Start an S Corporation in Wisconsin

Forming an S corporation (S corps) in Wisconsin isn’t a simple case of making a declaration about your business entity. You must follow several steps to ensure your small business achieves the desired designation. 

This article explores those steps, explains how the Internal Revenue Service (IRS) views S corps, and discusses the benefits of this tax structure.

S Corporation in Wisconsin: Key Points

• An S corp is a tax classification that passes all business income, losses, deductions, and credits to the company’s shareholders.

• Existing LLCs or corporations can elect S corp status with the IRS.

• There are several requirements a business must meet to elect S corp status, such as having no more than 100 shareholders.

What Is an S Corporation?

Though many make the mistake of calling an S corp a business entity or structure, it’s neither of those things. Instead, it's a tax classification that enables a limited liability company (LLC) or corporation to benefit from several pass-through tax rules.

In short, an S corp passes all business income, losses, deductions, and credits directly to the company’s shareholders.

This differs from the standard C corporation (C corp) setup, where the business gets taxed on those four things before they make their way to shareholders. As such, businesses avoid paying federal corporate tax with the S corp structure.

However, your business must meet several criteria to obtain S corp status. For example, it can only have up to 100 shareholders. Any more, and you must revert to C corp status. More details about these regulations are in the “Requirements for Forming an S Corporation in Wisconsin” section.

In practice, an S corp is closer to a typical LLC. However, it has benefits over this classification, particularly regarding the transfer of business ownership and enhanced liability protection.

Tax Considerations for an S Corporation in Wisconsin

With S corps being a tax classification instead of a business structure, you must understand the tax treatment the IRS bestows on this type.

Wisconsin Tax Treatment of S Corporations

Any Wisconsin business that obtains S corp status doesn’t typically pay federal corporation tax at the federal level. Rather, each shareholder in the corporation pays federal, state, and local income tax on the income they receive from the S corp.

As long as you apply for S corp status at the federal level, these rules apply throughout Wisconsin. Consequently, there’s little difference between how the state of Wisconsin treats an S corp and how it’s treated on the national level.

Wisconsin Franchise Tax for S Corporations

A Wisconsin S corporation may have to pay taxes on income generated via interest. Specifically, it may have to pay Wisconsin’s franchise tax on these earnings.

According to the City of Whitewater website, Wisconsin’s franchise tax applies to all domestic and foreign corporations. The rate currently stands at 7.9%, with your business being obligated to estimate how much franchise tax it will need to pay on its yearly tax return. This is assuming the business will have a tax liability of $500 or more.[1]

Pass-Through Taxation

According to the Tax Foundation, a pass-through business entity is any business that doesn’t have to pay corporate income tax.[2] An S corp is a prime example, though partnerships and sole proprietorships are also pass-through entities.

Instead of paying corporate income tax, each member, owner, or shareholder in the entity pays taxes on their own tax return. In some cases, S corp shareholders also have to pay self-employment tax, particularly in a sole proprietorship or in some types of LLCs.

For example, let’s assume you’re the chief shareholder in an S corp. You’ll receive income based on your ownership percentage, on which you pay tax. You must also account for distributions. However, you can deduct a percentage of the company’s losses from your tax return.

Interestingly, Wisconsin provides S corp creators with the option of whether to leverage pass-through tax. In 2017, the state passed Act 368, allowing S corp owners to have their businesses taxed at the entity level.[3] You have to opt-in to do this, with most S corps still operating via the traditional pass-through rules.

Requirements for Forming an S Corporation in Wisconsin

The Wisconsin Department of Revenue oversees the rules for which type of company can achieve S corp status.[4] Your business must meet the following regulations to become an S corporation:

• Have no more than 100 S corporation shareholders

• Be a domestic corporation created, based, and organized in the United States

• Have only a single class of stock, though you can have stock with different voting rights

• Only allow individuals, estates, certain trusts, and certain tax-exempt organizations to be shareholders

• Have no nonresident aliens as shareholders

Almost any business can apply to be an S corp, except the following:

• Corporations that receive a tax credit as part of doing business in the United States

• Financial institutions using the reserve method to account for bad debts

• Domestic international sales corporations or interest charge domestic international sales corporations

• Any insurance companies taxed via Subchapter L in the Internal Revenue Code

As you can see, the requirements for becoming an S corp are more complex than those for forming a limited liability company. That’s why Swyft Filings offers an online S corp filing service to ensure you don’t miss any crucial requirements.

Filing as an S Corp in Wisconsin

Creating an S corporation in Wisconsin isn’t a simple case of completing a form. There are deadlines to consider and several other aspects of business formation. 

The following six-step process demonstrates how your company can obtain S corp status in the state.

Step 1: Choose a Business Name

Your business name is your company’s unique identifier. Ideally, your name should be memorable and indicate what your business does. You can also choose a formal name for the business in addition to a “Doing Business As” (DBA) name.

A DBA name is any pseudonym or moniker you use for your company that isn’t exactly the same as your registered business name. For example, a company named “Wisconsin Real Estate Holdings, Inc.” could have a DBA name of “Wisconsin Realtors.”

You must choose a unique corporate name before you can form an S corporation in Wisconsin. The name you choose must not be in use by any other Wisconsin-based business. Otherwise, you violate the other company’s ownership of its name and potentially violate any trademarks it has on the name.

You can search for business names with our free business name search tool. 

Once you have a name, you can reserve that name for up to 120 days using a Name Reservation Application.[5] Name reservation is useful if you’re not ready to start your business at the point when you come up with the name.

Finally, consider trademarking your name and any identifying marks or slogans you create. Having a trademark makes it easier to contest illegal uses of your name and identifiers in court. Swyft Filings can help you to find an appropriate name as part of our filing services.

Step 2: Appoint Directors and a Registered Agent

Because an S corp is technically a corporate structure, even if you create an S corp from an LLC, you need a board of directors. This board can include any of your S corporation shareholders, with each of your S corp directors responsible for governing the business.

Elect only those willing to invest time and effort into running your S corp. Honorary positions are okay, though remember that you have a 100-person limit for S corp shareholders.

Next, your business must appoint a registered agent before it can transact in the state of Wisconsin. This agent is an individual or entity who takes on the following responsibilities:

• Maintain a physical address that serves as your company’s registered office (can not be a P.O. Box)

• Receive service of process and other documents on your business’s behalf

• Keep regular business hours to ensure they’re available to receive documents

You can be a Wisconsin registered agent if you’re an individual with a physical address in the state. As long as they have a physical address, business entities can also act as registered agents. You can also serve as your own registered agent for your S corp.

While serving as your agent means you save a little money and get more control, it has downsides. For example, you must maintain regular business hours, which isn’t possible for businesses like bars or restaurants, and take on an administrative burden.

That’s why many opt to use a third-party registered agent service. At Swyft Filings, our service offers fast receipt and transmission of your documents via a dashboard you can access whenever you want. Check out our registered agent services to learn more.

Step 3: File Articles of Organization or Articles of Incorporation

With an agent elected and your business name decided, it’s time to form your business. That means completing Articles of Organization if you have an LLC or Articles of Incorporation for a corporation.

In both cases, you must provide standard details about your business and pay a filing fee to submit the document.

For Articles of Organization, you can submit them online via the WDFI website or by mail to:

State of WI-Dept. of Financial Institutions

Box 93348

Milwaukee, WI 53293

You must pay a filing fee of $130 for online submissions or $170 for mail submissions.

You’ll use the same website and address when filing Articles of Incorporation. Filing fees are $100 for a for-profit corporation or $35 for a non-profit organization.[6]

After receiving your Certificate of Formation, your Wisconsin business must also stay in good standing with the state to stay in business. Wisconsin requires you to file an annual report to do this, which you can file via the One Stop Business Portal website.

At Swyft Filings, we can help you to form an LLC or corporation while ensuring you submit the relevant documents for your business.

Step 4: Create an S Corp Operating Agreement

An S corp operating agreement is an essential document in your corporate records. It denotes how you and the other shareholders or LLC members will run your business.

Wisconsin law doesn’t require business owners to have S corp operating agreements. However, it’s still a good idea to create one for the following reasons:

• Establishes bylaws for your business

• Ensures your business structure has protection in the eyes of the state 

• Clarifies the roles and responsibilities of each business member

• Denotes who receives what from the business, such as assigning percentages for splitting income and losses

• Formalizes your liability protection for LLCs

Step 5: Apply for an Employer Identification Number

An Employer Identification Number is like a Social Security Number (SSN) for your business. It’s a unique nine-digit code that the IRS uses to oversee employment taxes and income tax.

Your business needs to have an EIN if you have any employees. But even if you’re self-employed with nobody else in the business, it helps to have an EIN. Most banks won’t open business bank accounts for companies that don’t have an EIN.

You can apply for an EIN online via the IRS website, or we can handle the EIN application process for your business, allowing you to focus on the other steps for creating an S corp.

Step 6: File Form 2553 for S Corporation Election

The previous steps ensure you get your business up and running legally. However, you still need to apply for S corp status, which is where Form 2553 comes in.

This form allows you to complete the S corporation election, usually in preparation for the following tax year. For example, you may file the form for your business entity in November 2023 in preparation for becoming an S corp in the 2024 tax year.[7]

However, you’re in luck if you miss the tax year deadline. The IRS allows you to submit Form 2553 up to two months and 15 days after the beginning of the current tax year.[8] You can make this submission via the IRS website or by submitting your form via mail to the following address:

Department of the Treasury

Internal Revenue

Service Center

Kansas City, MO 64999

Finally, a business owner with an LLC they wish to turn into an S corp can do so even if they’re past the deadline. In these cases, you must submit Form 8832 alongside Form 2553.[9]

Wisconsin S Corp vs. Wisconsin LLC

Tax purposes are the most obvious reason for wanting S corp status. Having an S corp means you avoid double taxation on your company’s income. However, some may wonder why an S corporation election is a better choice than forming a limited liability company and leaving it at that. These are the pros and cons of each choice.

Advantages of Starting an LLC in Wisconsin

• Access flow-through tax treatment

• Gain liability protection to prevent creditors from coming after your personal assets

• File LLC taxes easier than corporate taxes

Disadvantages of Starting an LLC in Wisconsin

• A Wisconsin judge can choose to hold an LLC member personally liable in cases of fraud or similar illegal activity

• LLCs get the same treatment as partnerships from the IRS, meaning you may have to pay self-employment tax

• An LLC may have to dissolve if a member goes bankrupt or leaves the business

Advantages of Forming an S Corporation in Wisconsin

• Don’t have to pay federal taxes at the entity level

• Receive corporate-level liability protection

• Exist in perpetuity, meaning your S corp won’t automatically dissolve if a member leaves

• Use more flexible accounting methods due to being taxed on personal income alone

• Make your business appear more credible in some industries

• Transfer ownership easier 

Disadvantages of Forming an S Corporation in Wisconsin

• S corps require you to meet corporate governance requirements that aren’t present with an LLC

• You must operate within the restrictions placed on S corps, meaning less freedom

• The IRS tends to keep a closer eye on S corps than it does on LLCs

Ready to File for S Corp Status in Wisconsin?

Do you need help converting a C corp into an S corp so you can avoid the double tax law? Or do you want to convert your LLC to S corp tax status, which offers more protection and potential tax savings?

Either way, Swyft Filings can help.

Our team has helped over 250,000 businesses with their filing needs. We offer a transparent and fast service, ensuring your S corp filings are on time and accurate. If you’d like to learn more about how to form an S corporation in Wisconsin, get in touch with our team today.

Frequently Asked Questions

What is an S corporation in Wisconsin?

An S corporation is any business that has successfully applied for S corp status through the IRS.

Does Wisconsin recognize S corporations?

Wisconsin does recognize S corps. It also allows S corps to adopt a more traditional double taxation model.

What is the turnaround time for filing for S corp status with the IRS?

The IRS can take up to 60 days to respond to an S corp filing.

What is the difference between an S corp and an LLC?

There are several differences, including levels of liability protection and freedom in business governance. This article goes into more detail. 

What are the requirements for an S corporation in Wisconsin?

You must meet several requirements, including being a domestic corporation, having at most 100 shareholders, and only issuing one type of stock.

Are taxes for LLCs and S corps the same?

LLCs and S corps are pass-through entities, but how you’re taxed varies depending on the structure you create.

What is the S corp tax rate?

The S corp tax rate is the same as your federal and Wisconsin income tax rate because earnings pass through to you and your shareholders. S corps pay no corporation tax.

How do I dissolve an S corporation in Wisconsin?

You must close your business by submitting Articles of Dissolution via the State of Wisconsin Department of Revenue website.[10]

Bibliography

1. City of Whitewater. “Tax & Utility Rates.” Accessed March 6, 2023.

2. Tax Foundation. “Pass-through Business.” Accessed March 6, 2023.

3. Bakertilly. “Wisconsin enacts a pass-through entity tax.” Accessed March 6, 2023.

4. Wisconsin Department of Revenue. “Wisconsin Tax Treatment of Tax-Option (S) Corporations and Their Shareholders.” Accessed March 6, 2023.

5. Wisconsin Department of Financial Institutions. “Name Reservation Application.” Accessed March 6, 2023.

6. Wisconsin Department of Financial Institutions. “Corporation Section Filing Fees.” Accessed March 6, 2023.

7. Internal Revenue Service. “About Form 2553, Election by a Small Business Corporation.” Accessed March 6, 2023.

8. Internal Revenue Service. “Instructions for Form 2553.” Accessed March 6, 2023.

9. Internal Revenue Service. “About Form 8832, Entity Classification Election.” Accessed March 6, 2023.

10. State of Wisconsin Department of Revenue. “Closing a Business.” Accessed March 6, 2023.