How to Start a Business in Utah - 7 Steps to Get Started

For aspiring entrepreneurs, Utah provides a welcoming environment.

The state is a top contender for launching a successful business with minimal investment due to its favorable economic climate, supportive community, and business-friendly regulations, such as no personal income tax.

So, if you want to form a company in Utah, go ahead and do it. And here are seven simple steps to get you started:

1. Select Your Business Concept

Every thriving business begins with a good idea. Devote enough time to develop a unique and compelling business idea that distinguishes your company from the competition. To generate a strong idea:

• Examine your skills and interests to find a concept that appeals to you.
• Find a popular niche with room for expansion.
• Conduct market research and study existing small businesses to identify any market gaps you can exploit.

2. Develop a Business Plan

A business plan is important for your success. It outlines the company's goals, strategies for achieving them, and a business roadmap.

A well-crafted business plan also aids in the acquisition of financing and investors and serves as a guide for measuring the company's progress toward its goals.

Include the following components in your business plan:

Brief Synopsis: Create a business overview highlighting the company's key features and value proposition.

Business Description: Clearly articulate the nature of your company, including its purpose, goals, and distinguishing features.

Target Markets: Determine and assess the target market(s) in which your company will operate, as well as potential customer segments and growth opportunities.

Make a note of your offer: Describe your company's offerings, emphasizing their unique features, benefits, and competitive advantage.

Marketing Plan: Create a well-defined marketing strategy outlining how your company will reach and engage its target audience, including key marketing channels, messaging, and promotional activities.

Financial Plan: Provide a detailed financial plan that includes projections, budgeting, revenue models, and funding strategies, demonstrating your company's financial viability and potential profitability.

3. Select a Business Name

Register your company name: Your company name should be distinctive in Utah. Compile a list of potential business names, then use the Utah Secretary of State's (SOS) website's name search tool to ensure the name is available.

Include the following words: If you choose to form your business as a limited liability company (LLC), you must include the terms "Limited Liability Company" or "LLC" in the company's name. Corporations must use the words "Corporation," "Company," "Incorporated," or "Limited" or their abbreviations.

Examine for federal trademarks: In order to safeguard the uniqueness of your company name, it is advisable to conduct a thorough search on the United States Patent and Trademark Office (USPTO) website. By exploring this database, you can verify whether the federal government has already trademarked your desired company name. This precautionary step is crucial to avoid potential legal conflicts and establish a distinctive brand identity for your new business name.

Register a domain name and secure corresponding social media handles: When selecting a domain name, opt for one that aligns harmoniously with your company name or "Doing Business As" (DBA) designation. Likewise, ensure that the social media handles you secure bear similarities to your domain name, legal business name, or DBA. This cohesive approach will bolster your online presence and facilitate cohesive branding across various digital platforms.

4. Establish Your Business Structure

In the state of Utah, the prevailing business structures predominantly include sole proprietorships, partnerships, corporations, and limited liability companies (LLCs).

Sole proprietorship

A sole proprietorship structure is ideal if your company has little risk, low overhead, and no employees.

There is no legal distinction between the organization and the one starting a business or ownership in an informal business structure.

Consequently, if your business accumulates debts, creditors have the authority to seek your personal assets to recover what is owed to them.

However, there are benefits to this structure, such as ease of setup without the need for registration and a single tax filing fee, - sole proprietorships are pass-through entities, meaning they are only taxed one time at the owner's income level.

Sole proprietorships are not permitted to issue stocks or accept funds from investors.

How to Create:

• Pick a name for your company.
• Register a DBA (Doing Business As) name.
• Get an EIN from the IRS.
• List the Taxation Requirements.
• Obtain business licenses, permits, and zone clearance.

Partnership

Partnerships are classified as general partnerships (GP), limited partnerships (LP), and limited liability partnerships (LLP).

A GP is identical to a sole proprietorship but has multiple owners. It is an unincorporated, informal business structure that is taxed similarly to a sole proprietorship. And, as with a sole proprietorship, the owners are not protected from liability.

An LP has at least one partner and one limited partner. The general partner manages the company and is personally liable for its debts. Limited partners do not participate in day-to-day operations and have limited liability; they are only liable for the money they have invested.

In terms of liability protection, an LLP differs from other types of partnerships in that it protects all partners except the one responsible. If one partner makes a mistake, only they are responsible, not the others. However, like other partnerships, an LLP is a pass-through entity for tax purposes.

How to Create:

• Choose a business name.
• Consider registering a trademark for the business name (optional for GPs).
• Complete all necessary paperwork.
• Get an EIN.

Limited Liability Company (LLC)

LLCs provide a great combination of benefits to small business owners.

By forming your company as an LLC, you can protect yourself and your fellow members from personal liability for any debts or legal issues your company may face. This protection is a significant selling point for LLCs, and it is one of the reasons that many entrepreneurs prefer this structure.

How to Create:

• Select a name for your LLC.
• Find a registered agent.
• Send your Articles of Organization to Utah SOS.
• Develop an Operating Agreement.
• Get a federal employer identification number (EIN).
• Open personal and business accounts.

Corporation

Corporations distinguish themselves by establishing a legal barrier between the business and its owners. Despite the possibility of higher costs and increased federal tax compliance, incorporating has a number of advantages.

A corporation, as a very separate legal entity and business entity, has the same legal rights and responsibilities as an individual. It can enter into contracts, own assets, pay taxes, and even participate in legal disputes through lawsuits.

Two primary types exist in the realm of corporate structures: C corporations and S corporations.

While C corporations enjoy greater prevalence, they also entail a concept known as double taxation. This entails that the business itself is liable to pay taxes on its profits, and in addition, the owners are subject to taxes on any dividends they receive. Nonetheless, with multiple stock classes and unlimited shareholders, C corporations have greater flexibility, albeit with the requirement to adhere to stringent corporate formalities.

S corps, as opposed to C corps, are pass-through business entities. So, while S corporations have some limitations, such as an utmost of 100 shareholders and only one class of stock, they provide significant tax benefits to their owners.

How to Create:

• Choose a name for your company.
• Appoint directors to oversee the activities of the corporation.
• Find a registered agent in Utah to handle legal and official correspondence.
• File the Utah Articles of Incorporation.
• Create corporate bylaws to outline internal governance and operational policies.
• Create a shareholder agreement outlining shareholders' rights and responsibilities.
• Allocate and distribute stock to shareholders.
• Take the steps necessary to obtain the necessary business licenses and permits.

5. Licenses and permits for business

In Utah, all taxable businesses must obtain a general business license, whether they have a physical presence in the state or only operate their business online.

This requirement applies if your company sells or facilitates deliveries within Utah.

Furthermore, depending on the goods or services you intend to sell, you may need to obtain special permits for alcohol sales, tobacco products, wholesaling, and motor fuel.

6. Consider Purchasing Commercial Insurance

Business insurance protects your business and its assets from unexpected disasters. Consider the following alternatives: -

Businesses should have commercial general liability insurance

A CGL policy can protect you against financial claims resulting from bodily harm, property damage, false advertising, libel, and slander.

Insurance for workers' compensation

Worker's compensation insurance is critical because it covers medical expenses incurred from work-related injuries and illnesses. Furthermore, it provides disability benefits to employees who have been injured on the job.

This insurance policy is highly recommended for businesses that employ workers because it is a critical safeguard. It plays a critical role in keeping employees safe and secure while carrying out their job responsibilities by ensuring adequate coverage.

Professional liability insurance protects professionals from lawsuits

Professional liability insurance protects your company from allegations of malpractice or gross negligence. You can also obtain workers' compensation insurance to protect yourself from potential legal claims resulting from errors or mistakes made while working.

Commercial property insurance

Business property insurance financially protects a company if its property is lost, stolen, or damaged.

Insurance for cyber liability

Cyber liability insurance protects businesses by providing specialized coverage for a variety of business expenses, losses, disruptions, and potential penalties resulting from data breaches.

7. Establish a Business Bank Account

Maintaining a clear demarcation between your personal and business finances assumes paramount importance, particularly during the process of forming a formal legal framework for your enterprise, which shields you from personal liabilities. By refraining from commingling personal and business funds, you can proactively safeguard your personal assets against potential risks.

Apart from the security benefit, separating your finances has several practical advantages. It enables efficient monitoring of your income and expenses, improved cash flow management, and effective long-term planning for your personal and business expenses.