1. Local Zoning Laws and Regulations in Utah
Utah is home to 29 counties and 329 municipalities. Before establishing your therapy practice, even if it is based in your own residence, it is important to ensure that your chosen location complies with local zoning regulations.
In situations where conducting a business in a specific area goes against the usual zoning restrictions, such as operating a home-based business in a residential zone, you have the option to apply for a zoning variance. A zoning variance allows for exceptions to be made to the existing zoning laws.
To determine whether obtaining a variance is necessary, identify the types of zoning regulations recognized by your town or city, and assess whether your intended business activities align with the permissible uses in that area. It is recommended to contact your local municipality for information and guidance regarding zoning requirements and any mandatory permits. They can provide valuable assistance in navigating the zoning process and ensuring compliance with local regulations.
2. Business Name Search in Utah
To register a business name in Utah, it is necessary to register your business with the state. You have the option to form an LLC or corporation, or file for a “doing business as” (DBA) name with the state’s business division.
When registering your business name, it is important to ensure that it is unique and not already in use by another company within the state. It is also recommended to check the availability of the corresponding web domain (URL) for your business, even if you don’t have immediate plans to create a website. Acquiring the web address can help prevent others from obtaining the domain name associated with your business. Typically, if the web domain is available, it suggests that the name is likely available for business registration as well.
To perform a business name search in Utah, you can use the business search tool provided by the Utah Department of Commerce. This step is crucial because your filing may be rejected if you attempt to register a name that is already in use.
The search requirements can vary depending on the type of business structure you are filing for. For formal business structures like LLCs and corporations, a unique and available name is required. If you plan to file a DBA name for any type of business structure, it is necessary to ensure that the desired name is not already in use. However, for informal business structures like sole proprietorships or general partnerships in Utah, a state-level name search is not mandatory. Nevertheless, if you choose to register an assumed name or DBA name, it is essential to search the database to confirm the uniqueness and availability of your desired name.
3. Business Structure in Utah
When establishing a small business, there are several common legal structures to consider:
- Sole Proprietorship: This is the simplest and most common form of business structure. As a sole proprietor, you are the sole owner and operator of the business. You have full control and are personally responsible for all aspects of the business, including its debts and liabilities. From a tax perspective, your business income is reported on your personal tax return.
- Partnership: A partnership involves two or more individuals who agree to share ownership and responsibilities of a business. There are different types of partnerships, including general partnerships, where partners share equal responsibility and liability, and limited partnerships, where there are both general partners and limited partners with limited liability. Partnerships are not separate legal entities, and the partners are personally liable for the business’s obligations.
- Limited Liability Company (LLC): An LLC provides limited liability protection to its owners, known as members. This means that the members’ personal assets are generally protected from the company’s debts and liabilities. LLCs offer flexibility in management and taxation. They can be treated as either pass-through entities, where profits and losses flow through to the members’ personal tax returns, or as separate taxable entities. LLCs are popular among small businesses due to their simplicity and liability protection.
- Corporation: A corporation is a separate legal entity from its owners, known as shareholders. It offers the most significant level of personal liability protection. Shareholders’ liability is generally limited to their investment in the company. Corporations have a formal structure with shareholders, directors, and officers. They issue stock to raise capital and have ongoing reporting and compliance requirements. Corporations are subject to corporate taxation, and shareholders may also be subject to personal income tax on dividends received.
It’s important to carefully consider the advantages and disadvantages of each business structure in terms of liability protection, taxation, management, and financing options. Consulting with a legal or financial professional can help you determine the best structure for your specific business needs.
4. Register Your Business in Utah
To legally register your business in Utah, follow these steps based on your chosen business structure:
- Sole Proprietorship: There is no formal filing required with the state to establish a sole proprietorship in Utah. However, you should familiarize yourself with the guidelines for establishing a sole proprietorship in Utah.
- Partnership: For a general partnership, no formal filing is necessary. However, it is strongly recommended to create a written partnership agreement to outline the terms and obligations among partners. If you intend to form a limited liability partnership (LLP), you must file a Statement of Qualification with the Utah Department of Commerce – Division of Corporations and Commercial Code (DCCC). Learn more about the process of forming a partnership in Utah.
- LLC: To register an LLC in Utah, you need to file a Certificate of Organization with the DCCC. Additionally, appoint a registered agent in Utah who will receive legal correspondence on behalf of your LLC. While not legally required, preparing an operating agreement is highly recommended to establish the internal functioning of your LLC. Find detailed instructions on forming an LLC in Utah and forming a professional LLC (for professionals).
- Corporation: To create a corporation in Utah, file Articles of Incorporation with the DCCC. You must also appoint a registered agent in Utah. Although not mandated by law, it is advisable to develop corporate bylaws that define the internal operating rules of your corporation. Bylaws are not submitted to the state. If you wish to elect S Corporation status for tax purposes, you must file IRS Form 2553 with the IRS. Refer to the guides on forming a corporation in Utah for further information.
Make sure to carefully follow the instructions provided by the Utah Department of Commerce – Division of Corporations and Commercial Code for each business structure to ensure proper registration and compliance with state regulations.
5. Business Licenses & Permits in Utah
When conducting business in Utah, it is important to comply with the state’s registration and licensing regulations. Here’s an overview of the key requirements:
- Tax Registration: If your business involves selling goods in Utah, you must apply for a sales and use tax license. Additionally, if you have employees in Utah, you need to register for employer withholding tax. The state’s OneStop business registration website allows you to conveniently register for both types of tax.
- EIN (Employer Identification Number): If your business has employees or operates separately from your personal taxes, you must obtain a federal Employer Identification Number (EIN) from the IRS. Even if it’s not mandatory, obtaining an EIN can be beneficial for banking purposes, such as opening a business account, and for facilitating payments with other companies. You can apply for an EIN online through the IRS website, and there is no filing fee.
- Regulatory Licenses and Permits: Depending on your business activities, you may need to acquire specific licenses and permits related to health and safety, environmental compliance, construction, or industry-specific services. Utah’s OneStop online system enables you to register simultaneously with various state agencies, including the Utah State Tax Commission, Utah Labor Commission, Utah Department of Commerce, Utah Department of Workforce Services, and Utah Department of Environmental Quality.
- Local Licenses and Permits: It’s important to check the websites of the cities or counties where you plan to conduct business for information regarding any additional local licenses and permits that may be required.
- Professional and Occupational Licenses: Certain professions and occupations in Utah require specialized licenses. The Division of Occupational and Professional Licensing (DOPL) oversees regulatory boards and commissions for most licensed professions and occupations in the state. You can find a comprehensive list of professions and occupations covered by DOPL on their website.
Complying with these requirements will help ensure that your business operates legally and smoothly within the state of Utah.
6. Business Insurance in Utah
Utah businesses face risks during their operations, whether in Salt Lake City, Provo, West Jordan, or elsewhere. Having adequate business insurance is essential. Here are key insurance options available:
- Utah Business Owner’s Policy (BOP):
A BOP combines three important coverages:
- General liability insurance
- Commercial property insurance
- Business income insurance
- Utah General Liability Insurance:
Protects against claims for bodily injury, property damage, and personal injury.
- Utah Data Breach Insurance:
Covers losses due to the loss or theft of personally identifiable information.
- Utah Business Income Insurance:
Helps recover lost income during interruption caused by covered property damage.
- Utah Workers’ Compensation Insurance:
Mandatory for most employers, it provides benefits for work-related injuries and illnesses.
- Professional Liability Insurance in Utah:
Covers legal costs in case of lawsuits for errors or negligence in professional services.
Utah’s Minimum Business Insurance Requirements:
Utah law requires workers’ compensation insurance for most employers, including small businesses with one employee.
Consult with insurance professionals to customize your coverage based on your business’s needs and ensure compliance with Utah’s requirements.
7. Business Taxes in Utah
Utah imposes taxes on all types of businesses. For detailed information on state business taxes, refer to the Utah State Business Income Tax.
Here’s a summary of how different business structures are taxed in Utah:
- Sole proprietorships: Business income taxes are paid as part of the owner’s personal state income tax return (TC-40).
- Partnerships: Partners report partnership income on their personal tax returns. Most Utah partnerships also need to file Form TC-65, Utah Partnership/Limited Liability Partnership/Limited Liability Company Return.
- LLCs: Members report their share of LLC income on personal tax returns. Most LLCs also have to file an additional state tax form, which depends on their federal tax classification. LLCs classified as corporations are subject to Utah’s franchise tax. Additionally, Utah LLCs must submit an annual renewal with the Utah DCCC. Refer to Utah LLC Annual Report and Tax Requirements for more details.
- Corporations: Shareholders pay state taxes on dividends received from the corporation. Shareholder-employees with salaries must also pay state income tax on their personal tax returns. Corporations themselves are subject to Utah’s franchise tax and are required to file an annual renewal with the DCCC.
If you have employees, you must also handle state employer taxes. Additionally, federal income and employer taxes apply. For further guidance, consult IRS Publications 334 (Tax Guide for Small Business) and 583 (Taxpayers Starting a Business).