When considering the formation of a Limited Liability Company (LLC), understanding the legal differences between states is crucial. Delaware and Wisconsin are two states with distinct legal frameworks that impact LLCs.
In this comparison, we will navigate the legal differences between Delaware and Wisconsin LLCs, covering formation requirements, management structures, operating agreements, and other legal considerations.
By gaining insights into these variations, entrepreneurs and business owners can make informed decisions when choosing between Delaware and Wisconsin as the jurisdiction for their LLCs.
Delaware vs. Wisconsin LLC
Taxation:
Delaware imposes both state income and corporate taxes but lacks a state sales tax.
Wisconsin has state income and corporate taxes along with a 5.00% state sales tax, affecting the tax burden on businesses.
Filing Fees and Compliance Costs:
Delaware offers a lower initial filing fee but imposes an annual franchise tax, leading to ongoing costs.
Wisconsin has variable initial filing fees and requires an annual report with a fee, affecting both initial and annual expenses.
Business Environment:
Delaware is known for its corporate-friendly legal system and privacy protections for LLC members.
Wisconsin fosters a unique business culture with a focus on local businesses and a diversified economy.
| Delaware LLC | Wisconsin LLC |
|---|---|
| Delaware imposes a state income tax on individuals, with rates ranging from 2.20% to 6.60%. This can impact the personal income of LLC members. | Wisconsin also has a state income tax, with rates ranging from 3.54% to 7.65%. This affects the individual income of LLC members. |
| It has a corporate income tax rate of 8.70%, which impacts businesses structured as corporations or LLCs treated as corporations for tax purposes. | It levies a corporate income tax at a rate of 7.90%, affecting businesses structured in this manner. |
| Delaware LLCs are subject to an annual franchise tax with variable fees, which vary based on the LLC’s structure and authorized shares, potentially leading to ongoing compliance costs. | Wisconsin does not impose an annual franchise tax on LLCs, which can reduce annual compliance costs. |
| It offers a lower initial filing fee of $90, making it relatively cost-effective to establish an LLC. | Its initial filing fees vary based on the filing method, with a fee of $170 for mail submissions or $130 for online submissions. |
| Delaware does not have a state sales tax, which can be advantageous for businesses selling goods and services. | Wisconsin imposes a 5.00% state sales tax on most transactions, impacting the cost of sales for businesses. |
| It is renowned for its corporate legal system and expertise, attracting businesses with complex legal needs. | It fosters a unique business culture, emphasizing sustainability, local businesses, and social responsibility. |
| Delaware provides greater privacy for LLC members, as it doesn’t require members’ names to be disclosed in the public record. | Wisconsin’s privacy is relatively limited, as members’ information is part of the public record. |
| It does not require LLCs to file an annual report, reducing the associated annual compliance costs. | It mandates LLCs to file an annual report with a fee of $25, increasing annual compliance expenses. |
| Delaware is known for its well-established and predictable legal framework, making it attractive to businesses with complex legal needs. | Wisconsin emphasizes a progressive and sustainable regulatory environment, appealing to businesses focused on innovation and social responsibility. |
Cost Breakdown of The Two
You may use our free LLC cost calculator by state to find out filing fees, tax percentages, income taxes, and more.
Delaware LLC:
Filing Fees: Delaware charges an initial filing fee of $90.
Annual Franchise Tax: Delaware LLCs are subject to an annual franchise tax with variable fees, depending on the LLC’s structure and authorized shares.
This can range from a minimum annual tax of $175 to a maximum of $200,000.
Registered Agent Fees: Registered agent fees in Delaware can vary but typically range from $100 to $300 or more per year.
Wisconsin LLC:
Filing Fees: Wisconsin’s initial filing fee varies based on the submission method. It is $170 for mail submissions and $130 for online submissions.
Annual Report Fee: Wisconsin requires LLCs to file an annual report with a fee of $25, impacting the annual compliance costs.
Registered Agent Fees: Registered agent fees in Wisconsin are generally similar to Delaware, typically ranging from $50 to $300 or more per year.
Related Posts:
- Delaware LLC: Cost Breakdown, Pros and Cons, Requirements
- Wisconsin LLC: Cost Breakdown, Pros and Cons, Requirements
Similarities Between Delaware and Wisconsin LLC
Limited Liability Protection:
Both Delaware and Wisconsin provide limited liability protection to the members of an LLC.
This means that the personal assets of members are generally shielded from the debts and liabilities of the LLC, offering financial security.
Registered Agent Requirement:
In both states, LLCs are required to designate a registered agent with a physical address in the respective state.
The registered agent is responsible for receiving legal and official documents on behalf of the LLC.
Privacy:
Delaware and Wisconsin both allow LLCs to maintain a level of privacy regarding the public disclosure of members’ names in the state records, providing some confidentiality to the members.
Annual Reporting:
Both states have some form of annual reporting requirement.
Delaware imposes an annual franchise tax, while Wisconsin requires an annual report with a fee.
Compliance with these obligations is necessary for LLCs in both states.
Both states allow LLCs to choose between member-managed or manager-managed structures, offering flexibility in defining the management of the company.
Additional Resources:
Steps to Form LLC in Delaware
Choose a unique name for your Delaware LLC, ensuring it includes “Limited Liability Company” or its abbreviations (LLC or L.L.C.).
Designate a registered agent with a physical address in Delaware to receive legal documents on behalf of the LLC.
File a Certificate of Formation with the Delaware Division of Corporations, either online or by mail.
Pay the required filing fee, which is $90.
Create an Operating Agreement outlining your LLC’s internal management structure and member roles.
Obtain an EIN (Employer Identification Number) from the IRS for tax and banking purposes.
Comply with Delaware’s annual franchise tax requirements.
Consider seeking legal advice for specific needs, if necessary.
Steps to Form LLC in Wisconsin
Choose a unique name for your Wisconsin LLC that complies with state naming rules.
Designate a registered agent with a physical address in Wisconsin to receive legal documents on behalf of the LLC.
File Articles of Organization with the Wisconsin Department of Financial Institutions, either online or by mail.
Pay the required filing fee, which varies based on the filing method (e.g., $170 for mail submissions or $130 for online submissions).
Create an Operating Agreement outlining your LLC’s internal management structure and member roles.
Obtain an EIN (Employer Identification Number) from the IRS for tax and banking purposes.
File an Initial Report with the Wisconsin Department of Financial Institutions within 90 days of LLC formation.
Comply with any additional state and local business permits or licenses that may be required for your specific business type.
Feature Comparisons Between Delaware LLC vs. Wisconsin LLC
Delaware LLC:
Delaware imposes a state income tax and corporate income tax, with an annual franchise tax on LLCs. The state does not have a state sales tax.
It charges a lower initial filing fee, making it more cost-effective to establish an LLC.
Delaware is known for its well-established legal framework, particularly in corporate law, providing a reliable and familiar environment for businesses.
It offers greater privacy for LLC members, as it does not require members’ names to be disclosed in the public record.
Wisconsin LLC:
Wisconsin also has a state income tax and corporate income tax, along with a state sales tax, which can impact the overall tax burden for businesses.
Its initial filing fees vary based on the submission method, and it requires an annual report with a fee, potentially increasing the overall cost of formation and compliance.
Wisconsin has a unique business culture, with a focus on local businesses, diversity, and sustainability, creating a distinctive regulatory environment.
Registered agent fees in Wisconsin are generally comparable to Delaware, impacting the annual cost of maintaining an LLC.
Business Environment
Delaware LLC:
Corporate Legal Hub: Delaware is renowned as a corporate legal hub and attracts many large corporations and financial institutions due to its sophisticated corporate legal system and well-established precedents.
Predictability: Delaware provides a predictable legal framework with a history of business-friendly court decisions, offering a level of legal certainty.
Privacy: Delaware allows for greater privacy, as it doesn’t require members’ names to be disclosed in the public record, providing confidentiality for business owners.
Wisconsin LLC:
Local Business Culture: Wisconsin has a distinct local culture, emphasizing sustainability, community-oriented businesses, and a focus on environmental and social responsibility.
Progressive Regulatory Environment: Wisconsin is known for its progressive and sustainable regulatory environment, making it an attractive choice for businesses operating in specific industries such as agriculture, renewable energy, and tourism.
Innovation: Wisconsin promotes innovation and sustainability, creating opportunities for businesses that align with these values.
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Delaware vs. Wisconsin Taxes
Delaware Taxes:
It imposes a state income tax on individuals with rates ranging from 2.20% to 6.60%. This can affect the personal income of LLC members.
Delaware has a corporate income tax rate of 8.70%, impacting businesses structured as corporations or LLCs treated as corporations for tax purposes.
Delaware LLCs are subject to an annual franchise tax, the amount of which varies based on the LLC’s structure and authorized shares.
It does not have a state sales tax, which can be advantageous for businesses selling goods and services.
Wisconsin Taxes
Wisconsin does impose a state income tax with rates ranging from 3.54% to 7.65%.
The state levies a corporate income tax at a rate of 7.90%.
Additionally, Wisconsin has a 5.00% state sales tax on most transactions, affecting the cost of sales transactions.
Flexibility in Rules and Regulations
Delaware:
Well-Established Legal Framework:
Delaware is renowned for its well-established and highly predictable legal framework, especially in corporate law. It offers a consistent and business-friendly environment.
Privacy and Flexibility:
Delaware provides a degree of privacy for LLC members, as it doesn’t require members’ names to be disclosed in the public record. This enhances confidentiality.
It also allows LLCs significant flexibility in defining their own operating agreements and management structures.
Specialized Court of Chancery:
Delaware boasts a specialized Court of Chancery dedicated to handling corporate law matters.
This court is known for its efficient and expert handling of business disputes, which adds another layer of reliability for businesses operating in the state.
Wisconsin:
Unique Business Environment:
Wisconsin offers a unique business culture, emphasizing innovation, sustainability, and social responsibility.
The state is particularly attractive to businesses that align with these values.
Progressive Regulatory Environment:
Wisconsin maintains a regulatory environment that can be characterized as progressive and sustainable.
This makes it an appealing choice for businesses in specific industries like renewable energy, agriculture, and technology.
Local Focus:
Wisconsin has a strong focus on supporting local businesses and communities, which can create opportunities for businesses that prioritize community engagement and locally sourced products.
Key Differences Between Delaware and Wisconsin- An Overview
