So you are someone looking to start an LLC in Utah. Great choice! An LLC enjoys several advantages over conventional business forms, such as a partnership or a company. It offers excellent flexibility in terms of operations and provides the opportunity for tax savings.
Setting up an LLC is cost-effective compared to a Company and does not involve complex procedures. The steps for forming an LLC in Utah are very similar to the procedures laid down in other states of the US, except for a few minor variations. This article will guide you through all the steps involved in successfully setting up your LLC in Utah.
Naming Your Utah LLC
The first step in your journey to successfully setting up an LLC in Utah will be to select a name for your LLC. Selecting an appropriate name for your entity is crucial as it will be the very identity of your LLC in the market.
A good name will help create brand value for your business and help you stand out from the competition. In today’s market, there are plenty of competitors in almost every business segment. So the name you choose for your LLC in Utah must be unique, creative, and something that can strike a chord with your customer base. The name of your LLC will be the prospective customers’ first point of contact.
While naming your LLC, you must follow all the naming guidelines the State of Utah has laid down.
While naming your L.L.C., it’s important to make sure that the name contains the words “limited liability company” or “limited company” or the abbreviation “L.L.C.,” “LLC,” “L.C.,” or “LC.”
The name chosen by you should be unique and distinguishable from the actual, reserved, or assumed name of an existing entity. The selected name should also be discernible from an existing registered trade name, trademark, or service mark.
You should ensure that the name you select does not imply or give the impression that your L.L.C. is a government agency. Therefore, you cannot use terms like “F.B.I.” or “Treasury.”
Similarly, usage of certain words, like “Bank,” “Olympiad,” or “University,” is restricted and involves obtaining the written consent of concerned authorities as well as additional paperwork and compliance requirements.
To get a deeper understanding of the naming rules prevailing in Utah, you can read up on the Business Name Conventions and Policies Guidelines.
Does Your Business Require a DBA?
A DBA (doing business as) allows your LLC to conduct business under a different name. Even though having a DBA is not mandatory, it does provide the LLC with a unique advantage. For example, if your LLC’s legal name in the documents of formation is ‘ABC LLC,’ but you want to conduct trade under the name ‘XYZ,’ then you would list XYZ under your DBA filing. In Utah, a DBA is called an ‘Assumed Name.’
But remember that the trade name alone does not protect your personal assets. To avail of the protection of limited liability, you need to form an LLC.
Option 1: Apply for a DBA OnlineApply Online – OR –
Option 2: Apply for a DBA by Mail or In-PersonDownload Form
Utah Division of Corporations & Commercial Code
P.O. Box 146705
Salt Lake City
Heber M. Wells Building
160 E 300 S – 1st Floor
Salt Lake City
Doing a Name Search and Name Reservation
Before you go ahead and file for your LLC incorporation, you must ensure that the name you choose for the LLC is unique and distinguishable. You can do this by using the business name search provided by Utah’s Commerce and Commercial Code Division.
If you have decided on the name you want for your business but are not ready to immediately incorporate your LLC, you can reserve the name you have chosen.
Per the existing norms, you may reserve a name of your liking for 120 days. There are options for applying for name reservations online and through the mail. Ensure that you include all the relevant information in the application, such as your name, address, the name you want to be reserved for your LLC, etc.
Once an application is filed with the division, it will be reviewed. If the division is convinced that the name applied for is available, the same shall be reserved, for 120 days, in the name of and for the applicant’s exclusive use.
Option 1: Reserve Your Name OnlineApply Online – OR –
Option 2: Reserve Your Name by MailDownload Form
PO Box 146705
Salt Lake City
Registering your business domain
In an increasingly digitalized business world, you need to ensure that your business has a website address that matches your business’s name.
This is critical as it has a significant role in how customers find your business. Thus, before reserving the name of your LLC, you should check to see if the desired domain name is available.
You may do so by checking the currently available domain names.
Choose a Registered Agent in Utah
A registered agent appointed for your LLC shall receive all important communication and legal documents on behalf of the LLC. A registered agent is, for all purposes, a liaison between the LLC and the concerned authorities for matters including Tax forms, Legal Documents, correspondence with state authorities, Summons, etc.
The laws in Utah mandate that your LLC should have a registered agent. Utah allows an individual or a business entity to act as a registered agent for your LLC. The idea behind requiring such an appointment is that in all time-sensitive matters, the correct party is notified in the LLC.
As per the provisions of Section Section 48-3a-111 of the Utah Code, an LLC must appoint a resident agent.
A resident agent appointed for your LLC should be available during regular business hours to receive communications addressed to the LLC (such as Summons, notices, etc.). On receipt of such communications, the registered agent shall be required to forward it to the appropriate people within your LLC. In short, a resident agent acts as the LLC’s official point of contact for all outside stakeholders.
Who Can Be a Registered Agent?
The requisites for holding the position of a resident agent in Utah are dealt with under Chapter 17 of the Model Registered Agents Act. Accordingly, a registered agent in Utah must fulfill the following criteria:
- The designated agent must have a street address/rural route box number to which all communications, including Notices and Summons, can be delivered. Bear in mind that P.O. Boxes and Virtual Offices are not acceptable.
- If the resident agent is a business entity, then it shall be required for such an entity to be duly registered with the Division of Corporations in Utah.
- If the resident agent is an individual, they must be over 18 years.
- Also, remember that your LLC cannot serve in the capacity of its resident agent.
In your own capacity, you may act as the registered agent of your LLC, or you may choose to appoint any of your friends or family. Alternatively, you may also opt for a professional registered agent service.
You are required to nominate the person/business entity that shall act in the capacity of a registered agent for your LLC at the time of filing the paperwork for your LLC.
Individual v. Registered Agent Service
There is nothing preventing you from appointing yourself as the registered agent of your LLC. However, using a registered agent service has its own advantages. Some of the benefits of hiring a registered agent service are:
A registered agent service ensures you do not miss any critical communication addressed to your LLC. Running a business may require you to travel and be away from your office. This often results in you missing essential communications from concerned authorities. A registered agent service ensures that all Notices and other communications are duly received, and you are intimated of the same.
A registered agent service helps you focus your attention and energy on matters that are core to the business. Consequently, you may focus on growing your business rather than spending time on matters of compliance and paperwork.
Having a registered agent service will also protect your privacy to some degree, as your address is not listed in the public domain.
File the Certificate of Organization Utah
A Certificate of Organization in Utah is a legal document needed to form and legally incorporate your LLC officially. The laws of Utah require you to file this document with the Utah Department of Commerce. Once this is completed, your LLC is registered and is recognized in the eyes of the law. A Certificate of Organization should include details such as:
- The name of your LLC
- Details of the principal office address
- Details of your registered agent
- Signature of organizer
- Details, including names and addresses of additional members/managers, if any.
Option 1: File Your Certificate of Organization OnlineFile Online – OR –
Option 2: File Your Certificate of Organization by MailDownload Form
Utah Division of Corporations & Commercial Code
P.O. Box 146705
Salt Lake City, UT 84114
As of now, the State of Utah does not have any provisions pertaining to expedient processing of your Certificate of Organization.
Public Notice of Formation
As of now, the State of Utah does not have any provisions pertaining to a mandatory public notice of formation for your LLC.
Creating an Operating Agreement for Your Utah LLC
An Operating Agreement is an internal document governing an LLC’s operation and functions. It provides for provisions as to how your LLC shall be run, what shall be the duties and powers of the members, and other matters that are needed to ensure the smooth functioning of your LLC.
The State of Utah does not require you to adopt an Operating Agreement to start and run an LLC in the State. However, it is prudent for you as a business owner to have a well-defined Operating Agreement.
A well-drafted Operating Agreement offers credibility to your enterprise. External stakeholders, including banks and potential investors, usually ask for your Operating Agreement before deciding whether they will do business with you. It also ensures that there are no future conflicts between you and other stakeholders in the LLC, as the scope, powers, and duties of every member are laid down in the Operating Agreement.
There are no prescribed templates for an Operating Agreement in the State of Utah, and you may draft one according to the needs of your business. However, irrespective of the nature of your business, it shall be advisable for your Operating Agreement to cover the following areas:
- Organization Details
- Duties of Members and Managers
- Management and Voting
- Capital Contributions
- Division of Profit and Losses
Writing the Operating Agreement Yourself vs. Hiring a Service
You can draft your Operating Agreement. However, it is always advisable that you hire professional help. Having your Operating Agreement drafted by an expert well versed in State laws will help protect your interests. Professional help can also help you cover specific issues through your Operating Agreement that are unique to your business model.
Limits of Operating Agreement
There are no specific formats for an Operating Agreement. However, it cannot include any matters that are prohibited under the law of Utah. Section 48-3a-112(3) lays down a list of matters that are beyond the scope of an Operating Agreement.
Obtaining an EIN for your Utah LLC
EIN (Employer Identification Number) is a nine-digit number. It is assigned by the Internal Revenue Service (IRS) to enable them to identify a business for taxation purposes.
Your LLC will also require an EIN to start a business bank account, hire a workforce, and file tax returns (both State and Federal). Even if you have an existing EIN for your sole proprietorship, you are legally required to obtain a new EIN for your LLC. The IRS issues an EIN, which can be applied for by you either online or through the mail.
Option 1: Request an EIN from the IRSApply online – OR –
Option 2: Apply for an EIN by Mail or FaxDownload form
Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999
Fax: (855) 641-6935
File Annual Reports in Utah
Annual Renewal is a legal document that helps the State update itself on all the active businesses in Utah. The Utah Division of Corporation requires every LLC in Utah to file an Annual Renewal. This is a mandatory compliance requirement that every LLC should follow.
The first Annual Renewal is to be filed on completion of one year from the date of incorporation of your LLC. After that, you need to file your annual report every year before the anniversary date of your LLC, i.e., the date your LLC was incorporated. The Division of Corporation in Utah sends your LLC’s registered agent a notice of Renewal every year, sixty days before the due date.
If you miss the deadline for your LLC to file the report, you are liable to pay a late fee. In case you fail to file the return, you risk facing penal actions against your business by the authorities. Your LLC may be shut down, and you face the risk of losing the limited liability protection afforded by your LLC.
Hiring a reputed registered agent service can help you avoid such situations. Registered agent services promptly notify you about the deadlines for various filings.
For details regarding the fee applicable and the penalty in case of late filings, you may read the Instructions For Annual Report / Renewal Form.
You may file your report online or submit the duly filled form through mail to the Utah Division of Corporations and Commercial Code P.O. Box 146705 Salt Lake City, Utah 84114-6705.
Tax liability for your Utah LLC
An LLC in Utah needs to pay taxes both to the State and Federal Government, depending on the nature of the business. An advantage of forming an LLC is that, unlike a C Corporation, taxation for an LLC is by default not done at the business level. Instead, owners are required to pay taxes (both State and Federal) on the profits they receive individually from the profits of the business.
The way your LLC will be taxed depends upon the number of members in your LLC. There are four ways in which LLC will be taxed:
- Sole proprietorship: a business owned by a single person
- Partnership: a business owned by multiple people
- C – Corporation: income is split or segregated for taxation
- S – Corporation: tax liability is split between the business and its owners
Federal Tax Liability
An L.L.C. will be treated differently for tax purposes depending on the members’ chosen taxation structure.
If you’re a single-member L.L.C., your default taxation type will be that of a sole proprietor or ‘disregarded entity.’ The L.L.C. has to report its activities under Schedule C, Schedule E and/or Schedule F of Form 1040.
A multi-member L.L.C. is treated as a partnership by default for tax purposes. In such a case, the partnership rules will apply for tax purposes, which means that partners will not be personally liable for taxes. In this case, apart from filing Form 1040, you’ll have to file your partnership return in Form 1065 and provide information in the K-1 of each partner.
All members, as well as managers of an LLC who take a share of the profits of the LLC, are liable to pay federal self-employment tax. In addition to the same, Federal Income Tax shall also be applicable to you. The amount of the Federal Income Tax will vary depending on a number of factors such as your earnings, tax bracket, filing status, and deductions.
Corporate tax rules apply if the company is a corporation, and the company must file Form 1120. Unlike a partnership, the income of an L.L.C. is taxed. If the company is an S-corporation, the L.L.C.’s income is not taxed, but individual members are taxed on their allocated share of income. For tax purposes, an S-corporation must file Form 1120-s.
State Tax Liability
An LLC in Utah will have mainly two types of tax implications at the State level. Firstly, as a member of the LLC, you are required to pay an Income Tax at Utah’s standard rates for that part of the profit you receive from the LLC. Regular allowances and deductions are also applicable in this case.
However, if you treat your LLC as a corporation for taxation purposes, the State corporate tax will apply to your LLC. Utah has a corporate income tax rate of 5% (with the minimum amount being $100.)
Secondly, if your LLC is selling a physical product or providing some specified services, “Sales and Use Tax” will apply to your LLC. A “Sales and Use Tax” is levied on transactions through your LLC whereby taxable goods or services are exchanged.
Make sure you register the business with the authorities to get a seller’s permit. This allows your business to collect sales tax and remit the same to the authorities. You may check with the Utah State Tax Commission to see if your LLC is required to collect and pay sales tax.
Depending on the business domain in which your LLC operates, you may be required to pay certain other types of taxes as well. For example, if your business sells gasoline, taxes are applicable on the fuel you sell. Also, if your LLC has hired employees, you will have to sign up for both Unemployment Insurance Tax and Employee’s Withholding Tax.
Permits and Licenses
To operate an LLC business in Utah, you need to comply with State and Federal regulations. The kind of permits you may need depends on the area of your business. For example, running a restaurant requires licenses concerning health, building, and signage.
Your business may be subject to federal, state, and local licensing jurisdictions.
Federal Licensing requirements will depend on the business activity carried on by your LLC. If your company is engaged in any area of business regulated by the Federal Government, you will be required to obtain relevant Federal Licenses and Permits.
Some business activities requiring Federal Licenses and Permits are:
- Alcoholic beverages
- Firearms, ammunition, and explosives
- Fish and wildlife
- Commercial fisheries
- Maritime transportation
- Mining and drilling
- Nuclear energy
- Radio and television broadcasting
- Transportation and logistics
At the State level, your LLC should get a seller’s permit if it sells specific physical products or services to which sales tax applies.
Depending on where you operate your business, you may also be required to get the local government’s license and permit. In Salt Lake City, all businesses must obtain a city business license.
For Information regarding;
Local Permits may vary from county to county, and it would be advisable for you to get in touch with your county clerk to obtain the details about local business licenses and permits.
Business Bank Account & Phone Number
It is always prudent for you to open a separate Bank Account for your LLC and to also have a separate designated phone number. Having a separate account helps you to avoid mix-ups and is helpful in ensuring that your personal assets are not affected in case of insolvency or lawsuits.
Privacy has become increasingly important in today’s world. As a result, it’s a good idea to have a separate phone number for your business. Furthermore, a business phone number may provide customer support, increasing customer satisfaction and benefitting your business.
You can obtain a phone number using any network carrier’s services (such as AT&T). Typically, some documents are required to prove the existence of a business entity. Depending on the service provider, the documents required may differ.
Utah has a booming economy that is highly suitable for start-ups. It is home to some of the most successful start-ups, including Tranont. The State offers several incentive programs aimed at small and medium enterprises.
The Utah Enterprise Zone Program (EZ) and the Foreign Trade Zone (FTZ) are two such schemes. Get in touch with your local county or city government office to determine if your LLC is eligible for any of these incentives.
Once your LLC is incorporated and registered, you can take other steps such as obtaining necessary permits, starting your business bank account, getting requisite insurance for your business, applying for business credit cards, etc.
Enjoy your new LLC!