A Wisconsin LLC Operating Agreement is a contract that highlights all the company’s internal policies and procedures as a guide to thriving and uniform business operations.
All LLC owners are referred to as LLC members. Limited Liability Companies can be owned by either single or multiple entities. These entities may include a sole proprietor or another business in form of partners or corporations.
LLC members with the Wisconsin LLC operating agreement can protect their assets from losses in company bankruptcy or any litigation issues. In addition, with the agreement, these members can separate their private assets from their business assets, hence avoiding any losses.
Wisconsin State advises the LLC members to have this operating agreement based on the Limited Liability Companies (Chapter 183) and State Definition (§ 183.0102(16)) supporting state laws found in their statues database.
With a Wisconsin LLC operating agreement, company members can receive tax benefits and hiring incentives. The process of filing this agreement is free, and although it is not a requirement, LLCs should have it to increase personal liability protection.
Also, the document is necessary for LLCs because, without it, the State of Wisconsin will intervene to solve any internal conflicts, according to the state laws that govern LLCs. If the LLC has an operating agreement, the document will be used in court to solve any internal conflicts.
Types of the Operating Agreement
There are different types of Wisconsin LLC operating agreements that LLC members can choose according to their operations. The two types of LLC operating agreements in Wisconsin State include:
Single-member LLC operating agreement
This document is most appropriate for LLCs with a single member, usually the owner. It is best if the notary public signs this document for authenticity reasons.
Download: Microsoft Word (.docx)
Wisconsin Multi Member LLC Operating Agreement Template
This document is best used by LLCs that have more than one member. All members must review the information in the document before signing, and filing can happen.
Download: Microsoft Word (.docx)
Importance of Operating Agreement
Even though it is not a requirement, having a Wisconsin LLC operating agreement is beneficial. Apart from protecting personal assets from business assets in Wisconsin, there are other benefits the LLC members with this agreement will receive.
Here is the importance of having a Wisconsin LLC operating agreement.
- The operating agreement acts as a guide for the company by providing daily operations to long-term plans for the LLC.
- Companies can make their own business decisions without interference from Wisconsin’s state laws meant for LLCs with an LLC operating agreement.
- This document is a reference point for any company-internal disagreements where members can resolve their issues.
- The operating agreement is also beneficial when it comes to business finances. For example, banks will only allow LLCs with this document to open bank accounts, and lenders will only give loans to LLCs with this contract.
- This document is also helpful when potential investors wish to evaluate and learn more about the business before investing in the company.
Information to be Included
Each company in Wisconsin is different and may have unique needs that should be addressed in the operating agreement. Whatever the case, there are essential details that must be found across all Wisconsin LLC operating agreements.
The information to be included in the Wisconsin LLC operating agreement includes:
The name of your LLC is the first part of the operating agreement and must be written in full. The name must be the same as the one used in the Articles of Organizations when forming the LLC. Any abbreviations or punctuations in the name must be well indicated. This will help with the identification of the company.
The operating agreement should have a list of names of all members who are owners of the company. In addition, their addresses, capital invested, and percentage of ownership should be written next to their names. This will help to provide precise details of the company’s ownership hence better management and responsibilities division.
The management structure mentioned in the agreement can either be member-managed or manager-managed, depending on the members’ decisions. This means that members can manage themselves or hire a manager to deal with all the management responsibilities. For a member-managed structure, the members can also choose one or two members who will handle management duties in the company.
Duties of members
The duties of managers and members should be well highlighted in this section to avoid future conflicts. With this section in the agreement, authority is clearly defined, and expectations are set.
Rights and responsibilities
Both passive and active company members have the rights and responsibilities to vote, which must be included in the agreement. In addition, voting leads to decision-making. This means that the voting process and matters requiring voting should be specified in this agreement section.
Distribution of profits and losses
Division of profits and losses among members should be determined in advance in the operating agreement. This might be done equally or based on the percentage of ownership and capital investment. No matter the case, this information must be included in this section to ensure proper business operations. When it comes to cash, there should be specific details.
Even though there are no particular requirements on how LLCs should handle their meetings, there is a need to include guidelines for scheduling and holding meetings in the operating agreement. This way, each member knows where, when, and why to attend a meeting. Also, the consequences of failing to attend a scheduled meeting can be included in this section.
Buyout and Buy-Sell rules
The membership of the LLC might change with existing members leaving and new members joining. That means that there should be guidelines on how to handle such transitions smoothly. Be it retirement, death, or bankruptcy, the exit of a member should be prepared to determine their payments, who will receive these payments, and who will inherit them.
New members must know the amount they need to pay for their capital investment based on the information provided in this section.
Dissolution of the LLC
If a company dissolves, there should be rules surrounding the dissolution process in the operating agreement. For example, the vote might have to be unanimous from all members for dissolution to take place. Also, how to handle the company’s pending projects and debts must be well planned for in this document.
Company members should also remember to file the Articles of Organization with the state and pay $20 to complete the dissolution process of the company. This way, no taxes will be expected from the company.
Modify your agreement
Since an operating agreement can be changed, a section should specify what will lead to such changes and how the changes will be handled for easier transitions. The guidelines on how to modify the document should also be included in the operating agreement. The most important thing to remember is that every change made in the operating agreement must be made in the Articles of Organizations to ensure that the two documents match.
Operating Agreement Template
Since it is vital to have an LLC operating agreement, we have the Wisconsin LLC operating agreement templates to guide how to write the correct document. Company members can form their operating agreements. However, with a template, all the information that must be present is included.
Download the free and easily accessible Wisconsin LLC operating agreement template today and use it to prepare this document. With a template, you will have a practical guide for preparing your operating agreement in Wisconsin State.
How to Form an LLC Operating Agreement?
The first thing LLC members must do is to confirm that their LLC name is unique by searching for their business name in the State’s Records. Any similarity between their LLC name and the already registered LLCs will lead to the rejection of the application.
For LLC members in Wisconsin to form a proper LLC operating agreement, here are the steps they need to follow to form one:
All the members that manage the company must choose an agent who will handle all the state filings and legal notices on behalf of the company. The agent must be registered, a resident of Wisconsin State and have the authority to conduct business.
The registered agent will then select the LLC types, domestic or foreign LLC, and file the required applications. For example, with the domestic LLC, the registered agent will need to file the Articles of Organizations online or through an Adobe PDF. Likewise, the agent will file the Certificate of Registrations for a foreign LLC online or through an Adobe PDF.
For the application filing to be successful, the registered agent must pay a filing fee of $130 (online) or $170 (Adobe PDF) for a domestic LLC. For foreign LLC, the filing fee is $100, both online and Adobe PDF.
For paper applications (Adobe PDF), the registered agent must enclose proof of payment with the other documents and send it to the ‘Department of Financial Institutions’ to this address:
State of WI Dept. of Financial Institutions, Box 93348, Milwaukee, WI 53293-0348. Online applications require payment at a particular stage before the process is completed.
A single-member or multi-member Wisconsin LLC operating agreement is drafted at this stage. The type of operating agreement chosen must represent the business structure of the company properly.
Getting the EIN from the IRS is the final step of forming an operating agreement in Wisconsin. The EIN is a nine-digit number that is needed for tax reports, opening company bank accounts, and financial transactions like getting loans from lenders. It also helps the company during the hiring process of new employees. You can apply for the EIN online through the IRS website or submit your application through the mail.
Frequently Asked Questions
An operating agreement is not a requirement for LLCs in Wisconsin. It is, however, advisable for LLC members to prepare and have this agreement for successful business management.
In Wisconsin, a single-member LLC also needs an operating agreement, just like a multi-member LLC might need one. This helps single-member LLCs to get protection from personal liability when it comes to issues regarding the company.
You can write your LLC Operating Agreement in Wisconsin State. However, the best way to go about it is to consult an attorney who will guide you and ensure that all the necessary information is present before the document is signed.