Have you been looking to start a business in the state of Utah, but you’re unsure as to how to? Or are you a sole proprietor of a business and is looking to safely expand? Well, an LLC Is the perfect solution for you. Starting an LLC could seem intimidating for someone looking to start one for the first time, not to mention it could be confusing for someone not from Utah.
This is because the procedures for starting an LLC varies from state to state and country to country. Although the steps for starting an LLC in Utah are rather similar to other countries or states, it should be noted that some key differences should be looked into when starting a Utah LLC.
This article is here to assist you in learning the appropriate steps needed to start an LLC here in Utah, regardless of where you’re from. We will first be explaining the benefits of starting an LLC here in Utah, followed by the steps to starting an LLC in Utah, and lastly, some frequently asked questions when it comes to a Utah LLC.
Benefits of a Limited Liability Company (LLC) in Utah
Starting an LLC in general presents a lot of great benefits for the business. This is no different when it comes to starting an LLC in Utah. Below are some of the benefits of starting an LLC in Utah.
Freedom to customize your small business
An LLC offers a degree of flexibility that cannot be matched by most other business models. Regardless of size, an LLC is flexible enough to accommodate businesses of varying sizes. This is because starting involves the drafting of an operating agreement that can be tailored to the needs of your business.
This quite literally means you can write your own rules to suit the needs of the business.
Raising angel capital for the business
LLCs have become one of the best entities for raising angel capital (start-up investments of up to $500,000). This has made the LLC business structure popular among smaller investors. What about venture capital firms? Well, most venture capital firms prefer to invest in corporations due to familiarity, they are also not allowed to invest in LLCs due to stockholder rules.
Protection of real estate
One of the most notable benefits of an LLC is the ability to hold real estate. It comes with dual liability protection that shields the investments of average joe’s like you and me from lawsuits. This is especially useful for those who tend to get in trouble and is likely to get sued.
The protection from an LLC protects your assets such as real estate from being liquidated. This means that your real estate investments held under the LLC are protected from claim settlements.
Protection of personal assets
Another great benefit of an LLC is the protection it offers to your assets. Personal assets are assets you hold under your name. Some examples of personal assets are your bank account, your car(s), and your mutual funds, stocks, and bonds.
LLCs can protect all these assets from a lawsuit. This gives the LLC owners peace of mind that their personal assets are safe from personal lawsuit claims.
Ability to change profit distributions
This is one of the more unique aspects of this business structure. The profit payouts of an LLC can be disproportionate to the actual ownership percentages. This gives you and your business partners the option of choosing how much profit/loss you will receive.
In most cases, people will opt to take more profits and losses. This might seem a bit counterintuitive, but there is a good reason for this. By taking more profits and losses, you provide incentives for investors to invest in your company.
An example of this would be having the investor contribute to all the capital, and varying the profit distribution so that he gets 100% of the profits until his investment has been paid back. In some cases, you could provide interest as well to further incentivize investors to invest in your Utah LLC.
Segregation of Assets
The segregation of assets in a business is crucial. By segregating the business assets into individual LLCs, you protect them from your company’s creditors or other people that wish to sue you. LLCs do not always protect your assets.
Your business may be protected from your personal creditors, but what’s protecting it from its own creditors? If your LLC gets sued, the assets of the LLC can be seized and liquidated. In some cases, the court may put a lien on your company and then freeze your assets so that you have no access to your operating capital, and will lose the ability to write and receive funds from clients.
Starting an LLC in Utah
Now that we’ve gone through the benefits of forming an LLC, let’s get to the steps. Please keep in mind that this article may be comprehensive but it is by no means an all-encompassing guide to starting Utah LLC. We still recommend you do more research, even after reading through this article.
Choosing a Name for the Utah LLC
As stated under the state law, the name of a Utah LLC must end with the words “Limited Liability Company” or suitable abbreviations such as “LLC”, or “L.L.C.” with or without punctuation. You are free to use upper or lower-case abbreviations depending on your preference.
Similar to other states, when you form an LLC, The name chosen for the Utah LLC must be distinguishable from the names of other business entities that have already registered their name with the Utah Department of Commerce, Division of Corporations & Commercial Code.
If you are unsure if the intended name of your LLC is in use by another business, we recommend you check with the Utah business name database. You can also check the names of existing business entities while checking for the availability of the desired name for your Utah LLC through Utah’s business name database.
Once you have done so, you may begin using the name immediately. If you do not wish to do so, you have the option to reserve the name for 120 days by filing an Application for Reservation of Business Name with the Division of Corporations.
It should be noted that you do not have to use the official legal name of your Utah LLC that is registered in the Certificate of Organization when you do business. Well, then what do you use? You have the option of using a fictitious business name.
A fictitious business name is also known as a trading name or DBA (Doing Business As) or an assumed name. To do this in Utah, you can access the Division of Corporations Website. On this website, you will find an online services portal that you can use to register your DBA online.
Do keep in mind that you need to have a registered account on the website to proceed. Once, you’ve made it to the website, you simply click on “ Register a Doing Business As (DBA).” After that, you’ll need to fill out the DBA registration form.
Some important information you’ll have to include in the registration form are the desired DBA name, the names, and addresses of the registered agent in Utah as well as the name of the business owners, the location of the business, a description of the business’s activity, and which form of payment you will be using.
Upon completion of the registration form, you may submit it and pay the filing fees. You can then choose which method of submission you want (online or by mail). If you do opt for the online method, you can pay using your credit card or an existing Utah.gov subscriber account.
On the other hand, if you do opt to submit the form through the mail, you’ll have to pay with cash or a check with the order made payable to the “State of Utah”. With the DBA Registration Form submitted, you should expect confirmation of received from the State of Utah. Once approved, you may begin conducting business transactions using the DBA.
Appointing a Registered agent
Most commonly called a registered agent, it is also known as a resident agent in some states, we will be using these terms interchangeably in this article. Though it should be noted that in Utah, the appropriate name is a registered agent.
All LLCs in the state must have an agent for service of process in Utah. The registered agent in Utah is simply an individual or business entity that has agreed to accept legal papers on behalf of the Utah LLC in the event it is sued.
The agent in the state must be a resident of Utah or a business entity that is authorized to do business in the state. The registered agent in Utah can be any person who is at least 18 years old. The agent must have a physical street address in Utah.
Not only that, but the agent must be available during normal business hours to accept service of process. It should be noted that P.O. Boxes or shipping/ postal company addresses do not meet the requirements of a registered agent and therefore should not be used as the LLC registered agent.
An LLC that is not able to maintain a registered agent may be fined and face a possibility of losing its status as an LLC. Failure to name a reliable registered agent could result in the Utah LLC not receiving notifications of lawsuits that are filed against the company.
LLCs have 2 options when it comes to appointing a registered agent. They could appoint a suitable individual to act as the registered agent. They could also appoint a commercial registered agent. Appointing a commercial agent does have some added benefits as well as some additional costs.
Some of the aforementioned added benefits include reducing the risk of default judgement and administrative dissolution, protecting your privacy, and being able to maintain a flexible schedule and location.
File the Limited Liability Company Certificate of Organization
A Utah LLC is created by filing a Certificate of Organization with the Utah Division of Corporations. Among things that must be included in the Certificate of Organization would be the name of the Utah LLC.
Secondly, you must also include the name and address of the appointed registered agent for your Utah LLC. Third, the address of the principal office. This does not have to be an actual office address but if you do have an actual office for the Utah LLC you may use that. The principal office address must simply be a Utah street address where the LLC is located.
This address could be your home address or the address of a friend or family member. Furthermore, you will have to include the name and addresses of members and/or managers as well as their position in the LLC. It should be noted that this section is optional.
After that, you have the option of including the duration of your LLC and the purpose. Lastly, you have the options to state if the business is going to be female-owned or minority-owned.
When it comes to filing, there will be a $70 fee that is payable by card or check, depending on the filing option you have chosen. I
f you’ve decided to do it online, you get the added benefit of it being the fastest. You can begin by navigating to Utah’s OneStop Business Registration portal. After that, you simply have to log in with your existing account and follow through with the provided steps.
Payment for the online method can be made via debit card or credit card. For Hard copy filing, you have the option of doing it by mail, overnight mail, in person, or through fax. The address for these 4 methods vary and are listed below:
Utah Division of Corporations & Commercial Code
PO Box 146705
Salt Lake City, UT 84114-6705
Utah Division of Corporations & Commercial Code
160 East 300 South 2nd Floor (or 160E Broadway)
Salt Lake City, UT 84111
Heber M. Wells Building
160 E 300 S, 1st Floor
Salt Lake City, UT 84111
For the hard copy filing method, you will have to make payment through cash or a check payable to the State of Utah. For the fax method, you will have to send the form plus a fax cover sheet, to the fax number along with your credit card information on the cover sheet.
The processing time for each method varies. The online method has the fastest turnaround time of about 2 days. For the hard copy filing methods, the standard processing time is about 7 to 10 business days, unless you opt for the expedited option which costs an additional $75.
Prepare an Operating Agreement
Though an Operating Agreement is not required in Utah, it is still highly advisable that one be created. You may be wondering, if an operating agreement is not required by the state, why should you draft one? Well here are some of the reasons and benefits as to why an Operating Agreement is a must-have for any Utah LLC.
As the business grows, the LLC might start looking into hiring managerial staff to take care of the day-to-day business operations, giving more time for the members of the LLC to look at more business development opportunities.
The operating agreement can help define the role of the managerial staff and designate the authority and compensation for when and if the managerial staff wants to leave the company.
Avoiding default state-imposed rules
An LLC that does not have an Operating Agreement will be bound by the default rules of the state that it is bound to.
Separating professional and personal identities
In the event of a lawsuit, having one could help the court determine if the LLC is an entity separate from you, hence maintaining the liability protection offered by the LLC.
The Operating Agreement should include when the LLC was officially formed and who the members are. It should also include how the ownership of the LLC is divided. Multi-member LLCs could use an equal ownership structure or assign units of ownership to each member in the operating agreement.
It is also useful to include how management and voting procedures work. This will help determine if the LLC is going to be managed by a member or an appointed manager. This will also help members determine how voting on business matters should proceed.
Some examples of voting procedures that you should include are deciding what to do when a member is unable to vote, or how you would quantify abstained votes. Some LLCs have also included capital contributions in their operating Agreement. This will help keep track of the amount of money invested into the business by each member.
Following that, it should also have a section to decide the business’ distributions. This is an important one that helps settle how profits and losses will be divided among each member.
Obtaining an EIN
Provided the Utah LLC has more than a single member, the Utah LLC must then obtain its own IRS Employer Identification Number (EIN). If the Utah LLC does not have any employees, it is still required to obtain an EIN.
On the other hand, if the LLC does not have more than one member, the single member of the LLC must acquire an employer identification number if they have employees. Furthermore, if the owner(s) of the LLC have decided to be taxed as a corporation, and not a sole proprietorship, they will also have to file for an employer identification number.
File Annual Renewals
All LLCs in Utah foreign or local authorized to do business in the state must file an Annual Renewal with the Division of Corporations and pay a $20 filing fee. Annual renewal is the equivalent of an annual report. As the name suggests, this renewal must be done one year from the date of the Utah LLC’s initial registration and due annually for the years thereafter.
If you’re worried about forgetting to file annual renewals, fret not as the Division of Corporations will send a notice 60 days before the anniversary date of the Utah LLC to the registered agent. This annual report can be filed online or by accessing a blank renewal form from the Division of Corporations website.
How much does it cost to form a Utah LLC?
The Division of Corporations in Utah charges a $70 fee to file the Certificate of Organization. Additionally, if you wish to reserve the name of your Utah LLC, there will be a fee of $22. Though filing all the relevant forms by yourself is the cheapest option to form an LLC, the filing process itself could be complicated if you’re not one of the appropriate amounts of research.
As a result, you may end up missing some important forms that may lead to complications with your Utah LLC. If you’re looking for other options, you could opt to hire a lawyer to assist you in forming your Utah LLC.
Though this may not be the most wallet-friendly option, it will no doubt ensure a smooth process. Lastly, another option that you could consider is looking at LLC formation services available online. These options are generally cheaper and could come with some added benefits.
Is a Business License Necessary in Utah?
Unlike some states, all businesses operating in the state must obtain a license from the local municipality in which they are doing business. The type of licenses and permits needed to do business will depend on the type of business conducted by your business.
Keep in mind that some businesses might require more licenses and permits than others. To obtain a business license for your Utah LLC, you should contact the business licensing office for the city where the Utah LLC is operating.
You can find the list of these offices can be found on the Utah Business Licensing & Registration Guide. When it comes to professional licenses and permits, you can check Utah’s Division of Occupational and Professional Licensing.
Can a Foreign LLC do Business in Utah?
For foreign LLCs to do business in Utah, it must register itself with the Division of Corporations. Before doing business here, you should ensure that the name of your LLC is available in the state by checking in the Utah business name database. A foreign LLC must also appoint a resident agent in Utah that has a physical address in Utah for service of process.
Once again, the resident agent can be either a resident of Utah over the age of 18 or a business authorized to do business in Utah. To register your foreign LLC, you must file a Foreign Registration Statement.
The application may be filed online at the Utah Online Business Registration website or by mail to the mailing address: Utah Division of Corporation & Commercial Code PO Box 146705 Salt Lake City, Utah 84114-6705.
Accompanying the completed application should be a certificate of existence or good standing from the home state of the LLC and a filing fee of $70. It should be noted that the certificate of existence must not be more than 90 days old.
How Do I Get a Certificate of Existence in Utah?
You might be wondering, what is a certificate of existence? Do I need one? A certificate of existence or certificate of good standing in some states is a state document that verifies that your business was legally formed and has been sufficiently maintained.
Well you do not necessarily need a Certificate of Existence to run your business here, there are some instances where having a Certificate of Existence may be beneficial (e.g. registering to do a business in other states, opening a business checking account, etc.).
In the state of Utah, the Utah Department of Commerce is the body that provides the Certificate of Existence / Good Standing. Below is a more detailed breakdown of how to get a Certificate of Existence / Good Standing.
There are essentially 2 steps to getting your certificate of existence. First, you have to keep your LLC compliant. Secondly, you’ll have to simply order the certificate of existence.
How would you know your business is compliant? For your business to be compliant, it must have all the necessary licenses and permits according to the federal, state, and local licensing guidelines. Secondly, depending on your business activity, you might have to register for different forms of state tax.
Lastly, the annual report of the LLC must be filed annually with the Utah Department of Commerce each year before the anniversary date of the business.
Once you have ensured that your LLC is compliant, you may order your Utah Certificate of Good Standing from the Utah Department of Commerce. This can be done online, by mail, fax, or in person. The mailing address of the Utah Department of Commerce is 160 East 300 South, PO Box 146705, Salt Lake City, UT 84114-6705.
Can I form a single-member LLC in Utah?
When it comes to forming an LLC in the state of Utah, the single-member LLC is no different from the multi-member LLC. The steps needed to start an LLC in Utah are the same as listed above. Single-member LLCs do have additional flexibility when it comes to tax purposes.
How Do I Dissolve my Utah LLC when I am Done?
When you wish to close your business and cease all operations, you will want to properly dissolve your Utah LLC to limit the chances of lawsuits and government fees. Similar to the formation of an LLC, some steps must be considered when you intend to dissolve your LLC.
Among the important steps would include voting to dissolve the LLC, filing the proper dissolution forms, cancelling out-of-state registrations, and possibly getting a tax clearance. It is advised that you do further research about dissolving LLCs as it could become a complex task for someone inexperienced.
Once again, we would recommend you contact your lawyer regarding this matter or seek an LLC Formation service. By following these steps you are guaranteed to limit your liabilities.
Starting a business correctly doesn’t have to be difficult. With over 15 years of experience consulting new businesses and start ups, Matthew is probably the best person to help you set a strong foundation for your business.