When deciding on a business idea, there are several factors to consider. Here are some important ones to consider:

Research the industry: The first step for starting a business in Utah is having a good business idea. Maybe you already have an idea picked out, or maybe you are still deciding on one. Regardless, you can check out our library of business ideas to get detailed industry information, trends, costs to start, tips, and lots more.

Personal interests and passions: Consider what you are passionate about, what you enjoy doing, and what you are good at. Your business idea should align with your interests and strengths.

Market demand: Research the market to determine if there is a demand for your product or service. Look at industry trends, customer needs, and competitors.

Competition: Analyze your competition to determine if there is room for your business idea. Look at their strengths and weaknesses, and determine how you can differentiate yourself from them.

Target audience: Identify your target audience and determine if your business idea appeals to them. Look at their needs and preferences, and determine how you can meet them.

Financial viability: Determine the financial viability of your business idea. Look at the costs of starting and running your business, and determine if you can generate enough revenue to make a profit.

Scalability: Consider the potential for scalability of your business idea. Determine if it can grow and expand over time and if there is a potential for future profits.

Once a solid business idea is in place, it’s time to start working on the business plan. A business plan serves many purposes; from getting thoughts from the entrepreneur’s head on to paper, creating a playbook for the business, and obtaining funding.

According to a study conducted by Palo Alto Software, entrepreneurs that take the time to create a plan for their business idea are 152 percent more likely to start their business (Source: “Business Planning Makes You More Successful, and We’ve Got the Science to Prove It”, Tim Berry, Bplans).

A comprehensive business plan should include an executive summary, company description, market analysis, competitive analysis, product/service information, operations, and management structure, financial projections, and funding requirements.

Related: How to write a business plan

The next step to starting a business in Utah is selecting a business entity. A business entity is a legal structure that defines how a business is owned, operated, and taxed. It is important to choose the right type of business entity as it will determine the liability of the owners, the amount of taxes paid, and other factors such as how easy it is to transfer ownership or raise capital.

In Utah, there are four common types of business entities: sole proprietorship, general partnership, corporation, and Limited Liability Company (LLC).

A sole proprietorship is an unincorporated business owned by one individual. This type of entity offers no protection from personal liability for debts or lawsuits incurred by the business.

A general partnership is similar to a sole proprietorship but involves two or more individuals who share in the profits and losses of the business. Like a sole proprietorship, this type of entity does not provide any protection from personal liability for debts incurred by the business.

A corporation is a legal entity that exists separately from its owners and provides limited liability protection for its shareholders. This means that if the company incurs debt or faces legal action, only corporate assets can be used to satisfy these obligations. Corporations also have greater access to capital than other types of entities due to their ability to issue stock and bonds.

Related: How to form a Utah corporation

Finally, a Limited Liability Company (LLC) combines the limited liability protection of a corporation with the tax flexibility of a partnership or sole proprietorship. The Limited Liability Company does not have many of the burdens the corporation has and has the greatest tax flexibility of the four entities. Income can be taxed as a pass-through entity like the sole proprietor or partnership or as an S corporation.

Related: How to form a Utah LLC  

Overall, new small business owners in Utah need to understand what type of business entity best suits their needs before making decisions about their company’s structure. Each type has its own unique advantages and disadvantages, so it is important to do your research before making any commitments.

Obtaining the necessary licenses and permits for operating a business in Utah can be difficult to track down which ones are required, but it’s important that they are obtained before starting operations in order to remain compliant with local, state, and federal laws. Some common registrations include:

Business Licenses – The state of Utah doesn’t have a general business license; however, all businesses in the state are generally required to license with the local municipality where they are operating. Each city and county has different procedures, so it is best to contact your city or county office to know the exact requirements.

Employer Identification Number: Partnerships, corporations, multi-member LLCs or any business entity that has employees will need to register for an EIN, which is a number assigned by the Internal Revenue Service to identify a business.

Business Name Registration (Sole Proprietorships & General Partnerships): A sole proprietorship or general partnership operating a business under a name that is different from the owner(s) will need to file a Business Name Registration, with the Utah Division of Corporations and Commercial Code.

Sales Tax License – Businesses selling products and certain services will need to register for a Sales Tax License with the Utah State Tax Commission.

Professional Licensing – Some occupations, such as accountants, electricians, handymen, hunting guides, and landscapers, require licensing in Utah.  While this isn’t a license on the business, licensing is required in order to operate.

Related: What business licenses and permits are needed in Utah?

Opening a business bank account is a great way to organize and track your business. Separating your personal and business funds makes it easier to track income and expenses, which not only helps with record keeping and tax time, but gives more protection in the event of an audit.

Obtaining the funds to start a small business is a challenging process for many. Not only are there unfamiliar terms like collateral, equity, assets, liabilities, and others, but there are several sources of funding with different rules, processes, and costs.

I’ll go over the most common sources of funding. Each option has its advantages and disadvantages, so it’s crucial to carefully consider which option best fits your business needs and objectives.

Personal Funds: Many entrepreneurs use their savings, credit cards, or take out a home equity loan to fund their new business. Using personal funds gives you complete control over your business and doesn’t require you to share profits or decision-making with investors. However, it also puts your personal assets at risk if the business doesn’t succeed.

Conventional Bank Loans: Banks and credit unions offer small business loans to qualifying borrowers. These loans typically have lower interest rates than other financing options, but they often require a personal investment, strong credit history, collateral, and a detailed business plan. It can be challenging for new businesses to qualify for conventional bank loans, but establishing a relationship with a local bank can improve your chances.

SBA Loan Guarantees: The U.S. Small Business Administration (SBA) offers loan guarantee programs to help small businesses obtain financing from participating lenders. These programs reduce the lender’s risk by guaranteeing a portion of the loan, making it easier for small businesses to secure funding. The most popular SBA loan program is the 7(a) Loan Program, which can be used for various purposes, including working capital, equipment, and real estate.

Microloan Programs: Microloan programs are designed for small businesses that need smaller amounts of capital. In Utah, several organizations offer microloan programs, such as the Utah Microenterprise Loan Fund and LiftFund. These organizations provide loans with more flexible requirements than traditional bank loans.

Investors: There are various types of investors who might be interested in funding your business, including angel investors, venture capitalists, and crowdfunding platforms. Angel investors are typically high-net-worth individuals who invest their personal funds in early-stage businesses in exchange for equity or debt. Venture capitalists are firms that invest in high-growth potential start-ups, often providing funding in exchange for significant equity stakes and decision-making power.

Related: Understanding the different types of business funding

Hiring employees is a complex and often overwhelming process for a new business owner as there are multiple agencies to register with and labor laws to understand.

Employers are responsible for reporting new hires, verifying employees are eligible to work in the U.S., income tax withholding, obtaining workers’ compensation insurance, unemployment insurance, unemployment taxes, and payroll withholding taxes, including Social Security and Medicare.

Related: Steps to hiring your first employee in Utah

Starting a small business in Utah comes with risks and uncertainties. To protect your company’s financial well-being in case of unexpected events, such as accidents, natural disasters, or lawsuits, the right insurance coverage is needed. Without it, a single incident could potentially lead to significant financial loss or even bankruptcy. By investing in insurance, you protect your business assets, ensure business continuity, and provide a sense of security to your employees and customers.

Common Types of Insurance Policies for Small Businesses

General Liability Insurance: This type of insurance protects your business from claims of bodily injury, property damage, and personal injury (e.g., slander or libel). General liability insurance is essential for all businesses, as it covers a wide range of incidents that could occur during your business operations.

Property Insurance: Property insurance covers damage to or loss of your business property, such as buildings, equipment, and inventory. This policy is essential for businesses with physical locations or valuable assets that could be damaged by events like fires, storms, or theft.

Workers’ Compensation Insurance: Most businesses in Utah are required to carry workers’ compensation insurance, which provides medical and wage benefits to employees who suffer work-related injuries or illnesses. This insurance not only protects your employees but also shields your business from potential lawsuits related to workplace injuries.

Professional Liability Insurance: Also known as errors and omissions (E&O) insurance, professional liability insurance is crucial for businesses that provide professional services or advice. This policy covers claims of negligence, errors, or omissions in the services you provide, which could lead to financial losses for your clients.

Commercial Auto Insurance: If your business owns or operates vehicles for business purposes, commercial auto insurance is necessary. This policy covers physical damage, liability, and medical expenses resulting from auto accidents involving your business vehicles.

Business Interruption Insurance: In case of a covered event (e.g., fire or natural disaster) that disrupts your business operations, business interruption insurance can help cover lost income and additional expenses incurred while your business is unable to operate.

Related: Types of insurance your business may need

Setting up an accounting system for your business is one of the most important things you can do for your company to ensure long-term success. Accurate accounting records not only provide a clear picture of a business’s financial health and can help identify areas where improvements can be made, but they are necessary to ensure that taxes are paid correctly and on time.

A few benefits of proper bookkeeping include:

Monitor your business’s financial health: Regular bookkeeping allows you to track your income and expenses, helping you understand your business’s profitability and cash flow. By monitoring your financial health, you can make informed decisions to improve your business’s performance.

Budgeting and forecasting: Accurate financial records enable you to create budgets and financial forecasts, helping you plan for future growth and anticipate potential financial challenges.

Prepare and file accurate tax returns: Detailed financial records make it easier to prepare and file your business’s tax returns, reducing the likelihood of errors that could lead to penalties, audits, or fines.

Claim eligible deductions: Accurate bookkeeping allows you to track and document deductible expenses throughout the year, helping you maximize your tax deductions and minimize your tax liability.

Avoid late fees and penalties: Timely bookkeeping helps you stay on top of your tax filing deadlines, ensuring that you submit your tax returns and make any required tax payments on time, avoiding late fees and penalties.

If you are not confident in managing your business’s accounting and bookkeeping, consider hiring a professional accountant or bookkeeper to help you stay organized and compliant.

Related: Setting up accounting for a business