There are a lot of factors to consider when starting a business. Among the most important are the timing and location. However, another thing that can affect your success is choosing the right business entity structure. So why should you choose a Utah LLC?
Why Choose A Utah LLC
The location you choose will affect your business. Each state has its own laws regulating companies. So, where you will form your company will determine your obligations and responsibilities.
If you are looking for a state to start, consider Utah. It is home to hundreds of thousands of companies. It is a thriving center for small business owners and emerging entrepreneurs. It has a business-friendly environment too. In fact, industry experts consider it the 2nd business-friendliest state in the country.
Here are some of the advantages of doing business in Utah:
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- Doing business in Utah is inexpensive. It ranked 8th on the 2019 State Business Tax Climate Index of the Tax Foundation. While it may impose taxes in major categories, these remain low.
- Its economy is diverse and growing. Utah is one of the fastest-growing states in terms of economy. Recent years showed an increase in presence in prominent business sectors.
- It has a supportive regulatory environment. The state government constantly reviews laws and regulations to remove unnecessary restrictions. It is part of its commitment to keep the regulatory structure supportive of a good business climate.
- The startup culture in the state is thriving. The state opens new opportunities for young brands and new businesses. Its tech hub has become a place where many entrepreneurs migrate.
Start A Utah LLC
Once you decide where to do your business operations, your next move is to figure out the business structure suitable for your company. A lot of new entrepreneurs choose a limited liability company (LLC).
Generally, it offers similar protection for the assets of the owners that corporations have. That means that the owners, also known as members, will not be held liable for the obligations or debts that the company incurs. It also has the same features of a partnership. Most LLCs operate as pass-through tax entities. All profits of the business will be passed through to members, who will then report them on their individual income tax returns.
So, if you want to have your own business, you can start a Utah LLC. It offers protection without the need for all formalities that corporations require.
Understanding LLCs
An LLC has principal characteristics. If you think these will be beneficial to you, then it might be the best structure for your business.
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- LLCs do not have to hold annual meetings or comply with the same operational restrictions that corporations have to follow.
- There is no restriction on the number and type of owners.
- LLC members can participate in managing the company to a great extent.
- LLCs are subject to disclosure, record keeping, and reporting requirements.
- An LLC can be owned by an individual or multiple people.
Here are other benefits that an LLC provides:
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- It limits the owners’ personal liability for the company’s obligations.
- It allows the transferring of ownership of the company.
- It allows the business to continue even beyond your lifetime.
- The members do not have to be U.S. citizens or permanent residents of Utah.
Types of LLCs
If you want to start a Utah LLC, you have to understand that there is more than one type. You have to make sure that you choose the one that fits your company’s activities.
In Terms of Home State
1. Domestic – If you formed your LLC and are doing business in Utah, the state will consider it as a domestic LLC. It means you formed it within the Utah government’s jurisdiction.
2. Foreign – If you formed your LLC in a different state but want to expand your business operations in Utah, you will have to register as foreign LLC.
In Terms of Management Structure
1. Member-Managed – It is when all members of the LLC share the responsibility of managing the operations of the business.
2. Manager-Managed – This type suits LLCs where some members want to be passive. You can either appoint one or more members to serve as managers or hire others to manage the day-to-day activities of the company.
In terms of the Number of Members
1. Single-Member – As the name suggests, this type of LLC is for an individual company owner. Your company will be taxed the same as a sole proprietorship and be classified as a disregarded entity by default. The owner of a single-member LLC will have asset protection. So, you will not be personally liable for the company’s debts.
2. Multi-Member LLC – If your company has many owners, then it will be a multi-member LLC. If you want to avoid any disagreements or disputes, it is best to have a carefully laid out Operating Agreement. It is where you will define the responsibilities, powers, and obligations of each member. The owners will be responsible for reporting taxes for their income share on their personal return. However, they will not be personally liable for the company’s debts, liabilities, and judgments.
Other Special Types
In most cases, regular LLC types are enough for the needs of a business. However, Utah also offers other options to organize a special LLC type.
1. Series – This specialized LLC type will allow an entrepreneur to manage different LLCs under an umbrella LLC. Your formation documents will have to specifically allow the unlimited segregation of membership assets, interests, and operations into an independent series. Each series will operate as a separate entity. It can have a unique name, separate books and records, and bank account. Each one may also have different members and/or managers. The rights and obligations of the said members and/or manager will also differ. Basically, it allows you to segregate the risks within separate entities without the need to form new ones. You can choose this if you do not want to form separate LLCs for each business that you are running.
2. Professional – This type of LLC is for licensed professionals. It typically requires special licensing requirements. Here are the professions that the Division of Corporations of Utah allows to form this type of LLC:
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- Architect
- Chiropractor
- Clinical or Certified Social Worker
- Dentist
- Engineer
- Lawyer
- Mental Health Therapist
- Naturopath
- Nurse
- Optometrist
- Osteopathic Physician or Surgeon
- Pharmacist
- Physician, Surgeon or Doctor of Medicine
- Physician Assistant
- Physical Therapist
- Podiatric Physician
- Psychologist
- Public Accountant
- Real Estate Appraiser
- Real Estate Principal Broker, Associate Broker or Sales Agent
- Veterinarian
How to Get Started
Now that you have an idea about the various types of LLCs, you can start a Utah LLC. However, you have to keep in mind that there is a process you need to complete. The state requires the submission of formal paperwork, which is something that is called a Certificate of Organization. It comes with a $70 filing fee.
You should also make sure that your company complies with state laws. For example, its name has to be distinguishable. So, you will have to conduct a business entity name search on the state database to ensure that no other company uses it already. You should also follow the naming guidelines that the state has set. You have to include the words Limited Liability Company or any of its abbreviations. You also cannot use words that could confuse your company with any government agency.
Another requirement is the appointment of a registered agent. It can either be an individual, who is at least 18 years old and is residing in Utah. You can also opt for a third-party organization like DoMyLLC that is authorized to transact within the state. Your registered agent has to have an office address and is available during normal business hours. Make sure you choose the right agent because they will serve as the state’s point of contact and will receive all legal documents on your behalf.
If you want to know more about the process of forming an LLC in Utah, it is best to consult with experts. Our team at DoMyLLC can help you. We can handle the formation process and serve as your registered agent. Contact us now to find out how you can benefit from our services.
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