Utah is known for being very business-friendly and is home to some very famous and successful start-ups. You may have heard of businesses such as Crumbl, Cotopaxi, or Neighbor. Businesses such as these, and many others, have been founded in Utah post-2010. Technology, paired with Utah’s small business benefits, has made starting a business easier than ever.
Admittedly, even after seeing previous success stories of businesses in Utah, starting a business may not seem “easier than ever.” You may have a great idea and business plan, but you are unsure of the technical process of business creation. Perhaps you now may feel there are too many legal regulations, statutes, fees, or time involved in creating a business. Starting a new business can be scary, especially if you haven’t had experience with this sort of thing before. However, it may be easier and more cost-effective than you think. While everyone’s needs to start a business are specific and can’t be covered in one article, these 5 Basic Steps to Starting a Business may make the idea seem more feasible.
The first legal step that needs to be taken to form your business is choosing a legal structure. The decision on which legal structure your business entity will have depends on your situation, needs, and aspirations for your business. Some common legal structures for new businesses include limited liability companies (LLCs), partnerships, or sole proprietorships.
More options exist, but you must choose the structure that will provide your business with the most benefits. For example, if you aren’t planning on expanding your business and your activities are low risk, a sole proprietorship might be the best fit. This legal structure does not
separate your assets from your business, and therefore, you can be held personally liable. If you are involved with a riskier business (such as farming) and want a flexible business model but perhaps aren’t planning to make your business public on the stock market just yet, an LLC might be the right fit for you. An LLC separates the owners' or employees’ assets from the company. This enables the assets of those involved in the company to be protected from unfavorable outcomes such as bankruptcy or a lawsuit against the company.
While it would take too long to list all the structures and their uses, all this information can be found easily on websites such as the Utah Division of Corporations & Commercial Code. Registration of a legal structure in Utah costs around $50 – $70, and this process is also started on the same website previously mentioned.
Another important legal step in creating your business is choosing its name. You’ll want to choose a name that reflects your business and doesn’t clash with the goods or services that you sell. Once you have chosen a name, you will want to register it. There are 4 different ways to register your new business name. It is common for businesses to use the same name for all 4 registrations, but you usually aren’t required to. Additionally, you don’t have to register your business in all 4 ways; it just depends on what your goals are. The 4 types of registration are:
A. Entity: This registration functions on a state level. Usually, the name you pick cannot be one that already exists or is registered. On a state level, it prevents anyone from operating under that same name.
B. Trademark: This type of registration protects your business name on a national level. It makes your brand name recognizable and makes it so that no one else is able to operate or market their services under your brand.
C. DBA (or Doing-Business-As) is a fictitious or trade name that differs from your own. In some areas, you may be required to use one. You may also choose one at your discretion. Multiple businesses may be listed under the same DBA, so you have more flexibility. Check with your local municipality to verify DBA requirements.
D. Domain Name: If you desire an online presence, you may choose a domain name. Your domain name doesn’t have to be the same as your DBA or Entity name; it just can’t be the same as someone else’s.
If you decide to register your business name in all 4 ways, it might cost you around $100.
Depending on your business type and your future goals, you may have to get state and federal ID tax numbers. Getting these tax numbers is free, and it is usually a good idea to obtain them soon after the formation of your business entity.
If you plan on hiring employees, opening a bank account, paying federal taxes, or applying for business licenses or permits, you will need an Employer Identification Number (EIN). Although an EIN may not be necessary for your business, it is relatively easy to obtain and free. It is a good idea to obtain an EIN in the event you form a business.
Additionally, you will need a state tax number if you are selling any taxable goods or services. Tax obligations differ at local levels, so be sure to check with your local government.
There is also no charge to apply.
Now that you have chosen your legal structure, your name, and registered for relevant tax numbers, you must apply for a state business license. Since we are in Utah, you are in luck! Utah doesn’t require you to have a statewide business license. However, you will most likely need to get a license to operate from your local city or country office. Everyone must look up their own city’s requirements, as the price of these business licenses can vary depending on the region.
Depending on the nature of your business, each business owner may have to apply for licenses at the federal and state levels. For example, if you are involved in shipping animals across state lines, you need a license from the U.S Department of Agriculture. If you open a plumbing business, you will need to get a license from your state to operate such a business.
Individuals need to search online to find their necessary and corresponding licenses.
While starting a business can be scary, there is no need to be discouraged. In fact, the government loves to help new businesses. Because of this, the cost of starting a business (legally) is relatively low, and there exist structures like LLCs to protect new owners. They fully support and want entrepreneurs to enter to economy.
While these 5 basic steps aren’t comprehensive of everything required for a business, they can give you an idea of what is needed to be a legal business owner in Utah. However, it is important that you do your own research on websites such as https://www.sba.gov/business-guide and https://tap.utah.gov to know what you need to do for your specific business. Additionally, we have many seasoned attorneys here at Sumsion Business Law that would be happy to assist you with any business startup needs. We can walk you through and facilitate the process to eliminate stress and make your business aspirations become reality.