Steps to Forming an LLC
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How to Form a Utah LLC
Forming an LLC in Utah will help protect your personal assets from lawsuits and judgments against your business. An LLC is a legal structure that separates your business and personal assets. By not having your business in a separate legal structure, you can be held personally liable for certain debts and lawsuits incurred by the company. Forming a Utah Limited Liability Company does not require an attorney and you can save a lot of money if you do it yourself with the six simple steps below.
Before getting into the six steps here are a few things to know about Utah LLCs.
How Much Does It Cost to Get an LLC In Utah?
The filing fee for a Utah Limited Liability Company is $70, payable to the Utah Secretary of State. Expect 2-3 weeks for app
Utah Annual Report and Annual Fees
Utah requires the renewal of LLCs annually. The filing fee is $15 and is due each year by the end of the year the LLC was formed.
Foreign LLCs Operating in Utah
Utah law requires foreign Limited Liability Companies register for Authority to Transact business in Utah. The filing fee is $52, and the form can be downloaded here.
- Minimum Number – one or more
- Members/Managers- at least one is required to be listed in the Certificate of Formation
- Residence Requirements – none specified
- Age Requirements – none specified
In addition to forming your Utah LLC, you will need to check for licenses and permits. StartingYourBusiness.com has a list of local, state and federal permits for businesses in Utah.
Steps to Forming a Utah LLC
Step 1. Naming a Utah LLC
Utah LLC Name Search
Before settling on a name, you want to be sure nobody else is using it as each LLC must have a unique name. Here’s how to search available LLC names in Utah.
Your corporate name must end with the words Limited Liability Company or an abbreviation of these words (“LLC,” “L.L.C.,” “Limited,” “LTD.,” “LTD”.). Check out our article on naming your LLC for all of the requirements that you must follow when naming an LLC.
Also, there are some words that aren’t allowed to be used in the state, like those that could refer to a state agency or that require licensing from the state.
Step 2. Choosing a Registered Agent in Utah
What is a Registered Agent?
A registered agent is the central point of contact for the LLC, that can be either an individual or business entity, that receives important legal documents, tax notices or communications with the state.
Registered Agent Requirements
A registered agent in Utah can either be an individual resident or a registered business entity authorized to do business in the state. The registered agent must have a physical address and be available during normal business hours to accept service of process. A Post Office Box or personal mailbox is not acceptable.
Who can be a Registered Agent in Utah?
A registered agent can either be a resident of Utah or a corporation authorized to do business in the state.
Provided you as the business owner have a physical presence in Utah, you can be the registered agent, however, there are additional privacy benefits to having a third-party registered agent.
Check out our article on why an LLC Registered Agent may be a good choice for your business for more details.
Step 3. Filing the Certificate of Formation
The Certificate of Formation is the paperwork used to form an LLC with the state. This is the most important step and many people believe that you need an attorney to file. This is the most important step and many people believe that you need an attorney to file.
While we don’t discourage having an attorney, filing a Utah LLC can be done by most people, but you can save considerable money over an attorney and make sure everything is filed correctly by using a formation service such as LegalZoom.
Step 4. Creating an Operating Agreement
An operating agreement is not required in Utah but is typically a good idea, especially for an LLC owned by multiple people. The primary function of the operating agreement is to govern the relationship between the owners of the business, but also outlines who makes what decisions, how profits or losses are distributed and the operating procedures of the LLC.
Step 5. Getting an EIN
What is an EIN?
The Employer Identification Number (EIN), or Federal Tax Identification Number (FEIN), is used to identify a business entity. It is essentially a social security number for the company.
In addition to the EIN being an identifying number for the LLC it serves a few other purposes such as:
- Opening a business bank account
- Federal and State tax purposes
- The business account to pay payroll taxes for employees paid by the company
How to register for an EIN for a Utah LLC
To file an EIN for your LLC, visit the Internal Revenue Service (IRS) or obtain the SS-4 form. They show the steps on how to apply, but here is a video on how to apply for an EIN for more details. In about five minutes, you will have your number free of charge. Be sure to wait until your LLC is approved before applying for your EIN as the name that is registered for the LLC must be the same as the EIN.
Step 6. Selecting the Tax Status of the LLC
One of the advantages of an LLC is the flexibility in taxation as there are four ways an LLC can be taxed, compared with two ways for a corporation.
- Single Member LLC – An LLC with one member automatically becomes a single-member LLC with the IRS. The owner simply files their Schedule C with their 1040 at the end of the year. Filing as a single-member LLC means the entity does not pay sales tax and goes to the owner which is called pass-through taxation. The owner pays self-employment taxes on the net profit of the LLC, which while simpler to handle taxes, may be more costly.
- Partnership LLC – An LLC with two or more members is automatically considered a Partnership with the IRS and will file Form 1065. Like the sole-proprietorship as a pass-through entity, the LLC taxed as a Partnership pays no income tax and profit and losses flow to each member’s Form 1040s via Schedule K-1 of Form 1065.
- C Corporation LLC – An LLC can elect to be taxed as a C Corporation by filing IRS Form 8832. The major difference as an LLC that is taxed as a C corporation is that now the LLC pays tax on the profits and losses and are not directly passed down to the members. Most, but not all will find filing as a C Corporation will cost more in taxes as now the LLC has double taxation where there is a tax on the profits and dividends.
- S Corporation LLC – To get S Corporation status, you will file Form 2553 with the IRS. What makes the S Corporation attractive unlike the sole proprietorship or partnership is that you can potentially shield some of the profits from being subject to self-employment taxes. Dividends aren’t typically subject to self-employment taxes which is a large potential savings. There will be more work in accounting for an LLC that elected S Corporation status.
Each of the four ways for an LLC to be taxed in Utah can have a major impact on the taxes that are charged depending on the business and the member’s personal finances. It’s a very good idea to work with an accounting professional to see which one is most efficient for the business and members.
Don't want to go it alone but don't want the expense of an attorney? Another alternative is to use an LLC formation service that will do the formation at a low cost. Take a look at our comparison page of popular LLC formation services.
ZenBusiness has a special offer right now to form an LLC for only the cost of the state fees and a free registered agent for the first three months.