LLCs 101

These are the steps to follow to start your LLC.

1. Before starting the new LLC entity, protect your IP. See discussion in Publications Pages of this Blog on the WTN website Steps 1and 4. Many new business owners do not realize that they may have IP to protect. Even if you do not have patentable, copyrightable or such IP you may have trade secrets that should be protected. So make sure that you have written agreements with all parties with whom you do business.

2. Once you have the business idea and have protected it as best you can, you are ready to form the entity. To do so, most first find a name for it. See Steps 2 and 3 which address the business entity name and domain names. Also, Step 4 covers Trademarks.

3. Now that you have a name, you can form the entity. In Wisconsin, you go to the Wisconsin Department of Financial Institutions website. Go to the face page of this blog for the link. It will cost you $130. You will receive an email with confirmation that the entity has been formed. The information needed to prepare the Articles of Organization is modest and includes the entity’s name, registered office and agent, (usually either you or your attorney) and whether you wish to be member or manager managed. Member management is much like a sole proprietorship or a partnership. Manager managed is like the corporate model. We recommend that if it is a single member LLC it be member managed and if there are multiple owners that manager managed be chosen.

4. Once these steps are completed you can get a federal identification number which must be obtained before you can open a  bank account. Note: if it is a single member LLC, you do not have to have an identification number. You can use your social security number. This means you can file the entity’s tax return on Schedule C of your personal tax return form 1040. To get the federal identification number go to the IRS website.

5. Now that you have the federal identification number you can open a bank account. Take the federal id number and a copy of the Articles of Organization you filed with the Wisconsin DFI to your financial institution to open the account.

6. Next you should review what your insurance needs might be. Consider finding a reputable insurance agent to advise you on this.

7. Along the way, you will have determined the capitalization of the business. You need to transfer the assests to the new entity which will most likely include cash, intellectual property, some equipment and other assets.

8. You must make sure that all of your LLC papers list the company’s name. These papers include business cards, stationery, website, contracts, bank account and others.

9. You must file a tax return, not a seperate return if you are a single member LLC, annually. It is automatically a partnership return, form 1065, unless you elect to be taxed as a corporation. There will be further information provided on this.

10. You will annually receive a form from the Wisconsin Department of Financial Institutions which must be filed. If it is not filed, your entity can be administratively dissolved by the DFI. The cost is $25. You can file online.