Converting Sole Proprietorship to LLC 2023: Utah Conversion Guide

LLCBase is your go-to place for everything about LLCs, and it's led by Brian Cohan, who's an expert in the field. Brian and our team are here to give you clear and helpful advice on how to set up and manage an LLC. We've been through the process and know the ins and outs. Our articles and guides are based on real experiences, making them practical for you. We're committed to helping you make smart choices for your business. With LLCBase, you're in good hands as you navigate the world of LLCs.

How to Convert Sole Proprietorship to LLC in Utah

If you’re thinking of converting your sole proprietorship to an LLC in Utah, you’re making a smart move to protect your personal assets and boost your business’s credibility. At LLCBase, we’ll help you through this process by providing essential information and outlining the necessary steps for establishing a Utah LLC.

By starting an LLC in Utah, also known as The Beehive State, you’ll enjoy several benefits, including tax flexibility, limited liability protection, and a more professional image. Our comprehensive guide will equip you with the knowledge to successfully convert your sole proprietorship to an LLC in Utah, setting your business on a path to greater success and security.

What is a Sole Proprietorship and a Limited Liability Company?

A sole proprietorship is a business structure in which a single individual owns and operates the business. The owner is solely responsible for all decision-making, profits, and liabilities associated with the business. There is no legal distinction between the owner and the business, making the owner personally liable for any debts or legal issues the business may encounter. This business structure is the simplest and least expensive, as it typically requires minimal paperwork and regulatory compliance.

An LLC, or Limited Liability Company, combines a corporation’s limited liability protection with the operational flexibility of a partnership or sole proprietorship. In an LLC, the business owner, known as a member, has personal liability protection, meaning their personal assets are not at risk in case of the business’s debts or legal issues. LLCs also have flexible tax options, as they can be taxed as a pass-through entity (like a sole proprietorship) or a corporation. This type of business structure is more complex and involves a higher degree of compliance than a sole proprietorship but offers greater legal protection and flexibility for the owner(s).

One of the reasons LLCs are popular in Utah is their tax flexibility. LLCs are typically taxed as pass-through entities, meaning the profits and losses flow directly to the member’s personal income tax returns, avoiding the double taxation that corporations face. An LLC in Utah has fewer strict administrative requirements, allowing simpler management and decision-making processes.

Recommended: Upgrade your business potential in Utah – we recommend hiring an LLC Formation Service for a seamless Sole Proprietorship to LLC conversion. Elevate your enterprise today! We recommend –

Our #1 Pick: LegalZoom – ($0 + State Fees) Online LLC Setup

Differences Between Sole Proprietorship and LLC

A sole proprietorship is the simplest form of business structure, making it an attractive option for many small business owners. It’s easy to set up and manage since there is no legal distinction between the owner and the business. However, this lack of separation also means the owner has no personal liability protection. In a sole proprietorship, if the business faces financial trouble or legal claims, the owner’s personal assets, such as their home or savings, may be at risk to cover the debts and liabilities.

On the other hand, an LLC, or Limited Liability Company, is a separate legal entity that provides limited liability protection to its owners, known as members. This means that the member’s personal assets are protected from the company’s debts and liabilities, as the business is considered a distinct entity from its owners. This protection is particularly beneficial in lawsuits, bankruptcy, or other financial challenges.

Another significant difference between a sole proprietorship and an LLC in Utah is an LLC’s tax flexibility. While a sole proprietorship’s income is reported directly on the owner’s personal tax return and subject to self-employment taxes, an LLC can be taxed as a sole proprietorship, partnership, or corporation. This flexibility allows LLC owners to select the most advantageous tax structure for their specific situation, potentially resulting in tax savings and a more manageable tax burden.

In addition, starting a business in Utah may also provide a more professional and credible image to clients, customers, and potential investors compared to a sole proprietorship. This enhanced reputation can attract new business opportunities and contribute to the overall growth and success of the company.

Recommended: Elevate your business with a reliable LLC Formation Service! The perfect partner for a seamless transition from sole proprietorship to LLC! Experience simplified formation, compliance assistance, and an intuitive platform. We recommend –

Our #1 Pick: LegalZoom – ($0 + State Fees) Online LLC Setup

6 Steps to Convert Sole Proprietorship to LLC

Are you a sole proprietor looking to level up your business structure? Our straightforward 6-step guide will walk you through converting your sole proprietorship to an LLC, providing enhanced liability protection, potential tax benefits, and a more professional image for your growing enterprise.

Step 1: Confirm the Business Name

Before changing your sole proprietorship to a Utah LLC, you must check if your desired business name is available in Utah. You can do this by using the Utah Division of Corporations & Commercial Code to search the Utah’s official database for existing business names. If the name is available, you can reserve it for 120 days by paying the $22 for online reservations or the $22 for mail reservations. This ensures that no one else can register the same name while you complete the LLC formation process.

Recommended: We recommend hiring a business expert that can help you effectively and efficiently choose and reserve a business name. Let them go through the process and get 100% efficacy! We recommend –

Our #1 Pick: LegalZoom – ($0 + State Fees) Online LLC Setup

Step 2: File Certificate of Organization

Next, you’ll need to file the Certificate of Organization with the Utah Division of Corporations and Commercial Code. This legal document officially forms your LLC in Utah and includes information such as the name of your LLC, the registered agent’s contact information, and the LLC’s purpose.

You can file the Certificate of Organization either online or by mail, using the Create an account/Log in to the SOS site, get the e-form, fill it, and submit online. Or get the online PDF, fill it up and upload it back on the site. for online filing or the Send the form by mail to or drop it off in person at Utah Division of Corporations & Commercial Code, P.O. Box 146705, Salt Lake City, UT 84114 for mail filing. The $54 for filing online, by mail, in person filing, or by Fax must be paid when submitting your documents. When starting an LLC, we recommend hiring one of the best LLC formation services in Utah to help you!

LLC Services

Rating & Pricing

Top Features

Learn More

#1 Editor's Choice

$0 + State Filing Fee

  • Free LLC Formation

  • Various Legal Services

  • Attorney Advice

$299 + State Filing Fee

  • Single Package

  • Flat Pricing

  • Legal Services

Step 3: Execute an LLC Operating Agreement

Although not legally required in every state, creating an LLC operating agreement is highly recommended. This document outlines the ownership structure, management roles, and operating procedures for your Utah LLC. It helps establish the rules and expectations for business operations, which can prevent misunderstandings and disputes among owners. An operating agreement should cover profit and loss allocation, voting rights, management structure, and procedures for adding or removing members.

Recommended: When creating an operating agreement for your business, we recommend hiring a reliable LLC Formation Service to streamline the process. They can provide an agreement with 100% accuracy and reliability. We recommend –

Our #1 Pick: LegalZoom – ($0 + State Fees) Online LLC Setup

Step 4: File Form SS-4 to Obtain an EIN

An Employer Identification Number (EIN) is required for your LLC in Utah. You can apply for an EIN by filing Form SS-4 with the Internal Revenue Service (IRS). This nine-digit number is used for tax reporting, employee payroll, and other business-related activities. Obtaining an EIN is crucial for maintaining the separate legal identity of your LLC and ensuring proper tax compliance.

Recommended: EIN is crucial when starting an LLC in Utah, but obtaining it can be so stressful and time-demanding. We recommend hiring an LLC business expert to assist you on getting your new EIN! We recommend –

Our #1 Pick: LegalZoom – ($0 + State Fees) Online LLC Setup

Step 5: Apply for a New Bank Account

Once your Utah LLC is formed, you must open a separate bank account for your business. This is essential for maintaining the limited liability protection offered by your LLC, as it helps separate your personal finances from those of your business. Mixing personal and business finances can jeopardize the legal protection provided by an LLC, so it’s crucial to establish a dedicated bank account for your company.

Step 6: Apply for Business Licenses and Permits

Depending on the nature of your business, you may need to apply for Utah business licenses and permits to operate legally in Utah. These requirements vary by industry, location, and products or services. You can contact the Utah Division of Corporations and Commercial Code to inquire about the specific requirements for your industry. Examples of licenses and permits may include professional licenses, zoning permits, sales tax permits, and health department permits. Ensuring your business fully complies with all relevant regulations is essential for your LLC’s smooth operation and ongoing success in Utah.

We’ve also compiled a list of the best business attorneys in Utah to assist you in acquiring your business licenses, securing permits, and other Utah requirements!

Recommended: Unlock your business growth in Utah – choose a trusted LLC Formation Service for hassle-free license and permit applications. Secure your company’s legal foundation today! We recommend –

Our #1 Pick: LegalZoom – ($0 + State Fees) Online LLC Setup

Cost of Changing From Sole Proprietorship to LLC

The cost of changing from a sole proprietorship to an LLC in Utah includes the following fees:

  • $70 for filing the Certificate of Organization
  • $20 for the annual report filing (every 1 year years)
  • Utah State Tax Commission fees, which may include state income tax at 4.95% and state sales tax at 4.85%
  • No franchise tax annual franchise tax fee (if applicable)
  • in Utah, there is no late filing annual franchise tax late filing fee (if applicable)
  • Business license and permit fees, which vary depending on the type of business and the location

Why Change From Sole Proprietorship to LLC

There are several reasons why business owners choose to change from a sole proprietorship to an LLC in Utah:

  • Personal asset protection: One of the primary reasons for converting a sole proprietorship to an LLC in Utah is the added layer of personal asset protection. As an LLC is considered a separate legal entity, the owner’s personal assets, such as their homes, cars, and savings, are protected from the company’s debts and liabilities. In contrast, a sole proprietor’s personal assets are at risk if the business faces financial or legal challenges. Thus, forming an LLC provides a safety net for business owners, ensuring that their personal finances are not jeopardized by their business dealings.
  • Tax benefits: Another advantage of converting to an LLC in Utah is the potential tax benefits. An LLC offers flexible tax options, allowing the business to be taxed as a sole proprietorship, partnership, or corporation, depending on the most beneficial structure for the owner’s specific circumstances. For example, an LLC can avoid the double taxation that corporations often face by being taxed as a pass-through entity, where the business’s profits and losses directly flow through to the owner’s personal tax return. This flexibility can lower the owner’s overall tax burden and provide additional tax planning and savings opportunities.
  • Improved credibility: Forming an LLC in Utah can also enhance the credibility and professional image of the business. Clients, customers, and potential investors may view an LLC as more stable and established than a sole proprietorship. This improved perception can help attract new business, secure funding, and enhance the company’s overall reputation. Additionally, having an LLC in Utah may provide more opportunities for growth and expansion, as the legal structure can be more easily adapted to accommodate new partners, investors, or business ventures.


Why should I convert my sole proprietorship to an LLC in the state of Utah?
An LLC provides a number of legal and financial advantages, including liability protection for business debts and obligations, better access to business loans, and reduced personal risk to business owners.
How do I know whether I should convert my sole proprietorship to an LLC in Utah?
Depending on your individual business needs, operating as an LLC in Utah could provide important legal and tax protections, as well as easier access to loans and other financial resources.
Do I need to live in Utah to convert my sole proprietorship to an LLC in the state?
No, you do not need to be a Utah resident to register an LLC with the state.
What are the main advantages of operating as an LLC in Utah?
LLCs offer limited liability protection, provide pass-through taxation benefits, and offer more flexibility in terms of ownership and management arrangements.
How do I set up an LLC in Utah?
The process may vary slightly depending on your specific circumstances, but generally speaking, you will need to file articles of organization with the Utah Secretary of State’s office and pay the applicable processing fees.
How long does it take to set up an LLC in Utah?
Typically, you can expect to receive your completed LLC paperwork back from the Utah Secretary of State within several weeks of submission.
What are the filing fees for setting up an LLC in Utah?
As of 2021, the filing fees for registering a new LLC in Utah are $70.
Do I need to reserve a unique business name before applying for LLC status in Utah?
It’s not required, but you can reserve a business name in Utah for a small additional fee if you want to ensure that no one else uses the name you have in mind for several months.
How do I obtain a Utah business license after setting up my LLC?
You can obtain a business license from your city or county’s business office after your Utah LLC has been registered.
How do I register to collect and pay Utah sales tax as an LLC owner?
You can register for sales tax using a Tax ID number through the Utah State Tax Commission’s Online Tax Registration System.
Can LLCs in Utah have multiple owners/members?
Yes, you can have one or more owners for your LLC in Utah.
Are there any specific requirements for forming an LLC in Utah?
Utah law requires that an LLC have one or more members, a legal business name that includes the phrase ‘Limited Liability Company’ or an abbreviation of it, and must be registered with the Utah Secretary of State.
How do I obtain a Utah Tax ID number for my LLC?
You can apply for a Tax ID number through the IRS’s website using Form SS-4.
Can I change my main business personal email address after forming an LLC in Utah?
You can certainly change your personal or business address after you form an LLC in Utah, but you must inform the secretary of state to update its records.
Do I need to provide a publishing notice about the formation of my LLC in Utah?
No, in 2009, Utah removed the legal requirement that LLCs publish a notice of formation in local newspapers.
Are there any residency requirements for LLC owners in Utah?
No, there are no residency restrictions on LLC ownership in Utah.
Is there a state yearly fee for operating an LLC in Utah?
As of 2021, Utah does require a yearly maintenance fee, in addition to the $70 fee for filing articles of organization.
Can I file the articles of organization for my Utah LLC online?
Yes, the filing process can be done online through the Utah Secretary of State website.
Do I need an EIN (Employer Identification Number) for my LLC in Utah?
If your LLC has multiple members, it is required to have an EIN.
Can an LLC in Utah choose to be treated as a partnership for tax purposes?
Yes, if you serve as a member or manager of your LLC, you can choose to be treated as a partnership instead of a corporation for tax purposes.
Are there separate taxation laws for LLCs in Utah?
No, an LLC in Utah, which is not also recognized as an S-corp, is not considered separate from its owners for purposes of federal income tax.
Do LLCs in Utah need a designated business address?
Yes, you are required to provide a mailing address and a physical address within Utah for your LLC.
Can a single-member LLC in Utah choose to file as a S-Corp for tax purposes?
Yes, it is a common choice for small business owners in Utah for tax reasons to file an S corporation tax return which lets you collect a salary based on market rates, and take the balance in distributions that are theoretically tax-free.
How do I dissolve a Utah LLC?
You will need to file articles of dissolution with the Utah Secretary of State and submit all outstanding tax and registration fees.
Is there a penalty fee for dissolving an LLC early?
No, there is no penalty for dissolving an LLC ownership early in Utah.
Can I form an LLC in Utah that has a legal entity outside of Utah as a member?
Yes, it is legal to have a non-Utah resident as a member of a Utah LLC.
How do I convert my Utah sole proprietorship business to an LLC?
General steps for this conversion administrative change include registering an entity in Utah LLC Name reservation system, preparation of LLC Nevada formation documents, submission of Articles of Organization with state of city secretary, change IRS filing from sole proprietorship business to LLC formaт and make sure all identification number, licenses, and permits are updated with the new LLC status.
Are there any attributes of sole proprietorships that don’t exist in Utah LLCs?
When comparing the two ownership structures, LLCs generally provide clearer legal boundaries between liabilities and assets and post-sale transfers of ownership. Sole proprietorships possess unique taxation rules related to liability and unlimited personal financial risk.
Are there specific Utah labor or hiring laws that LLC owners need to understand?
Of course, as long as you have employees, Utah and federal laws on employment and labor apply, such as insurance for workers’ compensation, labor laws regarding overtime, pay equity, and leave usage requirements.

Also Read


Converting your sole proprietorship to an LLC in Utah offers numerous advantages, including personal asset protection, tax benefits, and improved credibility. By following the six steps outlined in this guide, you can confidently navigate the process of forming an LLC and enjoy its benefits to your business. Remember, investing in the right legal structure can provide long-term benefits and peace of mind as you grow and expand your business.

If you’re ready to take the next step and change your sole proprietorship to an LLC in Utah, visit LLCBase for more detailed information and guidance. Don’t wait any longer – start your journey toward a more secure and prosperous business today!

Leave a Comment