Converting Sole Proprietorship to LLC 2024: Wisconsin Conversion Guide

How to Convert Sole Proprietorship to LLC in Wisconsin

If you’re thinking of converting your sole proprietorship to an LLC in Wisconsin, you’re making a smart move to protect your personal assets and boost your business’s credibility. At LLCBase, we’ll help you through this process by providing essential information and outlining the necessary steps for establishing a Wisconsin LLC.

By starting an LLC in Wisconsin, also known as The Badger State, you’ll enjoy several benefits, including tax flexibility, limited liability protection, and a more professional image. Our comprehensive guide will equip you with the knowledge to successfully convert your sole proprietorship to an LLC in Wisconsin, setting your business on a path to greater success and security.

Convert Sole Proprietorship to LLC

On this page, you’ll learn about the following:

What is a Sole Proprietorship and a Limited Liability Company?
- Differences Between Sole Proprietorship and LLC
6 Steps to Convert Sole Proprietorship to LLC
Cost of Changing From Sole Proprietorship to LLC
Why Change From Sole Proprietorship to LLC
FAQs

What is a Sole Proprietorship and a Limited Liability Company?

A sole proprietorship is a business structure in which a single individual owns and operates the business. The owner is solely responsible for all decision-making, profits, and liabilities associated with the business. There is no legal distinction between the owner and the business, making the owner personally liable for any debts or legal issues the business may encounter. This business structure is the simplest and least expensive, as it typically requires minimal paperwork and regulatory compliance.

An LLC, or Limited Liability Company, combines a corporation’s limited liability protection with the operational flexibility of a partnership or sole proprietorship. In an LLC, the business owner, known as a member, has personal liability protection, meaning their personal assets are not at risk in case of the business’s debts or legal issues. LLCs also have flexible tax options, as they can be taxed as a pass-through entity (like a sole proprietorship) or a corporation. This type of business structure is more complex and involves a higher degree of compliance than a sole proprietorship but offers greater legal protection and flexibility for the owner(s).

One of the reasons LLCs are popular in Wisconsin is their tax flexibility. LLCs are typically taxed as pass-through entities, meaning the profits and losses flow directly to the member’s personal income tax returns, avoiding the double taxation that corporations face. An LLC in Wisconsin has fewer strict administrative requirements, allowing simpler management and decision-making processes.

Recommended: Upgrade your business potential in Wisconsin – we recommend hiring an LLC Formation Service for a seamless Sole Proprietorship to LLC conversion. Elevate your enterprise today! We recommend –
Our #1 Pick: LegalZoom – ($0 + State Fees) Online LLC Setup

Differences Between Sole Proprietorship and LLC

A sole proprietorship is the simplest form of business structure, making it an attractive option for many small business owners. It’s easy to set up and manage since there is no legal distinction between the owner and the business. However, this lack of separation also means the owner has no personal liability protection. In a sole proprietorship, if the business faces financial trouble or legal claims, the owner’s personal assets, such as their home or savings, may be at risk to cover the debts and liabilities.

On the other hand, an LLC, or Limited Liability Company, is a separate legal entity that provides limited liability protection to its owners, known as members. This means that the member’s personal assets are protected from the company’s debts and liabilities, as the business is considered a distinct entity from its owners. This protection is particularly beneficial in lawsuits, bankruptcy, or other financial challenges.

Another significant difference between a sole proprietorship and an LLC in Wisconsin is an LLC’s tax flexibility. While a sole proprietorship’s income is reported directly on the owner’s personal tax return and subject to self-employment taxes, an LLC can be taxed as a sole proprietorship, partnership, or corporation. This flexibility allows LLC owners to select the most advantageous tax structure for their specific situation, potentially resulting in tax savings and a more manageable tax burden.

In addition, starting a business in Wisconsin may also provide a more professional and credible image to clients, customers, and potential investors compared to a sole proprietorship. This enhanced reputation can attract new business opportunities and contribute to the overall growth and success of the company.

Recommended: Elevate your business with a reliable LLC Formation Service! The perfect partner for a seamless transition from sole proprietorship to LLC! Experience simplified formation, compliance assistance, and an intuitive platform. We recommend –
Our #1 Pick: LegalZoom – ($0 + State Fees) Online LLC Setup

6 Steps to Convert Sole Proprietorship to LLC

Are you a sole proprietor looking to level up your business structure? Our straightforward 6-step guide will walk you through converting your sole proprietorship to an LLC, providing enhanced liability protection, potential tax benefits, and a more professional image for your growing enterprise.

Step 1: Confirm the Business Name

Before changing your sole proprietorship to a Wisconsin LLC, you must check if your desired business name is available in Wisconsin. You can do this by using the Wisconsin Department of Financial Institutions to search the Wisconsin’s official database for existing business names. If the name is available, you can reserve it for 120 days by paying the $15 for online reservations or the $15 for mail reservations. This ensures that no one else can register the same name while you complete the LLC formation process.

Recommended: We recommend hiring a business expert that can help you effectively and efficiently choose and reserve a business name. Let them go through the process and get 100% efficacy! We recommend –
Our #1 Pick: LegalZoom – ($0 + State Fees) Online LLC Setup

Step 2: File Articles of Organization

Next, you’ll need to file the Articles of Organization with the Wisconsin Department of Financial Institutions. This legal document officially forms your LLC in Wisconsin and includes information such as the name of your LLC, the registered agent’s contact information, and the LLC’s purpose.

You can file the Articles of Organization either online or by mail, using the Create an account/Log in to the SOS site, get the e-form, fill it, and submit online. Or get the online PDF, fill it up and upload it back on the site. for online filing or the Send the form by mail to State of WI – Dept. of Financial Institutions, P.O. Box 93348, Milwaukee, WI 53293 for mail filing. The $100 for online and by mail filing must be paid when submitting your documents. When starting an LLC, we recommend hiring one of the best LLC formation services in Wisconsin to help you!

LLC Services	Rating & Pricing	Top Features	Learn More
#1 Editor's Choice	5/5 $0 + State Filing Fee	Free LLC Formation Various Legal Services Attorney Advice	Learn More
	3/5 $299 + State Filing Fee	Single Package Flat Pricing Legal Services	Learn More

Step 3: Execute an LLC Operating Agreement

Although not legally required in every state, creating an LLC operating agreement is highly recommended. This document outlines the ownership structure, management roles, and operating procedures for your Wisconsin LLC. It helps establish the rules and expectations for business operations, which can prevent misunderstandings and disputes among owners. An operating agreement should cover profit and loss allocation, voting rights, management structure, and procedures for adding or removing members.

Recommended: When creating an operating agreement for your business, we recommend hiring a reliable LLC Formation Service to streamline the process. They can provide an agreement with 100% accuracy and reliability. We recommend –
Our #1 Pick: LegalZoom – ($0 + State Fees) Online LLC Setup

Step 4: File Form SS-4 to Obtain an EIN

An Employer Identification Number (EIN) is required for your LLC in Wisconsin. You can apply for an EIN by filing Form SS-4 with the Internal Revenue Service (IRS). This nine-digit number is used for tax reporting, employee payroll, and other business-related activities. Obtaining an EIN is crucial for maintaining the separate legal identity of your LLC and ensuring proper tax compliance.

Recommended: EIN is crucial when starting an LLC in Wisconsin, but obtaining it can be so stressful and time-demanding. We recommend hiring an LLC business expert to assist you on getting your new EIN! We recommend –
Our #1 Pick: LegalZoom – ($0 + State Fees) Online LLC Setup

Step 5: Apply for a New Bank Account

Once your Wisconsin LLC is formed, you must open a separate bank account for your business. This is essential for maintaining the limited liability protection offered by your LLC, as it helps separate your personal finances from those of your business. Mixing personal and business finances can jeopardize the legal protection provided by an LLC, so it’s crucial to establish a dedicated bank account for your company.

Step 6: Apply for Business Licenses and Permits

Depending on the nature of your business, you may need to apply for Wisconsin business licenses and permits to operate legally in Wisconsin. These requirements vary by industry, location, and products or services. You can contact the Wisconsin Department of Financial Institutions to inquire about the specific requirements for your industry. Examples of licenses and permits may include professional licenses, zoning permits, sales tax permits, and health department permits. Ensuring your business fully complies with all relevant regulations is essential for your LLC’s smooth operation and ongoing success in Wisconsin.

We’ve also compiled a list of the best business attorneys in Wisconsin to assist you in acquiring your business licenses, securing permits, and other Wisconsin requirements!

Recommended: Unlock your business growth in Wisconsin – choose a trusted LLC Formation Service for hassle-free license and permit applications. Secure your company’s legal foundation today! We recommend –
Our #1 Pick: LegalZoom – ($0 + State Fees) Online LLC Setup

Cost of Changing From Sole Proprietorship to LLC

The cost of changing from a sole proprietorship to an LLC in Wisconsin includes the following fees:

$170 (by mail and $130 online) for filing the Articles of Organization
$25 for the annual report filing (every 1 year years)
Wisconsin Department of Revenue fees, which may include state income tax at 7.90% and state sales tax at 5.00%
No franchise tax annual franchise tax fee (if applicable)
in Wisconsin, there is no late filing annual franchise tax late filing fee (if applicable)
Business license and permit fees, which vary depending on the type of business and the location

Why Change From Sole Proprietorship to LLC

There are several reasons why business owners choose to change from a sole proprietorship to an LLC in Wisconsin:

Personal asset protection: One of the primary reasons for converting a sole proprietorship to an LLC in Wisconsin is the added layer of personal asset protection. As an LLC is considered a separate legal entity, the owner’s personal assets, such as their homes, cars, and savings, are protected from the company’s debts and liabilities. In contrast, a sole proprietor’s personal assets are at risk if the business faces financial or legal challenges. Thus, forming an LLC provides a safety net for business owners, ensuring that their personal finances are not jeopardized by their business dealings.
Tax benefits: Another advantage of converting to an LLC in Wisconsin is the potential tax benefits. An LLC offers flexible tax options, allowing the business to be taxed as a sole proprietorship, partnership, or corporation, depending on the most beneficial structure for the owner’s specific circumstances. For example, an LLC can avoid the double taxation that corporations often face by being taxed as a pass-through entity, where the business’s profits and losses directly flow through to the owner’s personal tax return. This flexibility can lower the owner’s overall tax burden and provide additional tax planning and savings opportunities.
Improved credibility: Forming an LLC in Wisconsin can also enhance the credibility and professional image of the business. Clients, customers, and potential investors may view an LLC as more stable and established than a sole proprietorship. This improved perception can help attract new business, secure funding, and enhance the company’s overall reputation. Additionally, having an LLC in Wisconsin may provide more opportunities for growth and expansion, as the legal structure can be more easily adapted to accommodate new partners, investors, or business ventures.

FAQs

What are the benefits of converting a sole proprietorship to an LLC in Wisconsin?

Some benefits include limited liability protection, potential tax advantages, and separation of personal and business assets.

Can I convert my sole proprietorship to an LLC without changing my business name?

Yes, you can keep your business name while converting to an LLC in Wisconsin.

What is the process to convert a sole proprietorship to an LLC in Wisconsin?

The process can vary, but generally involves filing articles of organization with the Wisconsin Department of Financial Institutions and obtaining a new EIN for the LLC.

Do I need an attorney to convert my sole proprietorship to an LLC in Wisconsin?

It’s not required, but it’s wise to consult with an attorney familiar with Wisconsin business law to ensure everything is done correctly.

How much does it cost to convert a sole proprietorship to an LLC in Wisconsin?

Fees can vary based on the size and nature of your business, but generally cost around $130 to file articles of organization and obtain a new EIN.

What happens to my sole proprietorship’s debts when I convert to an LLC in Wisconsin?

Your sole proprietorship’s debts don’t go away, but they are now separate from your personal liabilities, meaning your personal assets are not at risk.

Will I need to obtain new licenses and permits when converting to an LLC in Wisconsin?

Not necessarily, but it’s important to check with your local and state licensing departments to make sure everything is in order.

How long does it take to convert a sole proprietorship to an LLC in Wisconsin?

The timeline varies, but it typically takes several weeks to a few months to complete the legal process.

Are there any tax implications when converting a sole proprietorship to an LLC in Wisconsin?

Yes, there may be tax implications depending on your business structure and income level. Consult with a financial professional for advice.

Is the process to convert a sole proprietorship to an LLC in Wisconsin different than other states?

The process can vary slightly by state, but the basic steps are similar.

Do I need to notify my customers or vendors when converting my sole proprietorship to an LLC in Wisconsin?

Legally, no, but it’s a smart idea to let them know to avoid confusion or misunderstandings.

What are the first steps to converting a sole proprietorship to an LLC in Wisconsin?

The first steps are generally to consult with an attorney and file articles of organization with the Department of Financial Institutions.

Do I need to hold a meeting or notify shareholders when converting a sole proprietorship to an LLC in Wisconsin?

No, as a sole proprietorship, you are the sole owner, so there are no formal shareholder or meeting requirements.

Can I continue to operate my business as usual during the conversion process to an LLC in Wisconsin?

Yes, you can continue to operate your business while the legal process is being completed.

Are there any disadvantages to converting a sole proprietorship to an LLC in Wisconsin?

Depending on your business structure and income level, there may be taxes and administrative costs associated with creating an LLC.

How is an LLC different from a sole proprietorship in Wisconsin?

An LLC offers limited liability protection and a separation of personal and business assets, while a sole proprietorship does not.

Is there a deadline to convert my sole proprietorship to an LLC in Wisconsin?

There is no specific deadline, but it’s recommended to convert sooner rather than later if you want to protect your personal assets.

Can LLC owner names be changed when converting from a sole proprietorship in Wisconsin?

Yes, the owner names can be changed when transferring to an LLC, but additional documentation may be required.

Can I keep the same bank account when converting my sole proprietorship to an LLC in Wisconsin?

It depends on the bank’s requirements, but it’s generally possible to use the same account if you notify them of the change in legal status.

Do I need to file any additional paperwork to dissolve my sole proprietorship in Wisconsin when converting to an LLC?

No, converting to an LLC essentially dissolves your sole proprietorship.

Can I bring on other owners when converting my sole proprietorship to an LLC in Wisconsin?

Yes, an LLC allows for multiple owners, whereas a sole proprietorship does not.

Are there any ongoing filing requirements for LLCs in Wisconsin?

Yes, LLCs are required to file an annual report and maintain certain records with the state.

Can I convert from an LLC back to a sole proprietorship in Wisconsin?

Yes, it’s possible to dissolve an LLC and revert back to a sole proprietorship if needed.

If my sole proprietorship is registered in another state, can I still convert to an LLC in Wisconsin?

Yes, but you’ll need to register your LLC as a foreign entity to legally operate in Wisconsin.

What liability protections do LLCs offer in Wisconsin?

LLCs offer limited liability protection, meaning personal assets are not at risk in the event of a lawsuit or debt collection.

Can I operate my business under a different name after converting to an LLC in Wisconsin?

Yes, but you’ll need to technically register a Doing Business As (DBA) name with the Wisconsin Department of Financial Institutions.

Do I need to notify my employees when converting my sole proprietorship to an LLC in Wisconsin?

It’s not legally required, but it’s a good idea to notify your employees of the change in business status and structure.

Does Wisconsin offer any tax incentives or benefits for LLCs?

Wisconsin offers various tax credits and incentives for businesses operating in the state, including LLCs.

Can I convert my in-home business to an LLC in Wisconsin?

Yes, in-home businesses can convert to an LLC in Wisconsin, just like any other type of business.

What is a sole proprietorship?

A sole proprietorship is a business that is owned and operated by a single individual.

What is an LLC?

An LLC, or limited liability company, is a type of business structure that provides its owners with personal liability protection, while still maintaining the flexibility and tax benefits of a partnership.

Can a sole proprietorship be converted to an LLC in Wisconsin?

Yes, a sole proprietorship can be converted to an LLC in Wisconsin.

Why would someone want to convert their sole proprietorship to an LLC?

Converting to an LLC can provide personal liability protection for the owners, as well as potential tax benefits.

What is the process for converting a sole proprietorship to an LLC in Wisconsin?

The process for converting a sole proprietorship to an LLC in Wisconsin involves filing certain forms with the Wisconsin Department of Financial Institutions.

What are the forms that need to be filed in order to convert a sole proprietorship to an LLC in Wisconsin?

The forms that need to be filed include a Wisconsin Articles of Organization form, along with a $170 filing fee.

Can the owner of the sole proprietorship continue to operate their business during the conversion process?

Yes, the owner can continue to operate their business during the conversion process.

Will changing to an LLC affect the business’s tax status?

Converting to an LLC may have some tax implications for the business, such as changes to the way income is reported.

Are there any fees associated with converting a sole proprietorship to an LLC in Wisconsin?

Yes, there is a $170 filing fee to convert a sole proprietorship to an LLC in Wisconsin.

Do owners of an LLC in Wisconsin have personal liability protection?

Yes, owners of an LLC in Wisconsin are typically provided with personal liability protection.

Are there any residency requirements for forming an LLC in Wisconsin?

No, there are no residency requirements for forming an LLC in Wisconsin.

Can a non-US citizen form an LLC in Wisconsin?

Yes, a non-US citizen can form an LLC in Wisconsin.

Can a business be converted to an LLC if it has existing debts?

Yes, but it may require additional steps to address existing debts.

How many people are needed to form an LLC in Wisconsin?

Only one person is needed to form an LLC in Wisconsin.

Is an LLC the best option for every business?

No, there are many factors to consider when deciding on the best business structure for a particular business.

Does changing to an LLC affect the name of the business?

Converting to an LLC may require a change to the name of the business.

Are there any annual fees associated with having an LLC in Wisconsin?

Yes, there is an annual LLC report fee of $25 that must be paid to the Wisconsin Department of Financial Institutions.

How are LLC profits taxed in Wisconsin?

LLC profits are typically taxed as personal income for the business owners.

Can an LLC be owned by another LLC or corporation in Wisconsin?

Yes, an LLC can be owned by another LLC or corporation in Wisconsin.

How long does an LLC last in Wisconsin?

In Wisconsin, an LLC can operate indefinitely, unless it is dissolved by its owners.

How long does it take to get an EIN for an LLC in Wisconsin?

It typically only takes a few minutes to get an EIN for an LLC in Wisconsin.

Do owners of an LLC always have equal voting rights?

No, the voting rights of owners in an LLC can be arranged in the LLC’s operating agreement.

Can an LLC have multiple classes of ownership in Wisconsin?

Yes, an LLC can have multiple classes of ownership in Wisconsin.

Can a Wisconsin LLC be owned by a single member?

Yes, a Wisconsin LLC can be owned by a single member.

Is an operating agreement required for a Wisconsin LLC?

Technically, no, but it is highly recommended that all LLCs have an operating agreement in place.

Can a Wisconsin LLC be managed by its owners?

Yes, a Wisconsin LLC can be managed by its owners, or by a manager appointed by the owners.

Are there any other steps required to convert a sole proprietorship to an LLC in Wisconsin?

No, as long as the necessary paperwork is filed with the Wisconsin Department of Financial Institutions, the conversion should be fairly straightforward.

Conclusion

Converting your sole proprietorship to an LLC in Wisconsin offers numerous advantages, including personal asset protection, tax benefits, and improved credibility. By following the six steps outlined in this guide, you can confidently navigate the process of forming an LLC and enjoy its benefits to your business. Remember, investing in the right legal structure can provide long-term benefits and peace of mind as you grow and expand your business.

If you’re ready to take the next step and change your sole proprietorship to an LLC in Wisconsin, visit LLCBase for more detailed information and guidance. Don’t wait any longer – start your journey toward a more secure and prosperous business today!