Utah is an excellent destination for entrepreneurs who love the outdoors: the state’s national and state parks offer some of the best skiing, hiking, and camping to be that can be found in the country.
The Beehive State’s business climate isn’t bad, either: Forbes recently named Utah the 2nd best state for business in the nation for ranking in the top five in several categories, including labor supply, regulatory environment, and growth prospects.
In order to help budding business owners in the state, we’ve put together the definitive guide to starting a business in Utah. We’ll walk you through each key step of getting a venture off the ground, from drafting a business plan, to filing the necessary documents to make your company legal in the state.
Utah small business statistics at-a-glance
- 287,803 small businesses operate in Utah, which is 99.3% of the state’s businesses.
- 572,888 Utah residents are employed by small businesses, accounting for 46.2% of the state’s private workforce.
- Utah entrepreneurs self-employed at their own incorporated businesses earned a median income of $55,477 in 2017.
- 79.27% of Utah startups survive beyond their first year of existence.
- Utah startups create 5.67 new jobs in their first year, on average.
- Tax Foundation ranked Utah 9th in its 2020 Business Tax Climate Index based on the strength of its 5th ranked property tax and 10th ranked individual income tax.
- Accommodation and food services is the largest small business employer industry in Utah, followed by healthcare and social assistance, and construction
Starting a business in Utah in 12 steps
1. Develop an idea
The first steps of an entrepreneur very often start with a good idea. Ask yourself these questions:
- Which product or service can your business provide that doesn’t already exist on the market?
- How does your business idea refine an existing product or service?
Determine your personal strengths and interests: developing an idea that suits your personality and positive traits will provide motivation to put in the long hours necessary in addressing the myriad challenges you’ll face in getting your business off the ground.
Figure out how to market your expertise: if your business idea is not something you totally believe in and can sell effectively, it will be much harder to succeed.
2. Do the research
Once you have an idea, it’s time to put it through the wringer and decide if it’s viable in the market. Conduct market research to arrive at answers to these key questions:
- Is there a demand for your product/service in Utah?
- Who is your target market?
- Do existing businesses in Utah offer a similar product/service?
- What makes your business unique compared to the competition?
Coming up with satisfactory answers may require refinement, or even a total overhaul, of your original idea. Be patient: you’ll only want to proceed with the next steps after determining that a niche exists in the Utah market for your business idea.
3. Draft a business plan
Now it’s time to write the blueprint of your business. A great business plan should chart the path of your company from infancy to success while being able to attract investors to provide financing.
Your business plan ought to include the following sections:
- Executive summary – An overview of your business and why it will be successful
- Description of business – Explain the advantages of your business and the problems it solves
- Market research – Provide research on your industry, target market, and potential competitors
- Organization and staff – Detail the nuts and bolts of your business; how it’s structured and who will run it
- Product or service description – State what you are selling or offering
- Marketing plan – Explain your strategy for attracting customers
- Fundraising – The money you’ll need in the next five years to grow your business and how you’ll spend it
- Financial forecast – Data and balance sheets providing a financial forecast for your business
- Appendix – An optional section with supporting and/or requested documents like resumes, letters of reference, permits, etc.
4. Secure funding
Every business needs money to get off the ground. In fact 82% of businesses that fail do so because of a lack of cash flow, U.S. Bank found in a recent study. Your business plan should include a detailed estimate of the funds you’ll need to cover expenses for at least a year, so now it’s time to acquire the money.
If you aren’t wealthy enough to self-fund your business, you can choose from a number of other funding options. These include a loan from the U.S. Small Business Administration, taking out a loan from a commercial bank, launching an equity crowdfunding campaign, or securing funding from an angel investor or venture capitalist group active in Utah.
An angel investor is a wealthy individual who invests their personal finances in a startup, typically in the beginning stages, whereas a VC is a group of investors that will fund a business throughout its existence.
Which route you choose depends on the specifics of your business: angel investors typically invest smaller sums to help get a startup off the ground, while VCs invest larger sums of money in exchange for a greater say in the operations of a business. Smaller startups usually opt to pursue funding from angel investors. Plenty of both types of investors are operating in Utah.
Utah Angel Investors and VCs
- Park City Angels – A highly active angel group based in Park City, Utah. Since 2008, Park City Angels has invested over $75 million and screened over 2000 Utah startups.
- Peak Ventures – An early-stage VC firm with a focus on technology companies.
- SLC Angels – A Salt Lake City-based angel group with an interest in early-stage, high-growth companies. The group offers mentoring to business owners, in addition to providing funding for their client companies.
- Utah Angels 2 – An angel group with decades of experience currently accepting pitches from startups.
Additional Investor Resources
- AngelList: Utah Angel Investors – A directory of over 5,000 investors interested in funding Utah startups with high growth potential.
5. Decide on a legal business entity
The form of business entity you choose will affect many factors going forward. There are 3 main options to decide from:
- Sole proprietorship – The name for running a business by yourself. Legally, you and your business are one and the same, with no separate legal entity for your business. A partnership is legally identical to a sole proprietorship, except that it comprises two or more people.
- Corporation – A complex legal structure that is a separate entity (providing legal protection to owners) from the owner and comprises directors, officers, and shareholders.
- LLC – AKA “Limited Liability Company”, this is a hybrid entity between a sole proprietorship and a corporation that possesses advantages of both. An LLCs provides the liability protection of a corporation, yet isn’t subject to double taxation as the profits go through your personal tax return.
Nowadays, LLCs are the option of choice for small business owners as they are easy to manage and provide the benefits of a corporation while lacking their complex structure. Taxwise, they operate more like a sole proprietorship.
You may want to consult with an attorney to help decide which entity works best for your business.
6. Register your business
Once you decide the structure your business will take, you can register your business with the state of Utah. This process follows different steps depending on whether you are establishing a sole proprietorship, an LLC, or a corporation.
For sole proprietorships
Whether you use your legal name as a sole proprietor in Utah or a separate business name, you must register your business with the Utah Department of Commerce.
If you plan to use a name separate from your legal name, use the Division of Corporations and Commercial Code Business Search to make sure that your chosen business name is distinguishable from others in the state.
After determining that the name is free, you can register an assumed business name, aka, dba (doing business as) with the Division of Corporations and Commercial Code online, or print out a PDF application and mail it in.
Those using their own name to do business may also register their business online with the OneStop service. The filing fee is $22.
For LLCs and corporations
The first step for forming either of these two entities in Utah is appointing a registered agent for service of process and handling government correspondence on the business’s behalf. Your registered agent must be a business or individual authorized to do business in the state and have a physical address in Utah.
Next, run a search to confirm that your chosen business name is available in the state. Then, you can file the necessary documents to form your business in Utah.
An LLC is formed in Utah through the filing of a Certificate of Organization, which can be filed online, or through the mail. The processing fee is $70.
A corporation is formed in Utah through the filing of Articles of Incorporation. Filing can be done online, or by using postal mail. The processing fee is $70.
7. Acquire federal and state tax IDs
Now you should obtain a Federal Employer Identification Number (EIN), which is like a social security number for a business and allows you to open bank accounts, handle payroll, and file taxes.
Each state has its own laws and taxes regarding businesses. Visit the Utah State Tax Commission website for information on state taxes that businesses are required to pay in the state, and instructions on how to register your business online to file and pay taxes.
8. Open business banking and credit accounts
Opening a bank account for your business is crucial because it allows you to separate company assets from your personal assets, and makes filing taxes a lot easier. This is a recommended step, even if you are operating a sole proprietorship.
It’s also a wise idea to obtain a credit card for your business because it will help you isolate business expenses and build up credit for your company, which may help in securing investment in later stages.
Banks operating in Utah good for small businesses
9. Get the necessary licenses and permits
Depending on the type of business you are opening, you may need to apply for a number of permits and licenses to operate legally. For example, a restaurant will need a liquor license, and a pawn shop will need a reseller’s license. The paperwork may prove a hassle, but it’s a necessary ordeal that will protect you from fines, lawsuits, and other legal hazards.
Visit the Utah.gov: Government Requirements page for a whole section on licensing regulations. You’ll find a business licensing & registration guide, information on all the professions and occupations that are regulated in the state, and more.
Business owners can use OneStop–the same online application used for registering a business in the state–in order to apply for locally-issued business licenses.
10. Choose a location
Whether you are running an online business or opening a restaurant, location is everything. Be aware of the demographics of the neighborhood or town that you are considering: Are the local residents likely to visit your business? Will nearby competitors take a share of your potential profits?
Salt Lake City, Utah’s capital, is our choice for the place to start a business in the state. The city is a tech hub, home to several top chemical research and biomedical institutions, in addition to the University of Utah.
Salt Lake City also shines in its high quality of life, being named a top 25 place to live in the nation by US News & World Report. Entrepreneurs based in the city can take advantage of the numerous national parks and ski resorts within driving distance.
11. Get insured
No matter what type of business you form, buying insurance coverage to protect yourself in the case of property damage or legal action is a good idea. In fact, businesses with employees are required by the federal government to have two types of insurance, while others are strongly encouraged, or required at the state level, depending on your business type. Consult with a licensed insurance agent to find out which types of insurance you should get.
Required forms of insurance:
- Workers’ compensation: Covers medical costs and disability benefits if an employee is injured or becomes ill on the job.
- Unemployment insurance: Provides benefits to workers after a loss of job through no personal fault.
Recommended forms of insurance:
- Professional liability insurance: Covers losses as a result of property damage, medical expenses, libel, slander, and negligence claims.
- Commercial property insurance: Covers property damage to business owned properties and possessions as a result of fire, theft, or storm.
- Disability insurance: Provides short-term benefits for employees suffering an illness or injury. Required in certain states such as California, New York, and Hawaii.
12. Develop an internet presence
Establishing an identity on the web is an important investment in a business’s future development. Here are some key steps in the process:
- Register a domain name for a company website (You can use domain.com, Bluehost, GoDaddy.com, Namecheap.com). Design the website and fill it with content.
- Create profiles on the popular social media services (Twitter, Facebook, Instagram)
- Register a Google profile for your business
- Create accounts on review sites such as Yelp, Google Reviews, and TripAdvisor
Utah small business resources
- Utah.gov: One Stop Business Registration – Use this handy online application to register your business with several state agencies, and apply for city business licenses.
- Utah State Tax Commission: Tax Information for Businesses – Learn about state-administered business taxes, and register to file and pay taxes in the state.
- Utah Department of Commerce: Division of Occupational and Professional Licensing – Apply for and renew state business licenses.
- NFIB: Utah – The Utah page of the nation’s leading small business advocacy group. Learn about pressing issues impacting Utah entrepreneurs.
- Utah Small Business Development Center – A statewide organization for Utah small business owners offering free one-on-one consulting, and a host of other services.
- 1 Million Cups Salt Lake – A weekly event where local entrepreneurs can present their startups to their peers and make invaluable connections with other business owners in the community.
- Sustainable Startups – A Salt Lake City boot camp-like incubation program for early-stage startups.
- Silicon Slopes – A website tracking developments in Utah’s tech industry, featuring profiles on the hottest local startups, information on upcoming entrepreneurial events, and a podcast.
- Spice Kitchen Incubator – A unique Salt Lake City incubator for chefs and food entrepreneurs. In addition to its incubator, Spice holds workshops and regular events highlighting the cuisine of local chefs.
- Utah | SCORE – The chapter of the nation’s leading business mentoring network serving the Salt Lake City area.