For entrepreneurs contemplating starting a business in Utah, there are many important considerations. To start, they will need to create a business entity, as most companies cannot operate lawfully in the state until this step in the business formation process is complete.
The legal form of an organization can have a major impact on how the company grows and what degree of risk and control an entrepreneur assumes upon their company’s launch. A sole proprietorship is the most basic legal entity, but that doesn’t necessarily mean it is always the best option. When considering personal responsibility and tax liability, there are other legal types that might work better depending on an entrepreneur’s plans.
A partnership
It is very challenging for one person to manage all practical considerations when starting a new business. Having a business partner can take some of the pressure off of an entrepreneur. A partner may have hands-on experience in an industry or local connections that will be valuable during the startup stage. They could also bring financial resources that help the company start off strong. Partnerships typically require agreements between the people running the business in addition to business plans.
Limited liability companies
A limited liability company (LLC) requires a bit of preparation and special paperwork to establish. However, the return on investment for those early efforts can be significant. When properly established and managed, an LLC will reduce personal liability for the company’s debts or its future failure. There are also tax benefits to an LLC that make it useful even if someone intends to run the business on their own.
A corporate business entity
There are several different types of corporate business structures. The corporations people form in Utah include S corporations and C corporations. Corporations provide protection from liability and a more formal structure that involves multiple parties influencing daily operations. Those that expect a business to grow quickly or to produce large amounts of revenue might find that a corporate structure is the best option. Those who want to engage in nonprofit operations often also require the protection of a corporate business entity.
Entrepreneurs who choose the right business form early in the business development process may have an easier time getting their concept off the ground. Additionally, having solid legal support and guidance during the business formation process might improve someone’s chances of starting a successful company overall.