Are you starting a limited liability company (LLC) in Wisconsin? Do you need an operating agreement or articles of organization? Do you understand the benefits, liabilities, and responsibilities of starting and operating an LLC? Alternatively, is your company already formed as an LLC, but do you need help with things like complex assets, employment issues, taxes, bank financing, real estate, and commercial leases?
LLCs offer real benefits, but many other factors exist that must be considered and addressed in an appropriate and strategic manner. At Heritage Law Office, our business attorney in Wisconsin will work with you on each and every aspect of starting and operating a successful limited liability company. Contact us today at 414-253-8500 or send us a message to schedule a free consultation and to learn more about the benefits of retaining a business attorney in Wisconsin.
What is a Limited Liability Company (LLC)?
A limited liability company is a business structure that combines features of a sole proprietorship or partnership and corporation. Like a company, the owner's personal liability in an LLC is limited. However, its tax situation is typically the same as a sole proprietorship or partnership.
LLCs can have an unlimited number of owners, called members. Each member owns a percentage of the business that is typically proportionate to their investment.
The specific regulations around forming and running an LLC vary between states.
What's the Difference Between an LLC and a Corporation?
While both limit the personal liability of their members (in the case of an LLC) and shareholders (in the case of a corporation), there are some key differences between the two structures.
Corporations are separate tax entities, filing and paying taxes at a corporate level. In comparison, LLCs are pass-through entities. They can elect not to pay federal tax, in which case the profits and losses are passed to owners who then pay tax at the personal tax rate.
LLCs use an operating agreement to set out how it will be governed, including management structure, restrictions on buying or selling shares, profit sharing, and its dissolution. Operating agreements are flexible and can be designed according to the members' wishes. Corporations, on the other hand, are required to formally adopt bylaws according to the relevant state law.
Level of Administration
Corporations must comply with more rigid government rules and regulations that LLCs do not have to follow. These rules and regulations involve stricter reporting and administrative requirements.
Advantages of an LLC in Wisconsin
There are many advantages that flow from forming a business as an LLC. Below are descriptions of a few of them.
- Limited liability. One of the biggest advantages of an LLC is that it limits the liability of owners to their investment in the business. Owners can't be held personally liable for a company's debts and their personal assets are protected in the event an LLC can't pay a creditor, goes bankrupt, or is subject to a lawsuit.
- Taxation. LLCs can be taxed as a sole proprietorship, partnership, or corporation. By default, an LLC is a pass-through entity. This means taxation is passed to the owners who pay taxes on the profits (or losses) via their personal tax return, avoiding double taxation. In some circumstances, an LLC can elect to be taxed as a corporation. This flexibility allows members to choose a taxation structure best suited to their situation.
- Flexible management structure. When it comes to management, the members of an LLC can choose to either share management responsibilities or act like passive investors by nominating one or two managers to run the business (either members or non-members).
- Less administration. It's typically easier to set up and run an LLC than a corporation. There's less paperwork involved and, unlike a corporation, an LLC isn't required to hold board or shareholder meetings or appoint officers and directors.
Whether one of the above or another advantage benefits your business depends on the business itself and what your goals are. That's why speaking to a business attorney in Wisconsin can be critical to the success of your company. Our business lawyer in Wisconsin will help you align your goals with the benefits associated with any and all business structures so you can be confident you form and operate your business under the most advantageous structure available to you.
Disadvantages of an LLC in Wisconsin
Some disadvantages exist with any given business structure. Here are a few that you should be aware of if you intend to form an LLC in Wisconsin.
- Set-up costs. Forming an LLC often involves filing fees. It can be more expensive to set up an LLC than other business entities, like a sole proprietorship or partnership. Many states also charge LLCs annual fees and taxes.
- Forced dissolution. In some states, an LLC must be dissolved when a member leaves, dies, or goes bankrupt. In comparison, a corporation can exist in perpetuity.
- Transfer of ownership. It can be more difficult to transfer the ownership of an LLC compared to a corporation or some other business entity.
- Potential investment limits. External investors often prefer investing in a corporation rather than an LLC. This preference is because an LLC is often viewed as a more complicated structure in terms of taxation and managing outside investment.
Do You Need a Business Lawyer for an LLC in Wisconsin?
While there's no legal requirement to hire an attorney when forming an LLC, it's a good idea to speak to a business lawyer to confirm whether it's the right business structure for your circumstances.
They can also assist you with forming an LLC, including registering your business and drafting documents such as the operating agreement. They can also often continue to act as your registered agent, receiving any legal documents on behalf of the LLC.
If your business is complex or involves especially risky transactions, a business lawyer can work proactively to avoid legal mistakes on your behalf. If a legal issue arises, they will walk you through the process, representing your interests throughout it.
Contact a Business Lawyer in Wisconsin Today
Make sure your company gets started on the right legal foot by making sure the business formation you choose, whether it's an LLC or another entity, is right for your business idea and goals. Get clarity and strong representation for a business already established as an LLC. Contact our business attorney in Wisconsin either by using our online form or calling us at 414-253-8500. You can schedule a free consultation to get the answers you need to some of your most pressing legal questions related to your business.
Frequently Asked Questions (FAQs)
1. What is a Limited Liability Company (LLC)?
A Limited Liability Company, often abbreviated as LLC, is a unique business structure that combines elements of both corporations and sole proprietorships/partnerships. It is characterized by limiting the personal liability of its members, similar to a corporation, while also offering the tax advantages of a sole proprietorship or partnership.
2. What are the benefits of forming an LLC in Wisconsin?
Forming an LLC in Wisconsin offers several benefits. Firstly, it protects the personal assets of the members from business liabilities. Secondly, it provides tax advantages as LLCs in Wisconsin are pass-through entities, meaning the profits and losses are passed onto the owners who pay tax at their personal tax rate. Thirdly, it offers operational flexibility as the members can design the operating agreement as they wish.
3. What are the disadvantages of an LLC?
While an LLC provides several benefits, there are also some disadvantages to consider. For instance, the formation and annual report filing processes can be complex and time-consuming. The ongoing compliance requirements, while less strict than corporations, still require careful attention. Finally, LLCs might have a harder time raising capital since they cannot issue shares like a corporation.
4. Do I need a lawyer to form an LLC in Wisconsin?
While it's not legally mandatory to have a lawyer when forming an LLC, it is highly recommended. A lawyer can help you understand whether an LLC is the right structure for your business, assist in registering your business, and draft important documents like the operating agreement. They can also provide continued legal guidance as your business grows and evolves.
5. What services does a business lawyer at Heritage Law Office offer for an LLC?
At Heritage Law Office, our business attorneys provide comprehensive services for LLCs. These services range from providing advice on the best structure for your business, assisting in the formation of the LLC, drafting and reviewing operating agreements, to acting as a registered agent for the LLC. They are also equipped to guide you through complex transactions and provide representation in any arising legal issues.