annual report, and neither is a reason to shop jurisdictions.

Everything that does not fit one of those profiles deserves a second look before defaulting to Wisconsin. An out-of-state founder holding a passive investment, a fund-of-funds structure, a multi-state operating business whose Wisconsin nexus is incidental: these are situations where a Delaware or Wyoming formation with foreign qualification in Wisconsin can pencil better, and the math is worth running. The Delaware versus Wyoming breakdown walks through the comparable out-of-state math for a founder who has not yet committed to a home jurisdiction.

If you are forming this month and the Wisconsin nexus is clear, file online with DFI, accept the one-business-day turnaround, and put the anniversary-quarter annual-report date on a recurring calendar before you close the confirmation PDF. The $25 notice that arrives next year looks like junk mail in Wisconsin too.

Sources

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