In this post, you will find all of the information you need to set up a limited liability company (LLC) in Utah. We’ll start with an overview of how to choose a name for your LLC and register it with the UT Division of Corporations Commercial Department. Next, we will outline the benefits of registering your company as an LLC.
How to Start an LLC in Utah
There are two forms of limited liability company (LLC) in Utah—corporations and LLCs with a manager. The form of an LLC you choose determines whether your company is taxed as a corporation or as an LLC with a manager.
The decision to choose between the two company types has no tax status consequence, but it does determine how much control you will have over your business and how much money you will pay in taxes.
Here’s how the two types of LLCs work.
Registered Manager LLC
A Registered Manager LLC is better suited for sole proprietors or partners who want to have limited liability protection while maintaining full control over their business.
A Registered Manager LLC involves a manager who is required to maintain the books and records for the company, pay taxes, file annual reports and provide information about the company as required by law.
A Registered Manager LLC also allows members of the LLC to be limited partners, which gives them more control than registered managers, but less than full-ownership in another corporation. In other words, a limited liability company Registered Manager allows you to be a partner in your own company—with all of the legal protections of a partnership, but with limited liability protection.
Registered Manager LLCs are also able to continue as an LLC if one or more of the members leaves the LLC. In other words, if one of the members sells their ownership share, resigns from their position, or dies, the other members can choose a new manager and continue on with business as usual.
Sole Proprietor LLC
A sole proprietor LLC provides limited liability protection to its owners, but it is not a good fit for businesses that require management. It is the simplest form of an LLC and is useful for one-person or single-member businesses. A sole proprietor LLC allows you to be a member of an LLC and maintain full control over the limited liability company (LLC) while maintaining ownership of your assets.
The owner and not the LLC own assets. As a member, you will also own an interest in the LLC’s property, which means you could lose all your assets if the LLC does not meet its obligations to creditors. The LLC is also taxed as a sole proprietorship.
Firstly, you need to file a Utah certificate of organization at the Secretary of State’s office in order to start the process of forming an LLC business.
Step 1. Name Your Utah LLC
The first step in setting up an LLC is choosing a name for your company. Utah’s corporation law states that you can choose any name you want, but some people choose to register their names separately from their business.
Utah Naming Requirements
- You may name your LLC the same as an existing business, but you must use this legal entity’s name in all of your LLC communications.
- You may not change the name of a registered foreign LLC once it has been registered.
- If you choose to register your LLC with Utah’s Department of Commerce Division of Corporations, you can use any combination of letters and numbers. You must not include punctuation unless you pay an extra fee.
- Businesses with names that include road or street names, a person’s name, or a publicly known name may be prohibited by the state.
Check if the name is available in Utah.
The safest thing to do is to check whether the name you want is available in Utah before you register your LLC. The Utah Division of Corporations provides a name availability search on its website.
You can also search for Utah company names at the UT Division of Corporations website. You will be charged $2 for each name you search, but it may be money well spent if you find out that your desired name is already in use.
Tips on naming your business
- Choose a name that is unique and not confusing. For example, do not choose “Plating LLC” or “Fabricated Metal Works, Inc.”
- Avoid using names in the form of initials or acronyms, as they can be difficult to remember.
- Avoid character strings such as “J & J Engraving LLC” or “MJW Enterprises Corp.”
- Be careful when naming your LLC because you could end up owning a name you don’t mean to buy and never use.
Do I need a DBA?
It is important to remember that a DBA (“doing business as”) is not required in Utah. You can register your LLC with Utah’s Department of Commerce Division of Corporations without a DBA number.
Do I have to register my business name?
If your business is not doing any business in Utah, you do not have to register your name with UT’s Division of Corporations. If you do desire to register a DBA for your limited liability company (LLC), you must register the name with the county clerk where you plan to open your business and/or the county where the majority of your business will be conducted.
Registration with the Department of Commerce Division of Corporations is then required in order to file any papers that will use your DBA, such as Articles of Organization or Notices of Formation.
Step 2. Choose Your Registered Agent Service
Utah requires LLCs to appoint a registered agent in the state. The registered agent is the only person who will be publicly linked to your Utah LLC, so it’s important to choose someone you trust and make sure that he or she is in Utah.
What is a registered agent?
A registered agent is an individual or business entity that maintains a record of business activities in Utah. Registered agents provide the necessary information and forms required by the state to keep track of your LLC, such as filing annual reports and other documents with the Utah Division of Corporations when you need to do business in that state.
A registered agent must be allowed to communicate with your LLC on behalf of its members. An individual can only be a registered agent if he or she is able to communicate with and negotiate on behalf of more than one LLC.
What does it take for someone to be a registered agent?
You will not be able to register your LLC with the Division of Corporations if your registered agent cannot provide the following:
- A power of attorney that allows him or her to communicate with your LLC on behalf of its members.
- Information that proves he or she is a Utah resident, such as a driver’s license, voter registration card, or tax return.
- A business address where documents can be mailed and served on the registered agent.
You are not required to register an individual as your registered agent. If you decide to go this route, you will need to obtain a letter of authority (also called a “letter of representation”) from each member authorizing that person as the registered agent for the LLC.
Can I elect myself or a member of my team to be the registered agent?
You may not elect yourself or any member of your team to be the registered agent. Each LLC must have its own registered agent.
What type of documents will my registered agent receive?
Your registered agent will receive the following documents that are filed with Utah’s Division of Corporations:
- LLC formation documents, such as Articles of Organization.
- Associated documents, such as Notices of Formation and Amendments.
- Depending on your business setup, you may also receive other documents that outline your operating agreement or articles of organization on behalf of your LLC.
- Notice from the state notifying him or her that statutory fees have been paid, such as publication in the local newspaper.
Step 3: File Articles of Organization
You must file your Articles of Organization with UT’s Division of Corporations before you can register your LLC with that state. The 30-day filing deadline is one day after the date that your LLC is formed, and these Articles are filed with the Division of Corporations.
Utah Filing Article Requirements
You must file the Articles of Organization for your LLC with Utah’s Division of Corporations when the following conditions are met:
- You are forming a Utah-based LLC. (In most cases, this means that you have physical or operational offices in Utah.)
- You plan to conduct business in the state.
- The minimum number of members required to form an LLC is one, and each member must be an individual or a domestic trust governed by a single trustee.
- You file your Articles of Organization with the Division of Corporations within 30 days of formation.
What will my Articles of Organization contain?
Here are the basic requirements for Utah’s Articles of Organization:
- Name and address.
- Name and location where the business is to be conducted in Utah. This is the street address and city/county where your LLC will maintain its registered agent. If you are not opening a physical office, provide just the mailing address.
- Federal Employer Identification Number (or EIN).
- The full legal name of the LLC.
- The address of any assets (real estate, bank accounts, etc.).
One member or fractional interest. – If you’re an individual and conducting business in Utah, you must list your home address as the location where your LLC will maintain its registered agent. If you’re a trust with one trustee or an LLC with only one member, list that person’s residential address as well.
Step 4: Draft your Utah LLC Operating Agreement
You are not required to have a written operating agreement for your LLC. However, some form of a written document is recommended as it is the only way to ensure that you and your partners are on the same page in regards to how your business is run.
What is the purpose of an LLC operating agreement?
An agreement between you and your partners is the best way to ensure that all future disputes are handled in a fair and effective manner. It also ensures that each member’s rights are protected.
Step 5: Register a Utah LLC Employee Identification Number (EIN)
You must apply for an EIN in order to file your Articles of Organization and register with Utah’s Division of Corporations. You can apply for your EIN online after applying for your Articles of Organization.
What is an EIN, and why do I need one?
The IRS issues an EIN to individuals and businesses that have a federal tax identification number (or employer identification number, or EIN). They are used on internal LLC records, such as payroll forms and tax returns.
How Do I Apply for an EIN?
You can apply for your EIN online through the IRS’ EIN Service Center (irs.gov/ein) or by completing a paper application and mailing it to:
Internal Revenue Service
1111 Constitution Avenue NW, IR-6526
Washington DC 20224
Do I need a social security number to get an EIN?
No, but you must provide the Social Security Administration (SSA) with your taxpayer identification number.
How much does it cost to start a Utah LLC?
The filing fee for your Articles of Organization and registering with Utah’s Division of Corporations is $128.
And if you file your Articles of Organization and register with the Division of Corporations within 30 days after formation, the application fee is reduced to $28.
Other ongoing costs:
- Paying a registered agent every year. This cost varies by the registered agent but is typically around $50-$100 per year. If your LLC is not active, you may still be required to pay the Division of Corporations an annual LLC fee of $10 (this applies only if your LLC needs to keep its official records updated).
- Incorporation state fees vary by state but typically range from $100 to $500.
Advantages of Incorporating a Business in Utah
Thanks to its business-friendly laws, Utah is both an attractive location to do business and a favorable state to incorporate in.
Advantage#1: Salient benefits of Corporation or LLC
Utah is the only state that requires that all corporations or LLCs incorporate in order to conduct business within its borders. This is a significant advantage for companies that consider their options carefully.
Advantage#2: Legal protection by law
In case of dissolution, an LLC or corporation in Utah will usually be dissolved, and its assets will be distributed to its members according to the agreed-upon terms of the operating agreement.
Advantage#3: Other Business Incentive Programs
Utah offers numerous incentives for companies that are looking to grow and hire additional employees. These include:
- The Small Business Development Center (sbdc.utah.gov)
- The Job Creation Tax Credit (jobs.utah.gov)
- The Empire Zone Tax Credit (empirezonecorps.com)
- The Enterprise Zone Tax Credit (empirezonecorps.com)
- The Advanced Technology Workforce Grant (utah.gov)
- The Small Business Development Services (sbds.utah.gov)
- Public Works Capital Improvement Programs (publicworks.utah.gov/)
Recycle Market Development Zone (RMDZ)
RMDZ tax credit -Utah’s umbrella program for the creation of Enterprise Zone (EZ) and Small Business Zone (SQBZ) projects- is a valuable incentive to first-time entrepreneurs relocating or expanding their operations.
The EZ Program provides 4-year tax credits, while the SQBZ Program offers a 3-year tax credit.
RMDZ companies will receive a credit of 25 percent, up to $500,000.
Are there any Disadvantages of Incorporating in Utah?
Although the benefits of incorporating your business in Utah are potentially significant, there are some important disadvantages to be aware of.
Disadvantage#1: Real Estate Costs
Utah is known for its high-end real estate market, and while this may be beneficial for some businesses, it can prove to be an expensive barrier for many small and mid-sized companies.
One big expense: the annual fee that must be paid in order to maintain your LLC registered agent.
Additionally, there is a fee for your LLC operating agreement. These fees vary by registered agent and are typically around $50-$100 per year.
Disadvantage#2: Corporate franchise tax
Because it is unusual for LLCs and corporations to be taxed in Utah, the state has decided to tax these business entities at a higher rate than most other states.
Disadvantage#3: New Business Registration
Some new businesses may not be able to conduct business immediately after the incorporation or formation of an LLC. This is because the new business must register with the Division of Corporations, which may cause a delay in the opening of your business.
Open A Business Bank Account
Bank account work does not have to be complicated. To open a business bank account in Utah, the first step is to find a bank. The Division of Corporations has a list of accredited banks and credit unions (bank.utah.gov).
In addition to the list provided, you can also search for local banks by zip code on the Bank Rate Monitor website (bankrate.com/us/sc).
Get Small Business Insurance
Before you open your business bank account, it is important to make sure that all of the appropriate insurance is in place.
When considering any type of business insurance, make sure you understand what qualifies as a “small business” for the purposes of purchasing coverage.
In order to qualify, an organization must meet size criteria that are established by the state based on its revenue and number of employees.
Check with your existing insurer to see if it would offer coverage to your LLC if it ever sold or merged with another business entity.
How Much Does Business Insurance Cost?
The price of business insurance will vary by insurer, but a good place to start is with basic liability coverage.
That policy will include liability for bodily injury and property damage/loss caused by the negligence or wrongdoing of owners, employees, or others.
The average cost for this type of insurance is around $1,800 per year.
Secure the proper business licenses and permits
Ask the Division of Corporations for a list of which licenses and business permits will be required to operate your business.
Individuals who plan to work in Utah should acquire a license from the Division of Occupational and Professional Licensing (dopl.utah.gov).
Before opening your doors, be sure to acquire a business license or certificate, regardless of whether or not you plan to offer your services as a sole proprietor.
Register For Taxes In Utah
You should also register your business in the appropriate tax jurisdiction.
A few states, including Utah, have a single-level entity rate of 25 percent for both corporations and LLCs.
To get an idea of what the average corporate income tax rate is for a business owner in Utah, use the small business rate calculator at usataxrates.com.
This website can be used to estimate taxes and fees that may be due when registering your business and gathering information on both income and expenses (utahtaxbar.org).
Use the following website to find the correct form to fill out for registering and paying your taxes: taxes.utah.gov.
When you have a business, it is important to pay your taxes on time. The penalty for late payment of corporate income tax is $25 for each day that the deficiency remains unpaid.
It is also important to note that a corporation must report its income in accordance with IRS regulations.
What is a seller permit?
A seller permit is required for home sellers and real estate brokers who sell five or more properties in a given year.
To get a proper permit, contact the Utah Department of Commerce (commerce.utah.gov).
A seller permit is required for anyone who works as an independent contractor/tradesman and receives payment from consumers or entities that make more than $5,000 per year.
Utah Employer Tax
If you have a business and employ workers in Utah, you may be required to pay Utah employer tax as well.
In addition, there is a special business tax rate for veterans whose income has ceased to be active-duty military service. This rate is 5 percent and is applied to the first $150,000 of net business income in a year, provided that the business does not have more than 25 employees.
Why do I need to register for unemployment insurance tax?
Whenever a business is formed or reorganized, it may be the case that one or more of its owners are eligible for unemployment insurance.
There are two types of unemployment insurance:
If the business fails to register for both forms of unemployment insurance in Utah, the state may levy up to $800 in penalties. The maximum penalty is $4,000 per year.
File Your Utah Annual Report
All corporations and LLCs that are registered in Utah are required to file an annual report by May 1st every year.
The good news is, this filing can be done online at our website (utahcorporations.com).
With an online filing, you can avoid the inherent delays produced when a paper copy of the annual report is mailed in.
The cost of filing an annual report is $100 plus a $20 expedite fee if you want the report filed within four business days.
What happens if I’m late on filing my annual report?
If you fail to file your annual report by the May 1st deadline, you will have to pay a late fee of $50 for every month that your report is late.
The maximum amount of the late fee is $1,000. If the report is filed later than one year after the due date, you will also be charged a $200 penalty.
Finding a place to start your business and setting it up so that it is eligible to operate in Utah and beyond requires a bit of work. Still, the steps required to get your business going are straightforward and not overly complicated.
To get started, use the resources we have provided here, along with the forms available on the websites of various agencies, to create your own list of what you need to do.