So, you’re an entrepreneur with the next big idea? Maybe you’ve already started brainstorming logos, looking at locations, or thinking about hiring new employees. While the idea stage might be the most exciting part of bringing your business to life, an equally important part is fulfilling the legal requirements surrounding entrepreneurship in Utah. This article walks you through five essential legal to-dos, from choosing a business structure to registering for taxes, so you can move forward with confidence.
Step 1: Choose the Right Business Structure in Utah
Your first major decision is choosing a business structure. Choosing how your business is formed affects your personal legal liability, taxes, and how your business will be managed. There are four major types of business formations:
- Sole Proprietorship
- Partnership
- Limited Liability Company (LLC)
- Corporation (C-Corp and S-Corp)
Sole Proprietorship
This is the simplest type of business structure. Essentially, you are the business, and you report all income on your personal tax return. The downside is that you are personally liable for all business debts and legal claims. Sole proprietorships are a good fit for low-risk ventures like freelancing or small-scale services. If you use a business name different from your legal name, you will need to register a DBA (Doing Business As) with the state.
Partnership
If you are starting a business with someone else and do not form a formal entity, you have a General Partnership (GP) by default. All GP partners have unlimited personal liability for business debts. You can also choose a Limited Partnership (LP) or Limited Liability Partnership (LLP), which restrict liability for those partners. LPs and LLPs require registration, and a written agreement clarifies roles, responsibilities, and profit sharing between all classifications of partners.
Limited Liability Company (LLC)
LLCs are popular for small businesses and side hustles because they offer personal liability protection. When properly managed, your personal assets are shielded from business liabilities, provided there’s no fraud, illegal conduct, personal guarantees on loans, or commingling of funds. LLCs don’t require the same formalities as corporations, and profits typically pass through to the owners’ personal tax returns, avoiding double taxation.
Corporation
Corporations are more formal and typically better suited for businesses planning to raise capital or scale quickly. Like LLCs, they offer limited liability. An S Corporation (S-Corp) is popular with smaller businesses, and it allows profits to pass through to shareholders personal tax returns, avoiding double taxation, but it has ownership restrictions. C Corporations (C-Corps) are often the preferred structure for larger companies or startups aiming for venture capital. While they face stricter regulatory requirements, more complex compliance, and are subject to double taxation, C-Corps offer the advantage of no shareholder limits.
There is no single best structure. Think about your business’s risk level, whether you have partners or investors, and how you want to handle taxes. It is often helpful to consult with a lawyer or accountant to make the right choice.
Step 2: Register Your Business and Name in Utah
After selecting a structure, the next step is registering your business with the State of Utah.
Choose and Register a Name
You will need a unique name that does not conflict with other Utah businesses. Use the state’s online business name search to check availability. It is also smart to do a quick national trademark search to avoid future disputes. If you are a sole proprietor or general partnership using a business name that is not your legal name, you must register a DBA with the state.
File Formation Documents
LLCs must file a Certificate of Organization and Corporations file Articles of Incorporation with the state. Both forms ask for basic details like the business name, address, and registered agent. Utah provides an easy online portal for filing, and the fee is typically under $100. LLCs and corporations must list an in-state registered agent who can receive legal documents on the business’s behalf. Be cautious of third-party websites that charge high fees for filings you can complete yourself for a fraction of the cost.
Step 3: Understand Utah Business Taxes
Taxes are a part of running any business. Here is how to get started.
Apply for an EIN
The Employer Identification Number is your federal tax ID, like a Social Security number for your business. It is required for LLCs, corporations, partnerships, and any business with employees. Sole proprietors often get EINs to avoid using their personal SSN. You can apply for free on the IRS website and receive your EIN instantly.
Register for Utah State Tax Accounts
If you are selling products or taxable services, you need a state sales tax license. If you have employees, you must register for state income tax withholding with the Utah State Tax Commission and unemployment insurance through the Department of Workforce Services. You will also need workers’ compensation insurance once you hire employees.
Understand Your Tax Responsibilities
Different structures have different filing obligations for state and federal taxes. Sole proprietors file Schedule C as part of the owner’s individual Form 1040. Partnerships file Form 1065 and issue K-1s. S Corporations file Form 1120-S, and C Corporations file Form 1120. If your LLC is taxed as a sole proprietorship or partnership, you may want to elect S Corporation status for tax savings once you are profitable. Work with a tax advisor to make sure everything is filed correctly and on time.
Step 4: Get Licenses and Permits Needed to Operate in Utah
You may need additional approvals before you can legally open your doors.
State and Professional Licenses
Some industries in Utah require a professional license. This includes construction, cosmetology, financial services, healthcare, and others regulated by the Division of Occupational and Professional Licensing.
Local Business Licenses
Most Utah cities and counties require a local business license, even for home-based operations. Visit your city’s official website to see what is needed. The process typically includes an application, a small fee, and possibly a zoning or safety review.
Zoning and Permits
Many businesses require additional localized permitting. For example, if you are serving food, remodeling space, or operating out of a home, you may need health permits, fire department approval, or a home occupation permit. Always check your city’s zoning rules before signing a lease or launching operations. Having the right licenses shows you are serious, builds trust, and keeps you compliant. Many licenses must be renewed annually, so keep track of deadlines.
Step 5: Build Your Legal and Financial Foundation
A few final steps will help your business stay legally protected and financially organized.
Create Owner Agreements
If you are starting a business with others, create a written agreement. An LLC should have an Operating Agreement outlining management roles, profit sharing, and what happens if someone leaves. Partnerships should have written agreements. Corporations should adopt bylaws and keep minutes of their meetings. These agreements reduce future disputes and help preserve liability protections. Even if you are operating alone, consider writing a basic business plan and operational notes for future reference.
Open a Business Bank Account
Keeping business and personal finances separate is essential. Open a dedicated business checking account even if you’re operating your business by yourself. It helps with taxes, improves your professional image, and protects you from liability if you have an LLC or corporation. Banks may require your state registration documents, EIN, and for LLCs, an Operating Agreement.
Get Business Insurance
Insurance adds another layer of protection. General liability insurance can cover accidents or damage related to your operations. If you offer advice or services, look into professional liability coverage. Utah also requires workers’ compensation insurance for businesses with employees. Insurance is often affordable and can prevent major losses.
Plan for Ongoing Compliance
Legal compliance does not stop once your business is launched. LLCs and corporations must file an annual renewal with the state. Update your registered agent and address if anything changes. Renew local licenses, file your taxes, and keep good records. Setting calendar reminders or using management software can help you stay on track. As your business grows, think about legal needs like creating contracts, protecting trademarks and copyright, and hiring professionals for advice or bookkeeping.
Start Strong and Stay Compliant
Starting a business in Utah involves a few legal steps, but with the right preparation, you can launch confidently. It might seem like a lot to ensure you have the right entity structure, registrations, tax accounts, licenses, and internal setup, but these are all part of operating a business.
If you have questions or want personalized guidance, consider reaching out to a business attorney. Christensen & Jensen Attorneys are here for you. Our attorneys have guided Utah entrepreneurs through business formation, compliance, and planning. Let us take care of the legal side so you can focus on building your business.