What Kind of Business Entity Do I Need in Utah? (2023)

If you are starting a new business in Utah, choosing an entity type that fits your business is important. I once asked someone why they used a certain entity type when starting a business, and they said it was because it is what someone else in their industry said to do. While relying on the advice of someone in the same industry may or may not work well, there could be a better entity type that fits the goals and management of the business.

Important Utah Business Formation Considerations:

-          How will I finance my small business? Do I need to find investors, get a loan from a local bank, negotiated a deal with partners, or some other arrangement to finance my new Utah Business?

-          How will I control and manage my business? Can I comply with business governance requirements? Do I want to deal with corporation shareholders, a board of directors, or partners?

-          What is the purpose of my business? What potential liabilities are typical in this business? Who should shoulder any liability?

-          How will my business be taxed and how will it impact my personal tax return?

There are other considerations in addition to the basic ones above, however, the point of these questions is to demonstrate that a choice of entity does have a significant impact on a business and those who own and manage it.

Common entity types to choose from can include the following:

-          Limited Liability Company (LLC)

-          Corporation (S or C)

-          Partnership

-          Sole proprietorship

-          Other entities for specialized industries.

For Utah startups or other Utah businesses looking to raise capital and take on investors, using a C Corporation is usually recommended. Investors, including from venture capital, may prefer a C Corporation over an LLC or other entity type because of the difference in the economics, control, and tax implications of investing in a C Corporation.

If you have questions about what type of entity is best for your Utah business, whether you can or should convert your business to a different entity, or if you know you will be looking for outside investment for your Utah startup, please schedule a free consultation, send me a message, or give me a call.

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