Owning a business is one of the most significant accomplishments that an individual may have. However, starting a business is not an easy task; it requires time and dedication to succeed.
Before starting any business, one of the first steps is to decide what kind of business you wish to create.
However, before you make this decision, there are some things that you need to know about doing business in Utah.
How to register your business in Utah?
To start a business in Utah, you will need to file with the Secretary of State’s Corporation Bureau.
To do so, there are four steps involved:
- First, file your Articles of Incorporation online via the link posted below with your state government for $50. This document provides all of the necessary information regarding your business name, location, and any other pertinent details required by the corporation division. https://secure.utah.gov/sos/business/bussignup/login%20NewAccountRetrieve2
- Complete two consent forms. One for the registered agent and another for the company’s registered agent. These forms can be download from this website or emailed to you upon request.
- Arrange to have your Articles of Incorporation, consent forms, and initial filing fee (which is $75) sent via certified mail to the following address: ATTN: Division of Corporations, Utah Department of Commerce, 160 East 300 South, 3rd Floor, P.O. Box 146741, Salt Lake City, UT 84114-6741. Please note that documents must be received within 30 days to be processed without incurring additional fees. You also need to obtain two certificates required when establishing a business relationship with any other legal firm in the state. You can either download these certificates or request that they are emailed to you by calling the corporation division at 801-530-4849. Each certificate is $5 and must be notarized before being sent out with your certified documents.
- Once all of your papers have been received, processed and your registered agent has accepted their duties, you will receive a certification letter in the mail along with two wallet-sized cards, which are to be used when starting up any business relationships with other companies in this state. If you do not receive anything by 30 days after filing, contact customer support for additional information.
Once your company is approved, it’s time to start looking into obtaining licenses, tax identification numbers, and fulfilling all other state requirements for your business!
How to Start a Business in Utah?
Once you have decided on your future career path as an entrepreneur, one must wonder how one starts a business in the State of Utah? The answer to that question has many parts, and here are a few steps on how to start a business in Utah.
1. Choose a Business Idea
This is the first rule to starting any business. Choosing a good business idea and creating a business plan means selecting an idea with some potential; it must be something people need.
It can also be profitable, meaning it has to make money or offer some service that one would pay for. This is the basic rule when choosing a good business idea; if you don’t follow this rule, then your business will most likely fail after the first few years.
The State Business Office in Utah offers tips on how to start a new business. Some of the tools provided are seminars and online business resources. Another essential thing to note here, before starting any new business, you must comply with all tax laws and licensing requirements.
The state office also helps with this by giving information on trademarks, occupational licenses, and fictitious name registrations (name right), among many other things.
2. Decide on a Legal Structure
One of the most important things to decide on when you start a business is its legal structure.
There are five common types of businesses in Utah: sole-proprietorship, partnership, corporation, limited liability company, and nonprofit organization.
The sole-proprietorship is the most common legal business structure for small businesses; one is the only owner and operator of the company.
- A sole proprietor has all financial and operational responsibilities.
- All tax returns will be filed under their name, and social security number and all business transactions must go through them.
- Furthermore, a sole proprietor may hire employees to help run their business; as such, they will also take on some responsibilities as an employer.
- A partnership is similar to a sole-proprietorship in that there are no limitations regarding who may be involved in running the business.
- There are no boundaries on who may or may not be associated with the company.
- However, a partnership is more complicated than a sole-proprietorship because there are more people involved, which means there are more voices to listen to and personalities to consider when making decisions.
A corporation is defined as an association of one or more persons (or “shareholders”) permitted by law to act together for some purpose, such as producing/marketing goods or services.
- A corporation has many benefits compared to other legal structures: it offers limited liability, perpetual existence, and flexible distribution of profits and losses.
- Furthermore, in contrast to sole-proprietorships and partnerships, corporations have stricter guidelines regarding who can run the business.
- Only individuals can be shareholders of a corporation, meaning only humans can have an ownership interest in this legal structure.
The Utah State Legislature defines a limited liability company as “an unincorporated association of one or more persons having joint ownership and control.”
- This means that all members of an L.L.C. have the same rights and privileges when making decisions concerning their company.
- Furthermore, all member’s assets are protected from creditors because they cannot go after anyone other than what belongs to the L.L.C.; this would mean going after someone’s house or car if they were personally liable for their actions.
A nonprofit organization is a type of business that does not intend to make a profit. Instead, the money made goes back into the company and is used for promotion or other operations.
This is different from a for-profit business that makes money and distributes it to its’ shareholders (in a corporation) or gives it to its’ members (in an L.L.C.).
3. Choose a Name
Once you have decided on a legal structure, the next step is to choose a name for your business. Ensure that the name is available by checking the Utah State Corporation Commission website or phoning them at 801-530-6828.
The name must include a “doing business as” (D.B.A.) notice, which consists of two words and an appropriate suffix such as “and Company,” “Incorporated,” “Limited Partnership,” etc.
4. Get Your Chartered Accountant on Board
Now that your company’s status has been determined and your paperwork has been filed with the state, it’s time to make some decisions regarding taxes and licensing.
Finding an accountant who specializes in small businesses is significant because they will help you set up a budget and identify tax deductions.
Furthermore, there are often notable tax credits available to women and minority-owned businesses, including free services from the government’s Minority Business Development Agency (MBDA).
5. Licenses and Permits
Upon meeting with your accountant, you’ll find out what licenses and permits are needed to run your business. This will vary from industry to industry because the government creates many regulatory laws to protect consumers.
There may be certain licensing information required for professional services such as law, architecture, and design.
Local governments create zoning regulations to promote a community’s general health, safety, and welfare.
These regulations ensure that your business is not placed in a residential area which would increase traffic and noise levels that might be harmful to the surrounding residents.
b) Selling/Service Licences
If you plan on getting into contracts with individuals or companies for goods or services, there may be specific licensing requirements depending on the type of service you offer. For example, if you’re going to open up a daycare facility, you will need a special license from your city or county.
c) Employee Licence
To hire any employees, you will need a business license known as an Employee Licence. This is given by the Utah State Tax Commission and allows you to have one employee and yourself.
From then on, every time you add another employee, a new application must be filled out and submitted with fees of $5 per person.
d) Contractors License
Generally speaking, if your business provides services for other people rather than manufacturing or selling goods, you will need what is called a Residential Builder’s Contractor’s License (R.B.C.).
If your business manufactures anything which requires licensing, contact the Department of Commerce at 801-530-8158 for more information.
6. Pick a Business Location and Check Zoning Regulations
If you rent or lease your business location, make sure that the property meets any local zoning requirements. This means that you must ensure that the property is correctly zoned for commercial use and has received necessary building permits from public authorities.
If you own the building outright, it’s still a good idea to get the proper zoning information because some areas have certain restrictions on what types of businesses can be run in that area (i.e., the distance between establishments).
7. Review Your Tax Registration and Reporting Requirements
At this point, you will need to know if there are any sales or use taxes you will need to collect from customers. In general, sales and use taxes are collected on a per-state basis, meaning they cannot be combined from multiple states.
However, several states have tax reciprocity with Utah, including Arizona, Idaho, and Nevada, meaning that these states will allow Utah residents to purchase items without being taxed at the state level
8. Obtain Insurance
Your business may require several different types of insurance coverage depending on your particular industry.
General liability, workers’ compensation, and even car insurance are all required for certain businesses.
1) Worker’s Compensation
If you plan on hiring employees at any point, you will need to have Worker’s Compensation Insurance in order to comply with state law.
This type of insurance is mandated through taxation by the federal government and covers medical expenses for employees who are injured during work hours or conditions resulting from that job. The specific amount of coverage needed varies depending on how many people you hire.
2) Business Auto Coverage
Generally speaking, if your business owns any vehicles used for commercial purposes (i.e., delivery trucks), you will want to make sure they are insured accordingly.
This means you may need several different types of insurance, including liability, comprehensive, and uninsured/underinsured motorist coverage, depending on your state.
3) General Liability Insurance
The most common type of commercial business insurance is general liability covering three main areas: injuries to people or property, advertising injury (libel), and product liability (injuries resulting from faulty products).
If you plan on selling any type of goods at your establishment, General Liability may be required in order to protect your business against lawsuits.
9. Open a Business Bank Account
It is important to open a business bank account as soon as you can so that you don’t mix your personal and business finances. This will make it much easier to manage your money and keep track of expenses at tax time.
You will need to provide the bank with all of the information listed on the application for a new account which includes your name, address, phone number, type of business, etc.
Pros and cons of registering a business in Utah
- 4% corporate tax rate
- $50 franchise tax for L.L.C.s and corporations
- No income, sales, or use taxes on out of state purchase
- No state income tax
- No estate or inheritance taxes
- S corporation option available for small corporations and commercial code
- 1.69% sales and use tax on out of state purchases (only two states with such a high rate)
- Personal property and inventory taxes vary depending on the county in which you live.
How much does it cost to register a business in Utah?
The cost of registering your business is dependent on the type of legal entity you choose to form as well as which county you decide to put your company in.
I. Starting an L.L.C.
If you plan to start an L.L.C., the filing fee is $50 for one member and another $50 if there are two or more members.
Your name must contain the term “Limited Liability Company” or one of its abbreviations: L.L.C., L.L.C., L.L.C., etc… If you change the name at a later point, it will only require a small update fee to make changes with the state.
II. Starting a Corporation
In order to register a corporation, it will cost you $125 to file the initial paperwork with your state. Your name must contain one of the following abbreviations: Corp., Co., Corp., Incorporated, or Ltd.
If you only plan on having shareholders and no employees, then your company may be able to file as an S Corporation, which does not require yearly fees or filing updates.
III. Starting an L.P.
If you form a Limited Partnership (L.P.) company instead of an L.L.C., there are several additional steps involved in order to do so including adding another partner who is responsible for providing half of the capital needed for starting the business.
However, if done properly, this type of company can issue out tax-free income so long as certain requirements are met.
IV. Starting an LP Sole
For those who plan to be the only owner of your Limited Partnership, you will have to follow a few extra steps in order to comply with state filing rules for this type of business entity.
The initial fee is $100 and it requires a yearly fee of $25 as well as additional updates every time there is a change in your company’s information or structure.
V. Other Legal Entities
You can also register as a corporation, limited liability partnership, unlimited liability partnership, limited liability company, general cooperative association, registered cooperative association and so much more!
Each legal entity comes with its own benefits and limitations which is why it is important to do some research before making a final decision on which type of company you wish to form.
How to Get Funding?
After you have chosen the type of company that you wish to register with the state, step two is obtaining funding for your business.
This can be done by applying for a small business loan or line of credit from a bank or financial institution. You can also ask friends and family members if they are willing to invest in your new venture.
What is an E.I.N.?
An E.I.N. (Employer Identification Number) is a federal tax id number that is required to open up a bank account, apply for loans or credit, and any other formalities of starting a new company. You will also need this number if you plan on hiring employees as well. This can be obtained from the I.R.S. website and should be done as soon as possible after filing your D.B.A. documents with the state.
What is the federal employer identification number?
The federal employer identification number is assigned by the Internal Revenue Service (I.R.S.) to companies in the United States who are not required to have a social security number (SSN). This number will be used when filing tax returns, withholding taxes, and any other business-related matter with the I.R.S.
It is also common for your employees who do not have an SSN to request this tax id. If you file for an E.I.N., it may take up to 4 weeks before they send you back your actual number which can be obtained online or over the phone with their agency.
The steps to register a business in Utah are straightforward and relatively easy compared to the other states.
There is minimal paperwork involved, no income or sales tax, as well as several different legal entities you can choose from.