The formation of a Limited Liability Company is quite different from the creation of other business entity types, such as corporations. It’s typically less regulated which can make the process go faster. But how fast is fast and how soon can you get an LLC in Utah? This guide will provide you with detailed information about the formation process, formation times, and what it’s like to do business in the state. We’ll have you covered every step of the way!
Discovering Utah
The western state of Utah is often referred to as “the Beehive State”, which is a reference to the work ethic of people in the state, as in “busy as bees”.
It’s bordered by Wyoming, Idaho, Colorado, Nevada, Arizona and New Mexico. In fact, the southeastern tip of the state creates a corner where Arizona, New Mexico, Colorado and Utah all meet. It’s the only place in the United States to do so, and it’s called the “Four Corners”.
The Rocky Mountains can be found in the state, and the highest point in Utah is Kings Peak, which is 13,528 feet. Aside from mountains, there are canyons, valleys, rock spires, mesas, salt flats, and of course the Great Salt Lake, which is the largest saltwater lake in the entire western hemisphere.
A lot of copper is mined in Utah. It’s home to the world’s biggest open-pit copper mine, which could fit two Willis Towers in it at 1,454 feet apiece. In Moab there are manmade ponds that are used to produce potassium chloride, used in foods, medicines and fertilizer. Other minerals and stones that are mined in the state include uintaite or gilsonite, which is a black rock used to make asphalt, cement and paint, as well as semi-precious stones like topaz, red beryl and purple bertrandite.
Economic Overview of Utah
Utah has the nation’s biggest economy with a Gross State Product (GSP) of $185.2 billion and a growth rate from 2017-2022 of 3.7%.
The top-performing industries according to revenue in the state are Drug, Cosmetic & Toiletry Wholesaling, E-Commerce & Online Auctions, New Car Dealers, Grocery Wholesaling, and Petroleum Refining. The companies in the state that employ the most people are Intermountain Healthcare, the University of Utah, Walmart Inc., The Kroger Co. and Amazon.Com, Inc. And the sectors that contribute to Utah’s GDP are Manufacturing, Real Estate & Rental & Leasing, Professional, Scientific & Technical Services, Information, and Finance & Insurance.
Utah has a thriving tourism industry thanks to the “Four Corners”. It’s also home to one of the biggest independent film festivals in the world, the Sundance Film Festival. And it’s known for being a great place to ski because of the large amounts of snow in the mountains around Salt Lake City.
Business Environment in Utah
Utah is consistently rated as the best state in the U.S. to do business. Usnews.com rated its business environment #7, growth #2, and employment #1. Its unemployment rate is only 2.8% and while the national average for job growth is only 0.2%, it’s 2.6% in Utah.
It’s rated #28 for affordability and #7 for economic opportunity. The cost of living in the state is 94.6, which is down from the national figure of 100.0. The median household income is $79,449 which is well above the national average of $69,717. Because of this the poverty rate is well below the 12.8% nationally at only 8.6%.
However, it’s rated #48 for equality. So if you’re looking for an inclusive state that’s accepting of everyone and various lifestyles, this is not that.
State Specific Regulations and Incentives for Forming an LLC in Utah
Here’s a look at some of the incentives and programs Utah provides for businesses.
- Economic Development Tax Increment Finance Tax Credit (EDTIF): LLCs and other businesses that locate into Economic Development Zones could qualify for tax credits. The credit amount is up to 30% of the new state revenues that the business attraction or expansion project generates over a 5-10 year period. You can’t claim more than 50% of the award total in a single year. Businesses must create a minimum of 50 jobs with wages at or above 110% of the county’s average wage in both urban and rural communities. As a discretionary program, it’s available for businesses in the state’s targeted industry sectors.
- High-Cost Infrastructure Tax Credit (HCITC): This tax credit incentive is designed to help cost intensive, natural-resource based infrastructure projects. It’s available for businesses that:
-Invest in expansion or creation of mining, industrial, agricultural or manufacturing activity;
-Include a minimum of 10% of infrastructure costs and
-Generate new state revenues on an incremental basis which are the direct result of the expanded or created activity.
Infrastructure investments that are qualified will typically receive a tax credit for 30% of the infrastructure-related revenue generated during a tax period. The maximum credit amount is 50% of the total infrastructure investment.
- Research Activities Credits: If a business is taking part in certain R&D activities, it could qualify for one or more of these tax credits:
-5% of R&D research expenses in the state during the current tax year that exceed a base amount.
-5% of payments made to specific organizations for research in the state, exceeding a base amount.
-7.5% of certain research expenses.
- Rural Economic Development Tax Increment Financing Credit: This program is available for businesses that either create or expand operations in rural sections of the state. The tax credit should function as a rebate for 50% of the state tax revenues generated during the project, which is usually limited to 5-10 year terms.
- Technology & Life Sciences Tax Credits: These are credits for investors who make contributions to technology and life science businesses. This credit is for up to 35% of the amount of investment and is dispersed over a period of 3 years. There’s only $300,000 allocated for the program each year and it’s awarded on a first-come-first-serve basis. Investors are required to make an investment of $25,000 and not have 30% or more stakes in the company. They must also submit the application before they complete the investment.
- Enterprise Zone Tax Credits: If your business is located in a designated Enterprise Zone and it creates new jobs in the area, it could qualify for corporate income tax credits equal to $750 per job, and a bonus of $500 if the jobs pay wages of 125% or more of the county’s average wage. There are other credits for companies that add value to agricultural commodities in the state with their manufacturing. There’s also a 25% credit for the first $200,000 invested for renovating vacant buildings. Additional tax credits of 5% are also available if you make an investment of over $750,000 in manufacturing equipment or plants.
- Tax Exemptions: The purchase of replacement or new manufacturing equipment is exempt from sales & use taxes in Utah.
Pros and Cons of Establishing an LLC in Utah
There are lots of reasons to start an LLC in Utah.
Not only is the majority of Utah’s labor market young, it’s highly educated. 73% have a post-secondary certificates or higher degrees, and more than half of the workforce has a bachelor’s degree or higher education.
Utah has one of the lowest corporate tax rates in the U.S. at only 4.65%. The personal income tax rate is a flat rate of 4.85%, too. That means whether your LLC is taxed as a corporation or as a pass-through entity, it will enjoy low tax rates.
There’s a lot of access to financing in the state. There are a wide variety of venture capital groups, student startup funds and other financing programs in the state. And the Utah Innovation Lab was recently created, which is an independent nonprofit designed to invest in startups during the “pre-seed” phase, when venture capitalists usually don’t finance companies.
But there are downsides, too.
Utah is consistently voted the worst state for women. This is because the state has the biggest wage gap in the United states, there are massive disparities in political representation, and women in executive positions in the state are a rarity. Some of these metrics have been improving, but even with improvement the state is still lagging far behind the rest of the country.
The 2.8% unemployment rate may make Utah’s government look good, but it’s bad news for businesses. It means that to fill a position you’ll have to compete with other businesses in the state. And many big businesses could be able to afford benefits to attract new hires that you can’t.
Procedure of Establishing an LLC in Utah
Just because it’s considered easier to form an LLC than a corporation doesn’t mean there isn’t a substantial amount of paperwork and red tape involved in the process. Lucky for you, we’ll explain it all and give you a simple checklist to streamline the process.
Necessary Documentation for Filing an LLC in Utah
If you get all of your paperwork together before filing, it can make filing for an LLC far simpler. Here is a list of LLC formation essentials.
- Name Reservation Application: It’s crucial that your business name meets all of the legal requirements for business names. For instance, your business name can’t be either too similar or identical to another business name in use in the state. You can’t know all of the business names in Utah, you can run a search on the business name database on the Division of Corporations and Commercial Code website. Once you’ve found an acceptable business name, you’re required to file an Application for Reservation of Business Name with the Division of Corporations. This reserves it for your business and disallows other businesses in the state to use it.
- Certificate of Organization Form: Your Certificate of Organization form is of vital importance because it not only legitimizes your business, it also functions as an application to receive your LLC. In many places, it’s referred to as an Articles of Organization Form. It provides the Division of Corporations with information such as your business name, business address, registered agent, along with a list of your LLC members and their contact information. It may even request information about whether your LLC is member-managed or manager-managed, its duration, or its purpose.
- Employer Identification Number (EIN): An EIN is necessary to complete a variety of important activities, like opening a business bank account, hiring employees and filling out tax forms. You can get yours quickly and for free from the IRS website.
- Operating Agreement: LLCs aren’t required by law to create operating agreements, but most contemporary business advice recommends them. This is because your operating agreement is a set of detailed instructions for how your business should run, and works as a contract between LLC members. Some of the information within the document includes contact information for each LLC member, the roles of LLC members and their contributions to the LLC, the distribution of profits and losses and information about compensation plans, and an important section that describes the process of adding and removing members. That section can be a lifesaver if an LLC member dies or if someone unexpectedly leaves the company.
- Initial Report: LLCs in Utah are required to file an annual renewal, which is called an annual report in other states. But the first one is called an initial entity report, and it’s filed along with your Certificate of Organization.
- Business Licenses: There aren’t state business licenses in Utah, so you’ll need to contact the cities, counties and towns where your business operates to obtain the necessary licenses and permits in your jurisdiction. If you head to the Division of Corporations website you can find more information about licensing.
- Tax Registrations: Every business needs to sign up with the Department of Commerce, but if your business collects sales tax then you’ll also need to sign up with the Utah State Tax Commission.
Legal Requirements for Starting an LLC in Utah
Here are the steps to forming an LLC in Utah.
- Get a Certificate of Formation Form: Your Certificate of Formation is your application to establish an LLC, so it’s the first step of your formation adventure.
- Choose Your Business Name: As we explained in the previous section, you can’t use a business name that’s already in use by another business in the state. You must use the business name database to find one that isn’t being used, then file an Application for Reservation of Business Name to lock it in for your company.
- Choose a Registered Agent: Every LLC in the state must have what’s known as a “registered agent”. This is a term for an important business position. This person or business will receive mail from government agencies on your company’s behalf, as well as accept service of process, all at their address during business hours. This correspondence is then forwarded to you. This process is set up to ensure that your business receives important notices and mail. You’re allowed to choose a trusted individual to perform the duty, like a family member or friend. Or if you want peace of mind you could hire a professional registered agent service.
- Choose Your Business Address: If your business has a physical location then this may be a no-brainer. But if it doesn’t, you may be tempted to use your home address. This will land it on the public record, which means that the entire internet will have your home address, which is a scary thought. If you want to avoid that worst-case scenario, you can find out whether there are virtual offices or virtual addresses near you, or ask your registered agent about using their address as your business address.
- Sign and File Your Certificate of Organization: Once you’re sure that all of the information is filled out correctly on the form, it’s time for it to be signed and submitted. You can do this yourself, but it will result in your name being listed on the public record as your company’s LLC Organizer. To secure your privacy and personal information, you can hire an LLC formation service instead. This is a company that will sign and file your documents for you, protecting your information. Many of them will even fill the documents out for you which saves you some work and time. But don’t worry, they don’t gain ownership of your company for filing on your behalf.
Time Frame for Establishing an LLC in Utah
It’s important to know how long it can take to receive approval for your LLC once you’ve submitted your documents. We’ll break down the various formation times in this section.
How Long Does the Initial Paperwork Take in the State of Utah?
Approval times account for the entire time span from the time documents are submitted until the time you receive approval, and it also includes both processing time and transit time.
To file online, approval time is 2 business days. To file by mail, approval time is 2-3 weeks.
Processing Times in the State of Utah
Processing time for mail filing is 3-7 business days, or 2 business days for online filing.
Common Delays in the LLC Formation Process in Utah
There are several variables which could result in delayed LLC formation times. Here’s a look at some things that could hold up your formation.
- Weekends and Holidays: Your documents won’t be processed on weekends or government holidays. Most times, government employees aren’t in the office on holidays or weekends, so you should avoid filing on these days or before them as doing so will cause a delay.
- Technical Problems: If the servers go down or power goes out at the Division of Corporations office, then it will understandably cause a delay until everything comes back online.
- Filing Method: The filing method you choose can have a big impact on formation times. For instance choosing to file by mail will result in much slower times than choosing to file online.
Expedited Processing for LLC Formation in Utah
One good way to rush through the formation process is expedited processing. We’ll explain the expedited service options in Utah in this section.
What Are the Expedited Options Available?
The expedited service option is guaranteed 2 business days.
Additional Costs for Expedited Services in Utah
You’re required to pay the fee for expedited services on top of the filing fees. So to get guaranteed 2 business day processing costs $75 extra.
Comparing LLC Formation Time Frame in Utah with Other States
Processing times vary wildly from state to state. Comparing the processing times in your state with other states can help you not only put them in perspective but also help you make important decisions, such as whether to start a domestic LLC, or choose a foreign LLC in another state.
Brief Comparison with Key States
In Utah, processing time for online filing is 2 business days, 3-7 business days for mail filing, and there’s an expedited processing option for guaranteed 2 business day processing.
There are slower options. In Maryland, it takes 5-8 weeks to process mail filings, it’s 4-8 weeks in Texas, and an incredible 8 months in New York. Processing for online filing in Arizona takes 14-16 days, and it’s 13-15 days in Texas. Even expedited processing can be slow, taking 7 days in Maryland.
There are also options that are far faster. Mail filings are processed in Alabama, Massachusetts and South Dakota in 1-2 days, and 1 day in Kentucky and Ohio. Alabama, Alaska, Colorado, Kansas, Kentucky, Minnesota, Missouri, New York, South Dakota, Tennessee, Wisconsin, and Wyoming all provide immediate processing if you file online. And Delaware, Michigan, Montana, Nevada, Pennsylvania, and West Virginia all have 1 hour expedited processing.
Why is Utah a Favorable Place for Forming an LLC?
Utah is a viable state to form an LLC in because it has a large workforce full of young, educated people, it has low taxes, and there are plenty of financing opportunities in the state.
