How to Incorporate in Utah vs. How to Start a Utah LLC
A Guide to Choosing the Best Business Entity in Utah
Starting a business in Utah, but not sure if you should form an LLC or start a corporation? Active Filings has the guide for you! We’ll walk you through the advantages and disadvantages of incorporating or forming an LLC in Utah. Throughout this Utah-specific corporation and LLC formation guide, you’ll discover exactly how to form either an LLC or corporation in Utah, and learn the disadvantages and advantages of each business type.
Once you’ve decided which business structure best meets your needs, you can hire Active Filings and have our professionals streamline your incorporation process. At Active Filings we offer our customers peace-of-mind by establishing their companies fast, efficiently and at an affordable price. When you work with Active Filings, we’re confident that you’ll find out in no time why we are America’s most reliable business incorporation service.
Hire us to form your LLC or Corporation in Utah!
LLCs vs. Corporations
People looking to start a business often ask whether they should set up an LLC or incorporate for their new venture. Like everything else in life, the answer depends. Below you’ll find the three factors we think will help you make an informed decision.
- Ease of maintenance
Rules and regulations governing LLCs are far less restrictive than those governing corporations. In general, LLCs are not held to the same standards when it comes to record keeping, nor are they restricted in size, but generally, a corporate structure is better for larger businesses. Of course with greater size comes greater responsibility. For a corporation this comes in the form of more rules, regulations, and paperwork. - Desired tax structure
By default, an LLC is considered a pass-through entity, similar to a sole proprietorship or partnership. This means that the business itself doesn’t pay income taxes on its profits; rather any profits or loss are passed through to the owners (called members) and reported on their personal tax returns. By contrast, a corporation is considered a separate legal entity and must submit a tax return and pay income taxes on its profits. In some cases, this can lead to “double taxation,” where the corporation is taxed on its profits, then when the owners take those profits out, they will need to report the dividend on their personal tax returns. For some small-business owners who are accustomed to taking profits out of the business, double taxation can be costly. - Investors
When it comes to investing in a company, most investors feel most comfortable investing their hard earned money into corporations. The biggest reason investors prefer corporations is their favorable taxation rules. Unlike LLCs, a corporation’s shareholders are not taxed on company profits unless profits are distributed, which means the dividends paid from the corporation can be structured to take advantage of the best tax scenario for the shareholders. If you plan to grow your small business into a larger entity and attract investors, forming a corporation is your best bet.
One final thought on LLCs and corporations. While the local florist down the street is a fine upstanding company, their LLC just doesn’t have the prestige of a Nike, Inc or a Walmart, Inc. When you hear the word corporation, many people think of big multi-national companies with tons of resources at their disposal. While the LLC is perfect for the small to medium-sized business, the words Limited Liability Company (LLC) doesn’t carry the same weight as the corporation. While LLCs first came into being in the late 1970s, the corporation is the oldest recognized business entity in the US, and thus they carry with them an aura of prestige.
Note that whether you form an LLC or a corporation, you’ll need to file a Beneficial Ownership Information (BOI) Report with the Financial Crimes Enforcement Network (FinCEN) once your company is officially formed with the state of Utah. This report provides the federal government with identifying information about your company and those with the most control over profits and business operations. However, unlike state filings, the information shared in your report does not go on the public record and there is no filing fee. (Though if you don’t want to file this on your own, we offer BOI filing service for just $25.)
UT LLCs vs. UT Corporations
While we’ve already broken down the differences between an LLC and a corporation, we’re going to dig a bit deeper into the pros and cons of forming an Utah LLC or corporation. Take a look below to see what makes Utah LLCs and corporations unique:
- Annual Report
Some states wield their annual report as a blunt object, swinging it to and fro, drumming up more revenue and digging deep into business owners’ pockets. Not Utah. All they ask is a $20 processing fee for LLCs or corporations. Non-profits pay $10. Their late fee is just $10. Pretty chill if you ask us, considering some states charge a great deal more and tack on “franchise taxes” as well. - Flat Income Tax
A flat tax often eliminates deductions, exemptions, and most tax credits, while making sure everyone pays the same rate. A flat tax also simplifies the tax code and often eliminates the need for costly tax preparation for individuals and businesses alike. Utah’s flat income tax is 4.95%, which ranks it in the top ten for states that levy an income tax. - Low Corporate Income Tax
Utah’s corporate income tax rate of 4.95% mirrors it’s income tax, and ranks the state in the top ten for lowest corporate tax. - The New Act
In 2014, Utah adopted the “New Act,” which was a complete revision to it’s laws governing LLCs. The New Act allowed for several new provisions that bolstered the overall asset protection benefits of an LLC. One example is, that in the past, if an LLC member loaned money to the LLC that also had non-member creditors, the member who loaned the money was required to wait for non-member creditors to be paid first. The New Act allows that member’s loan to hold equal weight as non-member creditors. Also, Utah’s prior LLC laws required a two-thirds majority vote by the members to approve a sale, liquidation, merger, or other large change in the operation of the LLC. The New Act states that 100% of the members must consent to any such decision. This protects minority equity holders from being overrun by another majority member.
Utah LLC or Utah Corporation? Final Answer.
LLCs are the most popular business entity in the US, and for good reason. The flexibility, ease of maintenance, and liability protections rival the more prestigious, but often more work-intensive corporate structure. With this in mind, if you’re looking to form a small to medium business and you don’t need to attract big-time investors, the Utah LLC is for you.
How to Incorporate in Utah
It costs $70 (plus an optional $5 fee for fax confirmation) to file the Articles of Incorporation with the Division of Corporations & Commercial Code. You can file the document online or by mail. Save some time and add a bit of privacy to these filings by hiring Active Filings as your registered agent.
Utah business name must include “Corporation,” “Incorporated,” “Company,” or an abbreviation of one of these words. Most folks keep it simple with “Co.” or “Inc.”
What does your business do? What does it sell? Utah wants you to tell them the purpose of “Talk to the Hand Gloves, Inc” which can be as easy as “we plan to sell gloves,” or something technical like “to engage in any lawful business activity for which a company can be organized in the state of Utah.”
Authorized shares refers to the total number of shares a company could issue. Typically, companies don’t issue all of their authorized shares, which allows them financial flexibility to issue new shares in case they want to or need to raise capital, or to issue stock awards to employees.
A registered agent accepts and sends legal documents on your corporation’s behalf. The registered agent for a business must be available during normal business hours in order accept important documents as they are delivered. Hire Active Filings and we’ll be your registered agent.
This must be a physical office where the corporation will receive service of legal documents in case of a lawsuit, such as notices or service of process. This address cannot be a P.O. box but must be a physical location where someone is present during normal business hours. Hire Active Filings and you can use our address.
The incorporator is someone who signs and submits your Utah Articles of Incorporation. Incorporators don’t have to be directors, officers, or anyone in the corporation, but they do have to include their name and street address. Active Filings will act as your incorporator when you hire us.
This is your main address where you plan to receive all of your mail. All the information in your Articles of Incorporation is public. Instead of a personal address, you’re allowed to use a business address and if you hire Active Filings, you can use our address, which will save you time and energy sorting through junk mail and hanging up on unwanted sales calls.
Your corporation needs at least one officer and one director, though Utah allows you a year reprieve. If you have officers or directors, this is where you’ll write their names and information. Otherwise you can report this information on your first Utah Annual Report.
How to Start an LLC in Utah
To start an LLC in Utah, you must file a Certificate of Organization with the Utah Division of Corporations & Commercial Code. The Certificate of Organization costs $70 (plus an optional $5 fee for fax confirmation) to file, and you can file the document online, by mail or in person.
Your name must include “Limited Liability Company,” “Limited Company,” or an abbreviation like “LLC.”
This is the official street address of the the LLC. Hire Northwest as your registered agent and you can use our Utah address as your principal address.
Your registered agent must be available during normal business hours in order accept important documents as they are delivered. Hire us as your registered agent and make life easier on yourself.
This must be a physical office where the corporation will receive service of legal documents in case of a lawsuit, such as notices or service of process. This address cannot be a P.O. box but must be a physical location where someone is present during normal business hours. Hire Active Filings and you can use our address.
This is just the person filing your Certificate of Organization. It doesn’t have to be anyone in the LLC. We’ll be your organizer when you hire Active Filings.
This section is entirely optional, and any information that you do put here will become part of Utah’s public record. Privacy is important. Most people leave this blank.
Feel like adding an expiration date to your LLC? Here is where you’d add that, but most people leave it blank.
You can write “this LLC is organized for any lawful purpose in the State of Utah,” or you can leave it blank. This section is optional.
Utah Annual Report Requirements
Think of Utah’s annual report as the state taking the pulse of your company. Annual reports give state governing authorities information regarding the names and addresses of directors or managing members of a corporation or LLC as well as the company and registered agent address.
How do I file my Utah Annual Report?
Utah generally refers to the report as a renewal and you have two options for filing it:
File your Utah annual renewal online at the Division website. You should receive a reminder postcard with the entity number and renewal ID from your Utah registered agent. You just log in and file the renewal easily. You can make changes to your information during the online renewal.
You can also download a renewal form from the same web page. Fill it out and send it in by mail or fax with the filing fee. If you need to make changes to the information on file, include the Registration Information Change Form. Use the fax cover sheet if fax filing. Or, think about this, skip all of this and hire Active Filings to file our report for you.
How much is this report going to cost me?
Utah doesn’t actually charge a ton for it’s annual report. Some state’s like to hit you with $100 or more every year, but not Utah. LLC’s and corporations pay $20, with non-profits paying just $10.
When is the Annual Report due?
Utah’s annual report is due by the end of the month of when you initial created your business. So if you filed your LLC or incorporation paperwork on July 3rd, then your report is due by the last business day in July.
Utah Business Taxes
Death, taxes, and Fast and Furious sequels are the only guarantee in this life. In this section we’ll give you a simple and hopefully brief overview of what you can expect from Utah taxes.
In Utah, do I have to file an income tax return for my LLC?
The IRS is hands off with LLCs, considering them “pass-through” entities. In short, the answer is no. You, and any other members of your LLC must report any profits or losses of your LLC on a Schedule C form and then submit it with your personal tax return.
Okay, so what tax forms do I need to file for an LLC in Utah?
TC-40 is the form you file for Utah state income tax.
What about a sole proprietorship LLC?
If you’ve set your LLC up as a sole proprietorship, fill out Schedule C as part of Form 1040 to show your LLC’s income counts towards your personal income tax returns. If your business is considered “specialty income”, then you may have to file Schedules E, F, or J instead of Schedule C.
What if my LLC has multiple members?
The IRS automatically treats multiple member LLCs as a general partnership for tax filing purposes. These LLCs must file partner tax returns that include a Schedule K. The LLC must also provide all the LLC owners with a Schedule K-1, which contains information about each owner’s proportionate share of income and expenses.
What information is required on these various LLC tax return forms?
If your LLC is characterized as a partnership for federal income tax purposes, you must file Form 6900.
Form 1065 gives the IRS a snapshot of the company’s financial status for the year. The partners must report and pay taxes on their shares of income from the partnership on their tax returns. Partners must pay income tax on their earnings regardless of whether the earnings were distributed.
A Schedule K-1 is a tax document used to report the incomes, losses, and dividends of a business’s partners or an S corporation’s shareholders. The Schedule K-1 document is prepared for each individual partner and is included with the partner’s personal tax return. An S corporation reports activity on Form 1120S, while a partnership reports transactions on Form 1065.
Beyond the basic information you’ll also need:
• payroll documents
• bank and credit card statements
• accounting documents
• partnership agreements
• depreciation schedules
• gross receipts
• checking and savings account interest
What tax form(s) does an Utah corporation need to file?
Corporations need to file TC-20, Utah’s “Corporation Franchise and Income Tax Return” form.
What’s the Utah corporate tax income rate?
Utah levies a flat tax for all corporate income. In 2018 Utah passed HB 293, lowering the state corporate income tax rate from 5% to 4.95%, which means you’ll save a little bit of money.
When are my business tax returns due?
Utah tax returns are due by April 15th, or by the 15th day of the 4th month following the end of the taxable year (for fiscal year filers).
What if I need an extension?
Utah gives you an automatic extension and up to six months to file your return.