LLC vs S-Corp in Utah

Utah has a flat 4.55 percent individual income tax rate and a 4.55 percent corporate franchise/income tax rate (both rates set under Utah Code 59-7 and 59-10; verify current rates on the Utah State Tax Commission site at https://incometax.utah.gov/ before relying on them for a given tax year). The Utah Division of Corporations and Commercial Code handles entity filing. The IRS handles the tax classification via Form 8832 and Form 2553. A Utah LLC can elect to be taxed as an S corporation. Utah LLC basics. - Certificate of Organization filed online with the Utah Division of Corporations at https://corporations.utah.gov/business-entities/ or via https://businessregistration.utah.gov/. The standard filing fee is $54 (verify current fee on the Division's fee schedule before filing). - Annual report / renewal. Every Utah LLC must file an annual renewal with the Division of Corporations to stay in good standing. The fee is modest. - Single-member LLCs default to disregarded entity for federal tax. Multi-member LLCs default to partnership tax. Either can elect S corp treatment with IRS Form 2553. - Utah has no franchise tax separate from the corporate income tax. Utah S corp basics. - Utah recognizes the federal S election. An S corporation files Utah Form TC-20S, the Utah S Corporation Tax Return. Income generally passes through to shareholders and is reported on their individual Utah returns at the 4.55 percent flat rate. A Utah S corp still has a $100 minimum tax under Utah Code 59-7-104, regardless of pass-through. - Utah's 4.55 percent corporate franchise tax applies primarily to C corporations. An S corp is generally not subject to that rate on pass-through income, except for items specifically subject to corporate-level tax and the minimum tax. - Payroll. An S corp must pay its owner-employee a reasonable W-2 salary. Utah imposes state unemployment insurance (SUI) tax through the Utah Department of Workforce Services once the business crosses the wage threshold. Why a Utah trades shop might elect S corp. The main driver is federal self-employment tax savings. A disregarded-entity LLC owner pays self-employment tax on the full net profit. An S corp owner-employee pays payroll tax on wages only; the distribution portion avoids self-employment tax. Utah's 4.55 percent flat state rate applies to the owner's pass-through income either way, so the state-tax side is roughly neutral between LLC and S corp (excluding the $100 minimum S corp tax). The federal payroll-tax math is where the decision is made. Rule of thumb. Start as a Utah LLC. When annual profit after a reasonable owner wage is high enough that payroll tax savings clear the payroll, retirement plan, and accounting costs (plus the $100 minimum S corp tax), elect S corp. A CPA with Utah construction clients can run the breakeven for your numbers and confirm the Utah filings, annual renewal schedule, and DOPL qualifier requirements for the entity you choose.