Articles of Organization LLC Utah: Everything You Need to Know
Articles of Organization for your LLC are required in Utah. An LLC is organized by filing a Certificate of Organization.4 min read
Limited Liability Companies Overview
Limited Liability Companies (LLCs) were first created in Wyoming in 1987. They have become the preferred entity when it comes to business operations, investing, and holding assets. LLCs were first created as a way to merge corporation liability protection with partnership tax flexibility. Now, LLCs are used for many more reasons.
In terms of liability, an LLC can compartmentalize risks associated with various business activities or ventures. It can also limit creditor rights where LLC owners are concerned.
LLCs also offer managerial benefits. They can operate on a majority-rules basis like a corporation, or they may be manager-managed, similar to a limited or general partnership. As for taxes, single-member LLCs don't have to be considered separate entities. They may be taxed as partnerships or even as corporations depending on the number of members.
Thanks to an array of options, LLCs can achieve a variety of business goals and objectives, giving the business owner plenty of potential for growth.
Understanding LLC Terms
Along with the establishment of LLCs, new terminology came into play in the business world. If you're planning on starting an LLC, brush up on the following terms:
- Member: The owner of the LLC. In Utah, an LLC may have one or multiple members who own interest in the business.
- Manager: The person or entity in charge of overseeing the LLC's operations.
- Articles of Organization: Currently referred to as Certificates of Organization, this document is filed with Utah's secretary of state to establish the LLC. The document contains information pertinent to the LLC's organization, including the name of the business, its mailing address, and member and manager names and contact information.
- Operating Agreement: An agreement reached by the members to govern the LLC's operations, including decision-making, allocation of profits and losses, and member interest transferability. This should be a written document, but Utah does allow oral Operating Agreements.
- Member-Managed: LLCs that are controlled by the members. This is similar to a corporate structure in which shareholders vote on various matters by majority vote.
- Manager-Managed: LLCs that are controlled by assigned managers, either individuals or entities. In Utah, managers are not required to be members, although they can be.
- Charging Order: A court-obtained order by a judgment creditor by which a member's membership interests or property of a debt is charged to pay debts. Charging orders limit the amount a creditor may collect to a debtor-member's share of the LLC.
- Transferee: An LLC membership interest recipient with the right to receive distributions but who doesn't actually become a member of the LLC. A transferee is not entitled to participate in the LLC's management nor have access to information regarding the business's activities.
Utah's New Limited Liability Company Act
Utah adopted a legal revision on Jan. 1, 2014, which completely revamped the state's laws governing LLCs. These series of laws are referred to as the New Act, which is short for the Utah Revised Uniform Limited Liability Company Act.
The New Act marked the state's first major overhaul of LLC regulations in more than 15 years. These changes affect both future LLCs and those already in existence within the state. During the first two years of the New Act's effectiveness, LLCs were able to opt into the New Act, but the new laws didn't apply to businesses existing before the effective date until Jan. 1, 2016.
Several changes arose from the New Act in Utah, including:
- Certificate of Organization replaced Articles of Organization as the required form to file for establishing an LLC.
- The new laws no longer require members to publicly disclose their identities. The only information required for public disclosure is the name of the LLC, its physical address, and the registered agent's name and address. Every LLC in Utah must file an annual report detailing at least one governing person who is either a member, manager, or executive.
- The New Act allows an LLC to file Statement of Authority, which lists those controlling or governing the business.
- Oral Operating Agreements are allowed under the New Act.
- LLCs enjoy Improved Asset Protection that enhances an LLCs overall asset protection benefits. These benefits include creditor rights as a member.
Prior to Utah's LLC law overhaul, members were required to have a two-thirds majority to approve mergers, sales, liquidation, or other major decisions. Under the New Act, 100 percent of the members must agree on these decisions.
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