Organization: It’s Not Just for Closets

Last week, we discussed why you would want to be a statutory entity.  The two most common choices are limited liability companies (“LLC”) or corporations – whether that is an S-corp. or a C-corp.  Each are controlled by their very own set of statutes.  Chapter 183 details the rules and defaults for LLC’s while Chapter 180 does the same for corporations.

Although there are a lot of similarities, there are some very big differences that are important for you to understand.  Be prepared to talk to your accountant and lawyer to get the best handle on what will work best for you.  That being said, let’s talk a bit about what you will need to have to become either.

In order to be either an LLC or a corporation, you must form and register your entity with the applicable state agency by paying a fee and filing your articles (LLC = Articles of Organization, Corporation = Articles of Incorporation).  In Wisconsin, it is the Department of Financial Institutions.  To file an LLC, you need to include the following in your Articles:

  1. Name: The proposed name of the new limited liability company.
  2. Registered Agent: The name of the registered agent and the registered office address.
  3. Management: The type of management the new LLC will use; will management be vested in a manager/managers or in a member/members of the new LLC. (See Wisconsin Statute 183.0401.)
  4. Organizers: The names and complete addresses of each organizer.
  5. Signature: The articles must be signed by one or more organizers.
  6. Contact: The name, address, email address, and phone number of the contact person for the filing.
  7. Fees: Online Wisconsin Limited Liability Company filing fee is $130.00. This fee is not refundable.

For a corporation, you need to include the following in your Articles:

  1. Name: The proposed name of the new corporation.
  2. Registered Agent: The name of the registered agent and the registered office address.
  3. Number of shares of stock authorized: The number of shares of stock the corporation shall be authorized to issue. Some quantity of shares must be authorized.
  4. Incorporators: The name and complete address of each incorporator.
  5. Signature: The articles of incorporation must be signed by one or more incorporators.
  6. Contact: The name, address, email address, and phone number of the contact person for this filing. All communication regarding this filing will be via the e-mail address of the contact person.
  7. Fees: Online Wisconsin Stock For-Profit Corporation filing fee is $100.00. This fee is not refundable

How do you decide which to become?  It depends on

If there are two or more owners of your LLC or you choose to be a corporation, you should seek the assistance of a lawyer to draft additional documents.  An LLC can have operating agreement that spells out such details as each member’s duties, capital contributions, and rights to profits.  A corporation has bylaws, which provides a lot of the same details. Both help avoid arguments later as a lot of the tough decisions get made while you are all getting along.  For example, if there are two of you, what happens when you need to make a decision, and you disagree? What is the tie breaker?  Or what happens when one of you want to leave.  Don’t fool yourself; it happens.

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