How to Start an S Corp in Utah
Utah is one of the fastest-growing economies in the country and a great place to start a business. It has a strong workforce, a great tax structure, business incentives, and an affordable cost of living. That means you’ll have a lot to consider as you prepare to start a new venture in Utah, including how to structure your business.
Choosing to set up your business as an S corporation (S corp) could save it a significant amount in taxes. This guide covers the actions you’ll need to take to set up your business as an S corp and ensure it remains compliant moving forward.
Not in Utah? Check out our other How to Start an S Corp guides to learn more.
Recommended: If you have at least $60,000 in net earnings, an S corp may offer tax advantages. Let Northwest start your S corp today.
Factors to Consider Before Starting an S Corp in Utah
Before forming an S corp, you have to consider the following factors:
- Is an S corporation the best strategy for your business?
- S corporation restrictions
- Are S corp tax advantages right for you?
Is an S Corporation the Best Strategy for Your Business?
For help with choosing the right structure for your business, visit our Choosing a Business Structure guide.
S Corporation Restrictions
S corps have several restrictions, such as being limited to one class of stock and 100 shareholders. Read our What Is an S Corporation guide for full details.
Are S Corp Tax Advantages Right for You?
An S corporation is a tax designation that can be elected by an LLC or corporation. With an S corp, business owners are considered employees of the company and must receive a reasonable salary. Since all S corps technically have employees, the s corp must run payroll.
In order to benefit from a Utah S corp tax designation, your business needs to make enough money to offset payroll expenses. Furthermore, S corps are beneficial for business owners who take large distributions in addition to their salary.
To learn more about the tax advantages of an S corp, read our LLC vs. S corp guide and take a look at our S Corp tax calculator.
For a Free Consultation with a Tax Professional
How to Form a Utah S Corp
There are two main ways to start an S corp:
- By forming an LLC and electing S corp tax status from the IRS when you request your employee identification number (EIN)
- By forming a corporation and electing S corp status from the IRS
We recommend forming an LLC because it’s simpler and more cost-effective.
Recommended: If you have an existing LLC, visit our How to Convert an LLC to S Corp guide.
Steps for Forming an LLC and Electing S Corp Status in Utah
Starting a Utah LLC and electing S corp tax status is easy. You can use our guides to start an LLC with the S corp status yourself, or you can hire a service provider like Northwest to guide you through this process.
There are five basic steps to start an LLC and elect S corp status:
Step 1: Name Your LLC
Step 2: Choose a Registered Agent
Step 3: File the Certificate of Organization
Step 4: Create an Operating Agreement
Step 5: Get an EIN and File Form 2553 to Elect S Corp Tax Status
Step 1: Name Your LLC
Choosing a company name is the first and most important step in starting your LLC in Utah.
Be sure to choose a name that complies with Utah naming requirements and is easily searchable by potential clients.
1. Follow the naming guidelines for a Utah LLC:
- Your name must include the phrase “limited liability company” or “limited company” or one of their abbreviations (L.L.C., LLC, L.C., or LC). “Limited" may be abbreviated as "Ltd.," and "company" may be abbreviated as "Co."
- Your name cannot include the following words or abbreviations: association, corporation, incorporated, limited partnership, or L.P.
- Your name cannot include words that could confuse your LLC with a federal government agency (FBI, Treasury, State Department, etc.).
- Your name cannot suggest in any way that the LLC is an agency of the state or any of its political subdivisions.
- Your name cannot imply that the LLC was organized for a purpose other than the one outlined in its Articles of Organization.
- You need approval from certain agencies to include certain restricted words in your name.
- Utah Division of Consumer Protection: College, Institute, University, Institution
- United States Olympic Committee: Olympic, Olympiad, Citius Altius Fortius
- Department of Financial Institutions: Bank, Banker, Banking, Banc, Banque, Banco, Bancorp, Bancorporation, Bankcard, Bancard, Savings Association, Building Association, Savings and Loan Assoc., Building and Loan Assoc., Savings Bank, Industrial Loan Corp., ILC, Thrift, Credit Union, Trust, Trustee, Trust Company, ESCROW, escrow
- Your name must be distinguishable from any existing business in the state. This includes Utah reserved names.
- You can read the Department of Commerce’s Business Name Conventions and Policies for more details.
You can also read the Utah state statute about LLC naming guidelines for more information.
2. Is the name available in Utah? You can use the business search on the Utah Division of Corporations and Commercial Code website to see if your desired LLC name is available.
3. Is the URL available? We recommend checking to see if your business name is available as a web domain. Even if you don't plan to create a business website today, you may want to buy the URL in order to prevent others from acquiring it.
Step 2: Choose Your Utah Registered Agent
You must elect a registered agent for your Utah LLC.
An LLC registered agent will accept legal documents and tax notices on your LLC's behalf. You will list your registered agent when you file your LLC's Certificate of Organization.
Many business owners choose to hire a registered agent service. Many of these services will form your LLC for a small fee and include the first year of registered agent services for free.
Step 3: File the Utah LLC Certificate of Organization
The Utah Certificate of Organization is used to officially register an LLC.
File Your Utah Certificate of Organization
OPTION 1: File Online With the Utah Department of Commerce
File Online- OR -
OPTION 2: File by Mail
Download FormState Filing Cost: $70, payable to the State of Utah (Nonrefundable)
Mailing Address:
Utah Division of Corporations & Commercial Code
P.O. Box 146705
Salt Lake City, UT 84114
Step 4: Create an LLC Operating Agreement
An LLC operating agreement is a legal document that outlines the ownership and member duties of your LLC.
For more information, read our Utah LLC Operating Agreement guide.
Our operating agreement tool is a free resource for business owners.
Step 5: Get an EIN and Complete Form 2553 on the IRS Website
An EIN is a number that is used by the US Internal Revenue Service (IRS) to identify and tax businesses. It is essentially a Social Security number for a business.
EINs are free when you apply directly with the IRS.
Elect S Corp Tax Status
During the online EIN application, the IRS will provide a link to Form 2553, the Election By a Small Business form.
Visit our Form 2553 Instructions guide for detailed help with completing the form.
This is the form to elect S corp tax status for your LLC:
Ready to start saving on your taxes?
We recommend using a formation service to start your Utah S corp for you, so you can focus on the things that matter most — growing your business.
Keep Your Utah S Corp Compliant
After you set up your Utah S corp, you'll need to ensure it remains in good standing with all Utah state laws and guidelines. This’ll require you to stay up to date on all local and state taxes as well as to file your business’s annual report each year.
Utah S Corp Annual Report
Utah requires businesses to file an annual report — also called a business renewal — with the Utah Department of Commerce’s Division of Corporations and Commercial Code. These reports are due every year on the anniversary of your filing to form your business.
Visit our Utah Annual Report guide for a step-by-step overview of the filing process.
Utah S Corp Taxes
S corporations benefit from pass-through taxation, meaning the business’s profits pass-through to S corp owners’ individual tax returns. S corp owners make money from their reasonable salary and distributions, and Utah S corp owners can expect to pay the following taxes:
Federal Self-Employment Taxes
Self-employment taxes cover social security and medicare. The self-employment tax rate is 15.3%, and money you take as salary will be subjected to the self-employment tax. However, distributions are not subjected to this tax.
Federal Income Taxes
Your federal income taxes will depend on your tax bracket, and the cutoffs for individual tax brackets as well as the percent owed will change each year. Both your salary and distributions are subjected to federal income tax.
Utah Income Taxes
In Utah, you must file the appropriate paperwork and pay a 4.85% income tax every year. While Utah does impose a state income tax, it’s one of the lower percentages across the country. Many states have income tax rates as high as 10% so you can save a significant amount by forming your S corp in Utah.
Utah Sales and Use Tax
Utah’s sales and use tax rate is 4.7% plus a local sales tax of 1% and a county option sales tax of 0.25%. Many cities and counties within the state may impose additional sales taxes. Visit Utah’s Taxpayer Access Point for more information.
Additional State Taxes
As a business owner in Utah, you may have to pay some additional state taxes. The Utah State Tax Commission outlines the numerous taxes imposed throughout the state, such as:
- Fuel Tax
- Cigarette and Tobacco Tax
- Mining Severance Tax
- Motor Vehicle Taxes and Fees
- Wine and Liquor Tax
Visit the Utah State Tax Commission website for more information.
Utah Local Taxes
Whether you open your business in Salt Lake City or one of Utah’s smaller cities, it may have to pay local taxes. Check with your local government to ensure your business complies with local laws.
Start a Utah S Corp FAQ
An S corporation (S corp) is a tax designation that an LLC or a corporation can elect.
No. The default taxes for an LLC and taxes for an S corp are not the same.
With an S corp, owners pay personal income tax and self-employment tax on a predetermined salary. They may then withdraw any remaining profits from the business as a “distribution,” which isn’t subject to self-employment tax.
With an LLC, all company profits pass through to the owners’ personal tax returns, and then the owners must pay personal income tax and self-employment tax on the entire amount.
S corp owners are required to earn a “reasonable” salary, which basically means a fair market rate based on the individual’s qualifications as well as their duties and responsibilities at the company. The purpose of this requirement is to prevent S corp owners from paying themselves an artificially low salary in order to pay less self-employment tax.
A distribution is a dividend that a shareholder/owner can take from the business profits that remain after a company pays all of its employee salaries. Shareholders must pay personal income tax on distributions, but distributions aren’t subject to self-employment tax.
LLCs and corporations that operate under a “doing business as” (DBA) name can choose the S corp election.
Utah has many industries in which you can form an S corp — from agriculture and mining to technology. Just make sure your business meets all of the S corp requirements set by the IRS.
With its low cost of living, booming economy, and low income tax rate, Utah is a great place to start an S corp.