Starting a new business in Utah has a very long list of important things to do to make it successful. One of the crucial decisions you’ll have to make is choosing the right kind of business structure. Here are some of the factors you should consider in this process.
Business structures in Utah
According to Utah business law, there are generally two types of business structures, i.e., formal and informal. Formal business structures include corporations and Limited Liability Companies (LLCs), whereas informal business structures include partnerships and sole proprietorship.
When to choose an informal business structure
If your business isn’t formally organized and you operate everything on your own, including filing for taxes under your name, then it is a sole proprietorship. A partnership is when you operate the business with your friends or members of your family. In both cases, you are one and the same with your business, meaning you are liable for any actions on your business.
You should choose an informal business structure if you have a small customer base or a very low risk of getting into financial and legal problems. In addition, if your small business is just part of your hobbies like video streaming or blogging, then it is safe to start it as an informal business structure.
When to start a formal business structure
If you want to be separate from your business entity, get tax benefits and increase your credibility, you should start your business as a corporation or LLC. A corporation is a business structure owned by the shareholder, whereas an LLC is owned by its members. In other words, in case something happens to your business, no one can come for your personal assets in an effort to pay for their losses or taxes.
You should start a formal business structure when you want to benefit from unique tax options, if there is a greater risk of liability and losses, and if you have a large customer base. LLCs and corporations also are also easily trusted by customers and investors.
Choosing the right business structure for you depends mainly on what you want to do and to who. Either way, they both have their advantages and disadvantages.