What are the different types of business entities and how do I choose the one I need?
When you start a new business, you can choose to operate as a sole proprietor, a partnership, a limited liability company (LLC), or a corporation. You choose the type of business entity based on how many people are participating in your business, how you wish to manage the business’s liabilities, how you wish to run the business itself, and how you wish to be taxed. We can help you understand the different types of entities and evaluate which entity type will work best for your business.
How do I form a new business in Utah?
A partnership, an LLC, and a corporation are all registered with the state by filing the correct formation document. For an LLC, this is a Certificate of Organization. For a corporation, this is the Articles of Incorporation. You will need a principal place of business and a registered agent to receive service of process for any entity type. Additional required information will depend on the entity type. Although your governance document(s) (such as a partnership agreement, an operating agreement, or by-laws) are not registered with the state, they are definitely the most important documents for your entity, since they determine how your company will operate. We always draft governance documents for our clients when we help them form their business.
Is a federal EIN the same as a Utah Entity number?
A federal Employer Identification Number is not the same as a Utah Entity number. You obtain your Utah Entity number when you register your formation document(s) with the state and pay the filing fee. You can obtain a federal EIN at no charge on irs.gov after you have registered your entity at the state level. We also obtain an EIN on behalf of our clients when we form their new business entity.
What documents do I need for risk management for my business?
You’ll definitely want to keep official state and federal documents with your entity numbers, etc. as well as governance documents, if you have them. The best way to mitigate risk for your business is to follow the governance documents you establish (which gives the rules for operating your business) and keep your business separate from your personal affairs, both financially and legally. You also need to obtain a business license from the city where you’re establishing your business. If you’re operating a business out of your home, you’ll need to consider zoning laws and whether you’ll have clients coming to your home to transact business. You should also consider digital security measures such as multifactor authentication, password protection, activity reports, etc. Finally, proper insurance policies are critical to manage risk for your business.
What insurance does my business need in Utah?
Although insurance requirements vary by location and business category, you will most likely need at least a general business liability policy. If you have any employees, you’ll need worker’s compensation insurance. If you’re renting a commercial space, you’ll want renter’s insurance in addition to any property insurance requirements imposed by your lease. And it’s a good idea to consider cyber liability insurance, given the current business landscape.
What are financial statements? Which ones do I need to understand?
Financial statements and reports help you track your business’s revenue and performance. The most common financial statements (used by accountants) include a Profit and Loss statement (which shows your business’s revenues and expenses), a Balance sheet (which shows your business’s assets and liabilities), and a Statement of Cash Flows (which shows where the money is coming from and going to). These statements are usually tracked and reported in a bookkeeping system like Quickbooks or Quicken. Other financial reports that help you evaluate your business are things like Days in Accounts Receivable report, Customer Acquisition Cost, and Average Revenue per buyer or purchase.
What is the best way to keep track of my business finances, expenses, taxes, etc?
You should always keep your business finances separate from your personal finances. This means having a business bank account (with checks, debit cards, and/or credit cards). Bookkeeping systems, like Quickbooks or Quicken, are standard in the accounting industry for keeping track of your business finances and expenses, but you could start with just a bank statement and a spreadsheet. If you follow the principle of “starting as you mean to go on,” you will most likely find great value in creating a robust accounting system at the beginning of your business so that you don’t get to the end of the year and face hours of work getting your finances in order for filing your taxes.
What are the different accounting methods?
The two most common accounting methods are cash accounting and accrual accounting. With cash accounting, income and expenses are recorded when money actually changes hands. With accrual accounting, income and expenses are recorded when they are earned or incurred, even if the money has not yet been received or paid.Most small businesses start with cash accounting because it is simpler and easier to manage. However, as your business grows, accrual accounting may provide a more accurate picture of your financial performance. Your accountant can help you determine which method is appropriate for your business and whether the IRS requires you to use a specific method based on your revenue or industry.
How should I handle startup and personal expenses for my business?
Many business owners incur expenses before their business is fully formed. These may include things like filing fees, equipment purchases, website costs, marketing expenses, or professional services. It is important to keep records of these expenses and keep them clearly separated from your personal finances. We recommend opening a business bank account as soon as possible and running all business transactions through that account. If you paid startup costs personally before opening your business account, those expenses can often be reimbursed by the business or recorded as an owner contribution. Maintaining clear records from the beginning helps protect your liability shield and makes tax reporting much easier.
What are wage and benefit requirements for my team? Are there any exceptions?
If you have employees, you must comply with both federal and state wage and labor laws. These laws establish requirements for minimum wage, overtime pay, payroll tax withholding, and workplace safety. You will also need to report employee wages to the appropriate state and federal agencies and maintain proper payroll records. Some workers may qualify for exemptions from certain wage rules, such as overtime requirements, depending on their job duties and salary level. In addition, different rules may apply to independent contractors, part-time workers, and certain family members working in a family business. Because wage classification mistakes can lead to significant penalties, it is important to evaluate each role carefully before hiring.
What are the different ways to hire team members?
There are several ways to bring people into your business, and the right approach depends on your needs and your budget. The most common option is hiring employees, who work under your direction and receive wages or salary through payroll. Employees are typically eligible for certain legal protections and benefits under employment laws. Another option is hiring independent contractors. Contractors generally provide services to multiple clients and maintain more control over how their work is performed. Businesses sometimes also use temporary workers, consultants, or professional service firms for specialized work. Choosing the correct classification is important because misclassifying workers can lead to tax liabilities and penalties. We can help you evaluate which type of working relationship fits your business goals and complies with applicable laws.
How do I market my new business?
Marketing your business starts with clearly identifying your target customers and understanding the problem your business solves for them. Once you know your audience, you can begin building a marketing strategy that communicates your value and makes it easy for customers to find you. Most new businesses start with a combination of digital marketing, local networking, and referrals. A simple website, a professional social media presence, and consistent messaging about your services can go a long way in establishing credibility. In many industries, building relationships within your community and encouraging satisfied clients to refer others is one of the most effective forms of marketing.
What are important growth metrics to track for my business?
Tracking the right metrics helps you understand whether your business is growing in a healthy and sustainable way. Some of the most important metrics include revenue growth, profit margins, cash flow, and the cost of acquiring new customers. You may also want to monitor metrics such as customer retention, average revenue per customer, and how long it takes to convert a prospect into a paying client. These metrics help you identify which parts of your business are working well and where improvements may be needed. Regularly reviewing your financial statements and key performance indicators allows you to make informed decisions about pricing, marketing, hiring, and long-term growth.