Beer, cheese curds, and football: what’s not to love about Wisconsin? Budding business owners in America’s Dairyland are able to take advantage of several perks, including low cost of living and housing prices, as well as a Business Development Tax Credit established to boost entrepreneurial activity in the state.
In the interest of supporting Badger State entrepreneurs, we’ve put together the essential guide to starting a business in Wisconsin. We’ll walk you through each step in the process of turning a great idea into a fully functioning enterprise, including drafting a business plan, registering with the state government, and developing an internet presence.
Wisconsin small business statistics at-a-glance
- 452,594 small businesses are active in Wisconsin, accounting for 99.4% of the businesses in the state.
- 1.3 million Wisconsin residents are employed by small businesses, which is 49.9% of the state’s private workforce.
- In 2016, small businesses were responsible for creating 30,108 net jobs in Wisconsin.
- Manufacturing is the leading small business employment industry, followed by healthcare and social assistance, and accommodation and food services.
- 79.62% of Wisconsin small businesses survive beyond their first year of existence.
- Wisconsin startups create 3.88 new jobs in their first year, on average.
- Tax Foundation ranked Wisconsin #26 in its 2020 State Business Tax Climate Index.
Starting a business in Wisconsin in 12 steps
1. Develop an idea
Every successful business starts with a good idea. Ask yourself these questions:
- Which product or service can your business provide that doesn’t already exist on the market?
- How does your business idea refine an existing product or service?
Determine your personal strengths and interests: developing an idea that suits your personality and positive traits will provide motivation to put in the long hours necessary in addressing the myriad challenges you’ll face in getting your business off the ground.
Figure out how to market your expertise: if your business idea is not something you totally believe in and can sell effectively, it will be much harder to succeed.
2. Do the research
Once you have an idea, it’s time to put it through the wringer and decide if it’s viable in the market. Conduct market research to arrive at answers to these key questions:
- Is there a demand for your product/service in Wisconsin?
- Who is your target market?
- Do existing businesses in Wisconsin offer a similar product/service?
- What makes your business unique compared to the competition?
Coming up with satisfactory answers may require refinement, or even a total overhaul, of your original idea. Be patient: you’ll only want to proceed with the next steps after determining that a niche exists in the Wisconsin market for your business idea.
3. Draft a business plan
Now it’s time to write the blueprint of your business. A great business plan should chart the path of your company from infancy to success while being able to attract investors to provide financing.
Your business plan ought to include the following sections:
- Executive summary – An overview of your business and why it will be successful
- Description of business – Explain the advantages of your business and the problems it solves
- Market research – Provide research on your industry, target market, and potential competitors
- Organization and staff – Detail the nuts and bolts of your business; how it’s structured and who will run it
- Product or service description – State what you are selling or offering
- Marketing plan – Explain your strategy for attracting customers
- Fundraising – The money you’ll need in the next five years to grow your business and how you’ll spend it
- Financial forecast – Data and balance sheets providing a financial forecast for your business
- Appendix – An optional section with supporting and/or requested documents like resumes, letters of reference, permits, etc.
4. Secure funding
Every business needs money to get off the ground. In fact 82% of businesses that fail do so because of a lack of cash flow, U.S. Bank found in a recent study. Your business plan should include a detailed estimate of the funds you’ll need to cover expenses for at least a year, so now it’s time to acquire the money.
If you aren’t wealthy enough to self-fund your business, you can choose from a number of other funding options. These include a loan from the U.S. Small Business Administration, taking out a loan from a commercial bank, launching an equity crowdfunding campaign, or securing funding from an angel investor or venture capitalist group active in Wisconsin.
An angel investor is a wealthy individual who invests their personal finances in a startup, typically in the beginning stages, whereas a VC is a group of investors that will fund a business throughout its existence.
Which route you choose depends on the specifics of your business: angel investors typically invest smaller sums to help get a startup off the ground, while VCs invest larger sums of money in exchange for a greater say in the operations of a business. Smaller startups usually opt to pursue funding from angel investors.
Investors in Wisconsin may be eligible for the Qualified New Business Venture (QNBV) Program, which offers tax credits to angel investors that invest in Wisconsin-based early-stage businesses. The credit can equal as much as 25% of the investment’s value. Like other state programs of its type, the QNBV program stimulates investment activity in Wisconsin and eases access to equitable capital for state entrepreneurs.
Wisconsin Angel Investors and VCs
- Golden Angels Investors – Founded in 2002, Golden Angels has plenty of experience funding midwestern startups in a number of fields.
- Rock River Capital – A young venture fund run by two University of Wisconsin graduates who returned to the state and started the fund to improve access to capital for startups in Wisconsin.
- SymphonyAlpha Ventures – A venture capital firm specializing in funding early-stage startups in the field of health care. So far, the firm has over 10 companies in its portfolio.
- Wisconsin Investment Partners – Self-proclaimed as “Wisconsin’s foremost angel investment group”, WIP presents a strong case: the 100-member strong group has invested $41 million in 80 companies, to date.
Additional Investor Resources
- AngelList: Wisconsin Angel Investors – A directory of 4,958 angel investors open to investing in Wisconsin startups.
5. Decide on a legal business entity
The form of business entity you choose will affect many factors going forward. There are 3 main options to decide from:
- Sole proprietorship – The name for running a business by yourself. Legally, you and your business are one and the same, with no separate legal entity for your business. A partnership is legally identical to a sole proprietorship, except that it comprises two or more people.
- Corporation – A complex legal structure that is a separate entity (providing legal protection to owners) from the owner and comprises directors, officers, and shareholders.
- LLC – AKA “Limited Liability Company”, this is a hybrid entity between a sole proprietorship and a corporation that possesses advantages of both. An LLCs provides the liability protection of a corporation, yet isn’t subject to double taxation as the profits go through your personal tax return.
Nowadays, LLCs are the option of choice for small business owners as they are easy to manage and provide the benefits of a corporation while lacking their complex structure. Taxwise, they operate more like a sole proprietorship.
You may want to consult with an attorney to help decide which entity works best for your business.
6. Register your business
After deciding on the business structure that’s right for your company, you can register it with the state of Wisconsin. This process follows different steps depending on your chosen business entity.
For sole proprietorships
Sole proprietors in Wisconsin are not required to file with the state government. However, the state gives sole proprietors using a name different from their legal name the option to obtain a certification of trade name with their local County Register of Deeds, though it is not mandatory to do so.
First, run a search using the Wisconsin Department of Financial Institutions Business Name Database to verify that your chosen business name is distinguishable from others on record. Then, you can head to the County Register of Deeds Office in the county where your business is located to file out and submit a registration of firm names. The filing fee is $30.
For LLCs and corporations
Everyone forming an LLC or corporation must first appoint a registered agent to handle process notices and other government correspondence on behalf of the business. The registered agent must be a firm or individual authorized to do business in Wisconsin and have a physical address in the state.
Next, run a search to confirm that your business name is available for use in the state. Then, you can file the paperwork necessary for the formation of your business.
An LLC is formed in Wisconsin through the filing of Articles of Organization with the Wisconsin Department of Financial Institutions. You can file the articles online at the WDFI website, or through the mail. The filing fee is $130 for online filing and $170 for mail filing.
A corporation is formed in Wisconsin through the filing of Articles of Incorporation with the Wisconsin Department of Financial Institutions. This can be done online, or by using postal mail. The filing fee is $100.
7. Acquire federal and state tax IDs
Now you should obtain a Federal Employer Identification Number (EIN), which is like a social security number for a business and allows you to open bank accounts, handle payroll, and file taxes.
Each state has its own laws and taxes regarding businesses. Most Wisconsin businesses must register to pay the state business tax. This can be done at the Wisconsin Department of Revenue website for an initial fee of $20. Registration covers a period of two years, after which you must renew for a fee of $10.
After registering for the state business tax, you can file and pay taxes online for your business.
8. Open business banking and credit accounts
Opening a bank account for your business is crucial because it allows you to separate company assets from your personal assets, and makes filing taxes a lot easier. This is a recommended step, even if you are operating a sole proprietorship.
It’s also a wise idea to obtain a credit card for your business because it will help you isolate business expenses and build up credit for your company, which may help in securing investment in later stages.
Banks operating in Wisconsin good for small businesses
9. Get the necessary licenses and permits
Depending on the type of business you are opening, you may need to apply for a number of permits and licenses to operate legally. For example, a restaurant will need a liquor license, and a pawn shop will need a reseller’s license. The paperwork may prove a hassle, but it’s a necessary ordeal that will protect you from fines, lawsuits, and other legal hazards.
Wisconsin does not issue a statewide general business license, however, many businesses will need one or more occupational licenses, certifications or permits if it operates in a state-regulated category.
The Department of Revenue has a section on permits and licenses, along with links on how to apply for them. Other commonly required permits and licenses are issued by the Wisconsin Department of Natural Resources, and the Wisconsin Department of Health Services.
10. Choose a location
Whether you are running an online business or opening a restaurant, location is everything. Be aware of the demographics of the neighborhood or town that you are considering: Are the local residents likely to visit your business? Will nearby competitors take a share of your potential profits?
While it’s not the state’s largest city (that’s Milwaukee), Madison may be Wisconsin’s best city to live and start a business in. As home to the largest University of Wisconsin campus, Madison boasts a lively restaurant and nightlife scene, as well as a young, well-educated populace from which to draw talent in order to staff your business.
With a population of around 258,000, Madison is large, but not intimidatingly so. The city’s five major lakes are the icing on the cake: lending beauty to the city, and opening up many recreational opportunities.
Milwaukee is another great option for entrepreneurs: the city is inexpensive to live and do business in, boasting cost of living and housing prices much lower than those of many major U.S. cities. The city also has a ton of breweries, for those who love great beer, and two major sports teams.
11. Get insured
No matter what type of business you form, buying insurance coverage to protect yourself in the case of property damage or legal action is a good idea. In fact, businesses with employees are required by the federal government to have two types of insurance, while others are strongly encouraged, or required at the state level, depending on your business type. Consult with a licensed insurance agent to find out which types of insurance you should get.
Required forms of insurance:
- Workers’ compensation: Covers medical costs and disability benefits if an employee is injured or becomes ill on the job.
- Unemployment insurance: Provides benefits to workers after a loss of job through no personal fault.
Recommended forms of insurance:
- Professional liability insurance: Covers losses as a result of property damage, medical expenses, libel, slander, and negligence claims.
- Commercial property insurance: Covers property damage to business owned properties and possessions as a result of fire, theft, or storm.
- Disability insurance: Provides short-term benefits for employees suffering an illness or injury. Required in certain states such as California, New York, and Hawaii.
12. Develop an internet presence
Establishing an identity on the web is an important investment in a business’s future development. Here are some key steps in the process:
- Register a domain name for a company website (You can use domain.com, Bluehost, GoDaddy.com, Namecheap.com). Design the website and fill it with content.
- Create profiles on the popular social media services (Twitter, Facebook, Instagram)
- Register a Google profile for your business
- Create accounts on review sites such as Yelp, Google Reviews, and TripAdvisor
Wisconsin small business resources
- Wisconsin Department of Financial Institutions – Register your LLC or corporation online with the state government.
- Wisconsin Department of Revenue: My Tax Account – Register your business online to file and pay state taxes.
- Wisconsin Small Business Development Center – A large statewide organization dedicated to aiding Wisconsin small business owners through free consultation, providing access to funding, and other helpful services.
- NFIB: Wisconsin – Get the latest Wisconsin business news and learn about important issues facing the Wisconsin entrepreneurial community.
- gener8tor – A “turnkey” accelerator program with bases in Milwaukee, Madison, and Minnesota. Each year, gener8tor invests $100K in five of the most promising startups that participated in its 12-week program.
- Startup Milwaukee – An organization that extends access to capital, mentorship and other resources to startups in Southeast Wisconsin. You can also learn about upcoming community events through the site.
- StartingBlock Madison – A huge 50,000 square foot center for entrepreneurial activity and networking in downtown Madison.
- Horizon Coworking – An excellent coworking space in Madison boasting a SupraNet Gigabit fiber internet connection and a slew of facilities, including meeting rooms, a kitchenette, and a commuter shower.
- SE Wisconsin | SCORE – The nation’s leading business mentoring network’s chapter covering the densely populated southeast part of the state. Based in Milwaukee.
- West Central Wisconsin & UP of Michigan – SCORE’s chapter serving the more remote parts of Wisconsin and Michigan.