After you’ve filed your certificate of organization with the Utah Division of Corporations, your LLC begins its legal life. But before you kick back and dive into that celebration cupcake, there are a few other things you need to do to make your LLC fully operational.
We’ve put together a list of steps that you need to take as a new LLC owner in Utah. Some of them are legally required. Others aren’t mandatory, but highly recommended.
Please just keep in mind that, while we’ve made every effort to ensure that this information is up-to-date and accurate, it doesn’t constitute legal advice, and it shouldn’t be considered a substitute for legal advice. Always consult with your attorney to get answers to your questions regarding your LLC.
Step 1: Draft and Sign an LLC Operating Agreement
First up, the operating agreement.
What’s an operating agreement?
Basically, it’s a legal document establishing how your LLC is run.
It includes:
- How decisions are made
- How money is distributed
- How disputes are resolved
An operating agreement has lots of detail here, so take your time as you draft it, and really think about what you’re putting into it.
All of the members of your LLC need to sign the agreement and agree to follow the rules that it contains. Obviously, if you’re the only member of your LLC, you’ll be the only one who needs to sign it and follow it.
Do you really need an operating agreement?
An operating agreement isn’t mandatory, but it’s a great idea to have one in place, even if your LLC only has one member and you’re in charge of making all of the decisions.
Why? Because having a written operating agreement gives credibility to your LLC.
It also shows that your LLC is a legitimate business entity that’s separate from you, not just some sham that’s been created to avoid liability. This is especially important for single member LLCs (SMLLCs) because, without the formality of an agreement, an SMLLC can look like a sole proprietorship, which doesn’t provide limited liability.
Plus, lenders might ask to see an operating agreement before they agree to issue you a loan in your LLC’s name. If you’re planning on taking out loans to build your business, this simple document will definitely help you.
The good news is that your operating agreement doesn’t need to be complex or long, especially if you’re an SMLLC.
And, while you don’t need to file the agreement with the Secretary of State—or anywhere else, for that matter—you should keep this document with all of your other important LLC files.
Step 2: Get a Federal Tax ID (EIN)
Next up is the Federal Tax ID (or Employer Identification Number / EIN).
You can obtain an EIN from the IRS. This nine-digit number is used by the IRS to identify your LLC, and you’ll need to include it in all of your tax forms and communications with the IRS and the Utah State Tax Commission.
If your SMLLC doesn’t have any employees, a separate EIN is, generally, not required. Instead, you can use your personal Social Security number. But it’s still recommended that you get an EIN.
Why is an EIN important?
First, it helps prove that your LLC is a legal entity that’s separate from you personally, just like the operating agreement.
Plus, using your EIN rather than your Social Security number helps avoid identity theft, which is frighteningly common today.
And, on top of all of that, many banks actually require an EIN when you open up a business bank account in your LLC’s name.
Luckily, it’s super easy (and free) to get an EIN and you can complete an online application at the IRS website.
Step 3: Get a Business License
All businesses operating in Utah must be licensed by the city or county where they’re doing business. And each city and county has its own licensing requirements.
If you register your LLC certificate of organization online with the One Stop Business Registration System, you’ll receive all of the information necessary to go to your local city or county to apply for a business license.
Also, the Utah Business Licensing & Registration Guide contains contact information for most Utah city licensing offices.
The benefits of getting your business license
Just like an operating agreement and EIN, getting your business license helps prove that your LLC is legitimate. It also helps preserve your limited liability.
More importantly, if your local government finds out that you didn’t get a required license to run your company, it could impose penalties and fines. These fines cost a lot more than it would’ve cost you to get the license in the first place. So be like Nike and just do it.
Getting your business license is easy
Don’t stress, getting a local business license is usually simple and straightforward.
The specific details for your particular license will be available from your local government, so some research is required.
Once you know what you need, you have to fill out an application and pay a fee.
Just keep in mind that, in addition to a local business license, you might also need to get a license or permit from the State of Utah, or even from the federal government. This will depend on the work that you do. For example, real estate brokers and salespeople must be licensed by the state.
Step 4: File Annual Renewals
All Utah LLCs must file an Annual Renewal with the Utah Division of Corporations and pay a $20 fee.
The renewal is due one year from the date of your LLC’s initial registration and due annually after that. You can file the renewal online or download a renewal form from the Division of Corporations website. The renewal is used to require LLCs to pay an annual fee to the state. Basically, all you do is provide your LLC’s name, number and type.
Step 5: Open a Business Bank Account
We highly recommend that you open a bank account in your LLC’s name, rather than use your personal bank account for business purposes. Once again, it boils down to making sure that your LLC is recognized as a separate, legal entity that’s a legitimate business. Combining your personal funds with your LLC’s funds in a single account is a bad idea.
If you use your personal bank account for business purposes, you might even end up losing the limited liability that you got by creating your LLC. You definitely don’t want that! Setting up a business bank account might seem daunting at first, but it’s really not as bad as it sounds. Check out our article Freelancer’s Guide to Banking to learn more.
Step 6 (Optional): File “Doing Business As” Registration
Did you know that you aren’t required to operate your LLC under the legal name that’s listed in your articles of organization? It’s true; you can use a different name. This name is referred to as an assumed name or “doing business as” DBA name.
All you have to do is register your Doing Business As name with the Utah Division of Corporations, and it’s good throughout the state. To register, file a Doing Business As (DBA) application and pay a $22 fee. You can file online.
You can also register your DBA name online when you file your certificate of formation with the Division of Corporations. Check the Utah Online Business Registration Database to be absolutely sure that the name you wish to use isn’t already taken by another business.
Not sure where to start with naming your LLC? Check out this article for a complete guide to naming your LLC in Utah.
Maintaining Your LLC Doesn’t Have to Be Complicated
Wow, those are a lot of rules! Take a deep breath and just remember to take things one step at a time so that you don’t become overwhelmed.
Also, know that Collective is here for you to help you through all of the important steps above (and more!).
With the right strategy and the right support, you can rest easy knowing that your LLC has everything it needs to operate legally and be recognized as the legitimate business that it is.
Stephen has dedicated his career as an attorney and author to writing useful, authoritative and recognized guides on taxes and business law for small businesses, entrepreneurs, independent contractors, and freelancers. He is the author of over 20 books and hundreds of articles and has been quoted in The New York Times, Wall Street Journal, Chicago Tribune, and many other publications. Among his books are Deduct It! Lower Your Small Business Taxes, Working with Independent Contractors, and Working for Yourself: Law and Taxes for Independent Contractors, Freelancers & Consultants.