Business Entity Regulations
Business activity may be conducted through a variety of organizational structures or entities. Whichever business structure is selected will determine the legal requirements or regulations with which the business owner is required to comply. In selecting an organizational structure, protecting the business owner from liability is a primary consideration. “Other considerations are the transferability of ownership rights, the ability to continue as a business in the event of the death or withdrawal of one or more of the owners, the capital needs of the business, and tax liabilities.” (Utah.gov) The most commonly registered business Entities in Utah are sole proprietorships, general partnerships, limited partnerships, corporations, and limited liability companies.
A sole proprietorship is a business entity formed by an individual, and are the most common and simple form of business structure. The owner is responsible for all of the control, liability, and management of the business. Although the business owner gets all the profits from the business, they are personally liable for all debts incurred by the business. Because the sole proprietorship is merely an extension of its owner, it has no life apart from its owner. It is not a legal entity; therefore, it cannot sue or be sued. Creditors must sue the owner and vice versa. There are no formalities necessary when creating a sole proprietorship. By simply not choosing another business form or structure, the person going into business by himself automatically creates a sole proprietorship by default. The business name simply needs to be registered with the state.
A general partnership is a business made up by two or more people who agree to conduct business for profit. Each partner shares the profits and losses while contributing their labor and skills to the business. “General partners have a fiduciary duty of loyalty and trust to the other partners and must subordinate their personal interests to those of the partnership.” (Utah.gov) In order to create a general partnership there must be an agreement, but there are no formalities necessary. If partners conduct business under an assumed name, they have to file the business name with the Utah Division of Corporations and Commercial Code. Although there are no formal requirements with regards to the agreement, the partners should take action in creating a formal written agreement to protect their interests in the event of a dispute.
Limited Partnership (LP)
The limited partnership is basically a specialized form of a general partnership. It is a business made up of one or more general partners and one or more limited partners. The general partners manage the business and are 100% liable for the business debts. Limited partners share in the profits of the business, but their risk is limited to the extent of their investment. These limited partners are typically not involved in the day-to-day operations of the business. When creating a Limited Partnership in Utah, the general partners must file a “Certificate of Limited Partnership” with the Utah Division of Corporations and Commercial Code.
“The modern corporation is the most important form of business in the history of the world.” (Utah.gov) A corporation is a complex business structure. Corporations are entities created with the permission of the state and have certain rights, privileges, and liabilities beyond those of an individual. Shareholders are the actual owners of the corporation and elect the directors that establish policies. Doing business as a corporation can have tax or financial benefits, but there are other fees and considerations to consider.
Limited Liability Company (LLC)
“A limited liability company (“LLC) is a new form of business entity that combines the operational flexibility and tax status of a general partnership with the limited liability protection traditionally associated with limited partnerships and corporations.” (Utah.gov) The LLC offers the most operational flexibility. It may be an incorporator, general partner, limited partner, applicant of a DBA, or a manager of any corporation, partnership, limited partnership or limited liability company. Members are not personally liable for the obligations of the LLC. However, An LLC is subject to disclosure, record keeping and reporting requirements that do not apply to a general partnership. LLC’s are organized by filing in accordance with the state Articles of Organization.
In order to start a business in Utah, besides a sole proprietorship, the business owner(s) need to file/register with the Utah Division of Corporations and Commercial Code. The address of this corporation commission is:
Division of Corporations and Commercial Code
Utah Department of Commerce
160 East 300 South
Salt Lake City, Utah 84114
Annual Filing Report
Each year companies have to do an annual renewal. In order to obtain the necessary documentation to file the annual report, the business needs to go to www.utah.gov, business online services, then annual business renewal. From the renewal screen, the entity has the option to “renew” or do “multiple renewals.” After entering the entity number and renewal ID, the company has access to the renewal forms.
State of Utah (2008) Retrieved ****** **, 2008 from www.utah.gov.
Business Entity Regulations