Photo: Ambro
Twice in the last month or so, OAA has assisted Wisconsin
partnership startups with what they need to do to form a limited liability corporation,
or LLC. OAA is an LLC, which combines pass-through taxation (like a
sole-proprietorship) with limited liability (like a corporation). We don’t
provide tax or legal advice, but when a client asks, here's what I recommend:
1. GET AN ATTORNEY: Organize the LLC by creating an
operating agreement with an attorney - this is essential so that you all
have the same understanding from the beginning. You never need a contract
when things go well, but it's when they don't go so well, it keeps the playing
field level and gives a "way" to dissolve, if needed. Saving hundreds
by cutting corners on this step now can cost everything later.
2. FILE LLC WITH DEPT. OF FINANCIAL INSTITUTIONS (DFI)
& ELECT A REGISTERED AGENT: Most likely the attorney will do the initial
creation of your LLC with the DFI. But this is something you can do
yourself. If you know how the LLC needs to be organized, the attorney
will determine this when creating the operating agreement, as a
member-managed or manager-managed LLC, you can save attorney time by
filing the LLC with the DFI yourselves. It is a pretty straightforward
online form. The DFI charges $135 to create the company. It's not a
bad idea to have the attorney do the initial filing. However, he or she does NOT
have to be your registered agent - for ongoing mail and correspondence.
When an attorney creates the LLC often they will name themselves as registered
agent. Be sure you are your own registered agent. This way
YOU will get the notices for your annual report and can file it
or contract it out, as you wish. DFI charges $25, at this time, for
annual reports. When you file with the DFI you will get
"Articles of Incorporation.”
2B. FILE FOR SALES TAX NUMBER: This is the
half-step. Skip it if you’re selling a service. If you’re selling goods rather
than services, you will most likely need to file for a Sales Tax number with
the State of Wisconsin because you will have to charge and then pay the
sales tax on the product you sell direct to a customer. You won’t need to
charge tax on items you sell to a wholesaler or retailer, but they’ll want your
Sales Tax ID.
3. SET UP A BANK ACCOUNT: After you receive your
Articles of Incorporation, use this information to obtain a bank account. Keep
the income and expenses separate from your personal banking!!
4. SET UP YOUR BOOKKEEPING/ACCOUNTING: You will
need to determine who will do your bookkeeping and select a CPA. If you want
to do it "in house" I can help you set up the books, help you find a
bookkeeper, or consult. It's important to set this up correctly from the
get-go to avoid future problems. Employing someone? Anyone to whom you
pay more than $599/year as a contract worker will get a 1099 from you at year
end. Keep clear records and get a W-9 from anyone to whom you pay money before
they get their first payment, if you can.
5. GET AN INSURANCE POLICY: I have yet to meet a
business or business owner that doesn’t need a BOP (Business Owners Policy - a
general business liability insurance policy). It’s a litigious
world, we’re just doing business in it.
6. UNDERSTAND WHAT YOU DO WELL AND FIND THE RIGHT
PERSON TO HELP WITH THE THINGS YOU DON'T. In my experience with small
business, owners have a "trade" a "skill" or an
"idea" but that doesn't mean they are a good business owners and they
get into trouble by not "knowing" they were supposed to do
something. Find people you trust, but don't give any one person all
the keys to your business. Checks and balances and frequent reporting are
important.
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