Utah’s small business climate is thriving. With small businesses employing well over 500,000 residents as of 2015, it is a good time to start a business in Utah. UT was voted by Forbes Magazine as the best state for businesses, a distinction the state continues to receive. However, starting a business without proper planning, despite the fertile economic climate in Utah, can spell disaster for fledgling businesses. Taking the time to understand the rules, taxes and business structures required of a new business owner can make all the difference. Many businesses fail because the owners did not adequately prepare for the typical costs of doing business, were unaware of required insurances or permits or failed to set their rates and pay their taxes adequately. Any, or all, of those factors can sink your business before it has even had time to establish itself. The following is a brief overview of the items you will need to check off your list if you plan to start a business in Utah.
What type of Utah business will you own?
Will you purchase an existing business from someone else? Perhaps you will go with a tried method and purchase a franchise opportunity. Most new businesses in Utah, however, are started from scratch. There are benefits and disadvantages to all the above types of businesses. If you are purchasing someone else’s business, then you will inherit everything, even the business’s debt. You have to re-register the business under your name. Purchasing a franchise means you only have some say as to the direction of the business’s growth as much of it is dictated by a parent company. Starting a business from scratch means you will not have existing materials or clientele to begin with, and you must be prepared to put in some long hours to establish yourself.
What Utah business structure will you choose?
The structure you organize your business under determines what types of tax strategies you can employ. The main types of structures include sole proprietorship, general partnerships, limited liability companies and S-corporations. There are several other types of business structures, but most who are just starting out utilize the aforementioned structures. Sole proprietorships have one owner and less paperwork to file. However, the taxes and the resultant deductions you will be allowed may make you change your mind. General partnerships are owned by two people. They have more tax breaks, the stress and liability for running the business is shared between two people and partners have some limited liability for their personal finances if something happens to the business. This is similar to the Limited Liability Corporation which allows many more tax deductions as well as a reduced liability for personal loss. This type of structure is sort of a hybrid between a corporation and a general partnership. The S-corporation is for businesses that plan on hiring employees in the future and who would like to enjoy elevated tax benefits.
Business Taxes You Should Be Aware of in Utah
Most businesses have to pay quarterly taxes. You can find out what the amount will be and where to send the payments by working with an accountant. You are also responsible for paying payroll taxes if you have employees. These are called withholding taxes and are the taxes paid out of an employee’s paycheck each month. If you are selling something in the state, such as a product, then you must register with the state and charge state sales tax. This can be done using the Utah Small Business portal called OneStop Business.
Business Licenses and Permits in Utah
Most counties in Utah also require someone who is doing business in their area to obtain a local business license. The business license should be obtained after the sales and use tax license has been obtained. You will also want to apply for a Federal Employers Identification Number (FEIN). Many sole proprietors opt to use their Social Security Number instead, but in the end, most experts agree that getting the FEIN is the better route. Many home-based businesses also have to be registered, so running a business out of your home may not be as simple as you thought. There are many rules and regulations pertaining specifically to what can, and cannot, be done out of a home. Businesses must operate in an area zoned for business. The County Clerk’s office can tell you more about what will be required locally. Lastly, depending on the type of business you are opening, you may be required by the state and national government to have a permit or occupational license to practice.
Registering Your Business’s Name in Utah
Anyone doing business under an assumed name will be required to register that name within one month of starting the business. This is called the DBA, which stands for “doing business as.” You can file for this online, and there is a small fee. You can also search to see if your business’s name is already taken.