When you want to start a business, sometimes the most frustrating part is not even knowing what you don’t know. I regularly get asked, what do I need to do to start a business in Wisconsin? While the specifics will depend on many things, including the type of business, the following seven (7) steps are pretty universal.
- Form the entity – You can choose between an LLC or an S-Corporation. Many lawyers (including us) will offer flat fee services to get these set up and file the articles of incorporation (Corp.) or organization (LLC). You will also need an Operating Agreement (for an LLC) or formation paperwork and by-laws for a Corporation. These can range from being very simple (read cheap) to very complicated if there are multiple people getting started in the business and there are a number of issues to work out.
- Get an Employer Identification Number – If you have multiple members or shareholders, and/or if you are going to have employees, you have to get an Federal EIN. However, practically speaking even a single member LLC needs to get one. The IRS does not care (as they treat single member LLCs as disregarded entities) but almost all banks insist on an EIN to open a bank account. This leads us to our next item…
- Open a Business Bank account – The fastest way to lose your liability protection from an LLC or Corporation is to commingle funds and not keep your personal and business finances separate. You are forming a business entity specifically for the purpose of shielding your personal assets from liability. Get a bank account for your business and make sure you run all income through that account and only pay legitimate business expenses through the account (no personal groceries people). You should probably also look into getting insurance at this stage too. There are many businesses in which there is no real point to have a general liability policy and errors and omissions coverage (E&O) can be unavailable or cost-prohibitive for many so ultimately you need to talk to your lawyer and insurance professional about the practical aspects of insurance for your business.
- Get Operating Funds – Whether your operating funds come from a capital contribution you will put into the company yourself, investments from friends and family (be careful, you likely will have to comply with Wisconsin and Federal Securities regulations if you do this), or traditional lending, like a loan from the Small Business Administration (SBA), you need money to get everything going and keep running until you have sufficient revenue to be self-sustaining and, hopefully, profitable.
- Find a space and sign a lease – For some this is a brick and mortar store, for others it is an office share, and for still others it is just a business address from a place like the Hudson Business Lounge. These type of office-share arrangements allow you to go and work when you want, but otherwise simply serves as a great address in the Third Ward that you can use. This will often be the biggest liability you will take on as a business (and individually – you will likely be asked for a personal guarantee). This is the step in the process where things start to get dicey, as you will want to make sure everything else is in place, or is going to be in place before you are fully committed, there is little opportunity to turn back once that lease is signed.
- Get your necessary licenses – In Wisconsin, other than an occupancy permit, there is no requirement for a general business license. Instead, most licensing is handled on a business to business basis. There can be different requirements based on municipality or type of business. The catch can be that for certain licenses, like a liquor license, you have to have proof of the executed lease in order to apply for the license, but if you are denied the license it can create a big problem for you (remember that personal guarantee you signed for the lease?). This is why it is important to work with an attorney when signing your lease to make sure you have a way to cancel the lease if you do not get the licenses you need to operate. You can see a list of licenses from the State of Wisconsin, licenses from the City of Milwaukee, licenses from Wauwatosa, licenses from Shorewood, and licenses from West Allis.
- Hire employees, open, make money, repeat – Once you have your entity, your EIN, your Bank Account (possibly insurance), money for operations, a space to operate, and the appropriate licenses, you are all set for the hard part, turning your idea into a money making venture.
You can’t eliminate the uncertainty when you start a new business, and every industry will have different needs and perhaps slightly different steps, but if you are looking to start a business, hopefully this starts you off with a checklist to get going.
Sean M. Sweeney is a shareholder at Halling & Cayo. His practice focuses on business litigation, offering flat fees for business litigation, and recovering investors losses as a result of stock broker fraud on contingent fees. Sean represents investors in FINRA Arbitrations and companies in Wisconsin, all over the United States, as well as internationally with clients in Canada, Germany, and Australia.
Email Sean: sms@hallingcayo.com
www.The-Securities-Lawyers.com : www.HallingCayo.com/Flatfee