Utah Limited Liability Companies Doing Business Out of State

Forming a Utah limited liability company doesn't mean your company must have all of its business offices located in Utah. Your Utah LLC can have a principal business office anywhere in the world, and that address is the one you should enter for "Company Address, City, and State". If your Company does business in multiple locations, enter the address of the Company headquarters or where important Company paperwork should be sent. Utah law does require, however, that you maintain at least one office inside the state for the purpose of keeping important Company papers available for inspection. Many small business owners use their resident agent address (see below) as their required in-state business address.

Keep in mind that the business office address may or may not be the same thing as the resident agent address. While your business offices address can be any address in the world (including a Utah residence) all Utah based limited liability companies must have a Utah address for their resident agent.

Utah Limited Liability Company Resident Agent

Every business entity in Utah is required to name a Resident Agent. The Resident Agent is the person or entity that is formally designated to receive "service of process", which is the technical name for being served with a lawsuit. The State requires that you keep a Resident Agent somewhere in Utah, and that the Resident Agent have a valid Utah address. Naming a Resident Agent does not mean you will be served with a lawsuit, it just provides a means of getting the lawsuit to you so you can act on it in case your Company is ever involved in litigation.

Many small business owners name themselves as Resident Agent for their Companies. There is no real drawback to this except that you personally will receive the lawsuit for your Company at the address you set forth. If you don't want to personally receive the lawsuit or you reside outside of Utah, you can hire companies to serve as your Resident Agent, usually for $50-$150 per year. These companies' sole purpose is to receive the lawsuit and get it to you immediately, so you can act on it within the time permitted by law.

Member or Manager-Managed LLC

Whether to have your limited liability company managed by its members or by managers is a basic decision that you will need to make. For many small LLC's, management by members makes sense because all of the members will be taking an active role in running the company. However, if you have a large number of members, you may want to appoint manager(s) rather than having a large group of members trying to manage the company. Additional reasons some choose to have a manager-managed LLC are: (a) if you have a member or members who do not want to be involved in the management of the LLC; or, (b) the members want management of the LLC to be handled by someone from outside the company, perhaps by someone with business management expertise.

If you elect to be manager-managed, when you select your managers they can be members, outsiders, or a combination of members and outsiders-- it is up to you. Finally, regardless of whether your LLC members are simply members or if they are manager-members, they will still have legal immunity from debts and legal claims made against your LLC (unless they voluntarily waive their immunity.)

Utah Limited Liability Company Manager

In Utah, limited liability companies can be managed by a selected person or people called a Manager(s). Any person or business entity can be the Manager. The Manager does not need to also be a Member of the company. Under Utah law, the Manager has fairly broad powers to represent the LLC, bind the LLC to contracts, access the LLC's bank accounts, hire and fire employees for the LLC, and generally to run the day-to-day affairs of the company. All of the Manager's general powers over the LLC can be expanded, limited, or customized in the company's Operating Agreement.

Finally, it is also possible to allow the company to be run by all of the Members rather than a Manager(s). This is a cooperative approach to management and is often less efficient than appointing a single Manager and making that Manger accountable to the Members. Furthermore, there is no practical difference between a Member-managed LLC and a Manager-managed LLC; the only real distinction is the use of the word "Manager" to describe the person or people who are in charge of the Company. If you desire to have all your Members jointly operate the LLC, we suggest creating a member managed LLC. The use of the word "Manager" also helps third parties identify the person they are dealing with as someone who has authority over the LLC.

Utah Limited Liability Company Members

In Utah, the owners of a limited liability company are referred to as "Members". Members are analogous to the shareholders of a corporation in that both Members and shareholders are entitled to distributions of any profits from their respective businesses. Usually, Members also have the ultimate authority to hire and fire company Managers.

Unlike shareholders that own "stock" in a corporation, the Members of a limited liability company usually have ownership described in terms of percentages, such as a "40% Member". This simply means that for every dollar of profit that is distributed from the company, each Member is legally entitled to receive a percentage of that dollar that is equal to the Member's percentage of ownership interest. Obviously, the ownership interest of all Members must equal 100%.

Members can be passive, "silent partners" who do not actively participate in the company's affairs, or Members can take an active role. The beauty of Utah's limited liability company laws is that even Members who are active in company affairs do not become personally liable for company debts (unless the Members voluntarily agree to be liable).

What Types of Employees Will Your Company Hire?

In this question the IRS is seeking information about the number and type of employees you may hire. Keep in mind that your LLC is not required to hire the number and type of employees you enter in these boxes. You are simply providing your best guess. If you enter one or more employees in any of the three boxes, the IRS will send you information about how to withold employment taxes from the wages you pay these employees. That is the main reason for this question on the Form SS-4.

On the Form SS-4, the IRS classifies all employees into three types: Regular Employees, Agricultural Employees, and Household Employees.

Regular Employees means any employee except employees who work on farms or in the household.

Agricultural Employees means an employee who works in the agricultural field, primarily as a farmworker.

Household Employee means an employee who works in the household, ordinarily as a housekeeper or in a child care capacity.

Members' Initial Contribution

In Utah, all limited liability companies must be owned by at least one Member. What the Member really "owns" is a percentage of the company, which entitles the Member to a distribution of any profits the company might make.

When a company is first starting, the founding Members each contribute something of value in exchange for their ownership percentage. We have classified those initial contributions into five categories: Cash, Assets, Services, Real Property and Business Equity. Each of these is discussed more fully below.

CASH: This contribution is just what it says, money. Any Member who contributes money for his or her ownership interest in the Company should choose this category as his or her initial contribution.

ASSETS: Assets can be any kind of personal property that the Company might use, such as tools, raw material, or a vehicle. Assets can also be property that the Company isn't using, but which are nevertheless valuable, such as antique furniture or paintings.

SERVICES: Often the founders of a small company don't have a lot of cash or assets to contribute, but they have time and skills to apply toward the Company's success. Any Member who is going to earn his or her right to ownership through work should select this category as the initial contribution.

REAL PROPERTY: Real property is land and buildings that are affixed to it.

BUSINESS EQUITY: "Equity" in this sense means ownership interest in another business. When a Member contributes GE stock to the new LLC, for example, that Member is contributing equity. Business equity does not need to be publicly traded stock. Any ownership interest in another company, whether public or private, is equity that may be valuable to the Company.

If a Member's contribution falls into more than one category, just choose the one with the largest value. While it is important to characterize what each Member's initial contribution is, it is far more important to accurately describe the percentage of ownership each Member will initially receive for all that he or she contributes.