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Starting an LLC is a relatively complex process. Add to that the fact that every state has its own particular requirements, and things get even more challenging.
In this article, we walk you through how to set up an LLC in Utah specifically. We’ll make sure you tick every box, fill in forms accurately, and follow legal protocols.
Why Starting an LLC in Utah Is Worth It
Starting an LLC is a smart business move. This type of organizational structure is particularly advantageous.
It’s in the name: an LLC limits your personal liability. This is because it’s classed as a separate legal entity from its owners.
That means the company is responsible for debts or legal liabilities and not the people involved. Starting an LLC protects the owners’ personal assets, for example, their homes and personal bank accounts.
There are also tax benefits to be had by forming an LLC. Corporations are subject to double taxation, i.e., the company’s profits are taxed as income, plus shareholders must pay taxes on dividends.
LLCs, however, receive a pass-through. This means that profits are only taxed once on each member’s income tax return.
What’s more, an LLC offers greater flexibility in many respects. It doesn’t have the rigid formal structure of a corporation.
While a corporation must elect officers to manage the business and hold annual meetings to make decisions, LLC owners are free to manage the business and make decisions as they see fit.
Furthermore, there’s greater flexibility in the way you choose to distribute profits. Generally, an owner’s profit share reflects their level of investment. However, LLC owners can agree in their operating agreement to distribute profits how they please.
For example, an individual may get a more significant profit share if they invested early on or are more active in the company’s day-to-day running.
The Investment Needed to Start an LLC in Utah
There are a couple of minor fees associated with starting an LLC in Utah. The cost of filing a Certificate of Organization in Utah is $70. This is the legal document you must file with the state to form your LLC.
As the application process may take some time, you may also wish to reserve your LLC name in advance. In Utah, this costs $22.
The cheapest way to form an LLC in Utah is to complete the process yourself. However, as you’re about to see, it’s a multi-step process that requires further paperwork and forms, such as the EIN application.
With this in mind, you may wish to enlist the help of an online legal service to assist with the legal formation.
Incfile is an excellent choice as they offer LLC filing for free. You pay the state fee, and they take care of the paperwork.
They also offer additional affordable services that you may wish to take advantage of when starting your LLC. These include business license research, EIN filing, trademarking, and annual reports.
5 Steps to Start an LLC in Utah
There are specific regulations to adhere to and formal steps to follow when starting an LLC in Utah. Here’s all of the information you’ll need to complete the task.
#1 – Name Your LLC
If you’re starting a new business or even switching from a different type of organizational structure, you’ll need to give your LLC a legal name. This name is required on the Certificate of Organization, and it must comply with Utah’s naming requirements.
Here are some of the key requirements for you to bear in mind:
- The company name must end with Limited Liability Company, LLC, or L.L.C.
- The name must be distinguishable from other business names in Utah. Visit the Utah Department of Commerce’s Business Search website to check if your company name is unique.
- There are certain restricted words for which you must get permission from the relevant agency if you intend to use them in your company name. Examples are College, Bank, Savings Association, Credit Union, and Trust.
- The name can’t suggest that your company is part of a government agency or subdivision without authorization.
You can find more information on the Utah Department of Commerce’s Naming Policies page.
#2 – Appoint a Registered Agent
When you fill in the form to receive a Certificate of Organization, you’ll need to name a registered agent. This is an individual or business entity appointed to receive any kind of formal or legal documentation on behalf of the LLC.
This includes any communications from the State of Utah, such as the Utah Annual Report. It also consists of all service of processes for the business in any lawsuits.
You, any employee, or any member of the LLC can be appointed as the registered agent as long as you meet specific requirements. The registered agent must have a Utah address and be available to receive documents and communications during all regular business hours.
You can also opt to use a registered agent service as long as it also meets the above requirements. Registered agent services are useful as they retain copies of important documents and ensure your LLC remains compliant.
Incfile offers a free registered agent service for one year across all US states when you use their formation services.
As well as receiving legal and tax correspondence on your behalf, they’ll also help you manage documentation, stay on top of deadlines, and keep you in good standing.
#3 – File Your Certificate of Organization
The simplest way to file your Certificate of Organization in Utah is online via the OneStop Business Registration site. It’s also possible to file in person, by mail, or by fax if you need to.
Here’s the information you must include in the form:
- Entity Name – As mentioned in step one, the business entity’s name must meet Utah’s naming requirements.
- Principal Office Address – This is the principal place of business and can’t be a PO box.
- Registered Agent and Registered Office – Enter the name and address of the registered agent.
- Signature of Organizer – The person who is forming the LLC must sign the document.
- Names and Addresses of Members and/or Managers (optional) – You can choose to list the details of the LLC members and/or managers.
- Duration (optional) – You can choose to enter whether the LLC is perpetual or if there’s a dissolution date for the LLC.
- Purpose (optional) – You can choose to enter details about your product or service or enter “for all legal purposes.”
If you choose to file your Certificate of Organization online, it should take two business days for the Utah Department of Commerce to process your application. If you select another method, it can take five to seven days.
#4 – Create an Operating Agreement
An operating agreement outlines the structure of the LLC and how it will conduct business. It may cover voting rights, member contributions, dissolution procedures, and any other important agreements among members.
This document isn’t a legal requirement in the state of Utah. However, drafting an operating agreement is beneficial to all new businesses.
This is because you can use the operating agreement to help solve any financial or legal disputes that arise. If any problems do arise, the courts can decide based on the LLC’s agreements laid out in the operating agreement rather than state law.
Here’s some further information regarding what you may wish to include in the operating agreement:
- Organization of the LLC – Include information about the formation of the LLC, i.e., the official date it was formed and who the members are. Also, outline how ownership is divided among members. You may opt to assign equal ownership to each member or assign different ownership units to various members.
- Management and Voting Procedures – First, note whether the LLC’s members will manage the business or if they are to appoint a manager. Then, outline how members will vote on business matters. Usually, each member will be assigned one vote. But, again, you can choose to assign greater voting power to certain members if you wish.
- Capital Contributions of Members – Include how much capital each member invested in the company. You should also outline how you’ll raise funds in the future.
- Distribution of Profits – Outline how profits and losses will be distributed among members. This usually corresponds to the units of ownership of the LLC. However, you may wish to divide profits and losses differently.
- Procedures for Changes to the Membership Structure – Outline how ownership and roles will be transferred if a member leaves the LLC. Also include the procedures for buying out and/or replacing members.
- Dissolution Procedures – Describe how the LLC will be dissolved if the time comes. This is a formal process where the LLC members hold a vote, sell assets, and notify relevant authorities and creditors.
As an operating agreement isn’t a legal requirement in Utah, you don’t have to file the document with the state. Simply keep it on file and provide copies to all LLC members.
#5 – Get an EIN
You must obtain an Employer Identification Number (EIN) for your LLC through the IRS. First, it’ll allow you to hire employees. You’ll also need an EIN to open a business bank account, and it protects your personal finances by providing a corporate veil for your LLC.
To be eligible for an EIN, the applicant must have a valid taxpayer ID, such as a Social Security Number. The principal office must also be located in the US or US territories.
To get an EIN, you must fill in Form SS-4. The applicant can be the business owner, a member of the LLC, or any responsible party in charge of the business’s finances.
You can apply for an EIN by fax or mail. But the most straightforward and quickest method is to apply online via the IRS’s EIN Assistant.
The EIN application requires the following information:
- Business Entity Name and Trade Name – Enter the full legal name of your LLC. If the business trades under an alternate name (“trade name” or “doing business as” name), you must include it here.
- Mailing Address – Include the principal and mailing addresses of the company.
- The Responsible Party’s Information – This is the name and taxpayer ID of the applicant.
- Type of Business Entity – You’ll indicate here that the business is an LLC.
- Primary Reason for Applying – Choose from the options provided, such as “starting a new business.”
- Business Dates – Enter the date you formed the business and the final month of the fiscal year.
- Employee Information – Note the number and type of employees you expect to have in the coming 12 months.
- Principal Industry and Activity – Describe the goods or services you offer.
- Previous Applications – If the applicant has previously applied for an EIN, include the date of the application.
- Applicant Signature – Sign and date the application. Also include the mailing address, phone number, and fax number of the applicant.
When you apply online, you should receive your EIN immediately. Faxed applications may take up to four days. Mailed applications may take up to four weeks.
You should have a good understanding of the steps you must take to form an LLC in Utah. The next step will be to gather all relevant information that you must include in the various forms and documents outlined above.
You may also wish to research online legal services at this point. As you’ve seen, there are some lengthy, complex documents involved in starting an LLC. So, you may require some assistance.
Furthermore, if you’re struggling with step one, i.e., naming your LLC, you may wish to take a look at our guide to business name generators. Here you’ll find some useful tools that’ll help you come up with a name for your business, guidance on how best to use these tools, plus strategies to help you pick the perfect name for your business.