Embarking on the journey of forming a business entity is a thrilling venture. It’s an opportunity to bring your entrepreneurial vision to life and make a significant impact in the marketplace. 

However, alongside the excitement comes the legal complexities and requirements that can be daunting for any entrepreneur. This is where a skilled business lawyer becomes invaluable. In Utah, setting up a business entity requires a series of methodical steps, and with the guidance of an expert, the process can be navigated seamlessly. 

Below we outline the crucial steps for creating a business in the Beehive State, emphasizing the pivotal role of a business lawyer at each stage.

1. Business Entity Selection

The first critical step is deciding on the type of business entity that best suits your venture. Are you leaning towards a Sole Proprietorship, Partnership, Limited Liability Company (LLC), or Corporation? Each type has unique legal, tax, and financial implications. A business lawyer offers expert advice on the pros and cons of each entity type, enabling you to make an informed decision that aligns with your business goals and ensures optimal protection for your personal assets.

2. Name Reservation and Registration

Selecting a unique and compliant business name is essential. A business lawyer conducts a thorough search to ensure the name isn’t already in use or trademarked. Once a suitable name is pinned down, your lawyer will navigate the name reservation and registration process with the Utah Division of Corporations and Commercial Code to ensure it’s legally yours.

3. Filing of Formation Documents

Every business in Utah is required to file formal documents with the state. For instance, a LLC files Articles or Certificates of Organization, while a Corporation files Articles of Incorporation. A business lawyer meticulously drafts these documents to comply with Utah’s statutory requirements, highlighting details such as the business name, registered agent, principal office address, and the names of the organizers.

4. Creating an Operating Agreement or Bylaws

Even though Utah doesn’t necessarily require an Operating Agreement for an LLC or Bylaws for a Corporation, having these documents is best practice for a variety of reasons. For example, they outline the governance structure of your business, the rights and responsibilities of its members, and other operational details. A business lawyer helps to create a robust Operating Agreement or Bylaws tailored to your business’s needs, thus providing a clear framework for resolving potential disputes and guiding future decisions.

5. Compliance With Tax Requirements

Navigating the tax landscape is one of the most complicated aspects of forming a business entity. A business lawyer works with you and your accountant to obtain the necessary Tax Identification Numbers (TIN) or Employer Identification Numbers (EIN) from the IRS and ensures compliance with Utah State Tax Commission requirements. They can also help you understand the sales tax, payroll tax, and any other tax obligations that may apply to your business.

6. Obtaining Necessary Licenses and Permits

Depending on your business type and industry, you may require specific licenses and permits to operate legally in Utah. A business lawyer can help identify the necessary permits—from local business licenses to professional licenses—and assists in the application process, thus saving you time and avoiding unnecessary legal hurdles.

7. Creating Employee Agreements and Policies

If your business will have employees, you may want to develop certain employee agreements and policies in compliance with state and federal labor laws. A business lawyer can help create contracts that protect your business interests and advise on human resource policies and employment law compliance.

8. Continual Legal Guidance

Beyond the inception of your business, a business lawyer provides continuous support. They assist with contract drafting, intellectual property protection, privacy and disclosure documents, operating procedures/policies, etc., and can act as a guide through the growth or eventual sale of the business. They are also essential allies in litigation, should disputes arise.

Business Formation Examples

  1. Restaurants and Food Services – These businesses often require health permits, liquor licenses, and business licenses. Setting up as an LLC or Corporation can provide liability protection for the owners against claims related to foodborne illnesses or accidents on the premises.
  2. Construction Companies – Construction firms need various permits and licenses to operate, including general contractor licenses and building permits for specific projects. Forming an LLC or Corporation protects personal assets from business-related lawsuits and liabilities. Contractors also benefit from binding construction contracts. 
  3. Retail Stores – Retailers need sales tax permits and business licenses. An LLC or Corporation structure can provide financial and legal separation between the business owners and the business itself, shielding owners from debts and obligations of the business.
  4. Medical Practices – Doctors, dentists, and other healthcare providers require professional licenses and, in some cases, permits for operating their practices. Forming a professional corporation (PC) or professional limited liability company (PLLC) can offer liability protection and tax benefits.
  5. Bars and Nightclubs – These businesses need liquor licenses, entertainment permits, and sometimes special zoning permits. An LLC or Corporation can help manage the risks associated with serving alcohol and large gatherings of people.
  6. Manufacturing Businesses – Manufacturers may need environmental permits and health and safety licenses, depending on what they produce. Structuring as a Corporation or LLC can help in managing these regulatory requirements while protecting personal assets.
  7. Real Estate Agencies – Real estate brokers and agents require licensing to operate. Setting up an LLC or Corporation can offer benefits such as limiting personal liability and potentially providing tax advantages.
  8. Transportation and Logistics – Companies in this sector often need specific permits and licenses, including commercial driving licenses and federal DOT numbers. An LLC or Corporation can provide a structure for managing such regulatory requirements and separating personal from business liabilities.
  9. Gyms and Fitness Centers – These facilities may need health and safety permits, and in some cases, special zoning permits. Forming an LLC or Corporation can help protect owners from liabilities related to injuries on the premises and lawsuits.
  10. Beauty Salons and Barber Shops – These establishments require cosmetology licenses and may need health and safety permits. An LLC or Corporation can offer liability protection against claims arising from services rendered and protect the owners’ personal assets from business debts.

Conclusion

Setting up a business entity in Utah involves a multi-step process that includes making strategic choices and fulfilling various legal requirements. Each step presents potential challenges that can be skillfully managed with the expertise of a business lawyer. By taking advantage of their knowledge and experience, you can avoid common pitfalls that many new businesses face, ensuring a solid foundation for your business venture. Remember, while it’s possible to start a business on your own, enlisting the guidance of a seasoned business lawyer can be one of the wisest investments you make on your entrepreneurial journey.

Call Hillyard, Anderson & Olsen today at (435) 752-2610 to discuss your business venture.