Start a business

The Key Benefits of Creating Your Own Business Entity

If you run a business as a sole proprietor under your own name, or a DBA, but have yet to legally form a business entity then you’ll want to be informed on the options available to you and their respective benefits. Forming a corporation or LLC requires some paperwork and minor fees but in most cases the effort and cost is small compared to the benefits.

The LLC

Most small business owners opt to form a Limited Liability Company (LLC) because of the flexibility and simplicity that this option affords. LLCs can be structured in nearly any way seen fit by the members and changes can be made with relatively little hassle as the company grows or evolves.

Perhaps the biggest benefit of creating an LLC, as opposed to a sole proprietorship or general partnership, is that your personal assets will be protected. Your home, for example, could not be sought by creditors to pay outstanding business debts.

Although other types of corporations will also allow you to limit personal liability, one advantage of an LLC is that business tax liabilities are passed through to members and the business itself is not taxed. The tax benefits, coupled with the simplicity and flexibility, make an LLC a great option for any company that plans to keep ownership restricted to a relatively small number of individuals.

The C Corporation

A standard corporation (commonly referred to as a C Corporation) is helpful for businesses anticipating venture capital funding because it affords more flexibility when multiple investors are involved (and is particularly helpful if those investors won’t be actively involved in day-to-day decisions).

Although C Corps are subject to the “double tax,” this option allows more legal options that offset heavy taxation than an LLC or sole proprietorship. Both the salary and fringe benefits (health insurance premiums etc.) of a shareholder would be tax deductible, for example.

An additional benefit to C Corps is that they can offer stocks and stock options can be a big incentive for keeping and/or attracting employees. C Corps are a terrific choice for companies expecting the type of expansion that would require numerous investors.

The S Corporation

The S Corp’s most attractive feature is pass-through taxation. Similar to LLCs, S Corps are not subject to taxation on the corporate level and personal level. Unlike LLCs, however, S Corps offer many of the benefits mentioned in the C Corp section above.

The key difference between the S Corp and C Corp is that S Corps face more restrictions than C Corps when it comes to those benefits. S Corps are not allowed to have more than 100 shareholders, for example. S Corps also cannot have non-US citizen shareholders. These restrictions do not apply to C Corps. S Corps do have stocks (and the stock options that come with them) so they offer that advantage over LLCs but these stocks are restricted to a single class whereas C Corps are allowed more diversity in stocks.

The S Corp is a great choice for companies that anticipate growth outside of the local market but do not anticipate expanding internationally.

Call J. Cutler Law Today

At J. Cutler Law, we offer free initial consultations for you and your business. We can help you decide what type of entity best fits your business’s needs. Call us today for a free consultation at (801) 618-4469 or contact us online.

How do I start my own LLC in Utah?

 

If you are thinking about starting your own limited liability company (LLC) it is important to go over a few questions to make sure an LLC is right for your business. Once you've determined that an LLC is right for you, then there are seven steps to forming and operating your LLC in Utah. However, before we get to those seven steps, let's have a quick refresher on what is an LLC and what are its benefits.

how-do-i-start-my-own-llc-in-utah.jpg

What is a limited liability company?

A limited liability company is a hybrid business entity, having characteristics of both a corporation and a partnership. Like a corporation, an LLC is a legal entity separate from its owners, thereby shielding its owners from any liability the LLC may incur. However, like a partnership, the LLC is managed without the formalities of corporation and without being tax separately as an LLC.

What are the benefits of an LLC?

A limited liability company is perhaps the most popular entity choice of new entrepreneurs because of the many benefits it provides. The most important being the limited liability it provides to all of the owners. This liability protection is also found with a corporation, however, an LLC is not required to hold annual meetings or comply with the many operational restrictions imposed upon corporations.

This liability protection is similar to a limited partnership, however, unlike a limited partnership, a member of an LLC will not lose the protection of limited liability by participating in the management of the LLC. Thus, business owners who want total control and management of their business, while enjoying limited liability, should choose to form an LLC.

Lastly, an LLC has its own tax benefits. For tax purposes income is only taxed once, i.e., earnings of the LLC are treated as the earnings of its owners and thus no separate tax is imposed on the LLC. 

How do I form an LLC in Utah?

Starting your own LLC can be a straightforward process. However, the State of Utah has some specific LLC requirements that are unique to the state.

  1. Decide on a name for your business. You can choose any name for your LLC as long as it is not already taken and ends with “Limited Liability Company,” “Limited Company” or any variation of its abbreviation—e.g., LLC, L.L.C., LC or L.C.
  2. Assign an agent for service of process. This can be yourself or a registered agent such as J.Cutler Law.
  3. Get an Employer Identification Number (EIN) from the IRS.  This is needed for tax purposes.
  4. Registration. You must file Articles of Organization with the Utah Division of Corporations.
  5. Fees. There is a non-refundable filing fee for Articles of Organization. 
  6. Create an operating agreement. Although it is not required to have a limited liability company operating agreement in Utah, it is recommended to have one, especially if there is more than one owner of the LLC. The operating agreement is recognized by the State of Utah as the LLC's governing document.
  7. Renew your LLC every year. Your LLC must be renewed each year on or before the anniversary date of the formation of the LLC. The renewals are done online with the Utah Division of Corporations. There is a small filing fee.

How much does it cost to form an LLC in Utah?

Currently the filing fee with the Utah Division of Corporations is $70.00. If you were to do everything yourself (register your business name, act as the agent for service of process, get your EIN number, and draft your own operating agreement) this would be your only cost - besides the time it would take you to learn and do all of the above. However, if you would prefer an experienced business attorney to take care of this for you, you can hire a local business attorney. 

At J.Cutler Law, we can form your LLC from start to finish for $400, plus the filing fee. We guarantee you will be satisfied with our service, or your money back. We also provide free lifetime revisions on your operating agreement. In other words, if the ownership or operation of your LLC ever changes, we will update your operating agreement for free. For your initial complimentary consultation, please call us at 801-285-7602 or book online.