In honor of the STARTright “Utah LLC” release and, I will be looking at how a Utah LLC is taxed.
The State’s tax treatment of Utah LLCs is taken from the Revised Limited Liability Company Act (Citation: Utah Code Ann. §§ 48-2c-1-1 to 48-2c-1902).
In section 117 tax treatment of Utah LLCs is set forth:
A company established under this chapter or a foreign company transacting business in this state shall be taxed as provided in Subsection 59-10-1403(4).
Section 59-10-1403(4) then states:
A pass-through entity that is a limited liability company that transacts business in the state shall be classified for purposes of taxation under this title in the same manner as the limited liability company is classified for federal income tax purposes.
Thus, 1403(4) tells us clearly that the Utah LLC will be taxed in the same manner the owner determines it will be taxed at the federal level. Utah LLC’s that elect corporate taxation on the federal level are taxed according to Utah state corporate tax laws. Utah LLC’s electing pass-through (partnership) or disregarded (sole proprietorship) taxation at the federal level will not be taxed at all in compliance with 1403(2):
The income or losses of a pass-through entity shall be divided among and passed through to taxpayers.
According to Section 1403(1), a pass-through Utah LLC is not taxed; the Utah LLC members are attributed the income or losses of the LLC on a distributive basis (in other words if you own 40% of the Utah LLC, you get 40% of the income and losses attributed/allocated to you and you must record it on your personal tax statement). Unlike states such as California which directly tax a California LLC, a Utah LLC that is pass-through is not taxed directly with franchise taxes according to section 1403(1).
Subject to Subsection (3), a pass-through entity is not subject to a tax imposed by this chapter.
The tax imposed by Utah upon the owners for their distributive shares of income from the Utah LLC is derived from or connected with Utah sources only.
Filing Requirement
For a single member Utah LLC, the member merely shows the LLC income on the member’s personal state income tax forms.
For multi-member Utah LLC, the LLC may or may not have to file a TC-65 form with the Utah State Tax Commission (http://tax.utah.gov/).
A Utah LLC with non-Utah residents must file a TC-65.
A Utah LLC with only members who are Utah residents does not have to file a TC-65, however the LLC must keep up to date and accurate records that are available for inspection by the Utah State Tax Commission. Members of a Utah LLC with all resident members merely represent their respective share of income or losses on their personal Utah income tax statement.
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As a business law attorney and founder of STARTright, Spencer Rose is the driving force behind STARTright, and the voice behind STARTright Talk. A graduate of Boston University School of Law, Spencer developed STARTright to help entrepreneurs navigate the waters of starting a new business, especially the legal and tax aspects. "Talk is my opportunity to write about all kinds of aspects affecting entrepreneurship and business building." 
