How To Register A Sole Proprietorship In Utah Form

Sole Proprietorship in Utah

Sole means one. And Proprietor means owner. Put them together and you lot have a Sole Proprietor, or Sole Proprietorship. A Sole Proprietor is the person. A Sole Proprietorship is the business entity.

A Sole Proprietorship in Utah is an informal structure with one concern owner. Frequently, it is the easiest and simplest form of business concern structure to create. All the same, that doesn't ever mean they are the best choice for small-scale business concern owners.

While Sole Proprietorships have some advantages, there are besides disadvantages y'all should be aware of.

We've explained these below, too every bit provide step-past-pace instructions if you decide to start a Sole Proprietorship in Utah.

Pro tip: Sole Proprietorships don't protect your personal assets. On the other hand, if yous form an LLC, your personal avails are protected in the issue of a lawsuit. Check out Sole Proprietorship vs LLC for more data.

Advantages of a Sole Proprietorship

Ease of setup and maintenance

The master advantage of a Sole Proprietorship is how easy they are to ready up and to maintain.

In fact, there is no form to file in club to "create" one. If you're doing business past yourself, you're operating equally a Sole Proprietorship.

Think of it this manner: once you appoint in business activities, with the goal of somewhen making money, y'all are operating as a Sole Proprietorship.

For example, if you want to start a nuptials planning business, the moment you lot begin doing concern research, calling potential customers, or building your website, you're operating equally a Sole Proprietorship.

Taxation

The second advantage of a Sole Proprietorship is tax. Filing taxes for a Sole Proprietorship business is very similar to how you already file your private taxes.

Meaning, you already file a personal Form 1040 revenue enhancement render each twelvemonth. However, every bit a Sole Proprietorship y'all (or your accountant) will include a Schedule C which lists your business profits or losses.

Disadvantages of a Sole Proprietorship

There is i major disadvantage and a few other minor disadvantages of a Sole Proprietorship.

No liability protection

The main disadvantage of a Sole Proprietorship is liability protection: at that place is none.

If your business organization is sued, your personal assets (like your home, cars, and banking concern business relationship) could exist used to settle the concern's debts and liabilities.

On the other hand, if yous formed an LLC or a Corporation, your personal assets are protected in the upshot of a lawsuit. Only the business organisation's assets can be used.

Tip: LLCs offer boosted nugget protection that Corporations don't.

Lack of credibility

Even though you can file a DBA name (discussed below), Sole Proprietors are still ofttimes seen as being less credible.

On the other paw, if yous were to form a legal business concern entity, similar an LLC or Corporation, those are considered more official and reputable.

Converting from a Sole Proprietorship to an LLC

If y'all start your Utah business as a Sole Proprietorship, and so later desire to convert to an LLC or Corporation, it's a large headache with many steps involved.

There isn't a one-pace process to convert a Sole Proprietorship to LLC. In fact, there are oft multiple steps and multiple filings you must make with diverse state departments and local governments.

For case, you need to update the state, the IRS, and the banking company that your business organisation blazon has changed. And if your concern requires a license or permit to operate, yous will need to re-apply for those every bit the new business organisation. Y'all may too need to redo contracts with your clients and vendors, and update your website and marketing materials.

So if yous're on the fence most which type of Utah business to choose, and you take the money to spend on an LLC, we recommend starting an LLC in Utah.

Sole Proprietorship vs LLC

Quick Read: What is an LLC and what does it do?

A Limited Liability Company (LLC) is a legal entity that offers pass-through taxation and asset protection. If your LLC is sued, your personal assets – like your home, car, and personal banking concern business relationship – are protected.

An LLC with 1 owner is called a Unmarried-Member LLC. And the nifty affair about them is they are taxed just the same as a Sole Proprietorship. Check out LLC taxed as Sole Proprietorship for more details.

To start an LLC in Utah, you lot must file a Document of Organisation with the Dept. of Commerce and pay a $70 filing fee.

LLCs must also pay an LLC almanac fee and appoint a Registered Agent in order to stay in compliance.

If you lot want to rent a visitor to course your LLC, we recommend Northwest Registered Agent.

If you decide you'd rather operate as a Sole Proprietorship, we have the instructions below.

How to starting time a Utah Sole Proprietorship

The only thing you must do to start a Sole Proprietorship in Utah is simply make up one's mind to start.

Again, but by taking actions that may lead to making money ways that y'all're at present a Sole Proprietor. You don't have to file a document to "form" your Sole Proprietorship with the state.

However, at that place are a few things y'all may need to (or want to) do in order to operate legally. For instance, your business may demand a license or permit to operate.

And it's all-time practise to open a dissever business bank account.

You lot might also want to get a DBA (for branding), and an EIN Number (and so you aren't putting your social security number on invoices or contracts).

Nosotros'll walk you through each of these steps below.

Footstep i – Business Planning Phase

In one case you have a business idea and have decided to operate as a Sole Proprietor, it's a adept idea to establish some key components of the business.

Some things that are helpful to remember about are:

business model
business proper name
startup costs
industry
marketing ideas
business address

Your business model is how your Sole Proprietorship plans to make coin – what volition you sell, how it's made, how it'south delivered, how it's marketed or advertised, etc.

Information technology's a proficient idea to recollect of marketing ideas early on to help your business concern succeed. A skillful marketing plan can include developing a logo and brand name, deciding where to advertise, building a website, and developing a social media strategy.

You should besides choose a primary business concern address. This can be an actual function accost, only information technology doesn't have to be. It could be your home address or you could even rent a mailbox accost. The purpose is to accept one designated accost where all mail for the business is sent, and that you tin utilise on official documents.

Step 2 – Proper name your Sole Proprietorship and Obtain a DBA

At present that yous've done some business concern planning, you lot have the option to name your company.

By default, a Sole Proprietorship's proper noun is the owner'due south legal proper noun. However, if you'd rather practice business under a different proper name, yous can file a DBA name (Doing Concern Every bit name).

For instance: Felipe Cruz is starting a wedding planning concern. Instead of having to do business concern under his full name – Felipe Cruz – he'd like to do business under the name "Excellence in Events". In this example, he'll need to annals his DBA proper noun "Excellence in Events".

Having a DBA proper noun can arrive a lot easier to brand and marketplace your business. It can also make your business sound larger than a i-person business organisation.

Having said that, a DBA proper noun is not required for a Sole Proprietorship in Utah. If you lot'd rather do concern nether your first and concluding name, that is 100% okay.

Even so, Utah requires you to register a Business concern Proper name if your Sole Proprietorship is using any name other than your offset and terminal proper noun. This dominion is found in the Conducting Business Nether Assumed Name Police force.

Annotation: In Utah, a DBA is technically called a Business organization Name, however, they mean the same thing.

How do I go a DBA?

To annals your DBA in Utah, you'll need to submit a Business concern Name Registration (too chosen a DBA Application) and pay a $22 fee. Y'all can file online or by mail.

To file by mail:
Consummate the Business Proper name Registration / DBA Application form. Impress the form, and mail it to the Dept. of Commerce with your check for $22.

To file online:
First, create a UtahID account. Then to get Utah's online DBA filing system. Click "File a New DBA," complete the form, and submit your payment.

Need to salve time? We recommend hiring MyCompanyWorks ($99 + state fee) to file your DBA.

Stride three: Get an EIN from the IRS

By default, a Sole Proprietor uses their Social Security Number (SSN) for tax and financial reporting.

All the same, a Sole Proprietor also has the option of getting an EIN Number (Employer Identification Number) from the IRS.

Notes: Whether or not you get an EIN for your Sole Proprietorship will not bear upon your taxes. Your taxes will be filed the aforementioned either fashion.

An EIN is too called a Federal Tax ID Number, Federal Employer Identification Number, Employer Identification Number, or FEIN. They all hateful the same affair.

Getting an EIN for your Sole Proprietorship may be a good thought for a few reasons:

Safety (prevent identity theft)

Without an EIN, you may need to apply your SSN when dealing with vendors and clients. For instance, if a client pays you lot more than $600 per twelvemonth, you'll need to provide them with IRS Course W9.

Instead of using your SSN, you lot can list your EIN instead on Class W9.

The same affair tin too apply to online account setups and other places you may practice business organization with.

By using your EIN, you don't take to give out your SSN as much.

Hiring employees

In this instance, an EIN isn't optional; it's required. If y'all want to hire employees for your business organisation, you volition demand to obtain an EIN showtime. This is because an EIN is required in society to pay payroll taxes for your employees.

Note: Equally a Sole Proprietor, while you are considered cocky-employed, you are technically not an employee.

Footstep 4 – Enquiry business license requirements

When researching required business licenses, it's a good idea to cheque if at that place are country-level requirements. After doing so, you'll want to inquiry any local requirements, those enforced past the canton or urban center where you're doing concern.

Practiced news, Utah doesn't require a "general" business license at the state-level for Sole Proprietors.

Instead, y'all should check with the county, city or town where your business is located for license requirements. Some counties and municipalities take a full general business license requirement, while others only require a license for certain industries.

Here is a list of all City and Canton Authorities Websites from Utah.gov.

Tip: Relieve fourth dimension by hiring an good. We recommend using IncFile ($99) to handle the business organisation license research for y'all.

Step five – Maintain your business

Once yous have established your Sole Proprietorship, there are a few things to do in society to keep information technology in good working order.

Getting a business depository financial institution business relationship, maintaining business financial records, and filing taxes are all function of making your business run smoothly.

Business Bank Account

It's important to open a business concern bank account for your Sole Proprietorship.

Keeping concern finances separate from personal finances is an important part of operating a business safely.

Business bank accounts typically allow you to process more than transactions per month than a personal bank business relationship, and accept other benefits.

Some banks may require a DBA in gild to open a business bank account for a Sole Proprietor. We recommend calling the bank to see if a DBA is required or if you tin open the business business relationship in your ain name.

While yous're on the phone, it's also a good idea to ask about the products they offering, and what documents they require.

For instance, nigh banks require you to bring your photograph ID, and if y'all have them: your EIN Confirmation Letter and DBA filing.

Business Records

Most states crave that businesses keep certain records. There is no police force specifically governing Sole Proprietorships, nonetheless, information technology's a good thought to proceed the following records for your Sole Proprietorship:

Copies of taxation returns for the previous three years
Copies of any financial statements for the previous 3 years

If y'all're just starting out, y'all won't take these records right away, and that'south okay. Simply go along them saved and organized as fourth dimension goes on.

Nosotros recommend establishing a specific location to store the records. For example, a filing cabinet in your house or at the business's office location. Or an online cloud storage system where yous scan and salve all the documents.

File your taxes (or rent an auditor)

As mentioned above, when operating equally a Sole Proprietor, you'll report your business organisation profits or losses on your personal tax render.

While you can file your taxes yourself (using a software similar Turbotax), you lot may want to hire a professional person instead.

If so, we recommend that you hire a concern accountant. Check out our guide on how to choose an accountant.

Conclusion

While a Sole Proprietorship may seem easier and less expensive than starting a legal entity (like an LLC), information technology can be risky (no nugget protection) and nonetheless requires paperwork for a DBA name and business organization license.

In general, we don't run across many good reasons to operate every bit a Sole Proprietorship and nosotros don't recommend them. They only take disadvantages when compared to legal entities.

The exception to this would be if you really don't have coin to pay for an LLC, specially if your country has expensive fees. For some, a Sole Proprietorship may exist the simply choice to getting your business organisation off the ground and earning profit. In this scenario, a Sole Proprietorship can be a adept identify to commencement.

If you'd like to learn more well-nigh LLCs, bank check our our guide on Starting an LLC in Utah.

Utah Sole Proprietorship FAQs

What is better LLC or Sole Proprietorship?

While starting a Sole Proprietorship is easy, the advantages end in that location.

Sole Proprietorships offer no personal asset protection. If your business organisation is sued, you're personally liable for the business debts and obligations. On the other hand, if you course an LLC, your personal assets are protected if your business is sued.

Sole Proprietors are as well seen as less official and less legitimate than a formal entity similar an LLC.

Nosotros recommend forming an LLC instead of a Sole Proprietorship. Not only does it offer personal asset protection, but they are more credible, and there'south no deviation between how you file taxes for a Sole Proprietorship and an LLC.

How practice I make myself a Sole Proprietorship?

There is no form to file to commencement a Sole Proprietorship. Just by engaging in activities with the goal of making coin, yous are operating as a Sole Proprietor.

However, if you'd like to do business organization under a name besides your outset and final proper noun, you'll need to register a DBA (Doing Business concern As) Name.

Are Sole Proprietorships required to register in Utah?

Yous don't have to register your Sole Proprietorship with the Utah Secretarial assistant of Land. It but exists once you decide to beginning a business and engage in business activities.

However, if your Sole Proprietorship will use a DBA (aka Business Name), and so that needs to be filed with the Utah Secretary of State.

Additionally, yous should check with an accountant in Utah nearly whether your Sole Proprietorship needs to register with the Utah Department of Acquirement for things like sales tax or other types of taxes.

Can a DBA be a Sole Proprietorship?

A DBA isn't a Sole Proprietorship. A DBA is just a "nickname" for something else – whether that's a business organisation or person(s).

Having said that, your Sole Proprietorship tin exercise concern using a DBA (doing business organization as) proper name.

For example, the default name for a Sole Proprietorship is the first and last name of the possessor (like: Bob Barkley). However, if you lot're running a bagel store, you can file a DBA called "Bob'southward Bagels & Sandwiches" in gild to better brand and market your business concern.

How are Sole Proprietorships taxed?

Whatever profit or loss from your business is reported on a Schedule C with the Internal Acquirement Service (IRS).

And the Schedule C is included with the rest of your personal tax return (Form 1040).

What'due south the difference between a Sole Proprietorship and a Partnership?

A Sole Proprietorship is an breezy business organization structure with i owner.

A Partnership, aka General Partnership, is an informal business construction with two or more owners.

While both structures take pass-through taxation, a Partnership needs to file Grade 1065 at revenue enhancement time, while a Sole Proprietorship doesn't. Instead, a Sole Proprietor needs to include a Schedule C on their personal tax render.

Matt Horwitz

Founder & Educator, LLC Academy®

Matt Horwitz has been the leading expert on LLC education for the by decade. He founded LLC Academy in 2010 after realizing people needed elementary and actionable instructions to start an LLC that other companies weren't offering. He's cited by Entrepreneur Mag, Yahoo Finance, and the US Bedroom of Commerce, and was featured by CNBC and InventRight.

Matt holds a Bachelor's Degree in business organisation from Drexel University with a concentration in business law. He performs extensive research and analysis to convert state laws into simple instructions anyone can follow to form their LLC - all for gratis! Read more near Matt Horwitz and LLC University.