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Editorial 7 MIN READ

Utah in April 2022: the quietest fee table in the country, updated

A $70 Certificate of Organization, a $20 renewal, a corporate rate cut, and a new PTE election all landing in the same quarter

The Editors
Staff, Incorporator.org
7 min read Updated
Contents 6 sections
  1. What the Division actually charges
  2. The corporate rate, after SB 59
  3. The PTE election, after HB 444
  4. What the Silicon Slopes posture actually looks like
  5. Who Utah actually makes sense for
  6. Sources

Utah LLC costs $70 to form and $20 a year to keep. Those are the two numbers on the Division of Corporations fee table this spring, and they are among the lowest in the country.

The interesting news in Utah this quarter is not really the fee table, which has been stable; it is everything happening around it. The legislature cut the flat corporate and individual income tax rate to 4.85% in February and stood up a pass-through entity election in March. Both were signed by Governor Cox inside a five-week window, and both took effect for tax year 2022. For a state whose tech corridor between Lehi and Provo has been adding formations at a steady clip, that is a meaningful posture shift in a short time.

What the Division actually charges

You form a Utah LLC by filing a Certificate of Organization with the Utah Department of Commerce, Division of Corporations and Commercial Code. The authority is Utah Code § 48-3a-201, inside the Utah Revised Uniform Limited Liability Company Act (Title 48, Chapter 3a). The certificate lists the entity name, the designated office, the registered agent and address, the management form (member-managed or manager-managed), and the organizer. You can file online through the OneStop business registration portal or on paper.

The standard filing fee is $70. Expedited processing, where the Division commits to same-business-day turnaround, runs an additional $75 on top. There is no separate fee for using the online portal.

The maintenance piece is where Utah is unusually cheap. Every Utah domestic entity renews annually on the anniversary of its formation date. The renewal is $20 for an LLC and can be filed online in about five minutes. Miss it, and the Division marks the entity expired after a short grace period; reinstating costs more than simply renewing on time did, and the lapse can break contracts, banking, and any good standing certificate a lender or counterparty is holding.

Compare that to Delaware's $90 formation fee and $300 annual tax, and the arithmetic is $160 in first-year cost in Utah versus $390 in Delaware, widening to $20 per year versus $300 per year thereafter. The dollar gap is small in absolute terms and large in percentage. For anything that does not need Chancery case law, it accumulates.

The corporate rate, after SB 59

Utah runs a flat corporate income tax under Utah Code § 59-7-104. As of tax year 2022 the rate is 4.85%, cut from 4.95% by Senate Bill 59 of the 2022 General Session, which Governor Cox signed on February 11, 2022. The same bill cut the individual rate by the same ten basis points, added a state-level Earned Income Tax Credit at 15% of the federal EITC, and expanded the Social Security benefits credit. The rate change was retroactive to January 1, 2022, so any C-corp with a calendar-year return for 2022 will compute its Utah tax at 4.85% for the full year.

Ten basis points is small in the immediate arithmetic. The reason to notice the bill is direction: Utah has now cut its flat rate twice in three years (the 4.95% was itself a cut from 5% in 2021), funded by a structural rather than one-time surplus. Businesses looking at a multi-year entity plan are reading the rate as a floor that might keep drifting down.

For an LLC taxed as a partnership or a disregarded entity, the same 4.85% applies to each member's Utah-source income on their individual return. Utah has almost no rate spread between the personal and corporate side, which makes entity-choice math in the state less about tax-rate arbitrage and more about liability, payroll, and self-employment considerations.

The PTE election, after HB 444

The larger piece of 2022 tax news for operating LLCs and S-corps is House Bill 444, signed March 23, 2022, which created an elective entity-level tax on pass-through income. The bill touched Utah Code § 59-10-1403 and several neighboring sections; the mechanics live in the new § 59-10-1403.2. It took effect immediately and applies to tax years beginning on or after January 1, 2022.

The election works the way it does in most of the 20-plus states that have stood up a PTE tax since the IRS blessed the concept in Notice 2020-75. The pass-through entity, meaning a partnership, S-corp, or LLC taxed as either, elects on an annual basis to pay Utah income tax at the entity level on the distributive share of its electing owners. The rate is the standard 4.85%. Owners then claim a credit on their Utah individual returns for their share of the entity-level tax, so the Utah tax is not paid twice. The federal deduction for the entity-level payment sits with the entity, unconstrained by the $10,000 SALT cap that limits itemizers at the individual level.

Two implementation points matter in year one. The election is annual and has to be made by the due date of the entity return, including extensions; a missed 2022 election cannot be cured later. And the Utah PTE tax is computed on the final allocable income of electing resident owners and the Utah-source income of electing non-residents, with C-corp and most trust owners excluded from the base. Entities with mixed-composition cap tables should run the arithmetic carefully before electing, because partial-base elections can leave stranded credits.

For context on how Utah fits the national picture, we walked through twenty states' PTE workarounds last May in the 2021 map; Utah is now on that map.

What the Silicon Slopes posture actually looks like

The conventional picture of a venture-backed company in the Lehi-to-Provo corridor is a Delaware C-corp at the top with a Utah operating subsidiary, often an LLC, underneath. That picture is still correct in 2022, and the Utah fee table is one of the reasons it holds.

Formations coming out of Silicon Slopes bifurcate fairly cleanly. Angel-funded and bootstrapped companies that expect to stay pass-through for at least a few years tend to form a single Utah LLC, sometimes electing S-corp treatment once the payroll math turns. The $70 + $20 fee arithmetic makes this almost free on a maintenance basis. Companies that know they will raise institutional money form a Delaware C-corp, register to do business in Utah as a foreign entity, and pay both state fees. The foreign-registration filing in Utah is $70 (same as the domestic) and renews at $20 a year, so the Utah side of a dual-state setup is not where the cost sits.

What has shifted in 2022 is the tax posture around that structure. A Utah LLC taxed as a partnership now has the PTE election available to push SALT above the $10,000 federal cap for its owners, something a top-level Delaware C-corp does not benefit from. A Utah C-corp pays the new 4.85% rate on Utah-apportioned income, one of the lower flat corporate rates in any state with an income tax. For a founder in Alpine or Draper who is deciding where to domicile the next entity, the answer has not changed, but the math is friendlier than it was in January.

Who Utah actually makes sense for

The first group is anyone operating in Utah who does not need Delaware's case-law option. A two-person consulting LLC, a rental property holder, a local retailer, or a sole-operator S-corp comes out ahead forming at home. The $20 annual maintenance is a rounding error, and the 4.85% flat rate is competitive with the flat-rate states Utah is often compared to.

The second group is an operating subsidiary for a Delaware parent, if the operations actually live in Utah. Forming a Utah LLC as the OpCo, owned by a Delaware HoldCo, gives you local nexus where the people and revenue are, without paying Delaware franchise tax on the subsidiary's activity.

The third group is a pass-through with Utah-resident owners who want the PTE election on offer. That is a narrower case and turns on owner composition and itemized-deduction math, but for the owners it fits it is worth several thousand dollars a year against the alternative.

Utah is not the best state for privacy (Wyoming wins that), for litigation (Delaware wins that), or for nowhere-nexus setups (Nevada and South Dakota still compete on that). It is quietly one of the best states for cost, and in 2022 one of the more interesting states for operating tax.

Sources

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