Starting your own business in Utah might seem scary at first, but it’s actually pretty doable, and our guide is here to help you kick things off..
Steps To Start A Business In Utah
Step 1: Choose a Business Idea
The first step for starting a business in Utah is having a good business idea. Maybe you already have an idea picked out, or maybe you are still deciding on one. Regardless, you can check out our library of business ideas to get detailed industry information, trends, costs to start, tips, and lots more.
Step 2: Write a Business Plan
Once a solid business idea is in place, it’s time to start working on the business plan. A business plan serves many purposes, from getting thoughts from the entrepreneur’s head onto paper, creating a playbook for the business, and obtaining funding.
According to a study conducted by Palo Alto Software, entrepreneurs who take the time to create a plan for their business idea are 152 percent more likely to start their business. 1
Related: How to write a business plan
Step 3: Find Financing
Obtaining the funds to start a small business is challenging for many entrepreneurs. Not only are there unfamiliar terms like collateral, equity, assets, liabilities, and others, but there are several funding sources with different rules, processes, and costs.
Each option has its advantages and disadvantages, but here are the most common sources of funding.
- Personal funds: Many entrepreneurs use their savings and credit cards or take out a home equity loan to fund their new business. Using personal funds gives you complete control over your business and doesn’t require you to share profits or decision-making with investors. However, it also puts your personal assets at risk if the business doesn’t succeed.
- Conventional bank loans: Banks and credit unions offer small business loans to qualifying borrowers. These loans typically have lower interest rates than other financing options, but they often require a personal investment, strong credit history, collateral, and a detailed business plan.
- SBA loan guarantees: The U.S. Small Business Administration (SBA) offers loan guarantee programs to help small businesses obtain financing from participating lenders. These programs reduce the lender’s risk by guaranteeing a portion of the loan, making it easier for small businesses to secure funding. The most popular SBA loan program is the 7(a) Loan Program, which can be used for various purposes, including working capital, equipment, and real estate.
- Microloan programs: Microloan programs are designed for small businesses that need smaller amounts of capital. In Utah, several organizations offer microloan programs, such as the Utah Microenterprise Loan Fund and LiftFund. These organizations provide loans with more flexible requirements than traditional bank loans.
- Investors: There are various types of investors who might be interested in funding your business, including angel investors, venture capitalists, and crowdfunding platforms. Angel investors are typically high-net-worth individuals who invest their personal funds in early-stage businesses in exchange for equity or debt. Venture capitalists are firms that invest in high-growth potential start-ups, often providing funding in exchange for significant equity stakes and decision-making power.
Step 4: Select a Business Structure
The next step to starting a business in Utah is selecting a business structure. A business structure (or business entity) is how a business is legally owned, operated, and taxed. It is important to choose the right type of business entity as it will determine the liability of the owners, the amount of taxes paid, and other factors.
In Utah, there are four common types of business entities: sole proprietorship, general partnership, corporation, and Limited Liability Company (LLC).
A sole proprietorship is an unincorporated business owned by one individual. This type of entity offers no protection from personal liability for debts or lawsuits incurred by the business.
A general partnership is similar to a sole proprietorship but involves two or more individuals who share in the profits and losses of the business. Like a sole proprietorship, this type of entity does not provide any protection from personal liability for debts incurred by the business.
A corporation is a legal entity that exists separately from its owners and provides limited liability protection for its shareholders. This means that if the company incurs debt or faces legal action, only corporate assets can be used to satisfy these obligations. Corporations also have greater access to capital than other types of entities due to their ability to issue stock and bonds.
Related: How to form a Utah corporation
Finally, a Limited Liability Company (LLC) combines the limited liability protection of a corporation with the tax flexibility of a partnership or sole proprietorship. The Limited Liability Company does not have many of the corporation’s administrative burdens and has the greatest tax flexibility of the four entities. Income can be taxed as a pass-through entity like the sole proprietor or partnership or as an S corporation.
Related: How to form a Utah LLC
Forming a corporation or LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.
Some popular formation services include:
IncFile - Great service and free registered agent the first year.
Northwest - Privacy-Focused: Free registered agent and private business address for 1 year!
ZenBusiness - Easy to use and free registered agent for 1 year!
Step 5: Register the Business
It can be difficult to track down which business licenses and permits are needed for a business in Utah. While this isn’t a complete list, here are some of the most common registrations:
- Business licenses: The state of Utah doesn’t have a general business license; however, all businesses in the state are generally required to license with the local municipality where they are operating. Each city and county has different procedures, so it is best to contact your city or county office to know the exact requirements.
- Employer Identification Number: Partnerships, corporations, multi-member LLCs, or any business entity that has employees will need to register for an EIN, which is a number assigned by the Internal Revenue Service to identify a business.
- Business name registration: A sole proprietorship or general partnership operating a business under a name that is different from the owner(s) legal name will need to file a Business Name Registration with the Utah Division of Corporations and Commercial Code.
- Sales tax license: Businesses selling products and certain services will need to register for a Sales Tax License with the Utah State Tax Commission.
- Professional licensing: Some occupations, such as accountants, electricians, handymen, hunting guides, and landscapers, require licensing in Utah. While this isn’t a license on the business, licensing is required in order to operate.
Step 6: Open a Business Bank Account
Opening a business bank account makes it easier to track income and expenses, which not only helps with record keeping and tax time but gives more protection in the event of an audit.
Step 7: Hire Employees
If you plan to hire employees, there are multiple agencies an employer will need to register with and labor laws to follow.
Employers are responsible for reporting new hires, verifying employees are eligible to work in the U.S., income tax withholding, obtaining workers’ compensation insurance, unemployment insurance, unemployment taxes, and payroll withholding taxes, including Social Security and Medicare.
Step 8: Obtain Business Insurance
Starting a small business in Utah comes with risks and uncertainties. The right insurance coverage is needed to protect your company’s financial well-being in case of unexpected events, such as accidents, natural disasters, or lawsuits. Without it, a single incident could lead to significant financial loss or even bankruptcy.
Some common types of insurance for small businesses include:
- General liability insurance: This type of insurance protects your business from claims of bodily injury, property damage, and personal injury (e.g., slander or libel).
- Property insurance: Property insurance covers damage to or loss of your business property, such as buildings, equipment, and inventory.
- Workers’ compensation insurance: Most businesses in Utah with employees are required to carry workers’ compensation insurance, which provides medical and wage benefits to employees who suffer work-related injuries or illnesses. This insurance protects your employees and shields your business from potential lawsuits related to workplace injuries.
- Professional liability insurance: Also known as Errors and Omissions Insurance (E&O), professional liability insurance is for businesses that provide professional services or advice. This policy covers claims of negligence, errors, or omissions in the services you provide, which could lead to financial losses for your clients.
- Commercial auto insurance: If your business owns or operates vehicles for business purposes, commercial auto insurance is necessary. This policy covers physical damage, liability, and medical expenses resulting from auto accidents involving your business vehicles.
- Business interruption insurance: In case of a covered event (e.g., fire or natural disaster) that disrupts your business operations, business interruption insurance can help cover lost income and additional expenses incurred while your business is unable to operate.
Step 9: Track Income & Expenses
Setting up an accounting system is an important step when you’re starting a business. Whether you go old-school with pen and paper, use a spreadsheet, accounting software, or hire a CPA, you need a reliable system to keep an eye on the money coming in and going out.
Accurate accounting records not only provide a clear picture of a business’s financial health and can help identify areas where improvements can be made, but they are necessary to pay taxes correctly and on time.
Related: Setting up accounting for a business
This material is property of StartingYourBusiness.com
Common Questions When Starting A Business In Utah
What are the steps to starting an LLC in Utah?
How much does it cost to start an LLC in Utah?
The filing fee to form an LLC with the Utah Department of Commerce is $54.
How do I purchase inventory without paying sales tax?
To purchase inventory without paying sales tax, you’ll need to take a couple of steps in order.
First, get a Utah Sales Tax License from the Utah State Tax Commission. This license is also known by a few other names like a seller’s permit, sales tax number, or sales tax permit.
Once you have this license, you can then obtain a Utah Exemption Certificate, commonly known as a Resale Certificate to make tax-free purchases for your business.
Utah Small Business Resources
There are 333,661 small businesses in Utah, which is 99.3% of all businesses in the state,2 and 45.2% of Utah employees work for small businesses.3 Because of the economic impact of small businesses, the state of Utah has invested in several small business programs to help Utah businesses start and grow. Some of these resources include:
- Grow Utah: This non-profit organization nurtures entrepreneurship throughout the state by connecting startups with resources.
- Utah Innovation Center: The Utah Innovation Center is a resource for businesses looking to advance in the tech sector.
- Utah OneStop Business Registration: This state website streamlines the process of registering your business with several state agencies and applying for city business licenses.
- Utah Small Business Development Center: The SBDC is a statewide network offering services to small business owners in Utah.
- Veteran Business Resource Center: The VBRC focuses on supporting veteran entrepreneurs, providing them with the resources and guidance they need to launch and grow their businesses successfully.
- Women’s Business Center of Utah: The WBC is dedicated to empowering female entrepreneurs, this center provides a range of services and support specifically tailored to the needs of women in business in Utah.