State of Wisconsin
Department of Revenue
Limited Liability
Companies (LLCs)
Publication 119 (12/11)
Printed on
Recycled Paper
Table of Contents
Page Page
I. INTRODUCTION.................................................. 1 E. Are mergers or conversions of LLCs
allowed? .............................................................. 4
II. DEFINITIONS APPLICABLE TO LLCS .......... 1
VI. CLASSIFICATION OF AN LLC FOR
III. FORMATION OF AN LLC .................................. 2 WISCONSIN FRANCHISE AND
A. Who may organize an LLC? ............................... 2 INCOME TAX PURPOSES ................................. 5
B. For what purposes may an LLC be A. How is an LLC operating in Wisconsin
organized? ........................................................... 2 treated for Wisconsin franchise and
income tax purposes? .......................................... 5
C. Who may become an LLC member? ................... 2
B. How is an LLC classified under the
D. How is a member’s interest in an LLC Internal Revenue Code? ...................................... 5
determined? ......................................................... 2
E. What is the nature of an LLC interest?................ 2 VII. WISCONSIN TAX TREATMENT OF
LLCS ....................................................................... 5
F. What are the requirements in naming an
LLC?.................................................................... 2 A. Franchise and Income Tax .................................. 5
G. How is a foreign LLC treated in 1. What tax form does an LLC use to file
Wisconsin? .......................................................... 3 a franchise or income tax return? ................... 5
2. What is the treatment of Wisconsin tax
IV. MANAGEMENT OF AN LLC ............................. 3 credits for an LLC? ........................................ 5
A. Who is responsible for the management of 3. What are the Wisconsin franchise or
an LLC? ............................................................... 3 income tax consequences of forming an
B. How is the business operation of an LLC LLC? .............................................................. 7
managed? ............................................................. 3 4. What are the Wisconsin franchise or
C. Who makes the decisions for an LLC?................ 3 income tax consequences of converting
to or merging into an LLC? ............................ 7
D. Are managers required to be members of
an LLC? ............................................................... 3 B. Economic Development Surcharge ..................... 7
E. What are the responsibilities of a member C. Withholding Tax ................................................. 7
for the liabilities of the LLC? .............................. 3 D. Sales and Use Tax ............................................... 8
F. Who has ownership of LLC property? ................ 3 E. Excise Taxes (Beverage, Fuel, Cigarette,
G. How are profits and losses of the LLC and Tobacco) ....................................................... 9
allocated and distributed? .................................... 3 F. Withholding Requirement for LLCs
H. May a member make an assignment of an Having Nonresident Members ............................ 9
LLC interest? ....................................................... 3
VIII. TAX TREATMENT OF MEMBERS OF
V. DISSOLUTION OF AN LLC ............................... 4 LLCS CLASSIFIED AS PARTNERSHIPS ...... 10
A. How may a member withdraw from an A. LLC Members Who Are Full-Year
LLC?.................................................................... 4 Wisconsin Resident Individuals, Estates,
and Trusts .......................................................... 10
B. How is an LLC dissolved? .................................. 4
B. LLC Members Who Are Nonresident
C. What events may result in the dissociation Individuals, Estates, and Trusts ......................... 10
of a member? ....................................................... 4
C. LLC Members Who Are Part-Year
D. Under what circumstances may a court Wisconsin Resident Individuals ........................ 11
order the dissolution of an LLC? ......................... 4
D. LLC Members That Are Corporations ............... 11 E. LLC Members That Are Partnerships
(Including LLCs Classified as
1. Corporate Member Engaged in
Partnerships) ...................................................... 14
Business Wholly Within Wisconsin ............. 12
2. Corporate Member Engaged in X. TAX TREATMENT OF MEMBERS OF
Business in and Outside Wisconsin .............. 12 LLCS DISREGARDED AS SEPARATE
ENTITIES ............................................................. 14
3. Corporate Member Not Engaged in
Business in Wisconsin .................................. 12 A. LLC Members Who Are Full-Year
Wisconsin Resident Individuals, Estates,
E. LLC Members That Are Partnerships
and Trusts........................................................... 14
(Including LLCs Classified as
Partnerships) ...................................................... 13 B. LLC Members Who Are Nonresident
Individuals, Estates, and Trusts ......................... 14
IX. TAX TREATMENT OF MEMBERS OF
C. LLC Members Who Are Part-Year
LLCS CLASSIFIED AS
Wisconsin Resident Individuals......................... 14
CORPORATIONS ............................................... 13
D. LLC Members That Are Corporations............... 15
A. LLC Members Who Are Full-Year
Wisconsin Resident Individuals, Estates, E. LLC Members That Are Partnerships
and Trusts........................................................... 13 (Including LLCs Classified as
Partnerships) ...................................................... 15
B. LLC Members Who Are Nonresident
Individuals, Estates, and Trusts ......................... 14
XI. ADDITIONAL INFORMATION OR
C. LLC Members Who Are Part-Year FORMS.................................................................. 15
Wisconsin Resident Individuals......................... 14
D. LLC Members That Are Corporations ............... 14
Limited Liability Companies (LLCs)
sin franchise or income tax purposes. For additional
information about the tax treatment of LLCs, see
IMPORTANT CHANGES
Parts VI through X.
Estimated Quarterly Withholding Tax Payments.
Pass-through entities are required to make quarterly CAUTION
payments of estimated withholding tax on nonresident
The information in this publication reflects the posi-
members’ share of income attributable to Wisconsin.
tion of the Wisconsin Department of Revenue on
See page 9 for details.
laws enacted by the Wisconsin Legislature as of De-
cember 31, 2010. Laws enacted after that date,
New Credits. New credits are available for taxable
administrative rules, and court decisions may change
years beginning in 2010. They are:
the guidance provided in this publication.
• Food Processing Plant and Food Ware-
house Investment Credit
II. DEFINITIONS APPLICABLE TO
• Jobs Tax Credit LLCs
• Postsecondary Education Credit
Articles of Organization - Articles of organization are
• Woody Biomass Harvesting and Pro- articles filed under Chapter 183, Wis. Stats., and those
cessing Credit articles as amended or restated. [§183.0102(1), Wis.
Stats.]
• Water Consumption Credit
Distribution - A distribution is a direct or indirect
transfer by an LLC of money or other property, other
than an interest in the LLC, to or for the benefit of its
I. INTRODUCTION members in respect of their interests. [§183.0102(4),
Wis. Stats.]
This publication provides information about the Wis-
consin tax treatment of limited liability companies Domestic Limited Liability Company - A domestic
(LLCs). LLC is an organization formed under Chapter 183, Wis.
Stats., except as provided for mergers in
Effective January 1, 1994, Wisconsin law authorizes the sec. 183.1201(1), Wis. Stats. [§183.0102(10), Wis.
organization and operation of limited liability compa-
Stats.]
nies in Wisconsin. Prior to 1994, Wisconsin law did not
specifically address the treatment of LLCs. However, Event of Dissociation - This is an event that causes a
LLCs doing business in Wisconsin before 1994 would person to cease to be a member of an LLC.
be treated in the same manner as for federal income tax [§183.0102(6), Wis. Stats.]
purposes.
Foreign Limited Liability Company - A foreign LLC
An LLC is a business entity that possesses both corpo- is an organization that is all of the following:
rate characteristics and characteristics associated with a
partnership. LLCs possess the corporate attribute of • An unincorporated association.
limited liability for LLC owners or members and the
• Organized under a law other than the laws of Wis-
potential for treatment as a pass-through entity for fed-
consin.
eral and state income tax purposes. Federal law is
controlling in the determination of whether an LLC is • Organized under a statute pursuant to which an as-
treated as a corporation or a partnership for Wisconsin sociation may be formed that affords to each of its
franchise and income tax purposes. For taxable years members limited liability with respect to the liabili-
beginning on or after January 1, 1997, an LLC that is ties of the entity.
disregarded as a separate entity for federal income tax
purposes is disregarded as a separate entity for Wiscon-
1
Publication 119
• Not required to be registered or organized under organization are similar to a corporation’s articles
any statute of Wisconsin other than Chapter 183. of incorporation. [§183.0201, Wis. Stats.]
[§183.0102(8), Wis. Stats.] B. For what purposes may an LLC be organized?
Limited Liability Company Interest - An LLC inter- An LLC may be organized for any lawful purpose.
est is a member’s rights in the LLC, including the However, a business subject to other provisions of
member’s share of the profits and losses of the LLC, the the Wisconsin Statutes may organize as an LLC on-
member’s right to receive distributions of LLC assets, ly if not prohibited by, and subject to the limitations
and the member’s right to vote or participate in man- of, the other statutes. [§183.0106, Wis. Stats.]
agement of the LLC. [§183.0102(11), Wis. Stats.]
C. Who may become an LLC member?
Manager - A manager, with respect to an LLC that has
set forth in its articles of organization that it is to be Any person, including individuals, corporations,
managed by one or more managers, is the person or per- and other legal entities, may be a member of an
sons designated to manage the LLC. [§183.0102(13), LLC. A person may become a member of an LLC
Wis. Stats.] at its organization or at any time after its organiza-
tion. Prior to July 1, 1996, an LLC was required to
Member - A member is a person who has been admit- have two or more members. [§§183.0201 and
ted to membership in an LLC and who has not 183.0801, Wis. Stats.]
dissociated from the LLC. [§183.0102(15), Wis. Stats.]
D. How is a member’s interest in an LLC
Operating Agreement - This is an agreement or determined?
agreements in writing among all of the members as to
the conduct of the business of an LLC and its relation- A member’s interest in an LLC is based on the val-
ships with its members. [§183.0102(16), Wis. Stats.] ue of the member’s contribution to the LLC. A
person may contribute cash, property, services, or
Organizer - An organizer is the person who signs and written obligations to provide cash or property or to
delivers the articles of organization for filing to the De- perform services in order to become a member.
partment of Financial Institutions. [§183.0102(17), Wis. [§183.0501, Wis. Stats.]
Stats.]
E. What is the nature of an LLC interest?
Person - The term “person” includes an individual, a
general partnership, a limited partnership, a domestic or An LLC interest is personal property. [§183.0703,
foreign LLC, a trust, an estate, an association, a corpo- Wis. Stats.]
ration, or any other legal or commercial entity.
[§183.0102(18), Wis. Stats.] F. What are the requirements in naming an LLC?
State - The term “state” includes a state, territory, or The name of an LLC must include the words “Lim-
possession of the United States, the District of Colum- ited Liability Company” or an abbreviation of those
bia, or the Commonwealth of Puerto Rico. words. The name of the LLC must generally be dis-
[§183.0102(19), Wis. Stats.] tinguishable from other corporate, LLC, limited
partnership, limited liability partnership, or associa-
tion names registered with the Department of
III. FORMATION OF AN LLC Financial Institutions. However, the LLC may apply
to the Department of Financial Institutions for au-
A. Who may organize an LLC? thorization to use a name that does not meet this
requirement. [§183.0103, Wis. Stats.]
One or more persons may organize an LLC by fil-
ing articles of organization with the Department of
Financial Institutions. The organizer or organizers
do not have to be members of the LLC. Articles of
2
Limited Liability Companies (LLCs)
G. How is a foreign LLC treated in Wisconsin? D. Are managers required to be members of an
LLC?
An LLC organized under the laws of another state
or country is required to obtain a certificate of reg- Managers need not be members of the LLC. In ad-
istration from the Department of Financial dition, managers are not required to be individuals.
Institutions in order to transact business in Wiscon- A manager may be appointed, removed, or replaced
sin. A foreign LLC has no greater rights or by a vote of the LLC members, unless otherwise
privileges to operate in Wisconsin than an LLC that provided for in an operating agreement.
is organized in Wisconsin. A foreign LLC author- [§183.0401, Wis. Stats.]
ized to transact business in Wisconsin must
maintain in Wisconsin a registered office and regis- E. What are the responsibilities of a member for
tered agent. [§§183.1001 through 183.1022, Wis. the liabilities of the LLC?
Stats.]
The debts, obligations, and liabilities of an LLC are
solely the responsibility of the LLC. Generally, an
IV. MANAGEMENT OF AN LLC LLC member is not responsible for the debts or ob-
ligations incurred by the LLC beyond the value of
A. Who is responsible for the management of an the member’s contribution. [§183.0304, Wis. Stats.]
LLC?
Caution: Members or other individuals may be
Management of an LLC is the responsibility of its held personally liable for withholding, sales and
members, unless its articles of organization vest use, or excise taxes based on their responsibilities
management authority in one or more managers. or actions. See Parts VII.C, D, and E.
Managers or members exercising management re-
sponsibilities have the authority to act on behalf of F. Who has ownership of LLC property?
the LLC, and to contractually bind the LLC.
[§183.0401, Wis. Stats.] All property transferred to or acquired by an LLC is
property of the LLC and not of the members indi-
B. How is the business operation of an LLC vidually. [§183.0701, Wis. Stats.]
managed?
G. How are profits and losses of the LLC allocated
Members of an LLC may enter into an operating and distributed?
agreement that describes the responsibilities, rights,
and duties of members and managers and the pro- Profits and losses of an LLC are allocated among
cedures that govern actions of members or members on the basis of their contributions, unless
managers. An operating agreement is similar to otherwise provided for in an operating agreement.
corporate by-laws or a partnership agreement. If the Distributions of cash or the assets of an LLC are
LLC does not have an operating agreement, or if an made to members in the same manner that profits
issue is not covered by or permitted in the operating are allocated, unless the distribution is varied by an
agreement, then the terms in Chapter 183, Wis. operating agreement. [§§183.0503 and 183.0602,
Stats., apply. [§183.0401, Wis. Stats.] Wis. Stats.]
C. Who makes the decisions for an LLC? H. May a member make an assignment of an LLC
interest?
Unless an operating agreement provides differently,
a majority vote of the members or managers is gen- A member may assign an interest in an LLC, in
erally required to decide any issue. If management whole or in part, to another person. The assignment
of an LLC is reserved to members, a member’s vote transfers the assignor’s rights to profits, losses, and
is weighted according to the value of the member’s distributions. An assignee does not automatically
contribution to the LLC. If management is vested in become a member of the LLC; admission to the
one or more managers, each manager has one vote LLC requires the unanimous consent of the mem-
on an issue. [§183.0404, Wis. Stats.]
3
Publication 119
bers, unless otherwise provided for in an operating 1. If the member is an individual, the mem-
agreement. [§183.0704, Wis. Stats.] ber’s death or the entry of a court order
determining the member incompetent.
V. DISSOLUTION OF AN LLC 2. If the member is a trust, the termination of
the trust.
A. How may a member withdraw from an LLC?
3. If the member is a separate LLC, the disso-
Generally, a member may withdraw or dissociate lution of the separate LLC.
from an LLC by filing a notice of withdrawal with
the LLC, except as otherwise provided in an operat- 4. If the member is a corporation, the filing of
ing agreement [§183.0802(3), Wis. Stats.] articles of dissolution or the revocation of
its charter.
B. How is an LLC dissolved?
5. If the member is an estate, the distribution
An LLC is dissolved if any of the following occurs: by the fiduciary of the estate’s entire inter-
• The occurrence of events specified in an operat- est in the LLC.
ing agreement.
6. If the member is a partnership or other enti-
• The written consent of all members. ty, the dissolution of the partnership or
• Prior to July 1, 1996, if the LLC had only one entity.
member.
[§183.0802, Wis. Stats.]
• For an LLC organized before October 1, 2002,
an event of dissociation of a member, unless the D. Under what circumstances may a court order
remaining members unanimously agree to con- the dissolution of an LLC?
tinue the LLC or unless otherwise provided for
in the operating agreement. An LLC may be subject to judicial dissolution if
any of the following is established by a court:
• The entry of a decree of judicial dissolution.
• That it is not reasonably practicable to carry on
[§183.0901, Wis. Stats.] the business of the LLC.
C. What events may result in the dissociation of a • That the LLC is not acting in conformity with
member? an operating agreement.
• That one of the members or managers is acting
A person ceases to be a member of an LLC if the or will act in an illegal or fraudulent manner.
member:
• That LLC assets are being misapplied or wast-
• Withdraws voluntarily from the LLC. ed.
• Assigns all of the member’s interest in the LLC
and the assignee is admitted as a member. [§183.0902, Wis. Stats.]
• Is removed as a member in accordance with an E. Are mergers or conversions of LLCs allowed?
operating agreement.
Simplified procedures for the merger or conversion
• Takes certain actions specified in Chapter 183,
of business entities became effective October 1,
Wis. Stats., unless otherwise provided for in an
2002.
operating agreement or by the written consent
of all members. Events that may result in the
Unless otherwise provided in an operating agree-
dissociation of a member include the following:
ment, one or more LLCs may merge with or into
one or more other business entities. An LLC may
4
Limited Liability Companies (LLCs)
convert to another form of business entity if it satis- section 7701 that are effective for federal purposes
fies the requirements of Chapter 183, Wis. Stats., on January 1, 1997. These regulations generally al-
and if the conversion is permitted under the laws of low LLCs with two or more members to choose to
the jurisdiction that governs the organization of the be taxed as partnerships or as corporations. LLCs
business entity into which the LLC is converting. A that have a single owner may choose to be recog-
business entity other than an LLC may convert to nized or disregarded as entities separate from their
an LLC if it satisfies the requirements of Chap- owners. [Treas. Reg. §§301.7701-1, 301.7701-2,
ter 183 and if the conversion is permitted under the and 301.7701-3.]
laws of the jurisdiction that governs the business
entity.
VII. WISCONSIN TAX TREATMENT OF
For purposes of mergers and conversions, a “busi- LLCs
ness entity” is a corporation, a nonstock
corporation, an LLC, or a limited partnership, A. Franchise and Income Tax
which is organized under the laws of Wisconsin or
another jurisdiction. [§§183.1200 through 1. What tax form does an LLC use to file a
183.1207, Wis. Stats.] franchise or income tax return?
If a partnership: An LLC classified as a part-
VI. CLASSIFICATION OF AN LLC FOR nership reports its income on federal
WISCONSIN FRANCHISE AND Form 1065, U.S. Return of Partnership Income,
INCOME TAX PURPOSES and Wisconsin Form 3, Wisconsin Partnership
Return. [§71.20(1), Wis. Stats.]
A. How is an LLC operating in Wisconsin treated
for Wisconsin franchise and income tax If a corporation: An LLC classified as a corpo-
purposes? ration files federal Form 1120, U.S.
Corporation Income Tax Return, and Wisconsin
An LLC that is treated as a partnership under the In- Form 4 or 5, Wisconsin Corporation Franchise
ternal Revenue Code (IRC) is treated as a or Income Tax Return. If the LLC has elected to
partnership for Wisconsin purposes. [§71.195, Wis. be a tax-option (S) corporation, it files federal
Stats.] An LLC that is treated as a corporation under Form 1120S, U.S. Income Tax Return for an S
the IRC is treated as a corporation for Wisconsin Corporation, and Wisconsin Form 5S, Wiscon-
purposes. [§71.22(1k), Wis. Stats.] For taxable sin Tax-Option (S) Corporation Franchise or
years beginning on or after January 1, 1997, an Income Tax Return. [§§71.22(1k) and 71.24(1),
LLC that is disregarded as a separate entity under Wis. Stats.]
IRC section 7701 is disregarded as a separate entity
for Wisconsin franchise and income tax purposes, If disregarded as a separate entity: An LLC
and its owner is subject to the tax on or measured disregarded as a separate entity includes its in-
by its net income. [§§71.02(1), 71.20(1), and come, losses, and deductions on its owner’s
71.22(1k), Wis. Stats.] return.
For taxable years beginning on or after January 1, 2. What is the treatment of Wisconsin tax cred-
2010, “Internal Revenue Code” means the federal its for an LLC?
Internal Revenue Code as amended to Decem-
ber 31, 2008, with numerous exceptions. If a partnership: Members of an LLC classified
as a partnership may claim the same credits that
B. How is an LLC classified under the Internal are available to partners of partnerships.
Revenue Code?
If a corporation: An LLC treated as a corpora-
The Internal Revenue Service issued “check-the- tion may claim the same tax credits as a regular
box” entity classification regulations under IRC
5
Publication 119
(C) corporation, unless the LLC has elected to LLC’s activities for which the owner would
be treated as a tax-option (S) corporation. otherwise be eligible.
If disregarded as a separate entity: The LLC’s See the chart that follows.
owner may claim any tax credits based on the
AVAILABILITY OF TAX CREDITS
Tax Credit If a Partnership or a Disregarded If a C Corporation or a If a Disregarded LLC
LLC Owned Disregarded LLC Owned Owned by an Individual
by a Partnership1 by a C Corporation (Treated as Sole
Proprietorship)
Angel investment credit Yes. Calculated by LLC and passed No. Not available to LLC. Yes. Claimed by owner.
through to members who are indi-
viduals.
Dairy and livestock farm in- Yes. Calculated by LLC and passed Yes. Claimed by LLC. Yes. Claimed by owner.
vestment credit through to members.
Dairy manufacturing facility Yes. Calculated by LLC and passed Yes. Claimed by LLC. Yes. Claimed by owner.
investment credit through to members.
Development zones credits Yes. Calculated by LLC and passed Yes. Claimed by LLC. Yes. Claimed by owner.
through to members.
Early stage seed investment Yes. Calculated by LLC and passed Yes. Claimed by LLC. Yes. Claimed by owner.
credit through to members.
Economic development tax Yes. Calculated by LLC and passed Yes. Claimed by LLC. Yes. Claimed by owner.
credit through to members.
Enterprise zone jobs credit Yes. Calculated by LLC and passed Yes. Claimed by LLC. Yes. Claimed by owner.
through to members.
Ethanol and biodiesel fuel Yes. Calculated by LLC and passed Yes. Claimed by LLC. Yes. Claimed by owner.
pump credit through to members.
Farmland preservation credit Yes. Members may claim credit Yes. Claimed by LLC. Yes. Claimed by owner.
based on share of LLC’s taxes.
Film production company in- Yes. Calculated by LLC and passed Yes. Claimed by LLC. Yes. Claimed by owner.
vestment credit through to members.
Film production expenditures Yes. Calculated by LLC and passed Yes. Claimed by LLC. Yes. Claimed by owner.
credit through to members.
Food processing plant and food Yes. Calculated by LLC and passed Yes. Claimed by LLC. Yes. Claimed by owner.
warehouse investment credit through to members.
Health insurance risk-sharing Yes. Calculated by LLC and passed Yes. Claimed by LLC. No. Not available to LLC or
credit through to members. owner.
Internet equipment credit Yes. Calculated by LLC and passed Yes. Claimed by LLC. Yes. Claimed by owner.
through to members.
Jobs tax credit Yes. Calculated by LLC and passed Yes. Claimed by LLC. Yes. Claimed by owner.
through to members.
Manufacturing investment Yes. Calculated by LLC and passed Yes. Claimed by LLC. Yes. Claimed by owner.
credit through to members.
Meat processing facility in- Yes. Calculated by LLC and passed Yes. Claimed by LLC. Yes. Claimed by owner.
vestment credit through to members.
Postsecondary education credit Yes. Calculated by LLC and passed Yes. Claimed by LLC. Yes. Claimed by owner.
through to members.
6
Limited Liability Companies (LLCs)
Research expense credit No. Not available to LLC or mem- Yes. Claimed by LLC. No. Not available to LLC or
bers. owner.
Research facilities credit No. Not available to LLC or mem- Yes. Claimed by LLC. No. Not available to LLC or
bers. owner.
Supplement to federal historic Yes. Calculated by LLC and passed Yes. Claimed by LLC. Yes. Claimed by owner.
rehabilitation tax credit through to members.
Technology zone credit Yes. Calculated by LLC and passed Yes. Claimed by LLC. Yes. Claimed by owner.
through to members.
Water consumption credit Yes. Calculated by LLC and passed Yes. Claimed by LLC. Yes. Claimed by owner.
through to members.
Woody biomass harvesting and Yes. Calculated by LLC and passed Yes. Claimed by LLC. Yes. Claimed by owner.
processing credit through to members.
1
The same credit availability would also apply to a tax-option (S) corporation or a disregarded entity owned by a tax-option (S) corpora-
tion.
3. What are the Wisconsin franchise or in- on Wisconsin Form 3, Wisconsin Partnership and
come tax consequences of forming an LLC? Economic Development Surcharge Return.
[§§77.92(4) and (4m) and 77.93(3) and (5), Wis.
Wisconsin follows the IRC with respect to the Stats.]
tax consequences of forming an LLC. To the
extent allowable under the IRC, contributions If the economic development surcharge of an LLC
to an LLC are tax free to both the LLC and the classified as a partnership is delinquent, its mem-
member. The member’s basis in the LLC will bers are jointly and severally liable for it.
equal the basis in the property contributed. [§77.93(3) and (5), Wis. Stats.]
4. What are the Wisconsin franchise or in- If a corporation: An LLC classified as a corpora-
come tax consequences of converting to or tion calculates the economic development
merging into an LLC? surcharge on Wisconsin Form 4, 5, or 5S, as ap-
propriate. [§§71.22(1k) and 77.93(1), Wis. Stats.]
Wisconsin follows the IRC with respect to the
tax consequences of a partnership or corpora- An LLC that elects to be treated as a tax-option (S)
tion that converts to an LLC. If a business corporation calculates the economic development
entity that converts to an LLC is required to surcharge on Wisconsin Form 5S. If the economic
notify the Internal Revenue Service (IRS) of development surcharge is delinquent, its members
the conversion, a copy of the notification must are jointly and severally liable for it. [§77.93(1),
be provided to the Wisconsin Department of Wis. Stats.]
Revenue.
If disregarded as a separate entity: The LLC does
For Wisconsin income tax purposes, the mer- not compute its own economic development sur-
ger of a partnership, corporation, or LLC into charge. Instead, its owner includes the LLC’s
another form of business entity is treated in information in the owner’s computation of the sur-
the same manner as for federal income tax charge. [§77.935, Wis. Stats.]
purposes. If the IRS must be notified of the
transaction, a copy of the statement furnished Note: The economic development surcharge ap-
to the IRS must be provided to the Wisconsin plies to LLCs that have at least $4 million of gross
Department of Revenue. receipts for the taxable year.
B. Economic Development Surcharge C. Withholding Tax
If a partnership: An LLC classified as a partner- For withholding tax purposes, LLCs with two or
ship reports the economic development surcharge more members are treated in the same manner as
7
Publication 119
other business entities. The LLC, if an employer, or consumers. [§§77.52(7) and 77.53(9) and (9m),
is required to withhold, deposit, and furnish re- Wis. Stats.]
ports of Wisconsin income taxes withheld as are
other employers. [§§71.63(3), 71.65(1)(a), and If an existing entity becomes an LLC, the entity
71.71, Wis. Stats.] must notify the Wisconsin Department of Revenue
of the change. Notification may be made by filing
If an existing entity becomes an LLC and the IRS Form BTR-101, Application for Business Tax Reg-
does not require the LLC to obtain a new federal istration, for the new entity or by contacting one
employer identification number, the LLC may not of the Department of Revenue’s customer service
be required to obtain a new Wisconsin employer representatives at (608) 266-2776 or at
identification number. If the IRS requires the LLC sales10@revenue.wi.gov. This is the case whether
to obtain a new federal employer identification or not the IRS requires the LLC to obtain a new
number, the LLC must obtain a new Wisconsin federal employer identification number. When
employer identification number. contacting DOR, be sure to include the following
information:
If a member of an LLC performs services for the
LLC and the IRS does not treat the member as an • Tax account number (include the business
employee, the LLC is not required to withhold name and address if you have more than one
Wisconsin income taxes from payments made to location),
the member for services performed. • Federal employer identification number
(FEIN),
A member, employee, or other “responsible per- • Effective date of change, and
son” who is under a duty to withhold and deposit • Explanation of change.
taxes for an LLC may be held personally liable for
the LLC’s Wisconsin income taxes withheld or re- Generally, an existing partnership or corporation
quired to be withheld. [§71.83(1)(b)2, Wis. Stats.] that becomes an LLC will not be subject to sales
or use tax on the transfer of its assets to the LLC,
For wages paid on or after January 1, 2009, a dis- provided there is no change in the ownership in-
regarded entity is considered an “employer” for terests of its members. A business entity that
purposes of federal withholding taxes. Wisconsin converts to another business entity is subject to the
follows this treatment. Thus, for wages paid on or sales and use tax provisions applicable to liquida-
after January 1, 2009, a single-owner entity that is tions, reorganizations, and business entity
disregarded as a separate entity under IRC formations. [§77.61(15), Wis. Stats.]
sec. 7701 is an “employer” for Wisconsin with-
holding tax purposes. As an “employer,” a A member, employee, or other “responsible per-
disregarded entity must obtain a Wisconsin em- son” who is under a duty to collect and remit sales
ployer identification number. To obtain a and use taxes for an LLC may be held personally
Wisconsin employer identification number, the en- liable for the LLC’s Wisconsin sales and use tax-
tity must file an Application for Business Tax es. [§77.60(9), Wis. Stats.]
Registration, Form BTR-101.
Example: An LLC has five members. Mem-
D. Sales and Use Tax ber A has the authority and responsibility to
make the Wisconsin sales and use tax pay-
For sales and use tax purposes, LLCs with two or ments to the Department of Revenue. The
more members and single-member LLCs that elect other four members are not responsible for
to be taxed as corporations for income and fran- paying the sales and use taxes. Member A is a
chise tax purposes are treated in the same manner “responsible person” and may be held person-
as other business entities. The LLC, as a retailer or ally liable for the LLC’s Wisconsin sales and
consumer, is required to register, report, and pay use taxes. The other members are not “respon-
Wisconsin sales and use taxes as are other retailers sible persons” and, therefore, are not
personally liable for the LLC’s taxes.
8
Limited Liability Companies (LLCs)
A single-owner LLC that is disregarded as a sepa- If an LLC is disregarded as a separate entity for
rate entity (i.e., the single-owner entity and its Wisconsin franchise or income tax purposes, its
owner are treated as a single entity) for Wisconsin owner is subject to any excise taxes based on the
income and franchise tax purposes under Chap- LLC’s activities. [§125.02(14), Wis. Stats.]
ter 71 of the Wisconsin Statutes is also disregarded
as a separate entity for purposes of Wisconsin F. Withholding Requirement for LLCs Having
sales and use taxes. Prior to July 1, 2009, a single- Nonresident Members
owner entity disregarded as a separate entity for
purposes of Chapter 71 was treated as an entity In general, an LLC that is classified as a partner-
separate from its owner for Wisconsin sales and ship or tax-option (S) corporation is required to
use tax purposes, except for reporting purposes. withhold income or franchise tax on the income al-
locable to nonresident members.
For purposes of reporting and collecting Wiscon-
sin sales and use taxes, the owner of a disregarded A nonresident member includes an individual who
entity has the option to (1) include the information is not domiciled in Wisconsin, an estate or a trust
from the disregarded entity on the owner's return, that is a nonresident under sec. 71.14(1) to (3m),
or (2) file a separate electronic sales and use tax Wis. Stats., and a partnership, LLC, or corporation
return for the disregarded entity. If an owner that whose commercial domicile is outside Wisconsin.
owns more than one disregarded entity elects to The withholding rate for members who are indi-
file a separate return for one if its disregarded enti- viduals, estates, and trusts is the highest rate for a
ties, the owner is required to file separate returns single individual under sec. 71.06, Wis. Stats. The
for all of its disregarded entities. Such returns shall withholding rate for members that are partner-
be signed by the person required to file the return ships, LLCs, or corporations is 7.9%.
or by a duly authorized agent but need not be veri-
fied by oath. Note: Prior to September 1, 2009, the Exceptions: Withholding is not required on behalf
owner was required to include the information of the following nonresident members:
from the disregarded entity on the owner's return. • A member that is exempt from Wisconsin in-
come or franchise taxation. The LLC may rely
For additional information about the sales and use on a written statement from a member explain-
tax treatment of disregarded entities, see the FAQ ing why the member is exempt from
titled “Disregarded Entities (Sales and Use and Wisconsin tax.
Withholding Taxes)” on the department’s web site
at www.revenue.wi.gov/faqs/ise/disregent.html. • A member whose share of income from the
LLC attributable to Wisconsin is less than
E. Excise Taxes (Beverage, Fuel, Cigarette, and $1,000.
Tobacco)
• A member that files an affidavit with the De-
For excise tax purposes, LLCs are treated in the partment. To be eligible for this exemption,
same manner as other business entities. The LLC the nonresident must file Form PW-2, Wiscon-
is required to register, pay, and furnish reports of sin Nonresident Partner, Member,
Wisconsin excise taxes as are others. [Ch. 78, 125, Shareholder or Beneficiary Withholding Ex-
and 139, Wis. Stats.] emption Affidavit, and the Department must
approve the Form PW-2. The member must
A member, employee, or other “responsible per- present the approved Form PW-2 to the LLC,
son” who is under a duty to pay motor vehicle and the LLC must maintain this copy in its
fuel, alternate fuel, or aviation fuel taxes for the records to substantiate the withholding exemp-
LLC may be held personally liable for the LLC’s tion. See the Form PW-2 instructions for
Wisconsin excise taxes required to be paid. further details.
[§78.70(6), Wis. Stats.]
The LLC uses Form PW-1, Wisconsin Nonresident
Income or Franchise Tax Withholding on Pass-
Through Entity Income, to pay the withholding
9
Publication 119
and to report any nonresident members who have is subject to Wisconsin income tax on $10,000
filed Form PW-2 affidavits. For LLCs classified as of LLC income [10% x $100,000].
partnerships, Form PW-1 is due by the 15th day of
the 4th month following the close of the LLC’s The gain or loss from the disposition of an LLC
taxable year. For LLCs classified as tax-option (S) interest is also includable in Wisconsin net income
corporations, Form PW-1 is due by the 15th day of for a full-year Wisconsin resident. [§71.04(1)(a),
the 3rd month following the close of the LLC’s Wis. Stats.]
taxable year. Generally, Form PW-1 must be filed
electronically and the corresponding withholding B. LLC Members Who Are Nonresident
payments must be made electronically. See the Individuals, Estates, and Trusts
Form PW-1 instructions for details of the filing
procedures. Additionally, nonresident members A nonresident individual, estate, or trust member’s
having a Wisconsin filing requirement must file portion of the LLC income or loss which is at-
the appropriate Wisconsin income or franchise tax tributable to a business located in Wisconsin,
return, regardless of the amount of withholding services performed in Wisconsin, or real or tangi-
from the LLC. ble personal property located in Wisconsin is
includable in the computation of Wisconsin taxa-
A pass-through entity is required to pay quarterly ble income. Business income is taxable whether or
estimated withholding tax on a nonresident mem- not the individual member conducts business in
ber’s share of income attributable to Wisconsin. Wisconsin. However, LLC income derived from
The pass-through entity must make quarterly pay- personal services, including professional services,
ments of withholding tax on or before the 15th day is taxable to a nonresident member only if that
of the 3rd, 6th, 9th, and 12th month of the taxable nonresident member personally performs services
year. in Wisconsin. The amount of personal service in-
come attributable to the nonresident member’s
services performed in Wisconsin is taxable.
VIII. TAX TREATMENT OF MEMBERS [§§71.02(1) and 71.04(1)(a), Wis. Stats.]
OF LLCs CLASSIFIED AS
PARTNERSHIPS Example 1: A nonresident of Wisconsin who
is an individual has a 30% interest in an LLC
LLC members are treated as follows for Wisconsin that is engaged in business in and outside
franchise and income tax purposes. Wisconsin. The LLC has ordinary income of
$150,000, of which $60,000 is attributable to
A. LLC Members Who Are Full-Year Wisconsin its business activities in Wisconsin. The non-
Resident Individuals, Estates, and Trusts resident member is subject to Wisconsin
income tax on $18,000 of LLC income [30% x
All LLC income or loss of full-year Wisconsin $60,000].
residents is includable in the computation of Wis-
consin taxable income, regardless of the situs of Example 2: A nonresident of Wisconsin who
the LLC or the nature of the income from the is an individual has a 5% interest in an engi-
LLC, such as business income, service income, or neering firm that is organized as an LLC and
professional income, unless otherwise exempt operates in and outside Wisconsin. The LLC
(such as U.S. government interest). [§§71.02(1) receives income solely from the performance
and 71.04(1)(a), Wis. Stats.] of engineering services. The nonresident
member does not personally perform any en-
Example: An LLC is engaged in business in gineering services in Wisconsin. The
and outside Wisconsin. Member A, a full-year nonresident member’s share of LLC income is
Wisconsin resident, has a 10% interest in the not taxable by Wisconsin.
LLC. The LLC has ordinary income of
$100,000, of which $60,000 is attributable to Since an LLC interest is intangible personal prop-
business conducted in Wisconsin. Member A erty, any gain or loss realized on the disposition of
10
Limited Liability Companies (LLCs)
an LLC interest is not includable in Wisconsin the LLC’s taxable year. Member A is subject
taxable income of a nonresident individual, estate, to Wisconsin income tax on $10,616 of LLC
or trust. Gain or loss from the sale of intangible income, which is calculated as follows:
personal property follows the residence of these
nonresidents. [§71.04(1)(a), Wis. Stats.] For the period of residence:
25% x 90/365 x $50,000 = $ 3,082
An LLC that has two or more nonresident mem- For the period of nonresidence:
bers whose only Wisconsin taxable income is their 25% x 275/365 x $40,000 = 7,534
shares of LLC income or loss may file a composite Total $ 10,616
Wisconsin individual income tax return on behalf
of those qualifying members. The LLC files this D. LLC Members That Are Corporations
return on Form 1CNP, Composite Wisconsin Indi-
vidual Income Tax Return for Nonresident Corporations doing business in Wisconsin are sub-
Partners. ject to Wisconsin franchise or income tax. In this
publication, the terms “doing business,” “engaged
C. LLC Members Who Are Part-Year Wisconsin in business,” and “nexus,” refer to the degree of
Resident Individuals activity necessary before a state or foreign country
has jurisdiction to impose an income tax or fran-
An individual who is a part-year resident of Wis- chise tax measured by net income on the
consin must report to Wisconsin: corporation.
• While a resident: All LLC income or loss, re- The Wisconsin tax treatment of a corporation that
gardless of where it is earned or incurred, is a member of an LLC depends on where the cor-
while a resident of Wisconsin. The gain or loss poration and the LLC are doing business.
from the disposition of an LLC interest while
a Wisconsin resident is includable in Wiscon- “Doing business” in Wisconsin includes owning,
sin net income. [§71.04(1)(a), Wis. Stats.] directly or indirectly, a general or limited partner-
• While a nonresident: All LLC income or loss ship interest in a partnership or an interest in a
that is attributable to a business located in limited liability company treated as a partnership
Wisconsin, services the individual personally that does business in Wisconsin.
performed in Wisconsin, or real or tangible
personal property located in Wisconsin, while A multistate corporation that is a member of an
a nonresident of Wisconsin. The disposition of LLC treated as a partnership for federal tax pur-
an LLC interest while a nonresident of Wis- poses must include its share of the numerator and
consin is treated in the same manner as for denominator of the LLC’s apportionment factors
nonresidents. Since a member’s interest in an in the numerator and denominator of its appor-
LLC is considered intangible personal proper- tionment factors.
ty, any gain or loss realized on the disposition
of an LLC interest while a nonresident is not Note: Income from an LLC may be nontaxable
includable in Wisconsin taxable income. Gain under the principles of the U.S. Supreme Court
or loss from the sale of intangible personal decision in Allied-Signal v. Director, Div. of Taxa-
property follows the residence of nonresidents. tion, 504 U.S. 768 (1992), if the investment is
[§§71.02(1) and 71.04(2) and (3), Wis. Stats.] passive and does not serve an operational function.
In this case, the corporation would not include its
Example: Member A has a 25% interest in an share of the LLC’s apportionment factors in the
LLC that is engaged in business in and outside numerator and denominator of its apportionment
Wisconsin. For its taxable year beginning Jan- factors.
uary 1, 2010, the LLC has ordinary income of
$50,000, of which $40,000 is attributable to
business activities in Wisconsin. Member A
was a Wisconsin resident for 90 days during
11
Publication 119
1. Corporate Member Engaged in Business of the LLC’s total sales is included in the
Wholly Within Wisconsin denominator of the corporation’s sales
factor.
If a corporation that is engaged in business on-
ly in Wisconsin is a member of an LLC, the Note: For purposes of determining throwback
corporation’s share of the LLC’s net income sales in the numerator of the corporation’s
or loss is included in its Wisconsin net income sales factor, the corporation’s gross sales are
or loss. For a corporation engaged in business combined with its share of the LLC’s gross
sales. Sales to states in which neither the cor-
wholly within Wisconsin, all income is subject
poration nor the LLC have nexus are included
to Wisconsin franchise or income tax. in the numerator as throwback sales at 100%.
[§71.25(4), Wis. Stats.]
Example 2: A corporation that has been
Example 1: A corporation that is engaged engaged in business only in Wisconsin ac-
in business only in Wisconsin acquires a quires a 55% interest in an LLC that is
40% interest in an LLC that is engaged in engaged in business in and outside Wis-
business only in Wisconsin. The LLC has consin. Therefore, the corporation is
$250,000 of net income. The corporation engaged in business in the states where the
must include its $100,000 share of the LLC is engaged in business. The corpora-
LLC’s net income in its Wisconsin net in- tion must determine its Wisconsin net
come. income under the apportionment method.
Fifty-five percent of the LLC’s business
2. Corporate Member Engaged in Business in income or loss is included in the corpora-
and Outside Wisconsin tion’s apportionable income or loss. Fifty-
five percent of the LLC’s Wisconsin sales
If a corporation that is engaged in business in
is included in the numerator of the corpo-
and outside Wisconsin is a member of an
ration’s sales factor, and 55% of the
LLC, the corporation’s share of the LLC’s net
LLC’s total sales is included in the de-
income or loss generally is included in its ap-
nominator of the corporation’s sales
portionable income or loss. [§71.25(5)(a)14,
factor.
Wis. Stats.]
Note: For purposes of determining throwback
In computing the corporation’s apportionment sales in the numerator of the corporation’s
factors, the corporation must combine its share sales factor, the corporation’s gross sales are
of the LLC’s apportionment data with its own combined with its share of the LLC’s gross
apportionment data to determine the income sales. Sales to states in which neither the cor-
apportionable to Wisconsin. [§§71.25(9)(e)8, poration nor the LLC have nexus are included
71.25(15), and 71.45(6), Wis. Stats.] in the numerator as throwback sales at 100%.
Example 1: A corporation that is engaged 3. Corporate Member Not Engaged in Busi-
in business in and outside Wisconsin ac- ness in Wisconsin
quires a 60% interest in an LLC that is
engaged in business in Wisconsin. The If a corporation that has not been engaged in
corporation must determine its Wisconsin business in Wisconsin acquires an interest in
net income under the apportionment an LLC that is engaged in business in Wiscon-
method. The LLC has $300,000 of busi- sin, the corporation is subject to Wisconsin
ness income. Sixty percent, or $180,000, franchise or income taxation. The corporate
of the LLC’s business income is included member is engaged in business in Wisconsin
in the corporation’s apportionable income as a result of holding an interest in the LLC.
or loss. Sixty percent of the LLC’s Wis-
consin sales is included in the numerator The corporation’s share of the LLC’s net in-
of the corporation’s sales factor and 60% come or loss is includable in its apportionable
income. [§§71.22(1r) and 71.25(5)(a)14, Wis.
12
Limited Liability Companies (LLCs)
Stats.] The corporation must combine its share ners in other partnerships that are doing business
of the LLC’s apportionment data with its own in Wisconsin. For example, full-year Wisconsin
apportionment data to determine the income resident individual partners are subject to Wiscon-
apportionable to Wisconsin. [§§71.25(9)(e)8, sin income tax on their distributive shares of the
71.25(15), and 71.45(6), Wis. Stats.] partnership’s entire income, including its share of
LLC income. Nonresident individual partners are
Example: A corporation that has not been subject to Wisconsin income tax on their distribu-
engaged in business in Wisconsin acquires tive shares of the partnership’s income, including
a 50% interest in an LLC that is engaged its share of LLC income, derived from business
in business in Wisconsin. Therefore, the transacted in Wisconsin.
corporation is engaged in business in Wis-
consin and is subject to Wisconsin Example: Partnership A, which has not been
franchise or income tax. The corporation engaged in business in Wisconsin, acquires a
must determine its Wisconsin net income 40% interest in an LLC that is engaged in
under the apportionment method. Fifty business in Wisconsin. Individuals throughout
percent of the LLC’s business income or the United States are limited partners in Part-
loss is included in the corporation’s appor- nership A. Partnership A must file a
tionable income or loss. Fifty percent of Wisconsin partnership return because its 40%
the LLC’s Wisconsin sales is included in share of the LLC’s income is income from
the numerator of the corporation’s sales Wisconsin sources. The nonresident partners
factor, and 50% of the LLC’s total sales is must file Wisconsin income tax returns. They
included in the denominator of the corpo- are subject to Wisconsin income tax on their
ration’s sales factor. In addition, since the distributive shares of Partnership A’s share of
corporation has nexus with Wisconsin, the LLC income.
any Wisconsin destination sales made by
the corporation are included in the numer-
ator of its sales factor. IX. TAX TREATMENT OF MEMBERS
OF LLCs CLASSIFIED AS
Note: For purposes of determining throwback CORPORATIONS
sales in the numerator of the corporation’s
sales factor, the corporation’s gross sales are If an LLC is classified as a corporation, an LLC inter-
combined with its share of the LLC’s gross est is treated in the same manner as stock. The LLC’s
sales. Sales to states in which neither the cor-
members are taxed as explained below. If an LLC
poration nor the LLC have nexus are included
in the numerator as throwback sales at 100%.
meets the requirements and elects to be treated as a
tax-option (S) corporation, its members report their
E. LLC Members That Are Partnerships pro rata shares of the entity’s items of income, loss,
(Including LLCs Classified as Partnerships) and deduction as explained in the Wisconsin Form 5S
instructions.
A partnership, including an LLC classified as a
partnership, that is a member of an LLC doing A. LLC Members Who Are Full-Year Wisconsin
business in Wisconsin is required to file a Wiscon- Resident Individuals, Estates, and Trusts
sin partnership return. The LLC member is
considered to have income from business transact- Full-year residents are subject to Wisconsin in-
ed in Wisconsin. Since the LLC member is itself a come tax on distributions of income received from
partnership, the member must include its share of an LLC, regardless of where it is located. If a Wis-
the LLC’s apportionment data with its own appor- consin resident disposes of an LLC interest, any
tionment data to determine the income gain or loss is includable in Wisconsin taxable in-
apportionable to Wisconsin. come. [§§71.02(1) and 71.04(1)(a), Wis. Stats.]
Partners of a partnership (that is itself a member of
an LLC) are treated in the same manner as part-
13
Publication 119
B. LLC Members Who Are Nonresident E. LLC Members That Are Partnerships
Individuals, Estates, and Trusts (Including LLCs Classified as Partnerships)
Nonresidents who are individuals, estates, or trusts Distributions from an LLC are treated in the same
are not subject to Wisconsin income tax on distri- manner as dividend income. Gain or loss on the
butions of LLC income. Gain or loss realized on disposition of an LLC interest is treated as income
the disposition of an LLC interest is not includable or loss from intangibles.
in Wisconsin taxable income. [§§71.02(1) and
71.04(1)(a), Wis. Stats.]
X. TAX TREATMENT OF MEMBERS
C. LLC Members Who Are Part-Year Wisconsin OF LLCs DISREGARDED AS
Resident Individuals SEPARATE ENTITIES
Part-year residents are taxed on distributions of If an LLC is disregarded as a separate entity, its activi-
LLC income received while a resident of Wiscon- ties are treated in the same manner as a sole
sin. Gain or loss realized on the disposition of an proprietorship, branch, or division of the owner. The
LLC interest while a Wisconsin resident is includ- owner is subject to Wisconsin tax on or measured by
able in Wisconsin taxable income. [§§71.02 and the LLC’s income.
71.04(2) and (3), Wis. Stats.]
A. LLC Members Who Are Full-Year Wisconsin
Distributions of LLC income received by an indi- Resident Individuals, Estates, and Trusts
vidual while a nonresident of Wisconsin are not
taxable by Wisconsin. Any gain or loss realized by Full-year residents treat the LLC income or loss as
an individual on the disposition of an LLC interest if it were from a sole proprietorship. They report
while a nonresident is not includable in Wisconsin the income or loss on federal Schedule C and in-
taxable income. clude it in their Wisconsin adjusted gross income,
regardless of where the LLC is located or the na-
D. LLC Members That Are Corporations ture of its income. [§71.02(1), Wis. Stats.]
A corporation whose entire business income is at- B. LLC Members Who Are Nonresident
tributable to Wisconsin is subject to Wisconsin Individuals, Estates, and Trusts
franchise or income tax on income distributions
received from an LLC, regardless of where the Nonresidents who are individuals, estates, or trusts
LLC is located. Gain or loss on the disposition of treat the LLC income or loss as if it were from a
an LLC interest is includable in Wisconsin net in- sole proprietorship. They report the income or loss
come. [§§71.25(4) and 71.26(2), Wis. Stats.] on federal Schedule C and include it in their Wis-
consin taxable income to the extent that it is
A multistate corporation includes income distribu- attributable to a business located in Wisconsin,
tions and gain or loss on dispositions of an LLC services performed in Wisconsin, or real or tangi-
interest in apportionable income if there is a uni- ble personal property located in Wisconsin.
tary relationship between the corporation and the [§§71.02(1) and 71.04(1)(a), Wis. Stats.]
LLC, or if the LLC is not an affiliate or subsidiary
and the LLC interest is part of the corporation’s C. LLC Members Who Are Part-Year Wisconsin
unitary investment activity and serves an opera- Resident Individuals
tional function. [§§71.25(5)(a) and 71.26(2), Wis.
Stats.] Part-year residents treat the LLC income or loss as
if it were from a sole proprietorship. They report
the income or loss on federal Schedule C and in-
clude in their Wisconsin taxable income the
following amounts:
14
Limited Liability Companies (LLCs)
• While a resident: All LLC income or loss, re- E. LLC Members That Are Partnerships
gardless of where it is earned or incurred, (Including LLCs Classified as Partnerships)
while a resident of Wisconsin. [§§71.02(1)
and 71.04(1) and (2), Wis. Stats.] A partnership treats the LLC income or loss as if it
were from a branch of the partnership. If either the
• While a nonresident: All LLC income or loss partnership or the LLC has income from Wiscon-
that is attributable to a business located in sin sources, the partnership must file a Wisconsin
Wisconsin, services performed in Wisconsin, partnership return.
or real or tangible personal property located in
Wisconsin. [§§71.02(1) and 71.04(1) and (2), The partnership combines the LLC’s items of in-
Wis. Stats.] come, loss, and deduction with its items of
income, loss, and deduction. If either the partner-
D. LLC Members That Are Corporations ship or the LLC is engaged in business in and
outside Wisconsin, the partnership combines the
A corporation treats the LLC income or loss as if it LLC’s apportionment data with its apportionment
were from a division of the corporation. If either data. [§71.20(1), Wis. Stats.]
the corporation or the LLC is engaged in business
in Wisconsin, the corporation has nexus with Wis-
consin and must file Wisconsin corporation XI. ADDITIONAL INFORMATION OR
franchise or income tax returns. FORMS
If the corporation and the LLC are engaged in If, after reading this publication, you have any ques-
business only in Wisconsin, the corporation is sub- tions about Wisconsin’s treatment of LLCs, you may:
ject to Wisconsin franchise or income tax on its
entire net income, including the income from the • E-mail your question to corp@revenue.wi.gov
LLC. [§§71.22(1k), 71.25(4), and 71.26(2), Wis. • Send a FAX to (608) 267-0834
Stats.]
• Call (608) 266-2772
If either the corporation or the LLC is engaged in (Telephone help is also available using TTY equipment. Call
the Wisconsin Telecommunications Relay System at 711 or,
business in and outside Wisconsin, the corporation if no answer, (800) 947-3529. These numbers are to be used
includes the LLC’s income or loss in its appor- only when calling with TTY equipment.)
tionable income or loss. The corporation computes
its apportionment factors by combining the LLC’s • Write to the Audit Bureau, Wisconsin Department
apportionment data with its apportionment data. of Revenue, Mail Stop 5-144, PO Box 8906, Mad-
[§§71.22(1k) and (1r), 71.25(5)(a) and (15), ison, WI 53708-8906
71.26(2), and 71.45(6), Wis. Stats.] • Call or visit any Wisconsin Department of Reve-
nue office.
If a corporation that has not been engaged in busi-
ness in Wisconsin organizes a solely owned LLC If you need forms, you may:
that does business in Wisconsin, the corporation
must file Wisconsin franchise or income tax re- • Download forms from the Department’s Internet
turns. The corporation includes the LLC’s income web site at www.revenue.wi.gov
or loss in its apportionable income or loss. The • Request them online at www.revenue.wi.gov
corporation computes its apportionment factors by
combining the LLC’s apportionment data with its • Call (608) 266-1961
apportionment data. [§§71.22(1k) and (1r), • Call or visit any Wisconsin Department of Reve-
71.25(5)(a) and (15), 71.26(2), and 71.45(6), Wis. nue office.
Stats.]
15