South Jordan, UT: What Business Structure is Best for You?

When starting a new business in Utah, one of the most important decisions you’ll need to consider is choosing the best business structure for you. The legal structure of your business affects everything from your personal liability to your income tax obligations. Therefore, it’s essential to consult with an experienced business law attorney in South Jordan, Utah to help you determine what business structure is best for you.

In Utah, business owners generally have two main types of business structures to choose from: formal and informal. Formal structures, such as corporations and Limited Liability Companies (LLCs), come with certain legal protections and filing requirements. On the other hand, informal structures such as partnerships and sole proprietorships, are simpler to set up but come with their own set of pros and cons. Understanding the differences between these common business structures will help you choose the right legal structure.

Sole Proprietorship

A sole proprietorship is the simplest and most common business entity, ideal for small businesses and solo entrepreneurs. As the sole owner, you have full control over management and operations. There’s no need to file formal paperwork with the state, which makes it incredibly easy to set up. However, one major downside of a sole proprietorship is the unlimited personal liability. This means you’re personally liable for the debts of your business.

Find out   why and how to convert your sole proprietorship to an LLC.

Partnership

A partnership is a business arrangement where two or more individuals come together to run a business. Like sole proprietorships, partnerships are easy to form. Unlike sole proprietors, partnerships have multiple owners as partners.

There are three different types of partnerships in Utah.

General Partnership

In a general partnership, all partners share equal responsibility for the business’s debts and obligations.

Limited Partnership

A limited partnership consists of one or more partners who have limited liability, while others have unlimited liability for the partnership’s debts.

Limited Liability Partnership (LLP)

Partners enjoy limited liability, much like a corporation. LLPs must register with the   Utah Division of Corporations and Commercial Code.

Partnerships are often a good option for businesses with multiple owners, however, it’s important to have a well-defined partnership agreement to protect every partner’s interests.

Limited Liability Company (LLC)

The LLC has become a popular choice for many small and medium-sized businesses in Utah, especially for those who want to form a more formal business and pay a lower tax rate compared to a corporation. 

LLCs provide a hybrid structure that offers the flexibility of a partnership while providing limited liability protection to its owners (called members). LLCs protect members’ personal assets from the business’s financial obligations. The business can be taxed as a partnership, where profits and losses pass through to the members’ personal tax returns, or it can opt to be taxed as a corporation. The flexibility in taxation and limited liability protection make LLCs an attractive option for many business owners.

Learn   what happens when an LLC member dies   and how it impacts your business.

Corporation

Filing for a corporation is more complex and corporations are typically better suited for larger businesses or those planning to scale quickly. Unlike sole proprietorships or partnerships, a corporation is considered a separate legal entity from its owners (shareholders). This means the corporation itself is taxed, and owners are not personally liable for the company’s debts.

However, there is more paperwork, formalities, and expenses to set up and maintain a corporation. Corporations are subject to greater regulatory oversight and require detailed record-keeping which can be more time-consuming compared to LLCs or partnerships.

Contact Business Lawyer in South Jordan, Salt Lake County Today 

I’m a business attorney at Watts Law in South Jordan, UT, and I’m here to guide you in choosing the best structure for your business. Once you’ve made the right choice, I’ll assist you with formation, planning, and strategizing to set your business up for long-term success. 

Call me today at (801) 630-8309 to   schedule a free consultation.