For over 15 years, Sarah Ruddle has been a noteworthy leader in the business and nonprofit world.
Updated on July 16, 2024
When starting a new business, one of the first big decisions is which type of business entity to form. Many entrepreneurs choose a limited liability company (LLC) because of its many benefits. An LLC provides personal liability protection, for example, so that your assets are not at risk if your business is sued or cannot pay its debts.
Also, an LLC is a “pass-through entity” in taxes, meaning income passes through the company to the LLC owners or members, who report it on their tax returns.
LLCs also offer flexibility in management and tax status, yet another reason it’s popular in Utah.
Here are the steps that you need to take to form an LLC in Utah.
If you prefer video content, we offer an extensive visual guide on forming an LLC in Utah.
1. Name Your Utah LLC
Naming your business can be challenging. You need a name that’s unique and easy to remember and conveys what your business does. To choose a name, you can try a few different methods:
Decide on a Business Concept: Before you name your LLC, you need to have a clear idea of what your business will do.
Ask People You Know for Suggestions: Reach out to people whose opinions you value and trust. Explain your business concept and ask for their thoughts on a name.
Do a Web Search: Once you have a few name ideas, check their online presence. Is the domain name available? Are there companies with similar names that could create confusion?
Use an Online Business Name Generator: They can provide inspiration and help you think about your business from different angles. Keep in mind, though, that these generators can’t replace human creativity and may not understand the nuances of your business as well as you do.
Your business name is your business identity and the first impression people will have of your company, so be sure to take your time with this step and get it right.
Once you have a few business name ideas, you’ll want to ensure they’re available. First, do a business name search at the Department of Corporations and Commercial Code. Here’s how to conduct a Utah LLC name search and check the availability of your desired entity name.
In Utah, your LLC name must include the phrase “limited liability company” or one of its abbreviations (LLC or L.L.C.). Without state approval, it cannot have words like bank, insurance, or university.
Additionally, your business name cannot include words that could confuse your Utah LLC with any government agency and must be distinguishable from all other business names in the state.
Next, check with the US Patent and Trademark Office to ensure the name is not trademarked and is thus available nationally.
Once you’ve confirmed these, it’s a good idea to reserve the name with the state using its name reservation form.
2. Select a Registered Agent
Utah requires LLCs to appoint a registered agent, a person or company authorized to accept and respond to official business correspondence, such as legal, tax, or financial documents.
The registered agent ensures all important notices and documents are received. In Utah, the registered agent can be an LLC member, individual, or entity that meets state requirements. In Utah, a registered agent must:
Be 18 years or older
Have a physical address in Utah
Be available during regular business hours
Be registered to operate in Utah, if it’s a business
Many business owners hire a registered agent service to ensure their LLC stays fully compliant and for convenience.
If you choose to be your registered agent, you must be at your registered agent’s address for all business hours. A registered agent service allows you to be wherever you need to be to run and grow your business.
Members or managers can manage LLCs. In a member-managed LLC, members handle all management duties. In a manager-managed LLC, non-member employees oversee operations and management duties.
Note that with a manager-managed LLC, a member can be a manager, but only in cooperation with another manager who is not a member.
Member-managed LLCs generally work best for LLCs with few members, all of whom can take an active role in day-to-day operations. Conversely, manager-managed LLCs are best for LLCs with multiple members, some of whom want to be “silent” or passive members and not involved in day-to-day operations.
Most LLCs are member-managed, as they are small businesses that cannot afford a management team. In Utah, your LLC is considered member-managed if it’s not otherwise specified in a Certificate of Organization.
4. File a Certificate of Organization with the Utah Department of Commerce
To start, visit the Department of Commerce website and create an account to access the certificate of organization online. Then, click “create an account” and follow the instructions to register.
In Utah, the certificate of organization requires the following information:
LLC name
Principal office address
Registered agent contact information
Member and manager information
Business duration and purpose
Once you’ve created your account, log in and click the “Register a new business” button at the bottom of the homepage.
You will move through a series of screens that provide free business resources and then prompt you to choose whether to start a new business or update an existing one. For example, select “I am registering a new business in Utah” and answer the following questions.
Once you’ve answered the pre-registration questions, you’ll be prompted to choose your business entity (LLC) and select whether members or managers will manage it. You’ll also decide how you will want your LLC to be taxed.
The next step is searching for your desired business name to confirm availability. If so, you will need to wait until you receive a confirmation to proceed to the next steps. Confirmation will be sent via email.
After your LLC name is confirmed, you’ll be prompted to enter all the required information outlined in the bulleted list above. At the end of the process, review your entered information and ensure it’s correct before confirming and proceeding to the payment screen.
You can also complete and submit a paper form if you wish to file by mail.
The fee is $54. Your LLC should be approved and formed within two business days if you file online or two to three weeks for paper filings.
Contact Information for the Department of Commerce
Mailing Address: SM Box 146701 Salt Lake City, UT 84114-6701
Physical Address:
Heber M. Wells Building 160 East 300 South Salt Lake City, Utah 84111
5. Draft an Operating Agreement
An Operating Agreement is a legal document that outlines the ownership and member duties of your Limited Liability Company (LLC).
Utah does not require an operating agreement, but it’s still a good idea to have one, even for single-member LLCs, as it can provide legal protections and more established operating procedures.
Here are the elements an LLC Operating Agreement should typically include:
LLC’s name and principal address (primary location where business is registered)
Duration of the LLC
Registered agent name and address
Membership Information
Management and voting
Financial matters (e.g. the way profits and losses will be divided)
Changes and amendments (e.g. procedures for adding or removing members)
Disputes, legalities, and policies
Record keeping and communication
You can find operating agreement templates online, but it’s best to have them drawn up or reviewed by an attorney. The language of an operating agreement is crucial, and can often help determine how member disputes will be resolved. For more information about the operating agreement, refer to our comprehensive guide on the Utah LLC operating agreement, and you can also obtain a free template.
6. Get Your Employer Identification Number (EIN)
The IRS uses an EIN to identify your company for tax filing purposes. An EIN is required if your LLC has more than one member or if you are hiring employees.
Obtaining an EIN simply requires applying on the IRS website, as detailed here:
All EIN applications (mail, fax, electronic) must disclose the name and Taxpayer Identification Number (SSN, ITIN, or EIN) of the true principal officer, general partner, grantor, owner or trustor. This individual or entity, which the IRS will call the ‘responsible party,’ controls, manages, or directs the applicant entity and the disposition of its funds and assets. Unless the applicant is a government entity, the responsible party must be an individual (i.e., a natural person), not an entity.
Depending on the nature of your business, you may need to apply for various licenses and permits at the federal, state, and local levels.
At the federal level, licenses and permits are generally industry-specific and may include health licenses and permits from the Occupational Safety and Health Administration (OSHA). Check the SBA guide for specific licenses required for your business.
There is no state basic business license in Utah.
The Division of Professional Licensing, a division of the Utah Department of Commerce, issues licenses to professionals & enforces laws relating to licensure.
If you sell tangible goods or services subject to sales tax, you’ll need a sales tax license, also known as a seller’s permit.
Here are some standard licenses and permits you may need:
Industry-specific licenses for certain professions and industries, such as construction, plumbing, electrical, childcare, food handling, liquor, architecture, and finance
Building and zoning permits
Doing business as (DBA) permits using a name other than your LLC.
Health licenses and permits at federal, state, and local levels
Fire permits
Sign permits
This is a very important step in the LLC formation process, so make sure that you check with your state and local government offices to find out all the licenses and permits you need.
You could face steep fines and penalties if you operate without the proper licenses and permits.
It’s a good idea to consult with a business attorney to make sure you’re in full compliance. You can also use a service like MyCorporation to do the research and provide you with all the forms you need to license your business entirely.
8. Determine Your Tax Status
By default, an LLC is a “pass-through” entity, which means the business itself does not pay income taxes. Instead, the business’s profits or losses are passed through to the members’ individual tax returns. The taxes are then paid at each member’s individual tax rate.
Single-Member LLCs: If the LLC has only one member, it’s taxed like a sole proprietorship by default. This means the income from the LLC is reported on the member’s personal income tax return on Schedule C, and they’re responsible for paying self-employment taxes (Social Security and Medicare taxes) on that income.
Multi-Member LLCs: If the LLC has more than one member, it’s taxed as a partnership by default. The LLC must file an informational tax return (Form 1065), but the income and deductions are passed through to the members. Each member reports their share of the income and deductions on their personal tax return. As with single-member LLCs, members must also pay self-employment taxes on their share of the profits.
An LLC can also choose to be taxed as a corporation by filing an election form with the IRS (Form 8832 for a C-Corp and Form 2553 for an S-Corp). This can be beneficial under certain circumstances:
C-Corporation Taxation: Electing to be taxed as a C-Corporation can offer benefits to an LLC, particularly if the members want to retain earnings in the company. The corporation pays tax on its profits at the corporate rate (which was 21% as of 2022). If the profits are distributed to the members as dividends, the members must report these dividends on their tax returns and pay tax on them. This is known as “double taxation.” However, members aren’t subject to self-employment taxes on their dividends.
S-Corporation Taxation: Choosing S-Corporation status can also be beneficial for an LLC. Under this scenario, the LLC does not pay corporate income tax. Instead, the income, deductions, and credits pass through to the shareholders, who report them on their individual tax returns. However, unlike a standard LLC, an S-Corp is required to pay its members a “reasonable” salary for the work they perform for the company. This salary is subject to payroll taxes, but any additional profits distributed to the members aren’t subject to self-employment taxes. This can result in significant tax savings, especially for businesses with high net income.
Other Requirements
Open Your Business Bank Account
When you have an LLC, keeping your business and personal finances separate for accounting and tax purposes is essential. Commingling your business and personal funds can threaten your liability protection since the line between business and personal assets will need to be clarified.
Most banks offer business bank accounts, so check with your local bank. You’ll need your EIN and a copy of your Certificate of Organization. Your bank may require other documents as well.
Apply for a Business Credit Card
A business credit card can help establish business credit so that if you apply for a business loan or line of credit in the future, you’ll have a better chance of getting approved. A business credit card can also help pay startup expenses, reducing out-of-pocket costs.
Get Business Insurance
Insurance is the right choice to protect the investment you’ve made in your business. There are several different types of insurance you may need.
General liability: A comprehensive type of insurance covering many business elements. It includes coverage against bodily injury and property damage.
Professional liability: Protects against claims from a customer who suffered a loss due to an error or omission in your work. It’s also known as errors and omissions (E&O) insurance.
Workers’ compensation: Provides compensation to employees injured on the job.
Property: Covers your physical business space.
Business Property: Covers equipment and supplies.
Equipment Breakdown Insurance: Covers the repair or replacement of broken equipment due to mechanical issues.
Commercial auto: Covers your company-owned vehicles.
Business owner’s policy (BOP): This option combines the above insurance types.
LLC Records
You’ll want to keep copies of your formation documents and operating agreement in a safe place. Any other official documents, such as vendor contracts and legal or financial documents, should also be kept in your records.
