How to Start an LLC in Utah
As a Utah business owner, you may have decided that an LLC, or limited liability company, is the best way to be part of the growing economy. With personal liability protection and an easy setup process, doing business as an LLC has perks over other options like a sole proprietorship. If you’re looking to become an LLC owner, this step-by-step guide will help.
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Since businesses are regulated at the state level, the first and most important thing you can do when starting an LLC is to be sure it is registered with the appropriate state agency. In Utah, that is the Chamber of Commerce. Following a few simple steps will allow you to meet the Chamber of Commerce’s requirements for a Utah LLC and ensure you are set up properly from the start.
Name your LLC
Have a name in mind? See if it’s already listed in the state’s business directory. If the name comes up in a search, it’s taken. If it doesn’t, it’s yours to claim.
The name of your business is a critical piece of not only your formal paperwork, but also your marketing and brand. There are a number of considerations that are important when choosing a name in Utah.
LLC name availability
Like every state, Utah mandates all business names are distinguishable from one another, so you must first be sure that your chosen name is available. You can use the Utah Business Entity Search page to run a name search.
Keep in mind that this requirement is at the state level, so businesses in other states might have the same name. For national protection, you could file a trademark through the United States Patent and Trademark Office. You may also want to see if the matching domain name and social media usernames are available to prevent confusion.
Utah naming requirements
Along with being unique, Utah has a number of other rules related to naming LLCs.
- LLC names must include one of the following designators: Limited Liability Company, Limited Company, L.L.C., or L.C.
- The name cannot include the following designators: association, corporation, incorporated, limited, limited partnership, L.P, or Ltd.
- The name cannot suggest the business is an agency of the state, organized for an unlawful purpose, or organized for a purpose not specified in formation documents.
- The name must be either in English or written using the English alphabet.
- Some words are restricted based on a business’s industry and licensing. For example, only non-profit agricultural cooperatives can use the word “cooperative” in their LLC name.
Reserving a business name in Utah
Even if your name is available when you perform a search, it can be used until someone registers the name to a business. If you aren’t ready to move forward with the next steps, you may want to protect your name from being used by anyone else. Utah allows you to file a name reservation for up to 120 days by filing a simple form.
Select a registered agent
When filing to form an LLC, you will be required to provide a name and address of a registered agent. This can be a person or entity that agrees to receive important government mail, tax notices, legal documents, service of process, and other correspondence on behalf of the LLC. This ensures that there is a responsible party if the LLC needs to take legal actions.
To maintain accountability for this correspondence, a registered agent agrees to be available during all normal business hours. In order to ensure this availability is met, many people will use a registered agent service. These businesses charge a small fee in exchange for acting as a registered agent and ensuring receipt of mail. If you choose to use a service, they must be registered with the Utah Division of Corporations and in good standing with the state.
You can also choose to name an individual as a registered agent. This can be an LLC member, like yourself, or employee, or any trusted person. An individual must be 18 years old and have a physical street address (not a P.O. box) in the state of Utah.
File Certificate of Organization
Each state requires documentation surrounding an LLC in order for it to be registered. This is often called the Articles of Organization or, as it is in Utah, the Certificate of Organization.
In order to complete the Certificate of Organization, you will need to provide:
- The name of your LLC
- The primary address of your LLC
- The name and street address of your registered agent
- Signature of the organizer
You can also choose to provide the following:
- The name and address of all members or managers
- The duration of the business entity
- The purpose of the business entity
In some states, these formation documents are filed with the Secretary of State, but not in Utah. When you have completed the Certificate of Organization, it needs to be filed with the Utah Department of Commerce, Divisions of Corporation and Commercial Code. This can be done in person, via mail, through fax, or online.
You can fill out and submit your LLC formation documents here.
There is a $70 filing fee, payable to the State of Utah, due when filing a Certificate of Organization. This fee is nonrefundable, even if your business is not approved and formed.
Utah processing time
For online filings, there is a 2 day turnaround time for processing a Certificate of Organization, which cannot be expedited. When you file by mail or in person, the average turnaround time is between 3 and 7 business days. For an additional fee of $75, this can be expedited to 2 days.
Create an LLC operating agreement
For any small business, no matter the size, it is recommended that an operating agreement is in place to dictate how the business will be run and managed. This document is not required for LLCs in Utah, but it can help you avoid trouble in the future and is worth doing up front. Without an operating agreement in place, you will be subject to Utah’s default rules, which may not be in your best interest or the business’s.
An operating agreement should include all pertinent details about how the LLC will be run and managed. This can usually be achieved with a simple free template, but there are also attorneys who can help draft a complex agreement. Things that are usually covered will be:
- The management structure (member-managed, manager-managed, or single-member LLC)
- Rules and processes for adding or removing a member
- Succession plans in case a member leaves or passes away
- Designation of authority to act on behalf of the LLC, including voting processes
- Ownership allocation and capital contribution
- What dissolution would look like
Since it is an internal document, you do not need to submit your operating agreement to the state. Keep it on file for reference whenever you need it, and you can always amend it in the future if necessary.
Once you have completed the formation process for an LLC and received a Certificate of Existence, your business is recognized by the state of Utah. This status opens the door for you to begin operating, but you will need to comply with all state laws to remain in good standing. A critical part of running your LLC will be ensuring all of your requirements are met.
Get your EIN
Because businesses across the country could potentially share names, it is important that each entity have a unique identifier. This is typically done through the Internal Revenue Service, who provides Employer Identification Numbers to all businesses that apply. The business is then given a nine digit number unique to them, which allows for easy tax purposes, as well as identification in other scenarios.
You may find when filling out various paperwork and applications, especially with a bank, you are asked for a tax ID. If you do not have an EIN, it is sometimes possible to use your personal Social Security Number, but this can cause a security risk for your personal information. Having an EIN gives you a tax ID that is safe to use. Banks often require an EIN instead of a personal tax ID, as it shows legitimacy.
An EIN is often required by law. Any business with employees or that must pay excise taxes has to have an EIN as a part of their tax filings with the IRS. But even if your LLC does not need an EIN, they are free and easy to obtain and can make things easier for business owners.
You can get your EIN by visiting the IRS website.
Get Utah business licenses
At the state level, Utah does not require a general business license. However, there are two statewide licenses to consider:
- A seller’s permit is the state of Utah’s sales tax registration, and must be obtained by any business in Utah that is going to sell or lease tangible property subject to sales tax. There is no fee to apply for a seller’s permit, which can be done through the Utah Taxpayer Access Point.
- Certain industries and professions require additional licensing at the state level. The Utah Division of Occupational and Professional Licensing is in charge of this regulation and provides information on who needs licensing and how to obtain it.
Throughout Utah, various cities and counties have additional license and permit requirements for businesses located there. For example, Salt Lake City issues a city business license, which is required for all businesses operating there. The best way to determine what licenses and permits you may need is to contact local government offices.
Open business bank accounts
In forming an LLC as your business structure, you are afforded personal asset protection. This means that if the business is sued, in debt, or has other obligations, it is treated as a separate entity and your assets can’t be seized. Underlying this arrangement is the assumption that you are operating as a separate financial entity from the LLC. If this is shown to be untrue, your asset protection can be eroded, leaving you liable for large amounts of money.
One of the best ways to prove there is separation between you and your business is to have a dedicated bank account for your LLC. A simple checking account is often the best way to do this. As an added benefit, having this account can make your taxes much easier and lower your accounting costs.
You can also choose to open a savings account for your LLC, or even a credit card. Just like there is a credit report tied to your social security number, your EIN can be used to check the company’s credit, so a card may help you to build your score up.
Review LLC tax rules in Utah
LLCs can elect to have their incomes taxed in one of two ways: as a corporation or as a pass-through entity. It is rare that LLCs choose the former, but if they do, they will be subject to Utah’s corporate tax, or franchise tax. This is calculated at a flat rate of 5% of all taxable income, with a minimum of $100 due.
For the majority of LLCs, pass-through taxation is the norm. This allows all profits (and losses) to be reflected on the taxes of LLC members, rather than the LLC itself. When this is the case, all normal Utah income tax rules are applied to individual tax returns, but the corporate tax is avoided. State taxes and federal taxes are paid on your own tax returns.
File an annual report
As a part of Utah’s taxation system, each LLC must file an annual report or renewal. You can expect to receive a renewal notice about 60 days before the report is due, which is one the anniversary of your LLC’s formation. The report can be completed on the state website and has a filing fee of $15, as well as potential late fees.
Get insurance for your LLC
The main requirement for insurance in Utah surrounds worker’s compensation insurance. These policies offer coverage for employees who suffer an injury or illness, or even die, because of their work. Any business with one or more employees (excluding business owners) is required to have worker’s compensation insurance in place.
Along with the required coverage, it is a good idea to have liability insurance in place for your LLC. The most common kind is general liability insurance, which provides coverage for lawsuits surrounding things like property damage, bodily injury, or personal injury. Certain professions may also choose to purchase professional liability insurance, which is used in the case of malpractice or error accusations. While these are optional, it is best practice to protect your business through some form of insurance.
Additional resources to help you set up a business in Utah
Utah allows the majority of tasks related to your LLC to be performed online. In addition to providing simple “OneStop” options for business registration, the Division of Corporations and Commercial Code offer a variety of resources to support entrepreneurs.
Do LLCs in Utah have to have a business license?
The state of Utah requires most types of businesses to have a seller’s permit, which allows them to collect and pay sales taxes. Some industries and professions may also need to obtain specialized licensing. All other licenses and permits are issued by local cities or counties, not the state. Not every locality will require any licensing at all.
Who can be a registered agent in Utah?
If you choose to name an individual as your registered agent, they must be over 18 years old and a resident of Utah with a physical address in the state. They must also be available at that mailing address during normal business hours. If you are using a service, they must be eligible to transact business in Utah.
What happens if my Utah LLC is not in good standing?
When an LLC is formed appropriately and all requirements are kept up with, it is in good standing with the state. Utah can issue a Certificate of Existence to attest to this. If the LLC is no longer in good standing due to an unmet requirement, like a missed annual report, it can be dissolved by the state of Utah.
Do Utah LLCs need an operating agreement?
There is no requirement from the state of Utah for an LLC to have an operating agreement in place. However, it is recommended that all businesses (even single-member LLCs) have an operating agreement or single document in place. This can prevent future conflict and avoid the state’s default LLC rules, which may not be the best option for every business.
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