How To Start A Wisconsin Sole Proprietorship (2023)

Are you ready Discover the freedom of running your own show with a Wisconsin Sole Proprietorship. Be your own boss, make the decisions, and enjoy the rewards of your hard work—all in one streamlined business package.

Embarking on the establishment of a Wisconsin sole proprietorship entails a well-defined roadmap that underscores both legal compliance and strategic decision-making. Begin by meticulously selecting a business name that not only resonates with your vision but also adheres to Wisconsin’s naming regulations.

Ensure the availability of the name by registering it with the Wisconsin Department of Financial Institutions (DFI), solidifying your business identity in the state. While it’s not obligatory, getting an EIN as a foreign national, whether considering Delaware or an LLC, is a wise decision for various administrative and legal purposes.

This unique identifier simplifies financial management by segregating personal and business finances, even if you’re a sole proprietor without employees. Alternatively, you can operate using your Social Security Number.

Navigate the intricate landscape of local regulations to ensure your business operates within legal boundaries. Obtain the requisite permits and licenses from your city or county, bearing in mind that specific industry requirements might apply. If your chosen business name differs from your legal name, filing a “Doing Business As” (DBA) or fictitious name registration is vital to foster transparency in your business dealings.

Treading into the realm of taxation, register with the Wisconsin Department of Revenue (DOR) to fulfill state and local tax obligations, which could encompass sales tax. This might entail obtaining a Wisconsin Tax Number and streamlining tax reporting and compliance efforts. Concurrently, establishing a dedicated business bank account is a crucial move that simplifies financial management and enhances professionalism.

Moreover, meticulous record-keeping is indispensable for accurate financial tracking, tax reporting, and audit readiness. Business insurance is equally pivotal, shielding your venture from unforeseen liabilities and disruptions. Depending on your industry, secure any required professional licenses or certifications, particularly in regulated sectors like healthcare or legal services.

Should your business trajectory involve partnerships or investor engagements, consider drafting an operating agreement that outlines roles and responsibilities, minimizing future conflicts. Lastly, for home-based operations, navigate local zoning regulations and obtain necessary home business permits to ensure compliance.

As you embark on this entrepreneurial journey, engaging with legal and financial professionals is highly recommended. Their expertise can provide valuable guidance, ensuring compliance with legal prerequisites while setting a strong foundation for the growth and success of your Wisconsin sole proprietorship.

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What Is A Wisconsin Sole Proprietorship?

A Wisconsin sole proprietorship is a simple and common form of business ownership where an individual operates and manages a business on their own.

In this structure, the owner and the business are considered the same legal entity, meaning there’s no legal separation between personal and business finances. While it offers autonomy and a straightforward setup, the owner assumes full liability for the business’s debts and obligations.

This type of business doesn’t require a formal registration process, but obtaining the necessary licenses and permits is essential to operate legally in Wisconsin.

What Is A Sole Proprietorship?

A sole proprietorship is a basic and unincorporated business structure where a single individual owns and operates a business. In this arrangement, the owner is the business itself, leading to direct control over decision-making and management. While it offers simplicity and autonomy, the owner also bears full personal liability for the business’s financial obligations and legal issues. Sole proprietorships are easy to establish and don’t require a complex legal process, making them a common choice for small-scale enterprises.

Who Is A Sole Proprietor?

A sole proprietor is an individual who owns and operates a business on their own, without partners or shareholders. As the sole owner, they have complete control over the business’s operations, decision-making, and management. However, this ownership structure also means that the individual is personally liable for the business’s debts, liabilities, and legal obligations. Sole proprietors are common in small businesses and freelance ventures due to their straightforward setup and direct involvement in all aspects of the business.

Sole Proprietorship VS LLC

A sole proprietorship and a Limited Liability Company (LLC) are two distinct business structures, each with its own set of advantages and considerations.

Sole Proprietorship:

  • Ownership: A sole proprietorship is owned and operated by a single individual. There are no partners or shareholders.
  • Liability: The owner has unlimited personal liability for the business’s debts and legal issues. Personal assets are at risk.
  • Taxes: Business income is typically reported on the owner’s personal tax return (Form 1040), and self-employment taxes apply.
  • Ease of Setup: Sole proprietorships are easy and inexpensive to set up. Formal registration is often not required, but local licenses or permits might be necessary.
  • Control: The owner has complete control over business decisions and operations.

LLC (Limited Liability Company):

  • Ownership: An LLC can have one or more owners, known as members. It offers flexibility in terms of ownership structure.
  • Liability: One of the main benefits is limited liability. Members are generally not personally liable for the company’s debts and legal obligations beyond their investment.
  • Taxes: An LLC can choose to be taxed as a sole proprietorship (for single-member LLCs) or as a partnership (for multi-member LLCs), or it can elect to be taxed as a corporation. This flexibility allows for potential tax advantages.
  • Ease of Setup: Setting up an LLC involves filing articles of organization with the state. While it’s more formal and requires a filing fee, it provides legal protection and credibility.
  • Control: Members can define the operating structure and management roles in an LLC through an operating agreement.

In summary, a sole proprietorship is a simple and direct business structure suitable for individuals seeking autonomy and minimal setup. However, it comes with personal liability. On the other hand, an LLC offers limited liability protection and more flexibility in terms of taxes and ownership, making it a popular choice for those who want legal protection and potential tax benefits while maintaining a relatively straightforward setup process. The choice between the two depends on factors like your business’s size, risk tolerance, and long-term goals. Consulting with legal and financial professionals can help you make an informed decision based on your specific circumstances.

Basic Requirements To Start Wisconsin Sole Proprietorship

Starting a sole proprietorship in Wisconsin involves a few basic requirements:

1. Business Name and DBA Acquisition:

The first step is to choose an apt business name that aligns with your brand and adheres to Wisconsin’s naming criteria. If your chosen name differs from your legal name, you’ll need to file a “Doing Business As” (DBA) or fictitious name registration. This ensures that your business operates under the desired name, enhancing transparency and professionalism in transactions.

2. Determine Taxation Requirements:

Registering for state and local taxes is pivotal. The Wisconsin Department of Revenue (DOR) oversees taxation matters. Depending on your business, you might need to acquire a Wisconsin Tax Number, which simplifies tax reporting and compliance. Understand the specific tax obligations that apply to your business type and ensure timely filing and payments.

3. Obtain Business Licenses and Permits:

Contact your local city or county authorities to determine the licenses and permits required for your business. These requirements vary based on your business’s nature and location. Compliance with these regulations is crucial to operate legally and avoid potential penalties.

4. Operating Agreement:

While not obligatory, an operating agreement can be beneficial, particularly if your business includes partners or investors. This document outlines roles, responsibilities, and decision-making structures, which can prevent potential disputes down the line.

Starting a sole proprietorship in Wisconsin necessitates careful attention to these requirements. Given the complexity of legal and regulatory aspects, consulting with professionals experienced in business setup and compliance is strongly advised. Their expertise will ensure that you meet all necessary obligations and set a strong foundation for your business’s success.

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How To Start A Wisconsin Sole Proprietorship: A Step-By-Step Guide

Start a Wisconsin Sole Proprietorship

Starting a Wisconsin sole proprietorship is a carefully orchestrated process that involves a step-by-step approach to establishing your business correctly and in accordance with legal regulations. This guide will walk you through each crucial stage, ensuring that you lay a strong foundation for your venture while complying with Wisconsin’s business laws. From conceptualizing your business idea to executing it effectively, this step-by-step guide outlines the essential tasks to initiate and run a successful sole proprietorship in Wisconsin.

Steps to Start A WISCONSIN Sole Proprietorship
Starting a Wisconsin sole proprietorship involves a step-by-step process to ensure proper setup and legal compliance. Follow this guide:
Business Idea and Name

Brainstorm and decide on your business idea. Choose a unique and suitable business name that adheres to Wisconsin’s naming rules and resonates with your brand.

DBA Registration (if needed)

If your business name differs from your legal name, file a “Doing Business As” (DBA) or fictitious name registration with your county clerk’s office.

Determine Taxation Requirements

Understand the specific tax obligations for your business type. Register for state and local taxes with the Wisconsin Department of Revenue (DOR). Determine if you need a Wisconsin Tax Number.

Obtain Business Licenses and Permits

Contact your local city or county government to identify the licenses and permits necessary for your business. Fulfill these requirements to operate legally.

Business Insurance

Consider the appropriate business insurance coverage to protect against liabilities and risks specific to your industry.

Home-Based Business Considerations

If you’re operating from home, review local zoning regulations and secure any required permits.

Separate Business Bank Account

Open a separate bank account for your business finances to maintain clarity between personal and business transactions.

Record Keeping and Compliance

Keep meticulous records of all financial transactions, expenses, and income. This documentation is crucial for accurate bookkeeping, tax reporting, and legal compliance.

Optional: Professional Licenses

If your industry requires specific licenses or certifications, research and obtain the necessary credentials.

Operating Agreement (if applicable)

Consider drafting an operating agreement to outline roles, responsibilities, and decision-making processes, especially if you have partners or investors.

Start Your Business

With all legal requirements fulfilled, you’re ready to launch your Wisconsin sole proprietorship. Begin offering your products or services to customers.

Remember that while these steps provide a general framework, the details can vary based on your specific business and location. Seeking advice from legal and financial professionals can provide personalized guidance to ensure a successful and legally compliant start to your sole proprietorship in Wisconsin.

Advantages Of A Sole Proprietorship

A sole proprietorship offers several advantages that make it an attractive business structure for many entrepreneurs:

  • Simplicity: Setting up a sole proprietorship is straightforward and requires minimal legal formalities. You don’t need to file complex documents or adhere to extensive administrative requirements, making it an easy option for those just starting out.
  • Full Control: As the sole owner, you have complete control over all business decisions. You can swiftly implement your ideas without the need for consensus or approvals from partners or shareholders.
  • Direct Profit: You keep all the profits generated by the business. There’s no need to share earnings with partners or shareholders, allowing you to enjoy the direct fruits of your labor.
  • Decision-Making: With no partners or a board of directors, decision-making is quick and uncomplicated. You can respond promptly to market changes and adapt your strategies as needed.
  • Tax Advantages: Sole proprietorships often benefit from certain tax advantages. Business income is usually reported on your personal tax return, which can lead to simplified tax filing and potential deductions for business expenses.
  • Flexibility: Running a sole proprietorship allows for maximum flexibility. You can easily adjust your business model, change direction, or pivot based on emerging opportunities or challenges.
  • Privacy: Unlike some other business structures, sole proprietorships offer a degree of privacy. There’s no requirement to disclose sensitive business information to partners or shareholders.
  • Low Costs: Operating as a sole proprietorship typically comes with lower initial and ongoing costs compared to more complex business structures like corporations.
  • No Sharing of Profits: Since you’re the sole owner, you don’t need to divide profits among partners or shareholders, allowing you to invest earnings back into the business or personal endeavors.
  • Minimal Regulatory Compliance: Sole proprietorships often have fewer regulatory requirements compared to larger business entities. This means less paperwork and administrative burden.

While a sole proprietorship presents numerous advantages, it’s important to note that it also comes with potential downsides, such as unlimited personal liability for business debts. Weighing the pros and cons and considering your specific business needs will help you determine if a sole proprietorship is the right fit for your entrepreneurial journey.

Wisconsin Sole Proprietorship: Conclusion

In conclusion, a Wisconsin sole proprietorship offers a straightforward and flexible path for individuals to venture into entrepreneurship. This business structure comes with a range of benefits, including simplicity in setup, full control over decision-making, and direct access to profits. Entrepreneurs can enjoy the advantages of quick decision implementation, potential tax advantages, and the ability to adapt swiftly to changing market conditions.

Additionally, the low initial costs and minimal regulatory requirements make it an appealing option, especially for those starting small businesses. However, it’s essential to approach a sole proprietorship with a clear understanding of its drawbacks. One major consideration is the unlimited personal liability that comes with sole ownership, putting personal assets at risk in case of business debts or legal issues.

Additionally, the absence of partners or shareholders might limit access to additional capital and resources. As you embark on the journey of establishing a Wisconsin sole proprietorship, carefully assess your business goals, risk tolerance, and long-term plans. This evaluation will help you determine if a sole proprietorship aligns with your vision and offers the right balance between its advantages and disadvantages.

Seeking professional advice, particularly from legal and financial experts, can provide valuable insights and guidance, ensuring that you make informed decisions that set your business on a path to success.

Wisconsin Sole Proprietorship: Frequently Asked Questions

What is a Wisconsin sole proprietorship?

A Wisconsin sole proprietorship is a type of business structure where an individual operates and owns a business on their own. It’s the simplest form of business ownership, and the owner is personally responsible for all aspects of the business.

How do I register a business name for my sole proprietorship in Wisconsin?

If your business name is different from your legal name, you’ll need to file a “Doing Business As” (DBA) or fictitious name registration with your county clerk’s office in Wisconsin. This ensures that your business operates under the desired name.

Do I need to obtain an EIN for my Wisconsin sole proprietorship?

While not mandatory for sole proprietors without employees, obtaining an Employer Identification Number (EIN) from the IRS can be beneficial. It’s useful for opening a business bank account and can help separate personal and business finances.

What are the tax implications of a Wisconsin sole proprietorship?

In a sole proprietorship, business income is usually reported on your personal tax return (Form 1040). You’ll need to pay self-employment taxes, which include Social Security and Medicare taxes. Depending on your business, you might also need to collect and remit sales tax.

Are there any business licenses or permits required for a sole proprietorship in Wisconsin?

The licenses and permits required vary depending on your business type and location. Contact your local city or county government to determine the specific licenses and permits you need to operate legally.

Can I hire employees in a Wisconsin sole proprietorship?

Yes, you can hire employees in a sole proprietorship. However, you’ll need to register for an Employer Identification Number (EIN) and comply with federal and state employment laws.

Is liability limited in a Wisconsin sole proprietorship?

No, one of the drawbacks of a sole proprietorship is that there’s no legal separation between the business and the owner. This means that the owner has unlimited personal liability for business debts and legal issues.

Can I convert my sole proprietorship into a different business structure later?

Yes, you can convert your sole proprietorship into a different business structure, such as an LLC or corporation, if your business grows or your circumstances change. Consulting legal and financial professionals is recommended before making such a transition.

Can I have partners in a Wisconsin sole proprietorship?

No, a sole proprietorship, by definition, is owned and operated by a single individual. If you want to involve partners, you would need to consider forming a different business structure, such as a partnership or LLC.

What resources are available for starting a Wisconsin sole proprietorship?

The Wisconsin Department of Financial Institutions (DFI) and the Wisconsin Department of Revenue (DOR) provide information on business registration and taxation. Additionally, seeking advice from legal and financial professionals can provide valuable insights tailored to your specific business needs.

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