How to Start an LLC in Utah? (11 Steps Guide)
Embarking on the journey to establish an LLC in Utah can be a seamless and rewarding experience with expert guidance.
Leveraging my extensive background as a business expert, I understand deeply the importance of forming an LLC, including limited liability protection, tax advantages, and increased credibility.
By working in tandem with skilled legal experts, we have simplified and optimized the process, making it more efficient for your business's success and compliance with Utah's specific regulations
This comprehensive guide will lead you through the crucial steps, from choosing the type of your LLC and filing the Articles of Organization to understanding the tax structure and operational requirements.
Moreover, one of these Utah professional LLC services can be used to form an LLC for you.
- To form an LLC in Utah, you'll need to choose the right LLC structure, select a unique name, appoint a registered agent, and file the Articles of Organization with the Utah Secretary of State.
- Creating a Utah LLC Operating Agreement, though not mandatory, is highly recommended for outlining the internal management structure.
- According to U.S. Small Business Administration statistics, Utah is home to 333,661 small businesses, accounting for 99.3% of all business entities in the state, highlighting the prevalent choice of the LLC structure among entrepreneurs.
- Forming an LLC in Utah, in my opinion, is a straightforward process that offers flexibility and protection for business owners.
How to Form an LLC in Utah
To form an LLC in Utah, comply with statutory requirements and file the legal documents with the Utah Secretary of State.
1. Choose the Type of Your LLC (Mandatory)
In Utah, with 333,661 small businesses making up 99.3% of all business entities, as stated in the U.S. Small Business Administration, the decision to form an LLC aligns with the state's predominant business model .
This vibrant small business ecosystem offers a supportive backdrop for your LLC, whether it's a single-member entity or a more complex multi-member arrangement.
As a business consultant, I've seen firsthand how choosing the right LLC structure impacts a business's success.
One client, for instance, initially opted for a single-member LLC but later transitioned to a multi-member LLC to accommodate new partners.
This shift not only influenced their decision-making processes but also affected their tax obligations and liability considerations.
It underscored the importance of carefully evaluating and selecting the most suitable LLC structure for the specific needs and future plans of the business.
These are the most common types of LLCs:
Single-member LLCs are ideal for solo entrepreneurs. They offer simplicity in management and tax filing, as profits and losses are reported on the individual's tax return, avoiding corporate taxes.
However, this simplicity can be a drawback, as it may limit growth potential and investment opportunities compared to more complex structures.
Multi-member LLCs suit businesses with multiple owners. They provide a flexible management structure and the ability to raise capital by adding new members. Profits and losses are passed through to members' personal tax returns.
Yet, this type may face complexities in management and decision-making, especially without a well-defined operating agreement. Additionally, members are exposed to self-employment taxes on their share of profits.
Choosing the right LLC type depends on your business size, management style, and growth plans, each of which has its own distinct advantages and challenges.
2. Choose a Name for Your LLC (Mandatory)
Utah LLC formation includes choosing a business name. If you're looking to start a Utah LLC, it's important to familiarize yourself with the state's naming requirements.
The name must be unlike any other registered name and cannot include certain restricted words or phrases. You can search the Utah Division of Corporations' database to make sure your desired LLC name is available .
Your business name must include the words "Limited Liability Company" or the abbreviation "LLC." On the other hand, restricted words, such as "bank," "insurance," and "attorney," cannot be used in your LLC name unless you obtain specific business licenses.
Forbidden terms include any terms associated with a government agency or financial services.
You should also consider using an appropriate domain name when naming your Utah LLC. It is important to secure a domain name that accurately reflects your business and is easy for customers to remember.
Once you come up with a suitable LLC name, you can file an Application for Reservation of the Business Name with the Utah Division of Corporations and Commercial Code .
There is a $22 filing fee. Once this procedure is done, your business name will be reserved for the next 120 days.
3. Select a Registered Agent (Mandatory)
Every Utah LLC must have a registered agent or registered agent service. The Utah registered agent handles receiving legal and tax notices on behalf of the company and forwarding them to the appropriate individuals.
Utah registered agent service can be provided by an individual or business entity. If you choose to use an individual, they must reside in Utah. If you choose to use a company, several registered agent services are available in the state.
I once advised a Utah LLC that initially underestimated the role of a registered agent. They opted for an individual agent, a close acquaintance. However, when the agent missed a critical legal notice due to personal reasons, it led to a delayed response and complications.
This experience highlighted the importance of choosing a registered agent—whether an individual or a service—with utmost care, ensuring they are consistently available and professionally equipped to handle all legal and tax communications."
To be a valid registered agent, they must be available during regular business hours, have a Utah street address for mail, and agree to receive service of process.
When choosing a registered agent for your LLC, there are several things to keep in mind. Make sure to research registered agent services thoroughly and ask any questions you may have before selecting one.
4. File Utah Articles of Organization (Mandatory)
A Utah LLC is not a legal entity until the Articles of Organization are filed with the Utah Department of Commerce.
The document contains information about the LLC's name, registered agent, LLC's principal office address, and purpose.
It is important to make sure all the information is correct, as the state will use it to track the LLC .
The Utah LLC Articles of Organization can be filed online or by mail with the Utah Division of Corporations & Commercial Code. The filing fee is $70.
Steps to Take After Forming an LLC in Utah
Once your LLC is officially formed, understanding the broader economic and regulatory landscape in Utah is crucial for your business's sustainability and growth.
According to the Statistics of US Businesses, the state is home to 635,432 small business employees, who represent 45.2% of all employees . This significant proportion underscores the vital role small businesses, including LLCs, play in Utah's economy.
Nevertheless, here are essential actions to solidify your LLC's legal standing and operational readiness.
5. Create a Utah LLC Operating Agreement (Optional, but Recommended)
An LLC operating agreement is an internal document that contains the rules and regulations of your LLC. This document is not required in Utah, but it's highly recommended.
An operating agreement helps prevent disputes between members and provides a road map for the dissolution of the company.
It's important to include the following information in your operating agreement:
- Name of the professional limited liability company
- Members' names and addresses
- The percentage of ownership each member has
- How the LLC will be managed
- What happens in the event of a dispute among members
- How profits and losses are divided
- Voting rights and procedures
- When, how, and why the LLC can dissolve?
"If your LLC consists of two members who actively work on and manage the business on a daily basis, formal meetings might not be necessary. However, in cases where a two-member LLC is operated by one member, with the other contributing from behind the scenes, scheduling regular meetings is advisable to prevent any claims of being uninformed about the business's operations."
-Jon Morgan, Co-Founder & Chief Editor of Venture Smarter
Operating agreements can be very simple or quite complex, depending on the needs of your LLC. If you're not sure what to include, it's best to consult with an attorney to help polish operating agreements.
You can find a Utah LLC operating agreement template online or at your local legal supply store.
Make sure the template you choose for your operating agreement is specific to Utah and includes all the information mentioned above.
I always advise my clients that once you have an operating agreement template, fill it in with the relevant information for your LLC and have all members sign it. This will ensure that everyone is on the same page and knows what to expect from the LLC.
6. Apply for an Employer Identification Number (EIN) (Optional, but Recommended)
Generally, a single-member LLC in Utah is treated as a sole proprietorship, which means it can go by with just an SSN. However, regardless of the number of members, every LLC has to obtain an EIN if it plans to hire employees and open a business bank account.
Be sure to process your EIN after the operating agreement to ensure a smoother business flow.
Federal Employer identification number (federal tax identification number or federal EIN) is a nine-digit number assigned to existing businesses by the Internal Revenue Service. It is also used by individuals who have more than one job or are self-employed.
Limited liability companies in Utah can apply for an EIN online, by fax, or by mail.
To apply for an EIN online, visit the Internal Revenue Service website and click on "Apply for an Employer Identification Number (EIN)" under "Businesses." You will be directed to a secure application form that you will have to complete .
7. Open an LLC Bank Account (Optional, but Recommended)
Open your LLC business bank account to help your business build its credit history. By keeping business and personal finances separate, you protect yourself from any business liabilities.
There are a few options for where to open your LLC's bank account: a traditional bank, a credit union, or an online-only bank. Whichever option you choose, make sure the institution offers business checking accounts with no monthly fees and low transaction costs.
You'll also want to be sure the bank has a robust online banking platform and offers mobile apps so you can manage your business finances on the go.
One of the best features of LLC business credit cards is that they help existing businesses build their company's credit history. A good company credit score can open up doors for business financing down the road, such as loans or lines of credit.
You can start building your business credit history by applying for a business credit card that's tied to your LLC's name and EIN.
When you're looking for a business credit card, be sure to compare the APR, annual fees, and rewards offered by different cards.
8. File Your LLC Annual Report (Mandatory)
For LLCs in Utah, filing an annual report is a critical requirement to maintain your business's legal status.
This report ensures that the state has the most current information about your LLC, including details about your registered agent, principal business address, and the names and addresses of your LLC’s members or managers.
The annual report is due each year on the anniversary of your LLC’s registration. It's important to adhere to this deadline, as failing to file the report can result in penalties and potentially lead to the administrative dissolution of your LLC.
The process usually involves a filing fee and can be conveniently completed online through the Utah Secretary of State’s website.
Filing your annual report on time helps keep your LLC in good standing, reinforcing its legitimacy and operational integrity. Always stay updated with the Secretary of State’s office for any changes in filing requirements or deadlines.
9. Obtain Business Licenses and Permits
A Utah LLC is required to obtain certain LLC licenses to conduct business legally. The most common licenses are a business license and a sales tax permit.
For more information on obtaining these Utah business licenses, don't hesitate to get in touch with your local city or county clerk's office.
The Utah Division of Occupational and Professional Licensing can provide information about state-level permits, while the U.S. Small Business Administration handles federal licensing .
If you plan to start a professional Utah LLC, you will probably need professional licenses from the state.
The following professions typically require a professional business license in Utah:
- Insurance agents
- Real estate brokers
Consider talking to a lawyer for more information about the specific business license requirements.
10. Certificate of Compliance (Mandatory)
To ensure your LLC's legal standing in Utah, obtaining a Certificate of Compliance is essential.
This process involves registering your company with the Utah Division of Corporations and Commercial Code's (DCCC) online portal.
During registration, you will be required to pay a registration fee. Additionally, if you choose to file your paperwork electronically, there will be a fee for each document filed.
This certificate is a key component in establishing and maintaining your LLC's compliance with Utah state regulations.
11. Choosing Your Tax Structure
In Utah, LLCs can opt for different tax structures, each with its own advantages and disadvantages. The two primary choices are being taxed as a disregarded entity (like a sole proprietorship or partnership) or as a corporation (S-Corp or C-Corp).
Disregarded Entity: This structure is simpler and involves passing profits and losses directly to your personal tax return, avoiding double taxation. However, it may limit growth potential and access to certain tax benefits.
Corporate Taxation (S-Corp/C-Corp): Opting for corporate taxation, especially S-Corp, can yield tax savings on self-employment taxes, though it comes with stricter compliance and accounting requirements. C-Corp taxation involves double taxation (company and personal level) but offers benefits for reinvesting profits in the business.
Drawing from my experience in business structuring, I lean towards S-Corp taxation for small to medium-sized LLCs due to its balance of tax efficiency and flexibility.
Changing your tax structure requires filing an election with the IRS, typically by March 15th for it to be effective for the current tax year. Carefully consider your business size, revenue, and growth plans when choosing the most suitable tax structure.
Benefits and Drawbacks of an LLC in Utah
- Limited Liability Protection: Like other states, Utah LLCs provide personal asset protection. This means the personal assets of the LLC members are typically not at risk in the case of business liabilities or debts.
- Tax Flexibility: Utah LLCs benefit from "pass-through" taxation, avoiding the double taxation faced by corporations. Additionally, LLCs can choose to be taxed as S-Corps, potentially reducing self-employment taxes.
- Ease of Formation and Maintenance: Forming an LLC in Utah is relatively straightforward, with minimal paperwork and lower filing fees compared to corporations. Annual requirements are also less burdensome.
- Business Credibility: Having an LLC designation can enhance your business’s credibility with potential customers, vendors, and partners.
- Limited Growth Potential: For businesses looking to raise capital through the sale of stock, an LLC may not be the best choice. Unlike corporations, LLCs don’t issue stock.
- Self-Employment Taxes: LLC members are subject to self-employment taxes on their share of the profits, which can be higher than corporate taxes on dividends.
- State-Specific Nuances: Utah's unique business landscape might present specific challenges. For example, Utah's varying local laws across its cities and counties can mean a more complex process for obtaining necessary permits and licenses, depending on your business location.
- Franchise Tax: While Utah's overall tax burden is relatively moderate, LLCs are subject to a franchise tax, which is a consideration for those looking to minimize taxes.
DIY vs. Professional LLC Formation
DIY LLC Formation
- Cost-Effective: DIY is generally less expensive since you're not paying for professional services.
- Personal Learning Experience: Handling the formation process yourself can provide valuable insight into the legal and operational aspects of your business.
- Time-Consuming: The process requires time and effort to understand and complete all necessary steps correctly.
- Risk of Errors: Without professional guidance, there's a higher risk of mistakes in paperwork or compliance, which can lead to future legal or financial issues.
Professional LLC Formation
- Expertise and Accuracy: Professionals are well-versed in state-specific regulations, reducing the risk of errors.
- Time-Saving: A service takes care of the process, allowing you to focus on other aspects of your business.
- Compliance Assistance: Many services offer ongoing support, ensuring your LLC remains compliant with state laws.
- Cost: Professional services can be costly, especially for those with a limited startup budget.
- Less Personal Control: Relying on a service means less hands-on involvement in the formation process.
The choice between DIY and professional LLC formation in Utah depends on your priorities, such as budget constraints, time availability, legal knowledge, and desire for personalized control or professional guidance. Evaluate your specific situation and resources to make the best decision for your business needs.
How do I add a DBA to my LLC in Utah?
To add a DBA to your Utah LLC, file an assumed name form with the Utah Division of Corporations for a $22 fee. Renew the DBA every three years. Publish the new name in a local newspaper (cost varies).
How Do I Register a Foreign LLC in Utah?
To register a foreign LLC in Utah, file a foreign qualification form with the Division of Corporations and register with the Department of Commerce.
What Is an Entity Number in Utah?
An entity number in Utah is a unique identifier assigned by the Department of Commerce to each business or organization. It is specific to the state and different from EIN or social security numbers.