How to Start an S Corp in Wisconsin
Wisconsin boasts a healthy business climate with a rapidly growing economy, a wealth of resources, and access to an educated workforce. Starting a business in this state can be an exciting, yet overwhelming experience as you work to transform your ideas into a successful venture.
One of the many big decisions you must make involves choosing how to structure your business. Regardless of your industry, you potentially could save money on your taxes by electing to structure your business as an S corporation (S corp) in Wisconsin. Read on to learn everything you need to know about forming your Wisconsin S corp and ensuring you keep your business in a good standing year after year.
Not in Wisconsin? Check out our other How to Start an S Corp guides to learn more.
Recommended: If you have at least $60,000 in net earnings, an S corp may offer tax advantages. Let Northwest start your S corp today.
Factors to Consider Before Starting an S Corp in Wisconsin
Before forming an S corp, you have to consider the following factors:
- Is an S corporation the best strategy for your business?
- S corporation restrictions
- Are S corp tax advantages right for you?
Is an S Corporation the Best Strategy for Your Business?
For help with choosing the right structure for your business, visit our Choosing a Business Structure guide.
S Corporation Restrictions
S corps have several restrictions, such as being limited to one class of stock and 100 shareholders. Read our What Is an S Corporation guide for full details.
Are S Corp Tax Advantages Right for You?
An S corporation is a tax designation that can be elected by an LLC or corporation. With an S corp, business owners are considered employees of the company and must receive a reasonable salary. Since all S corps technically have employees, the s corp must run payroll.
In order to benefit from a Wisconsin S corp tax designation, your business needs to make enough money to offset payroll expenses. Furthermore, S corps are beneficial for business owners who take large distributions in addition to their salary.
How to Form a Wisconsin S Corp
There are two main ways to start an S corp:
- By forming an LLC and electing S corp tax status from the IRS when you request your employee identification number (EIN)
- By forming a corporation and electing S corp status from the IRS
We recommend forming an LLC because it’s simpler and more cost-effective.
Recommended: If you have an existing LLC, visit our How to Convert an LLC to S Corp guide.
Steps for Forming an LLC and Electing S Corp Status in Wisconsin
Starting a Wisconsin LLC and electing S corp tax status is easy. You can use our guides to start an LLC with the S corp status yourself, or you can hire a service provider like Northwest to guide you through this process.
There are five basic steps to start an LLC and elect S corp status:
Step 1: Name Your LLC
Step 2: Choose a Registered Agent
Step 3: File the Articles of Organization
Step 4: Create an Operating Agreement
Step 5: Get an EIN and File Form 2553 to Elect S Corp Tax Status
Step 1: Name Your LLC
Choosing a company name is the first and most important step in starting your LLC in Wisconsin.
Be sure to choose a name that complies with Wisconsin naming requirements and is easily searchable by potential clients.
1. Follow the naming guidelines for a Wisconsin LLC:
- Your name must contain the phrase “limited liability company” or “limited liability co.” or end with one of their abbreviations (LLC or L.L.C.).
- Your name cannot imply that the LLC was organized for any non-permitted purpose.
- Your name cannot include words that could confuse your LLC with a government agency (FBI, Treasury, State Department, etc.).
- Certain restricted words (e.g. Bank, Attorney, University) may require additional paperwork and a licensed individual to be part of your LLC.
- Your name must be distinguishable from any existing business in the state. This includes Wisconsin reserved names.
- You can read an overview of name availability from the Wisconsin Department of Financial Institutions for more information.
You can also read the Wisconsin state statute about LLC naming guidelines for more information.
2. Is the name available in Wisconsin? Make sure the name you want is available by doing a corporate record search on the Wisconsin Department of Financial Institutions website.
3. Is the URL available? We recommend checking to see if your business name is available as a web domain. Even if you don't plan to create a business website today, you may want to buy the URL in order to prevent others from acquiring it.
Find a Domain Now
Step 2: Choose Your Wisconsin Registered Agent
You must elect a registered agent for your Wisconsin LLC.
An LLC registered agent will accept legal documents and tax notices on your LLC's behalf. You will list your registered agent when you file your LLC's Articles of Organization.
Many business owners choose to hire a registered agent service. Many of these services will form your LLC for a small fee and include the first year of registered agent services for free.
Step 3: File the Wisconsin LLC Articles of Organization
The Wisconsin Articles of Organization is used to officially register an LLC.
File Your Wisconsin Articles of Organization
OPTION 1: File Online With the Wisconsin Department of Financial InstitutionsFile Online
- OR -
OPTION 2: File Form 502 by MailDownload Form
State Filing Cost: $130 online and $170 by mail, payable to the Department of Financial Institutions (Nonrefundable)
State of WI - Dept. of Financial Institutions
P.O. Box 93348
Milwaukee, WI 53293
Step 4: Create an LLC Operating Agreement
An LLC operating agreement is a legal document that outlines the ownership and member duties of your LLC.
For more information, read our Wisconsin LLC Operating Agreement guide.
Our operating agreement tool is a free resource for business owners.
Step 5: Get an EIN and Complete Form 2553 on the IRS Website
An EIN is a number that is used by the US Internal Revenue Service (IRS) to identify and tax businesses. It is essentially a Social Security number for a business.
EINs are free when you apply directly with the IRS.
Elect S Corp Tax Status
During the online EIN application, the IRS will provide a link to Form 2553, the Election By a Small Business form.
Visit our Form 2553 Instructions guide for detailed help with completing the form.
This is the form to elect S corp tax status for your LLC:
Keep Your Wisconsin S Corp Compliant
After you successfully form your Wisconsin S corp, you must take several steps to keep your business in good standing. Wisconsin requires you to file an annual report, pay local and state taxes, and follow all state laws and guidelines.
Wisconsin S Corp Annual Report
The state of Wisconsin requires all businesses operating within its borders to file an annual report with the Wisconsin Department of Financial Institutions. This report is due every year at the end of the quarter in which you formed your business. If you started your business in January 2022, for example, your annual report will be due on March 31, 2023.
Visit our Wisconsin Annual Report guide for a step-by-step overview of the filing process.
Wisconsin S Corp Taxes
S corporations benefit from pass-through taxation, meaning the business’s profits pass-through to S corp owners’ individual tax returns. S corp owners make money from their reasonable salary and distributions, and Wisconsin S corp owners can expect to pay the following taxes:
Federal Self-Employment Taxes
Self-employment taxes cover social security and medicare. The self-employment tax rate is 15.3%, and money you take as salary will be subjected to the self-employment tax. However, distributions are not subjected to this tax.
Federal Income Taxes
Your federal income taxes will depend on your tax bracket, and the cutoffs for individual tax brackets as well as the percent owed will change each year. Both your salary and distributions are subjected to federal income tax.
Wisconsin Income Taxes
Wisconsin has a graduated income tax that ranges from 3.54% to 7.65%, depending on your total income. This means you’ll pay a smaller percentage if you have a low-income year vs. a high-income year. Even with a higher income, the maximum income tax rate is 7.65%.
Because some states impose income tax rates of more than 10%, Wisconsin is one of the more business-friendly states in which to start a company.
Wisconsin Sales and Use Tax
Wisconsin's sales and use tax is set at 5% with a 0.5% county sales tax for a total of at least 5.5%. Some cities within the state also impose additional sales and use taxes. Check with the Wisconsin Department of Revenue for more information.
Additional State Taxes
The Wisconsin Department of Revenue outlines many state-specific taxes it may require your business to pay. Some examples that might apply to a small business owner include:
- Dry Cleaning Tax
- Alcohol Beverages Tax
- Cigarette Tax
- Fuel Tax
- Tobacco Products Tax
Visit the Wisconsin Department of Revenue website for more information.
Wisconsin Local Taxes
Depending on where you open your business — whether that's in Milwaukee, Madison, or any of the smaller cities — each municipality may require you to file and pay specific taxes based on your location. Check with your local government to ensure your business remains in good standing with local laws and guidelines.
Start a Wisconsin S Corp FAQ
No. The default taxes for an LLC and taxes for an S corp are not the same.
With an S corp, owners pay personal income tax and self-employment tax on a predetermined salary. They may then withdraw any remaining profits from the business as a “distribution,” which isn’t subject to self-employment tax.
With an LLC, all company profits pass through to the owners’ personal tax returns, and then the owners must pay personal income tax and self-employment tax on the entire amount.
S corp owners are required to earn a “reasonable” salary, which basically means a fair market rate based on the individual’s qualifications as well as their duties and responsibilities at the company. The purpose of this requirement is to prevent S corp owners from paying themselves an artificially low salary in order to pay less self-employment tax.
A distribution is a dividend that a shareholder/owner can take from the business profits that remain after a company pays all of its employee salaries. Shareholders must pay personal income tax on distributions, but distributions aren’t subject to self-employment tax.
Wisconsin has several major industries (e.g., manufacturing, agriculture, and aerospace) along with many small businesses that bring the state’s economy to life. Starting a small business in any industry can prove beneficial, and, by electing S corp status, you can potentially save some money come tax season.
Wisconsin fosters a business environment focused on growth and modernization. It’s a great state for S corps with its graduated income tax, low cost of living, and abundant resources.