Frequently Asked Questions
Wisconsin businesses are subject to various regulations through local, state or federal regulatory agencies. The Frequently Asked Questions below can assist you, the business owner, with basic planning needs. They are not all-inclusive and are not meant to serve as the only resource when making business decisions. We strongly recommend consulting with a qualified business attorney and Certified Public Accountant before making legal and financial decisions about your business.
For answers to your startup issues, talk to our experienced business consultants at the Wisconsin Business AnswerLine:
Business owners may file a registration of tradename with the DFI, and see the Trademarks and Tradenames page for more information. The application form for registration may also be found on DFI’s website. For further questions, please contact the Trademark section at the Department of Financial Institutions at PO Box 7847, Madison WI 53707-7847, or by phone at 608.266.8915.
Business owners may file a statement on the use of a business name with the county Register of Deeds. Please see section 134.17 of the Wisconsin Statutes and the Wisconsin Register of Deeds Association forms for further information, and contact your county Register of Deeds for recording requirements. Although these optional registrations create a public record of your use of a business name, the registrations, in themselves, do not establish or reserve exclusive rights to use of a name.
The FEIN or EIN is a nine-digit number that the IRS assigns to business entities. The IRS uses this number to identify taxpayers who are required to file various business tax returns.
A business is not required to have a FEIN if it has no employees and is organized as a sole proprietorship or limited liability company with one member. The owner’s social security number may be used instead. However, getting a FEIN in these cases may be wise because a business may be asked for its FEIN in the course of doing business, and this avoids the need to use the owner’s social security number as the company’s identification number. If the business changes to a partnership or corporation, or if it hires employees, a FEIN will be required.
To apply for a FEIN, go to https://www.irs.gov/.
Independent contractors, regardless of their business structure, are required by Wisconsin Worker’s Compensation Law to obtain a FEIN. A social security number cannot be substituted. When requesting a FEIN from the IRS, inform them that you are required by the State of Wisconsin to obtain a FEIN.
Facts that provide evidence of the degree of control and independence fall into three categories:
- Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
- Financial: Are the business aspects of the worker’s job controlled by the payer? These include things like how the worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.
- Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?
Businesses must weigh all these factors when determining whether a worker is an employee or independent contractor. Some factors may indicate that the worker is an employee, while other factors indicate that the worker is an independent contractor. There is no “magic” or set number of factors that “makes” the worker an employee or an independent contractor, and no one factor stands alone in making this determination. Also, factors which are relevant in one situation may not be relevant in another.
The key is to look at the entire relationship, consider the degree or extent of the right to direct and control, and finally, to document each of the factors used in coming up with the determination.
The State of Wisconsin presumes that any worker is an employee unless an employer can prove otherwise. This is an area often misunderstood by small businesses.
If you have employees, you must withhold certain taxes from your employees’ pay checks. An employer’s federal payroll tax responsibilities include withholding from an employee’s compensation and paying an employer’s contribution for Social Security and Medicare taxes under the Federal Insurance Contributions Act (FICA).
Employers must withhold federal income tax from employees’ wages, and the 0.9% Additional Medicare Tax on an employee’s wages and compensation that exceeds a threshold amount based on the employee’s filing status. Employers also report and pay Federal Unemployment (FUTA) tax separately from federal income tax, and Social Security and Medicare taxes.
The amount deducted must be forwarded to the IRS on an annual, quarterly, monthly, or weekly basis depending on the amounts involved. A penalty may be imposed if the funds are not paid. The individual owner or others may be held personally liable for the penalty.
A Wisconsin employer identification number is required for employers who pay wages subject to withholding of Wisconsin income tax or other persons with a withholding requirement. Employers may apply for this number online at https://www.revenue.wi.gov/Pages/Businesses/home.aspx.
For federal IRS information, visit https://www.irs.gov/businesses, and for Wisconsin Department of Revenue information, visit https://www.revenue.wi.gov/Pages/Businesses/home.aspx.
Generally, sole proprietors, partners, and shareholders of an S corporation pay tax on net profit by making regular payments of estimated tax during the year. If you expect to owe taxes of $1,000 or more (including Social Security and Medicare) when you file your return, you generally have to make estimated quarterly tax payments. Corporations generally have to make estimated quarterly tax payments if they expect to owe tax of $500 or more when their return is filed. Use Form 1040-ES, Estimated Tax for Individuals, or Form 1120-W, Estimated Tax for Corporations. More information may be found at https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes.
Every employer who meets both requirements “a” and “b” below is required to withhold Wisconsin income taxes:
- Pays wages to:
- A Wisconsin resident(regardless of where the services were performed), or
- A nonresident (persons domiciled outside of Wisconsin) for services performed in Wisconsin, unless:
- Employer is an interstate rail or motor carrier, subject to the jurisdiction of the Federal Interstate Commerce Commission and the employee regularly performs duties in two or more states.
- Payment is for retirement, pension, or profit sharing benefits received after retirement.
- Employee is a resident of a state with which Wisconsin has a reciprocity agreement.
- Wisconsin currently has reciprocity agreements with Illinois, Indiana, Kentucky, and Michigan.
- If you employ residents of those states, you are not required to withhold Wisconsin income taxes from wages paid to such employees.
- Written verification is required to relieve the employer from withholding Wisconsin income taxes from such employee’s wages (Form W-220).
- Employee is a resident of a state that does not have a reciprocity agreement with Wisconsin, and either:
- The employer is an interstate air carrier and the employee, having regularly assigned duties on the carrier’s aircraft, earns 50% or less of his or her compensation in Wisconsin, or
- The employer can reasonably expect the annual Wisconsin earnings to be less than $1,500.
- Is engaged in business in Wisconsin.
- Is licensed to do business in Wisconsin.
- Transacts business in Wisconsin.
- Is organized under Wisconsin law.
- Is primarily engaged in business outside of Wisconsin and is licensed to do business in Wisconsin or transacts business in Wisconsin.
For more information go to https://www.revenue.wi.gov/Pages/FAQS/pcs-with.aspx.
Am I a pass-through entity for Wisconsin tax purposes and do I have to pay estimated withholding taxes?
A pass-through entity is an organization whose income, loss, deductions and credits flow through and are taxed at the shareholder, partner, member, or beneficiary level. Partnerships, limited partnerships, limited liability partnerships, limited liability companies, tax-option (S) corporations, estates and trusts not taxed at the entity level are all pass-through entities.
Any pass-through entity that has Wisconsin income for a taxable year that is allocable to a nonresident partner, member, shareholder, or beneficiary must withhold Wisconsin tax on that income to the extent it is Wisconsin income to the nonresident. The withholding applies regardless of whether the income is actually distributed by the pass-through entity.
For more information, go to https://www.revenue.wi.gov/Pages/FAQS/ise-pass.aspx#q8.
A seller’s permit is required for every individual, partnership, corporation, or other organization making retail sales, leases, or rentals of tangible personal property or taxable services in Wisconsin, unless all sales are exempt from sales or use tax.
A seller’s permit will not be issued to wholesalers, manufacturers and other businesses not making direct retail sales of tangible property or taxable services.
For more information on how to obtain a permit, visit https://www.revenue.wi.gov/Pages/FAQS/pcs-seller.aspx.
Most Wisconsin employers must carry insurance to cover liability due to work-related employee injury or illness. This coverage is obtained through a private commercial insurer. Employer liability occurs when wages of $500 or more are paid in a quarter, or three or more people are employed.
Independent contractors are required by Wisconsin Worker’s Compensation Law to obtain a Federal Employer Identification Number (FEIN) or EIN. Always ask an independent contractor for their EIN before employing their services.
For more information go to http://dwd.wi.gov/wc/employers/.
Wisconsin UI law requires each covered employer to fund an account with the unemployment reserve fund based on a payroll tax formula. UI benefits paid to a former employee are generally charged to the employer’s reserve fund account.
For more information, go to http://dwd.wisconsin.gov/ui/.
The Unemployment Insurance (UI) program provides weekly benefits to eligible unemployed workers. These benefits provide economic stability to workers and their families during temporary periods of unemployment and help lessen the effect of unemployment on the local economy. The program is financed solely through employer contributions (taxes). It is not operated as a part of the federal Social Security system, the state Worker’s Compensation program or any federal or state welfare program.
For more information, go to http://dwd.wisconsin.gov/uitax/financing/.
Any business involving the sale of food or lodging will require an inspection by the Wisconsin Department of Health Services. Inspections are either conducted through the state or local county Health Department. To find contact information for your local health department, go to https://www.dhs.wisconsin.gov/lh-depts/counties.htm.
In an effort the help businesses with their exporting questions, the federal government has provided this website – https://www.export.gov/. In Wisconsin, businesses can get help on their export strategy from the Wisconsin Economic Development Corporation.