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STARTING AND OPERATING A BUSINESS IN UTAH Copyright © 2004, Michael D. Jenkins
CONTENTS OF THIS SECTION:
I. INTRODUCTION I. INTRODUCTION The state of Utah is an excellent place to start or operate a business. In 2004, USA Today ranked Utah #1 in the nation, as the fiscally best-managed state in the nation, and the state has a rare triple-A credit rating. In addition to its spectacular scenic beauty, world-class ski resorts and five major national parks that draw millions of tourists from around the world, it offers an excellent business climate and a highly motivated, well-educated workforce, making it a profitable place to do business, as well as extremely livable. Business Week in 2002 ranked Salt Lake City as the #4 "hotspot" in the country for entrepreneurs, and Utah ranks first in the nation in the percentage of households with computers. In addition, the state's very low property tax rates have helped to keep housing costs and the general cost of living quite low in Utah, especially in comparison to coastal states. [AUTHOR'S DISCLOSURE NOTE: The author of this publication is somewhat biased, as I moved to Utah several years ago, and have fallen in love with the place, a fact which the reader should duly note.] Utah has a reputation for being extremely helpful to high-tech startup businesses, and it has seen some of the most rapid growth in high-tech employment of any state in the union in recent years, with major local software companies like WordPerfect and Novell having grown to international prominence. In addition, Brigham Young University was recently ranked #1 nationally among all universities in 2002, in the number of start-up companies it has launched for every $10 million spent on research. Utah has a fairly typical tax and legal structure under which businesses must operate. Like most states, Utah imposes an income tax on individuals, a franchise tax (based on income) on corporations, a sales and use tax, various excise taxes, with property taxes imposed at the local level. The state has also adopted a limited liability company (LLC) law, and a limited liability partnership (LLP) law, so that businesses operating in Utah in LLC or LLP form may obtain the advantages of limited liability, without incorporating or becoming subject to corporate taxation, generally. Utah has a generally business-friendly legal and tax structure, exemplified by its complete exemption of business inventories and all intangible property from property tax, and the 1996 repeal of its bulk sale notification requirements upon purchase of a business. At present, the state's economy is quite robust, in terms of the level of unemployment, and has had one of the highest population growth rates in the nation recently. For example, in September, 2004, the unemployment rate in Utah was 4.8%, down from 5.5% a year earlier, and one of the lowest levels of unemployment in the nation. This compares to a national unemployment rate of 5.4% for September, 2004. After three years of essentially flat employment growth, Utah has added over 26,000 new jobs in the last 12 months, and economists at Wells Fargo Bank are projecting continued rapid growth of between 25,000 and 30,000 new jobs in the coming year. To view the latest federal Bureau of Labor Statistics unemployment rate data for Utah or any other state, visit the BLS website. II. LEGAL ENTITIES -- FILING FEES AND REPORTING REQUIREMENTS. (a) In General. A business that operates in Utah can operate as a sole proprietorship, a general or limited partnership, a corporation, or a limited liability company. In addition, like the federal tax law, the state income tax law also recognizes S corporations, for income tax purposes, and generally allows the income or losses of an S corporation to "flow through" and be taxed or deducted at the shareholder level, rather than taxing the corporation itself as an entity. Utah also provides for limited liability partnerships, in which no partner is liable for debts of the partnership, in general, as in the case of a corporation or LLC, but with fewer legal formalities than are required for either a corporation or an LLC. Each of the above entities is discussed below, along with the basic requirements for forming such an entity and any general ongoing (non-tax) reporting requirements that are applicable to it. The tax treatment of each form of legal entity is discussed in Section IV below. (b) Sole Proprietorships. In general, sole proprietorships in Utah can be set up with no formalities. However, as discussed in Section IV(b), it will typically be necessary to obtain one or more local business licenses from cities or counties in which you operate and, in some cases, state licenses, as well. The state also requires a sole proprietorship that operates under a name other than the name of the owner, or any other assumed name or "DBA" ("Doing Business As") name that implies the existence of other owners, such as "Jones & Co.," to register the assumed name, as discussed in Section IV(g). No separate tax form filing is required, generally, for a sole proprietorship, under the Utah income tax law. Instead, as with the Schedule C on your federal Form 1040, you simply report the net income or loss from your sole proprietorship on your state personal income tax return. See Section IV(c) for information on the Utah income tax and filing requirements for individuals. As a sole proprietor, if you have no employees, you are not required to pay any unemployment taxes, withhold any federal or state income tax from wages, nor obtain workers' compensation coverage for yourself. (c) Partnerships. As a rule, general partnerships in Utah can be formed with no formalities, although it is highly advisable to have a written partnership agreement. However, as discussed in Section IV(b), it will generally be necessary to obtain one or more local business licenses from cities or counties in which you operate and, in some cases, state licenses, for any type of partnership, including general or limited partnerships, or limited liability partnerships. A limited partnership, in which there is at least one general partner (who is liable for partnership debts) and at least one limited partner (not liable for partnership debts), may also be formed under Utah law. Unlike a general partnership, a limited partnership must generally have a written partnership agreement, and must file a certificate of limited partnership with the Utah Department of Commerce, Division of Corporations and Commercial Code. The certificate must be filed together with the applicable filing fee, which changes frequently. As of July 1, 2004, the filing fee was $52, and the annual renewal fee $12. For information on limited partnership filing requirements, see the contact information for the offices of the Division of Corporations and Commercial Code, listed in Section VI(a). Limited liability partnerships (LLPs) are a new form of partnership permitted under the laws of Utah. Somewhat like an LLC, an LLP provides a degree of limited liability for its owners, while retaining the tax advantages of a partnership for federal and Utah state income tax purposes. However, unlike an LLC, an LLP typically operates like a regular partnership, and is not required to file articles of organization. To form an LLP in Utah, you must register an existing Utah partnership and pay a filing fee of $22 to the Department of Commerce, Division of Corporations and Commercial Code. Foreign LLPs, those created under the laws of another state, if already registered as LLPs in another state, should also required to register with the Division of Corporations, and must pay the same registration fee as a domestic (Utah) LLP. LLPs must file annual renewal registrations and pay a $22 fee with each such report to the Division of Corporations and Commercial Code. For more information on LLP registration and reporting requirements, see the contact information for the offices of the Department of Commerce, Division of Corporations and Commercial Code, listed in Section VI(a). Note that one potential drawback of LLPs, if you will do business in other states besides Utah, is that some states, like California and New York, only recognize certain types of professional partnerships as LLPs. If yours is not a professional partnership, such other states may simply treat your LLP like an ordinary general partnership, with no limitation of liability. A partnership agreement, for any type of partnership, should spell out in considerable detail such matters as the following:
Partnerships, as entities, are not subject to state income tax in Utah. Instead, the income or losses of the partnership, as allocated among the partners, must be reported on the personal income tax returns of the individual partners (or on the corporate tax returns of any corporate partners). Partnerships are required to file an annual tax information return with the state. For details on Utah partnership tax return filing requirements, see Section IV(c). (d) Corporations. To form a corporation in Utah, you must file articles of incorporation with the Department of Commerce, Division of Corporations and Commercial Code and pay a fee of $52. A foreign corporation (one formed under the laws of another state or a foreign country), must obtain a certificate of authority before it may legally conduct business in Utah, by filing an application for a certificate of authority and paying a filing fee of $52. A foreign corporation will also need to provide, from its state of incorporation, a good standing certificate or a certificate of existence from that state. There is a $100 per day penalty for a foreign corporation that does business without first obtaining a certificate of authority, up to $5,000 per year. For more information on filing articles of incorporation or applying for a certificate of authority to do business in Utah, see the contact information for the offices of the Division of Corporations and Commercial Code, listed in Section VI(a). All corporate filings, other than taxes, are with this agency, which serves the functions that are usually served by the secretary of state in most other states. In addition, once your corporation is formed or obtains a certificate of authority to do business in Utah, it will be required to file annual renewal reports and a filing fee of $12 with the annual report each year. Failure to file this report on a timely basis could result in suspension or revocation of your corporation's charter. In addition to paying federal income taxes on its income, a corporation that does business in Utah must also file corporate franchise or income tax returns with the state. See Section IV(c) for a discussion of state corporate franchise/income tax rates and tax return filing requirements. For tax forms and more information on corporate income or franchise taxes in Utah, see the contact information for the offices of Utah State Tax Commission, listed in Section VI(a). (e) S Corporations. An S corporation is simply a regular corporation that has elected, for federal or state income tax purposes, or for both, to be taxed somewhat like a partnership, with its income, losses and tax credits flowing through to its owners, who report such income, losses, or credits on their individual tax returns. Utah recognizes S corporations for income tax purposes, and treats them in a manner similar to the federal tax treatment. However, an S corporation must withhold tax on the allocable share of income of any nonresident shareholders. (f) Limited Liability Companies. Utah, like every other state has adopted a limited liability company (LLC) law. Thus, in addition to the traditional choices of a sole proprietorship, partnership, or corporation, a business that operates in Utah may also choose to operate in the form of an LLC. In most states, LLCs are very attractive entities for many small businesses, in that they offer much the same protection as a corporation from creditors for debts of the business, while offering much of the flexibility plus the flow-through tax treatment of a partnership for federal tax purposes. See Section IV(c) for a discussion of the income tax treatment of LLCs under Utah tax laws. To form an LLC under the laws of Utah, articles of organization must be filed with the Department of Commerce, Division of Corporations and Commercial Code, which must be accompanied by filing fees of $52. Foreign LLCs, those formed under the laws of another state, must obtain a certificate of authority to do business in Utah, by filing an application for a certificate of authority with the Division of Corporations and Commercial Code and paying a filing fee of $52. A foreign LLC will also need to provide a certificate of good standing or certificate of existence from the state where the LLC was organized. Utah state law now recognizes the validity of 1-member LLCs, which can be advantageous, now that the federal tax regulations have been modified to allow 1-member LLCs to be treated as sole proprietorships for federal tax purposes, beginning in 1997. In addition to initial filing fees, an LLC formed in Utah must subsequently file annual reports and pay an annual report filing fee of $12 with each such annual report. A foreign LLC is also required to file an annual report and pay the applicable filing fee of $12. For more information on filing articles of organization for an LLC, see the contact information for the offices of the Division of Corporations and Commercial Code, listed in Section VI(a). III. BUSINESS ACQUISITIONS (a) In General. When acquiring an existing business, there are a number of state legal and tax issues you or, preferably, your business attorney, should attend to before closing the purchase. These include matters such as doing a title search for any real property that is being acquired, checking for any recorded security interests on personal property items, and thoroughly researching county, state, and federal records for any judgment liens, tax liens, or other liens, before property is acquired. You will also benefit from consulting a tax advisor before the agreement of sale is negotiated, in order to seek a structuring of the agreement so that the purchase price is allocated among the assets in a way that favors you. You may be able to obtain considerable tax savings if the purchase price is allocated in a way that gives you the best possible tax results under federal and state income tax laws, and other state tax laws, such as sales/use tax or property tax laws. Depending upon the state (or states) in which the seller's assets are located, you may also have to comply with state bulk sale or bulk transfer laws. You should also obtain tax releases from various state taxing agencies, as discussed below. (b) Bulk Sale Laws. Bulk sale laws typically require either publication of legal notices to all creditors in advance of the sale and recording of such notices in some cases, or maintenance of detailed lists of the property to be transferred, for inspection by the public. Utah is one of the business-friendly states that has repealed its bulk sale laws, so you no longer have to be concerned with this requirement when buying a business in Utah. The Utah bulk transfer law was repealed as of April 29, 1996. (c) Tax Releases. When you acquire an existing business, you will want to make sure that you do not unwittingly become liable for any unpaid taxes owed by the seller. Typically, to protect yourself, you will need to receive a tax release or releases from various state taxing agencies, for such taxes as sales and use tax, income tax withholding, and state unemployment taxes, in each state in which the seller does business. If you fail to obtain such a release or written statement from the tax agency that the seller is not delinquent on any tax payments, you will be held responsible for such tax if it is not withheld from the purchase price proceeds and paid to the state at the time the sale of the business transpires. In Utah, you should obtain tax releases for unemployment taxes and sales and use tax, generally. You should require that the seller obtain an unemployment tax release from the Utah Department of Workforce Services. Also, make sure the seller provides you with a sales and use tax release or clearance from the State Tax Commission, so that you will not be liable for any unpaid sales or use taxes owed by the seller. (d) Unemployment Tax Rating of Seller. In addition to obtaining tax releases, you may find it advantageous to succeed to the seller's unemployment tax experience rating, if the seller has a tax rate lower than you would otherwise obtain as a new business. To obtain the seller's favorable experience rating as a successor employer, you should contact the Department of Workforce Services for information on how you can obtain treatment as a successor employer. IV. UTAH TAXES AND OTHER GENERAL REQUIREMENTS. (b) State and Local Licensing. Nearly any business, operated anywhere in the United States, will have to have at least one government license of some kind. In most cases, this will be a local license, issued by your city or county. Before you open your business, contact your local city or county hall and find out if your particular business needs one or more local licenses. Most kinds of local business licenses are granted upon payment of a fee, with no further requirements, except possibly for annual or other periodic renewal fees. In Utah, all businesses must obtain a business license from the local city or county in which the business is conducted. Since local governments often have requirements that must be met prior to establishing a business within their jurisdiction, you should first obtain a federal Employer Identification Number (EIN) and a state sales tax license, if applicable, before you apply for a local business license. Your application for a city or county business license in Utah will typically require approvals from one or more of the following departments:
Zoning is regulated at the local level. Before purchasing or renting any type of building for commercial purposes, it is important to check with the local municipality to ensure your type of business is permitted to operate at the chosen site. It is a good idea for you to personally visit your city or county business licensing office. If you have more than one business location, check with each appropriate city or county office. They can assist you with the application forms and may even save you money where fees are prorated for the year. Contact the Utah Department of Commerce, Division of Corporations and Commercial Code, to obtain a directory of city and county licensing information. Also, see the web link in Section VI(c), to the Business Licensing and Registration Guide published by the Division of Corporations and Commercial Code. State governments have also traditionally required special licenses for many kinds of professionals, such as physicians, dentists, lawyers, and accountants. To further protect consumers, Utah has expanded the list of occupations that must be licensed by the state to include many other occupations. Most state licenses not only require payment of fees, but are only issued for a given profession or occupation upon showing that you have completed certain educational or experience requirements, or passed certain tests, or some combination of the foregoing. For information on state licensing and business registration requirements in Utah, see the contact information for the offices of the Utah Department of Commerce, listed in Section VI(a), and contact the Division of Occupational and Professional Licensing, which is a division of the Utah Department of Commerce. (c) Income and Franchise Taxes. Utah has both an individual income tax and a corporate franchise tax on taxable income, as well as a corporate income tax that applies to corporations that are not subject to franchise tax. The Utah individual income tax is imposed at a maximum tax rate of 7%. The income tax is virtually a flat tax, as only the first few thousand dollars of taxable income are taxed at less than the 7% tax rate. Individual taxpayers generally pay state income tax on their business earnings from a sole proprietorship, or on their share of the earnings of a pass-through entity, such as a partnership or S corporation or LLC. The Utah personal income tax return is Form TC-40, which must be filed with the Utah State Tax Commission, by April 15th each year, unless an extension is obtained. Partnerships, or entities taxable as partnerships, such as LLCs, are not subject to state income taxation in Utah, but must file an information return with the State Tax Commission each year, showing each partner's share of taxable income, losses, and credits, on Form TC-65. Individual taxpayers doing business as sole proprietors, or who are partners in partnerships, or members of LLCs, are not required to make payments of estimated Utah individual income taxes, but may do so voluntarily, if they wish, on Form TC-546, Voluntary Prepayment of Income or Fiduciary Tax. Utah is the only state with an income tax that does not require advance estimated tax payments. It is also the only state that does not tax the interest on state or municipal bonds from any other state, as well as exempting such interest received on Utah state or municipal bonds. The Utah corporate franchise (income) tax rate, on corporations other than S corporations, is 5% of taxable income. There is a minimum annual franchise tax of $100. The state corporation franchise tax return is Form TC-20, which must be filed with the Utah State Tax Commission by the 15th day of the fourth month following the end of the taxable year, or by April 15th in the case of a corporation whose taxable year is the calendar year. S corporations are not subject to tax, except on any income that is subject to federal income tax. They are also not subject to the $100 minimum tax. However, they must still file information returns, and must withhold and pay over individual income tax on behalf of any nonresident shareholders on their share of the S corporation income that is allocable or apportionable to Utah. Such nonresidents may file Utah income tax returns and claim any withheld tax as a tax payment. Corporations are required to make estimated tax payments of their state corporate franchise tax in advance, if their tax liability for the year exceeds $3,000. Estimated tax payments are due in advance, in four equal installments, on the 15th day of the 4th, 6th, 9th, and 12th months of the taxable year. The total estimated tax that must be paid in is usually equal to 90% of the actual tax liability for the year. However, if the preceding year was a full year of 12 months, the current year payments need only be equal to 100% of the prior year's tax liability, if less. Also, for the first year a corporate return is due, a corporation that pays in the amount of the annual minimum tax ($100 at present) by the due date of its return will not be subject to penalties for underpayment of estimated tax. Otherwise, penalties will be imposed for failure to make the required estimated tax payments on a timely basis. In Utah, a limited liability company (LLC) is taxed in the same manner as a partnership, if treated as a partnership for federal tax purposes, thus avoiding the possible double taxation of income that can occur with corporations. Note that under 1997 modified federal regulations, an LLC is now able to elect to be treated as a partnership if it has more than one owner, or as a sole proprietorship if it does not, for federal tax purposes. Utah law was amended in 1997 to permit formation of one-owner LLCs. Note that it is not always entirely clear whether an LLC is a "single-member LLC" LLC or not, where the "single owner" is a married couple who hold the entire ownership of the LLC in some form of co-tenancy, such as joint tenants with right of survivorship, tenants by the entirety, or as tenants in common. The federal Internal Revenue Service (IRS) has taken a very lenient position in Rev. Proc. 2002-69, where a couple hold the LLC interest as community property, ruling that the IRS will accept whatever choice the couple make, either to disregard the LLC as an entity (treating it as a "single-member LLC") or to treat it as a partnership between the husband and wife. However, Utah is not a community property state, so where the LLC is owned by a husband and wife in some form of co-tenancy, it is unclear whether the IRS treatment would be as lenient as for community property owners, since the IRS has not issued any published rulings on whether an LLC can be a disregarded entity if held in one of the various forms of co-tenancy by a married couple, rather than being held as community property. Thus, it is also unclear, where an LLC is owned by a husband and wife as co-tenants, whether Utah would treat the LLC as a single-member LLC or as a partnership. (d) Sales and Use Tax. Utah imposes a general sales tax on retail sales of tangible personal property and certain types of services at the statewide combined rate of 5.75%. In addition, many local governments also have adopted additional local sales taxes, at varying tax rates. Counties generally impose additional sales tax on auto rentals, restaurant receipts, and transient accommodations (room rentals of less than 30 days). In addition, municipalities are allowed to levy up to a 1% city tax on transient accommodations, such as that adopted by the city of Layton, effective January 1, 2004. Sellers are required to obtain a sales tax license and to collect and pay over the state and local sales and use taxes to the Utah State Tax Commission. There are numerous exemptions from the sales tax, the most important of which is the resale exemption. If you are a wholesaler or retailer who purchases goods that you will resell, your purchase of such goods may qualify as an exempt sale for resale. Similarly, if you sell goods to wholesalers or retailers for resale by them, your sale may also qualify as an exempt sale for resale. In any such transaction, the exemption is ordinarily available only if the purchaser gives the seller a valid resale certificate, certifying that the items are being purchased for resale, and not for use or consumption by the buyer. A shadow tax, the use tax, is also imposed at the same rate as the sales tax. It is primarily intended to tax property that is acquired from sources outside of the state, in transactions not subject to sales tax, when such property is used or consumed within Utah. Use tax may also apply to items purchased on an exempt basis, such as for resale, if such items end up being used or consumed, instead of being resold. Before making any taxable sales, you will need to register with the State Tax Commission on Form TC-69, which can also serve as your employer withholding registration form, cigarette tax license, and registration of business name. To partially compensate businesses for the administrative and accounting costs of collecting sales taxes, the state allows monthly filers of sales and use tax returns to retain a "seller's discount" equal to 1.31% of the tax due amount as computed on the sales tax return. Utah is one of a growing number of states that have enacted the Streamlined Sales Tax Administration Act. As part of that enactment, a number of definitional changes have been made in the Utah sales tax law. The term "sales price" has been amended, effective July 1, 2005, to include any fees for service charges necessary to complete the sale, and for other items, as follows:
Other new changes effective as of July 1, 2005 provide that:
For more information on Utah sales and use tax registration and compliance, see contact information for the offices of the Utah State Tax Commission in Section VI(a). (e) Real and Personal Property Taxes. In Utah, as in every other state, any business real estate you own is subject to real property taxes. In general, there is little that you must do in the way of compliance, unless you wish to challenge your assessed valuation, since the assessor will bill you for each year's property taxes as they come due. Utah also imposes personal property taxes on tangible personal property. However, certain business personal property, such as business inventories, are exempt from personal property tax in Utah. While Utah generally taxes tangible personal property, it does not impose a property tax on intangible personal property, such as stocks, bonds, promissory notes, and other such paper assets. For more information on Utah property taxes, contact the Property Tax Division of the Utah State Tax Commission, at the address listed in Section VI(a). (f) Other Business Taxes. Utah imposes a number of other taxes on businesses, including:
(g) Trade Names. A trade name, also known as a fictitious or assumed name, is any name used in the course of business that does not include the actual legal names of all the owners of the business. Thus, if your business goes by any name other than your own real name, it is operating under a trade name. The same is true of a corporation, if it operates under a name other than its legal name. A trade name might also be one that suggests the existence of additional owners, by using such words as "company," "associates," or "group." In most states where you do business, it will be necessary to register a trade, fictitious, or assumed name, so that people who do business with you can find out who the actual owners of your business are. You may also want to register any such trade name, as a means of protecting against other companies usurping that particular trade name. In Utah, all businesses operating under an assumed name must file a certificate of assumed and true name with the Division of Corporations and Commercial Code, and pay the applicable fee of $22. The registration is good for three years. V. EMPLOYER REQUIREMENTS IF YOU HAVE EMPLOYEES (a) Employer Registration and Withholding. If you have any employees, you will already be withholding federal income tax and FICA taxes from their wages. In addition, since Utah levies a state income tax on the income of individuals, you will need to also withhold Utah income tax from the wages of your employees. Before you begin to pay wages, you must register as an employer with the Utah State Tax Commission, on Form TC-69. For more information on Utah income tax withholding and registration requirements for employers, see the contact information for the offices of the Utah State Tax Commission, listed in Section VI(a). (b) Unemployment and Other State Payroll Taxes. If your business has one or more employees and you pay at least $140 in wages in any calendar quarter, or if you acquire your business from an employer who was subject to unemployment tax, you, as an employer will be required to pay state unemployment tax based on the amount of such wages paid. Whether are not you are an employer, your business will be required to register with Utah Department of Workforce Services, on Form 1, Status Report, to determine whether or not you are subject to the unemployment tax law. New employers are required to pay tax at rates that vary by industry, on the first $22,700 (in 2004) of wages paid to each employee. After you have had employees for a while, you will develop an unemployment tax experience rating. This rating is based on the number of employees you terminate who then claim unemployment benefits and on the amount of such benefits paid to those former employees, under a complex formula. The state will inform you when they have assigned you an individual tax rate based on your firm's experience rating. That rate may be higher or, if you have had relatively few benefit claims charged to your account, lower than the standard new employer tax rate you initially were paying. All state unemployment taxes are imposed upon you as the employer, and, under Utah law, cannot be charged to your employees or withheld from their wages. For more information on your unemployment tax obligations as a Utah employer, see the contact information for the offices of the Department of Workforce Services, as listed in Section VI(a). (c) Workers' Compensation. In Utah, virtually all businesses except certain family farms are required by law to have workers' compensation insurance, except those able to self-insure. Note, however, that a sole proprietor or a partner in a partnership is generally not required to be covered, if there are no employees employed by the sole proprietorship or partnership. Similarly, directors of corporations or employees of a corporation who are officers may be exempted from coverage if the corporation gives written notice to its insurance carrier of the persons who are not to be covered. Workers' compensation provides wage loss and medical benefits to employees injured on the job and it protects you, as an employer, from legal action for damages for injuries or job-related illnesses suffered by your employees. In effect, it is a "no-fault" insurance system for work-related injuries or illnesses. Thus, if you fail to obtain required workers' compensation insurance, and an employee is injured on the job, you will have opened yourself to unlimited liability and severe legal consequences, so it is very important to obtain workers' compensation insurance for your employees. Be aware that neither general liability nor health and accident insurance can properly substitute for workers' compensation insurance. As an employer, you must notify injured employees of their benefits and post a notice in the workplace informing your employees of their workers' compensation coverage. For more detailed information regarding your obligations as an employer under the Utah workers' compensation laws, contact your insurance carrier or see the contact information for the offices of the Workers' Compensation Fund of Utah, listed in Section VI(a). You can obtain workers' compensation posters, booklets and other information by writing to The Utah Labor Commission, Industrial Accidents Division, also listed in Section VI(a). (d) State Wage and Hour Laws. Some employees of certain small firms not engaged in interstate commerce are not covered by the federal minimum wage and overtime laws. However, even if few or none of your employees are covered by the federal wage-hour laws, because your firm does less than $500,000 a year in gross sales and the employees in question are not deemed to "...engage in (interstate) commerce...," they will still generally be subject to the Utah wage-hour laws, which provide for a state minimum hourly wage that is currently $5.15 an hour, the same as the federal minimum wage). Note that, as under federal wage-hour laws, certain classes of employees, such as outside salespersons, are exempted from the Utah wage-hour rules. Besides the federal wage-hour posters that you must display in the workplace, you must also display a state wage-hour poster, which you can obtain from the Labor Division of the Utah Labor Commission. In addition to wage-hour laws, most businesses are subject to federal child labor laws, which put numerous restrictions on the working hours and kinds of work in which minors under the age of 18 may engage. Your business must also be cognizant of similar state child labor laws, in Utah. Before hiring anyone, it is the responsibility of the employer to determine that the work being done by the youth worker is not prohibited by the Utah child labor laws. Under Utah labor laws, no young person under the age of 16 is permitted to work before or after school for more than four hours a day, nor before 5:00 a.m. or after 9:30 p.m., if the next day is a school day, nor in excess of eight hours in any 24 hour period, nor more than 40 hours in any week. Minors 14 and 15 years of age can work in some nonhazardous occupations such as retail stores, restaurants, fast food, service stations, lawn care, janitorial, and other occupations not determined harmful by the Labor Commission. Also, there are a number of specified hazardous occupations, as set forth under federal labor laws, that youths under the age of 18 cannot perform. (e) State Occupational Safety and Health Laws. Approximately half of the states have their own OSHA-like agency, charged with administering the state's own occupational safety and health laws. The remaining states have no such enforcement agency, and thus rely instead on the federal Occupational Safety and Health Administration (OSHA) to administer the federal job safety rules within such states. Utah is one of the states that has its own OSHA-type agency. To determine if your workplace is in compliance with federal and Utah job safety requirements, you may wish to contact the Utah Occupational Safety and Health Division (UOSH) and request a free safety consultation. You will not be cited for any violations detected, provided that you promptly correct the unsafe conditions. This differs from the rules for consultations by federal OSHA inspectors, who are required to cite you for any violations they find. For information on your job safety and health obligations as an employer, required posters, and possible on-site safety consultations, see the contact information for the Salt Lake City offices of UOSH, listed in Section VI(a). (f) Other Miscellaneous State Labor Laws. Other Utah labor laws you need to be aware of, as an employer, include the following: (1) Wage payments to terminated employees. In general, an employer must pay wages at least semimonthly, and if the day for payment falls on a weekend or legal holiday, wages must be paid on the preceding day. If you terminate an employee, you must pay all final wages within 24 hours, in general. If the employee makes a written request for his or her wages after being terminated, you must make payment within 24 hours, or else the former employee will be entitled to earn up to 60 days of continuing wages until you make payment. Otherwise, if an employee without a written employment contract voluntarily quits, you must make the final payment of wages by the next regular payday. Employers are required by law to notify a new employee of the regular paydays, or else post a payday notice in a prominent place in the workplace. (2) Right-to-work laws. About half the states have enacted "right-to-work" laws, which guarantee that no person may be denied employment for refusing to join a union or for not paying union dues, thus banning either "union shop" or "agency shop" agreements, or both. In a union shop, an employee not belonging to a union may be hired but then must join the union, usually within 30 days. In an agency shop, an employee need not join the union but, to remain employed, must pay union dues. Utah has a right-to-work law. (3) State anti-discrimination laws. In addition to complying with federal anti-discrimination laws, employers must also be aware of and comply with state civil rights laws in Utah, and display a poster informing employees of their rights. You can obtain this poster from the Salt Lake City office of the Anti-Discrimination Division, part of the Utah Labor Commission, at the address listed in Section VI(a). Employers subject to the Utah anti-discrimination law include any business that employs 15 or more employees within the state for each working day in each of 20 calendar weeks or more in the current or preceding calendar year. Under Utah laws, it is a discriminatory or prohibited employment practice to refuse to hire, promote, discharge, demote, terminate, or to retaliate against or to discriminate in matters of compensation or in terms, privileges, and conditions of employment against any persons otherwise qualified, because of race, color, sex, pregnancy or pregnancy-related conditions, age (40 and over), religion, national origin, or handicap. (4) Reporting new hires. Under federal welfare reform laws, employers in all states are now required to report newly-hired (or rehired) employees to a designated state agency (the Utah New Hire Registry, for Utah employers) within 20 days after the date of hire. See the contact information in Section VI(a) for the Utah New Hire Registry. VI. STATE SOURCES OF HELP AND INFORMATION (a) Key State Agencies Contact Information. Utah, as many states have done in recent years, has set up a "one-stop" center to help your new or existing businesses to obtain all necessary state licenses and permits from a single office, without your having to go from agency to agency to meet all the legal and regulatory licensing requirements. The Utah Department of Commerce, which handles incorporations and formation of other types of business entities, also provides a One Stop Online Registration service, where anyone with Internet access may register their business online. See the link to this site in Section VI(c). You can register your business with the state for Utah sales and use tax, employer withholding, and business name registration on a single state application form, Form TC-69, which can be obtained from the State Tax Commission. To obtain business registration forms and information on starting or relocating your business in Utah, contact either the Department of Commerce, Division of Corporations and Commercial Code, or the Utah State Tax Commission, at the addresses listed below for those two agencies. Or, for professional licensing requirements, contact the Division of Occupational and Professional Licensing, which is another division of the Utah Department of Commerce.
To obtain the helpful booklet, Doing Business in Utah Guide (last updated in 2000), contact:
The Department of Workforce Services was created by the Utah Legislature in an effort to consolidate and simplify Utah's workforce and welfare programs. In general, the result of the legislation was to consolidate the Industrial Commission, Department of Employment Security (Job Service), Office of Job Training (Job Training Partnership Act), Office of Family Support (JOBS/TANF), Office of Child Care, and the Turning Point (Carl Perkins Act, Single Parent/Displaced Homemaker Program) programs. Contact this umbrella agency at:
STATE LICENSES. The Utah Department of Commerce is the main Utah licensing agency. Contact this state agency at the address listed for it above. STATE SALES TAX. Obtain your sales and use tax license or permit and information on the Utah sales and use tax law, from the following agency Utah State Tax Commission, at the address listed above for that agency. STATE UNEMPLOYMENT TAX. Contact the following state agency to determine whether you are an employer subject to payment of state unemployment taxes, and for registration as an employer if you are subject.
Also, you can obtain workers' compensation posters, booklets and other information by writing to:
(b) Small Business Development Centers. A number of Small Business Development Centers (SBDCs) are located throughout Utah to assist you. These centers, usually located on college campuses, provide a wealth of start-up information and sponsor frequent business-oriented seminars. Contact the following Center for the location of other SBDCs nearer to you.
(c) Internet Sites. If you have access to the Internet, there is a wealth of state and even local business information provided by state and local governments. All states now have a state government Web page, and most major state agencies also have sites on the Internet where you can obtain useful small business information on matters such as state taxes, financing sources, or the addresses and phone numbers (or e-mail addresses) of various state and federal agencies' offices in Utah. Since new sites are appearing constantly, you might also want to search for other Utah government Web sites by using one of the popular Internet search engines, such as Excite! or Yahoo. To start your Internet search for Utah government information, you may want to begin with the following Internet sites: State of Utah home page: Utah Department of Commerce (Business registration, all filings for corporations, LLCs, LLPs, and limited partnerships, assumed business name filings): Business Licensing and Registration Guide (An online, downloadable guide to state licensing requirements in Utah, provided by the Utah Department of Commerce, Division of Corporations and Commercial Code): One Stop Online Business Registration (register your business online): Business.Utah.Gov (offering a wide range of helpful information for starting or relocating your business in Utah): Utah Tax Commission (tax forms and information, including online filing of some returns): Utah Labor Commission (workers' compensation, occupational safety and health, anti-discrimination rules, other state labor laws): Utah Microenterprise Loan Fund (microloans for very small businesses):(d) Financing Sources. For information and help on locating financing for your small business, contact the nearest U.S. Small Business Administration office in Utah, or contact a Certified Development Company (CDC). CDCs are private companies licensed by the US Small Business Administration that provide long term financing to expanding businesses under the SBA 504 Program. Certified Development Companies in Utah include the following:
In addition, the Utah Microenterprise Loan Fund (UMLF) is a tax-exempt, nonprofit corporation. It can provides small, secured financing of up to $10,000, with terms up to five years, to owners of startup and existing firms who do not have access to traditional funding sources, especially those who are socially or economically disadvantaged. The interest rate charged is prime plus 3 percent fixed, and the business must be located in Salt Lake County. For more information, contact:
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Copyright © 2004 Michael D. Jenkins
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