Utah is a growing state in the American southwest. Along with its projected population growth will be the opportunity to open and succeed in a number of businesses. For someone who is just starting, the best way to do that is by forming one’s own limited liability company (LLC).
Getting an LLC started, though, means you will have to put down some money. That might sound ominous, but it’s relatively painless if you know what you’re doing. We’re here to help you figure out where you need to spend your money, as well as optional purchases you’ll want to make that can make your life easier, both now and in the future.
This article will help you make a budget for starting an LLC in Utah.
- The required costs for every LLC
- Extra costs we recommend you incur
- The different ways you can form your LLC, as well as the pros and cons of each
Total Minimum Utah LLC Cost – $54
Forming an LLC in Utah only requires that you file a certificate of organization, which will cost you $54. The best way to do this is to file with the state online, which will register your business with the Department of Commerce, Department of Workforce Services, and State Tax Commission.
Though many states require a separate statement appointing a registered agent, in Utah, you will include that in your certificate.
The Department of Commerce’s fees are set by state statute, which is available on the Utah legislature’s website in addition to the current fee schedule.
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How Much it Costs to Start a Utah LLC
Of course, there’s quite a bit more to starting your company than just filing a legal document. There are several things you need to consider, and all of them cost money. Though you probably want to save as much money as possible, this section will outline the costs you need to think about incurring if you want to have the best start you can have.
Certificate of Organization Filing Fee – $54
Of all your LLC’s legal papers, this one is the most important. A certificate of organization is really a birth certificate for your LLC. Without it, the company doesn’t exist in any sense. Once it’s filed, though, it can do business, pay taxes, and take any other legal action. Thus, you need to make sure your LLC’s certificate is done first and done right.
This isn’t as tough as it sounds. While you can draft the Utah LLC certificate from scratch if you want, there’s no need. Utah has a robust online filing system that will register you with multiple departments. If you prefer to do things by mail or in person, you can also find a basic fill-in-the-blank form and instructions on the Internet.
If you have a complicated business or ownership structure, you may need an attorney to draft your Utah LLC certificate of organization. In most cases, though, the basic form should be fine.
Utah LLCs – Optional Costs to Consider
$54 may be all you need to get your LLC running. That doesn’t mean, though, that you shouldn’t plan on spending more. There are many other costs you should also plan for to give your LLC the best start it can get.
Expedited Filing Service – $75
How long you have to wait for your certificate to be processed will depend on your method of filing. If you use the online method, your certificate could be approved within 1-2 business days. On the other hand, if you mail your application, processing could take over 2 weeks.
If you have to use mail filing for whatever reason, you can get expedited filing to shorten processing time to what it would be if you had filed online (i.e., 1-2 business days). It costs an extra $75.
Business Licenses – varies
Another advantage of Utah’s online registration is that you get your licenses from the Tax Commission and Department of Workforce Services immediately. Though there is no extra cost associated with these, you will have to contact those departments personally if you file your certificate through the mail.
Many types of businesses will need professional licenses, so you should check with the Utah Division of Occupational and Professional Licensing to see what kind of license your LLC requires, as well as how much it will cost.
The Utah Department of Commerce also advises that you must register your LLC with your local government as well. Your city or county may also require your LLC to get a license. Salt Lake City, for example, asks for you to submit documents and pay fees depending upon the type of business you are starting.
As a rule of thumb, you should check with your city or county governments to make sure that you have complied with all licensing requirements.
Registered Agent Fee – about $100 per year
When you file your certificate, you’ll have to name your LLC’s registered agent so that the state and the public can timely communicate with your Utah limited liability company. This is important if someone decides to sue your LLC. That may not sound like fun, but it is critical to the life of your business that you know exactly when this happens.
Because your agent’s details are included in your certificate, you don’t pay an extra fee to the state to name an agent. Still, you should think about hiring a company to serve as your company’s agent.
Many owners are tempted to serve as their LLCs’ agents. This is not a good idea. It involves making your address public and always being available just in case someone wants to sue your company.
It’s an easier and more cost-efficient plan to hire a Utah registered agent service for your LLC. These registered agent companies usually charge $100 per year and take care of all your agent needs. It’s money well spent.
Check out our Best Registered Agent Services article for some of our recommendations.
Operating Agreement – varies
An operating agreement sets down the rules of your LLC. It says how the people in charge should do their jobs, when meetings must be held, how members can enter and exit the company, and almost any other matter you might need to address.
Utah won’t force your LLC to have an operating agreement if you don’t want one. Even so, we strongly recommend that you have a written contract. Without one, you have much less control over your company if and when something unexpected happens.
If you choose to have an LLC operating agreement, you don’t have to file it with the state. You can write it yourself, but unless you are a lawyer or know exactly what it’s supposed to look like, we don’t recommend that option.
A lawyer would likely charge you by the hour to draft a Utah LLC operating agreement. While that contract would likely be a good one, and a lawyer in Utah is often less expensive than lawyers in other parts of the country, it would still cost at least a few hundred dollars.
If you use an LLC formation service, though, you can save quite a bit of money. One of these services can get you a good contract for as little as $39.
DBA Fee – $22
After filing their Utah certificate of organization, many LLC owners find that the legal name of their LLC does not quite serve their needs. The LLC name might be hard to remember, sound too much like that of another company, or need to reflect a change in management or ownership.
These are common problems. All you’ll need to do is apply for an assumed name or DBA (“doing business as”) name for your LLC. Getting a DBA is easy. All you have to do is file an application online and pay a $22 fee. The DBA is then good for three years, after which time you will have to renew your DBA.
Name Reservation Fee – $22
Maybe you have a good plan and the perfect business name for your company, but you’re not ready to start just yet. If you want to make sure that you can use a certain LLC name when you are ready, you can apply for $22. The reservation is good for 120 days.
Domain Name – about $20 per year
In this day and age, small businesses need a presence on the Internet. The first step in creating a good website is to get your own domain name. While this might have been pricey in the past, it is now very affordable.
You should secure your domain name as soon as possible, even if you don’t have plans for a website right now. If you don’t, a competitor could buy your ideal domain and its variations to block you from using them. Domain squatters also sift through newly registered LLC names and will buy their domains only to relist them with huge markups.
In general, a domain ending in .com will be more expensive than a .net or .info domain, and some names will likely be taken, meaning you will have to do some searching (and maybe compromising).
A domain name from GoDaddy.com or a similar registrar may cost you between $20 and $50 per year, with regular specials and sales where you can get substantial discounts.
Registering with the Tax Office – Free
If you filed your certificate online, your LLC is already registered with the Utah State Tax Commission. If you filed by mail, you should contact the Commission directly to ensure that you are registered and have all appropriate licenses and identification numbers.
Getting a Federal Employer Identification Number (“EIN”) – Free
An EIN is a number created and assigned by the Internal Revenue Service to a business for paying taxes. (Think of an EIN as a social security number for a business.) Some LLCs need them, and some don’t.
Regardless of whether the IRS says you need one, we recommend getting an EIN. Many banks won’t allow your company to have its own account without one. Having an EIN can also simplify the process of getting credit.
You can apply online and get an EIN for free in minutes, or you can apply for one through the mail or fax. Whatever you do, don’t pay someone else to get an EIN for you. It’s too easy to pay someone else to do it unless it is part of a broader service package.
Foreign LLC Qualification Fees – about $100 per extra state
If your business takes off, congratulations! You may soon start thinking about expanding to new locations. If one of those places is in another state, you’ll have to pay for the privilege of doing business there. You won’t have to re-form your business, but you will have to register as a foreign limited liability company with the Secretary of State there and pay some extra fees.
The exact fees will depend on the state in which you are registering. As a rule of thumb, expect to pay about $100 in filing fees to register your LLC in another state.
Writing Formation Costs Off
Because it takes money to start your business, you can write off many, if not all, of your startup costs on your taxes for a deduction. The IRS has a lot of guidance on this matter, and you should compare your specific costs to the materials on the IRS website.
Though you can use these deductions in many states for their income taxes as well, Utah is a bit different. It instead allows you to claim a portion of your total federal deductions as part of a tax credit on your state return. Because this number is based on several factors and calculations, you should consult with a Utah accountant for more information on this tax credit.
Keep in mind that, in most cases, an LLC is taxed by the IRS as a pass-through business entity. Generally speaking, LLC owners can deduct up to $5,000 of their business startup expenses in the first year.
Doris forms an LLC in Salt Lake City for a shop that sells sweaters made out of wool provided by her sister, Lana, who raises alpacas at a ranch. The company, named Alpaca Sweaters for You LLC, will be owned by Doris with a 25% share by Lana. Lana will not actually work at the shop and is only an owner and supplier of alpaca wool.
Doris files the certificate of organization along with a DBA application for the name Alpacas 4U. Because she and her sister both have ownership in the business and their roles are different, she has a formation service help with an operating agreement to make the business run more smoothly.
Doris then applies to the city for a business license and pays $50 for that license.
Finally, Doris buys a web domain to advertise to potential customers. Doris, not Lana, paid all of these. (Had Lana paid some of them, Doris and Lana would split the deduction according to the costs each of them paid.)
Her formation costs are as follows:
- Utah LLC Certificate of Organization: $54
- Registered agent company fee (first year): $100
- Business license: $50
- Utah LLC operating agreement draft: $39
- Web domain costs (first year): $50
For income tax purposes, Doris has elected pass-through taxation for her LLC. So, the IRS will tax her directly for the money she gets from her LLC. She’ll then claim her startup deductions on her personal tax returns.
The total amount of Doris’s deduction in this example is $293. Before the deduction, her total taxable income for the year was $30,000. After the write-offs, the taxable income went down to $29,707.
Doris is in the 12% federal tax bracket. Thus, her deduction would save her $35.16.
Keep in mind that if Doris had spent more than $5,000, she would likely be able to write off all of that money, but not all in the first year. Instead, he would have to break out her deduction over multiple tax years.
Cheapest Way to Start an LLC in Utah
Now that you know all the basic costs, it’s time to shop around. Not every business needs to be formed in the same way, and you can save both time and money by picking the best option for you.
Formation Service – $39 + state fees
A business formation service is a popular and inexpensive way for new LLC owners to get started.
These companies are dedicated to helping entrepreneurs bring their visions to life. They have not only the knowledge of all the state laws you need to know, but also forms, documents, and procedures to make your life as easy as possible.
Formation services are quick and complete ways to handle formation needs for most LLCs.
- They’re easy. In most cases, a formation service will have helped hundreds of people through the exact process you are struggling with now. They have all the documents, information, and expertise you need right on hand.
- They don’t cost much. Because formation services have such a large volume of business, they don’t have to charge their clients that much money.
- They’re reliable. All of the formation services’ products and procedures have been tested hundreds of times over in the real world. That kind of experience should give you peace of mind and confidence going forward.
- They’re fast. Formation services have seen almost every business formation situation already. Chances are, they have many solutions for you that are ready right now before you even know you need them.
While formation services can be great for most people, they are not always the best choice. Some cons for these services are:
- They’re not the best solution for complex LLCs. If you are forming a complicated company or one in a heavily regulated industry, you will have concerns that probably need more focused expertise in that area of business.
- Even if a formation service is a good fit, you can expect upselling. Formation services have to make money too, and some of them may pressure you to buy formation products you don’t need. Even when you are using a formation service, you need to be a smart and informed consumer.
Using a professional LLC formation service can be a great way to set up a business. Check out our Best LLC formation services article for some of our suggestions.
Attorneys are licensed, reliable, and powerful resources for business formation. They are also pricey and more than most business owners need. In Doris and Lana’s case, they’ll be running a family business selling a fairly mundane product. An expensive business lawyer is thus probably not necessary for them.
A business owner with more money than Bruno, though, could benefit from having an attorney if their business was at all complicated. For that reason, some owners choose to go this route.
Despite the expense, sometimes hiring a lawyer is the best choice.
- Lawyers help you manage risk. An LLC with complicated legal issues needs a lawyer. Let’s say that, instead of a sweater shop, Doris and Lana wanted to create a wild animal park with tigers. In that case, having a lawyer on board to advise them and help them manage legal liability would be a smart move.
- Lawyers offer more customization when you need it. Do you need specific things put in an operating agreement? Is your company going to have a unique ownership structure? You may need an attorney to make sure these issues are handled properly.
For most people, getting an attorney comes with considerable downsides that outweigh any benefits.
- Lawyers cost more than any other option. The price tag alone should convince you that if you don’t need a lawyer, it’s not worth hiring one.
- Finding a lawyer takes a long time. Getting a lawyer who specializes in what you need, costs what you’re willing to pay, and can work with you well is a tall order.
- Lawyers also take longer to form a business than a formation service. Because lawyers are also very caring people, they will generally take much longer to form your company than non-lawyers would. Fortunately, most people don’t need a lawyer. In 90% of cases, a formation service will do just fine.
Do it Yourself
Many people, after searching the Internet for the information they need, decide to try forming their new LLCs themselves. This process can give you a lot of personal expertise, but remember that time is money. If you are spending hours on formation, that’s time you’re not spending on the substance of your business.
In most instances, then, it is more cost-effective to just pay an LLC formation service, with confidence that everything has been done correctly, rather than try to reinvent the wheel yourself.
- Personal knowledge. A DIY business owner will learn a lot about the process while forming their own business, and they probably will retain that knowledge for years to come.
- It costs less upfront. If you don’t figure out the value of your time, a DIY solution is the cheapest option.
- You’re losing money when you consider how much time it takes to DIY. If you figure out that your time is worth $30 per hour, and you take 20 hours to complete your business formation, you have essentially spent $600 on business formation.
- There’s the risk of making a mistake. DIY business owners can easily make a mistake with all the paperwork that then costs them more time and money.
- It’s a headache. State workers are very helpful, capable people. But they will also tell you that the laws and rules governing business formation are not easy, and they follow those rules for a living. It’s going to be even harder for you.
Annual Utah LLC Fees: How Much Will it Cost to Maintain your LLC?
Even after you’ve formed the LLC, there are annual costs for which you will have to budget. These include both government fees and amounts paid to third parties, like:
- Local Business License, depending on exact location: Varies
- Annual report fee: $18
- Registered agent fee: $100
- Domain name: $20
Utah LLC annual reports are due by the end of your LLC’s anniversary month. So, if you started your LLC on August 2, 2023, your first annual report would be due no later than August 31, 2023. You can file the report online to make the process easier. Failure to file the report on time will result in a $10 late fee.
Also, keep in mind that any small business should have an accountant. Costs for accounts vary significantly, but you should spend an average of $2,000 to $3,000 per year on an accountant in most cases.
How Much are LLC Taxes in Utah
How your LLC is taxed depends on how you characterize it with the IRS. If you elect pass-through taxation (the default method), the IRS and state will tax you personally on the money you received from your LLC. Utah’s personal income tax rate is 4.85%.
If your LLC elects a different tax treatment (e.g., as an S Corporation or partnership), then your LLC will likely also pay a 4.85% tax rate. Consult a Utah accountant for further details.
As mentioned above, you will also need to obtain a sales tax license and pay that to the state as well. As of the time of this writing, Utah’s average combined state and local sales tax rate sits at 7.19%.
Utah LLC Formation Costs Quick Links
- IRS — apply for an EIN online
- IRS information regarding the federal tax treatment of LLCs
- Salt Lake City Business License Division
- Utah Department of Commerce — Application for Reservation of Business Name
- Utah Department of Commerce — DBA Online Filing
- Utah Department of Commerce — Division of Occupational and Professional Licensing
- Utah Department of Commerce — Fee Schedule
- Utah Department of Commerce — Form Certificate of Organization
- Utah Department of Commerce — Online Business Registration
- Utah Department of Commerce — Renewal Process/Annual Reports
- Utah State Tax Commission — Employer Withholding
- Utah State Tax Commission — Sales and Use Tax
- Utah Unemployment Insurance Overview
Utah LLC Formation Costs FAQs
How much does it cost to start an LLC in Utah?
The minimum cost is $54. You must pay at least this amount to file your LLC’s certificate of organization with the state.
What is the cheapest way to start an LLC in Utah?
A do-it-yourself approach will have the lowest price tag, but it isn’t the cheapest in terms of your time. The best balance of price and time, for most people, is to use a formation service.
Do I need to hire an attorney to form an LLC in Utah?
No. Most people will not need to invest the considerable expense and time of hiring a lawyer. A formation service or a DIY approach will work for most business owners.
Can I pay to form an LLC more quickly in Utah?
Yes. Formation services will generally complete formation tasks faster than business owners acting on their own. If you file on your own, online filing only takes 1-2 business days without any further cost. If you file by mail, you can pay $75 to shorten the processing time from 2 weeks to 1-2 business days.