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Are you considering starting a business but don’t understand which kind of corporation to form? Consider forming a Limited Liability Company (LLC). This popular business structure offers the best of both worlds – the liability protections of a corporation with the flexibility and ease of operation of a sole proprietorship or partnership.
Establishing an LLC is a simple procedure that can be completed quickly, enabling you to focus on what truly matters: running and developing your business. Plus, with an LLC, you can manage your company in the way that best suits your needs and goals.
So why wait? Join the millions of business owners who have chosen to form an LLC and take advantage of its benefits. Let’s dive into the world of LLCs and see why this entity may be the perfect fit for your new venture.
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Pros of Starting an LLC in Utah
Limited Personal Liability
One of the advantages of forming an LLC in Utah is the limited personal liability it offers.This implies that the business owners are not personally accountable for the company’s debts or obligations. Instead, the liability is restricted to the business’s assets.This protection can give entrepreneurs peace of mind, knowing that their assets are not at risk in the event of a lawsuit or other legal issues.
Ability to Raise Capital
Utah is home to a thriving startup scene, so there are many opportunities to raise capital. From venture capitalists to angel investors, numerous resources are available to entrepreneurs looking to secure funding for their new ventures. Additionally, Utah has a strong community of crowdfunding supporters, making it easy to tap into a wide network of potential investors.
Low Filing Fees
Another major advantage of starting an LLC in Utah is the low filing fees. The state has some of the lowest filing fees in the country, making it an affordable option for entrepreneurs on a budget. This can be especially beneficial for new startups just getting off the ground and needing more capital to invest.
Good Economy
Utah’s economy is thriving, and there has never been a better moment to start a business there. Utah is routinely regarded as one of the best states for business growth and development, thanks to low unemployment rates and a robust GDP. The state boasts a highly educated workforce, low tax rates, and a robust infrastructure that makes doing business simple. Furthermore, Utah’s strong business community provides several services to assist businesses to flourish.
Tax Benefits
Utah offers several tax benefits to businesses. The state has a low corporation tax rate of 5%, and various tax deductions are available to enterprises that choose to do business there. For example, businesses in certain industries may be eligible for tax credits or exemptions that can significantly reduce their tax burden.
Cons of Starting an LLC in Utah
High Sales Tax Rate
One potential disadvantage of starting an LLC in Utah is the relatively high sales tax rate. The state sales tax rate is 4.85%, but when combined with local sales tax rates, it can reach 7.19%. This can be a significant expense for businesses that sell physical products, particularly those with lower profit margins.
Competitive Business Environment
Utah’s highly competitive business environment can be both positive and negative. While this can foster innovation and growth, it can also make it more challenging for new businesses to gain traction and compete with established industry players. This can be particularly true for startups just getting off the ground and may need more resources or brand recognition from larger competitors.
7 Steps on How to Start LLC in Utah
Here are 7 steps on how to open LLC in Utah:
1. Name Your Utah LLC
One of the first tasks in forming an LLC in Utah is deciding on a name for your company. Nonetheless, there are certain important criteria and constraints to remember when choosing a name.
- Ensure Your Name is Unique: Your business name must differ from any other Utah registered business. You can search the Utah Division of Corporations website to ensure your desired Name still needs to be put in use.
- Include “Limited Liability Company” or “LLC” in the Name: Utah law requires that all LLC names must include the words “Limited Liability Company,” “LLC,” or “L.L.C.” This ensures that potential customers and clients understand that your business is an LLC with limited liability protection.
- Avoid Using Words Used to Name Government Agencies: Your business name cannot contain words used to name government agencies or entities. This is to ensure clarity between your business and a government entity.
- Some words require additional paperwork: Some words, such as “bank” or “university,” are restricted and may require additional paperwork or licensure before they can be used in your business name. Check with the Utah Division of Corporations to see if your desired Name requires additional steps.
2. Select Your Registered Agent
A registered agent is a person or company appointed to receive legal notifications, process services, and other relevant paperwork on behalf of your LLC. While you can operate as your own registered agent, choosing a professional registered agent service is frequently suggested. This is because a registered agent must have a real street address in Utah and be available to receive relevant papers during regular business hours.
Employing a licensed professional agent guarantees that your company has a dependable and accessible point of contact for legal correspondence at all times. The cost of a registered professional agent varies according to the supplier and the amount of service required. Hiring a certified professional agent in Utah might cost between $100 and $300 per year. Some registered agent services may charge mail forwarding, document scanning, and other add-on services.
Employing a licensed professional agent may be an extra cost, but it may bring peace of mind and verify that your company complies with state rules. Having a registered professional agent can also assist you in avoiding missing deadlines or essential legal notices that could substantially impact your firm.
3. File Your Articles of Organization
The Articles of Organization is a document that you file with the state to incorporate a legal entity known as a limited liability company (LLC).
What to know before filing:
- Complete the Articles of Organization Form: To submit your Articles of Organization, complete the Articles of Organization form provided by the Utah Division of Corporations. This form requests basic information about your LLC, such as its name and address, as well as the name and address of your registered agent.
- Fill out the form and pay the filing fee: When you’ve completed the form, you may send it to the Utah Division of Corporation along with the required filing fee. The current charge for submitting Articles of Organization is $70. The paperwork and payment can be submitted online or by mail. If you file by mail, add a check or money order made payable to the Utah Division of Corporations.
- Wait for Processing: When you submit your Articles of Organization and payment, the Utah Division of Corporates may take several business days to complete your application. After your application is granted, the state will provide you with a certificate of organization, which legally forms your LLC.
4. Get Your EIN
Once you have formed your Utah LLC, you must obtain an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). A Federal Tax Identification Number (EIN) is used to identify a corporate organization.
You can get your EIN by filling out the IRS’s online EIN application. This application is free and takes only a few minutes to complete. You can also receive an EIN by completing a paper Form SS-4 to the IRS.
Your EIN is a vital identification number that you will need for filing taxes, creating a corporate bank account, and hiring personnel. To guarantee that you fulfill key tax and regulatory deadlines, you should acquire your EIN as soon as possible after establishing your LLC.
5. Create Your Operating Agreement
Another important step to take in order to form your LLC is creating an operating agreement. An operating agreement is similar to a partnership agreement in that it allows you to define your operations and governing guidelines for the LLC. It serves as a guide on crucial matters such as allocating earnings and losses, making choices, and managing the firm.
While an Operating Agreement is not needed by law, it is strongly recommended. It can assist in preventing disagreements among members, simplify decision-making procedures, and safeguard the business’s limited liability status.
If you need help creating an Operating Agreement, many free online templates can help you get started. However, it’s important to note that each business is unique, and you may need to tailor your Operating Agreement to fit your specific needs and circumstances.
6. Open a Business Bank Account
Opening a business bank account is essential for separating your finances from your business finances.A business bank account allows you to manage income and spending, pay invoices, and access finance for your company. Because all corporate transactions would be in one place, tax reporting would be considerably simpler and transparent.
A business credit card, in addition to a business bank account, can give various advantages. It can assist you in establishing credit for your company, managing cash flow, and earning incentives for purchases..
When choosing a business bank, you must consider factors such as fees, interest rates, online banking options, and customer service. Some steps you can take to choose the best bank for your business include:
- Investigate and compare rates and costs online.
- Ask other business owners for recommendations
- Consider the bank’s location and accessibility
- Evaluate the bank’s reputation and customer service
7. Follow the Ongoing Reports
After forming your Utah LLC, there are ongoing reporting requirements that you will need to meet to maintain your business’s compliance with state regulations. One of these requirements is an Annual Report.
The Annual Report is filed with the Utah Division of Corporations and Commercial Code annually. It provides essential information about your business, such as the names and addresses of members and managers and the business’s principal place of business.
The filing fee for the Annual Report is $20, and the deadline for filing is the anniversary month of the business’s formation. Failing to file the Annual Report on time may result in fines and the loss of your firm’s good standing with the state.
In addition to the Annual Report, your Utah LLC may be required to file other reports or registrations, depending on the nature of your business. For example, certain professions or industries may require specific licenses or permits.
Cost To Set Up LLC in Utah
The cost to set up an LLC in Utah can vary depending on several factors. Below are the cost to set up an LLC in Utah.
- Filing Fee: A $70 filing fee is required to file the Articles of Organization with the Utah Division of Companies and Commercial Code. This cost is non-refundable and must be paid when the application is submitted.
- Registered Agent Fee: As previously stated, you must choose a registered agent for your Utah LLC. A person or a professional registered agent service might be used. If you utilize a professional service, the annual charge might range from $50 to $300.
- Business License: Depending on your business type, you may be required to get a business license from the city or county where it is situated. The price of a business license varies depending on the area and type of operation.
Conclusion
Starting an LLC in Utah is a great way to protect yourself from personal liability while taking advantage of the state’s business-friendly environmentBy following the seven stages suggested in this article, you can establish a strong foundation for your business and position yourself for success.
Remember to carefully consider your business name, registered agent, operating agreement, and banking needs to ensure your LLC runs smoothly and complies with state regulations. And remember the importance of ongoing reporting and staying up-to-date with the state’s requirements.
