How to Form an S Corporation in Wisconsin

Introduction

When you form an S corporation in Wisconsin, you’ll be able to keep your business income separate from your personal income and shield some of it from taxes. You also won’t be personally liable for business debts or liabilities incurred by your corporation. The following is a guide to forming an S corporation in Wisconsin:

Before you start the process of incorporating your business as an S corporation in Wisconsin, be sure that your business actually qualifies as an S corporation by the Internal Revenue Service (IRS). S corporations are corporations that pay entity-level income tax. To qualify for this tax structure, a corporation must meet the following criteria:

  • There are no more than 100 shareholders or owners who own stock in your company.
  • You file Form 8832 to elect to be taxed as an S Corp with the IRS and obtain approval from them before you start operating your business under this legal structure.
  • The shareholder-employees have limited liability protection under state law (meaning they won’t be held responsible for any debts incurred by the company)

Be a Domestic Corporation

You must be a corporation incorporated under Wisconsin law and have its principal place of business in Wisconsin. To be eligible for an S corporation election, the corporation must also be:

  • A domestic corporation (as defined in Section 301(e)(3) of Title 15 of the United States Code).
  • One that is not prohibited from making an election by any provision of this chapter or by any other provision of federal law.

Have Only Allowable Shareholders

  • The share holders of an S corporation must be U.S. citizens or residents.
  • Shareholders can be corporations, estates (of deceased individuals), trusts, partnerships and other unincorporated entities but not nonresident aliens.

No More than 100 Shareholders

  • Have no more than 100 shareholders who are allowed to pass through earnings and losses on their personal income tax returns.
  • If you exceed that number, you’ll need to convert your S corporation into a C corporation, which is beyond the scope of this tutorial.
  • If you want fewer than 100 shareholders who can pass through earnings and losses, simply add them!

Have Only one Class of Stock

Another important consideration is that you cannot have more than one class of stock. All shareholders must be given the same voting rights, dividend rights and liquidation rights.

This means that if your company is already operating as an S corporation and you want to make any changes to its structure, then you need to convert it into a different type of entity before doing so.

Not Be an Ineligible Corporation

If you’re a financial institution or insurance company, you can’t form an S corporation in Wisconsin. Those types of entities are explicitly ineligible to be S corporations in the state.

Financial institutions include banks and credit unions as well as investment companies and money market funds. If your business is any of these, then it’s not eligible to be an S corporation in Wisconsin.

Insurance companies are also prohibited from being S corporations—and they must use a different entity type (such as an LLC) if they want to avoid double taxation on their earnings.

In addition, domestic international sales corporations (DISCs) aren’t allowed to obtain tax benefits from being set up as an S corporation because they’re designed for exporters who don’t need income tax deductions at all.

Choose a Name

Choose a name for your Wisconsin S corporation that complies with Wisconsin law and isn’t already being used by another business in Wisconsin. You can check the availability of your proposed S corporation name by searching the Department of Financial Institutions database. If you want to reserve a name while you’re preparing and filing other documentation with the state, you may file an Application for Reservation of Corporate Name with the Department of Financial Institutions; however, this is optional. If you do not reserve a name, you will need to complete your incorporation within 120 days of your approved corporate name application or it will expire.

You can reserve a corporate name for up to five years with the Department of Financial Institutions. It is not required that you reserve your corporate name, but doing so will allow you to keep the same name for up to five years before completing your incorporation. If you do not reserve a corporate name and complete your incorporation within 120 days of being approved for registration, your corporation’s articles of incorporation will have expired and be invalidated by law.

Conclusion

Incorporating your business as an S corporation in Wisconsin is a straightforward process. As long as you follow the state’s guidelines for forming a corporation, you’ll be able to get started with little hassle. To learn more about how to form an S corporation in Wisconsin and get started with incorporation today, contact us or visit our website!

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