The week of Memorial Day always feels like the first week of summer, even if we officially have another
three weeks of spring. School’s out, or nearly so, and you or your family might be thinking about starting
a business mowing lawns, opening an ice shack, or working on other projects. Just buying the equipment and starting to work may seem like the easiest option. And it is; in the short term. However, you run a lot of risks if you do not become a bona fide and registered business.
Register your business. If you are doing a business in the state of Utah, you are required to have a
business license. Failure to do so is a class B Misdemeanor. So, if you are opening your soda shack, make
sure to get your Federal EIN number and state and local business licenses.
Liability. Businesses organized as limited liability corporations, s-corporations, or corporations create a
boundary between your personal assets and business assets, as long as those assets are easily
separated. They also protect you from being personally sued when you are working for your business.
To avoid a forced liquidation of your business, make sure to have liability insurance in case you were
sued. Partnerships create less of a boundary between your personal and business assets.
Separate finances. Do not use your personal checking account as your business operating account. Open
a new bank account for your business. Only use this bank account for operating the business. Do not mix
your business and personal funds. If you are concerned about taxes, open a second bank account and
periodically put money in the “tax” account to prepare for tax season. You will thank yourself later.
Taxes. The state or federal government will find you, even in remote Wayne and Garfield Counties: at
least your mailing address. If you start a business selling jewelry or wood carvings but do not pay the
appropriate sales taxes or income taxes, you could face your day in court and have a tax lien filed
against you, your property, or your business property. Like student loans, a tax lien cannot be dissolved
in bankruptcy and a lien on your property can prevent you from refinancing your mortgage or taking out
additional loans with your property as collateral.
Operating agreement. Write down your business procedures. Do you pay yourself as revenue is
generated or once a month? Are you partnering with others? If you are starting a partnership, how will
profits, losses, and decisions be determined? If you have your own business, just start writing down in a
notebook or word documents the procedures of your business as they occur. This way, if you were ever
challenged with a lawsuit against your business, you can show you were acting on behalf of the business
and protect your personal assets from liability.
So what about that small, one time job, you did for your elderly neighbor? If you feel you are not
running a business and just doing some small things for one person or a few people, you run the risk of
personal liability if you are sued. However, if you are willing to take on the risks of not registering your
business, reduce your tax risk by noting the earned income on your taxes.
Richfield Reaper Best of the Best. Lastly, thank you to the readers of The Wayne & Garfield County Insider and
Richfield Reaper for voting me as the 2017 best attorney. I enjoy helping you and writing this column. As
always, please let me know what I can do to better serve you!
Disclaimer. As always, my column is not legal advice, instead merely insight into the law and legal
profession. If you have a general question about the law or legal profession, please email me at
email@example.com or call my office at 435.610.1431.
Published 5/25 in the Wayne & Garfield County Insider.