Top 5 Legal Mistakes Small Business Owners in Utah Make
Disclaimer: This blog is for legal informational purposes only. Nothing within this blog should be considered legal advice. Engaging with this article and this website does not create an attorney-client relationship between you and Walker Law Firm of Cache Valley. We are not your attorneys. Consult with a lawyer if you are in need of legal assistance.
Starting and running a small business in Utah is exciting—but it’s also full of risks. Whether you’re opening a bakery in Logan, a construction company in Ogden, or a tech start-up in Salt Lake City, every small business owner faces legal challenges. Many of these challenges aren’t obvious until it’s too late, and they can lead to costly lawsuits, fines, or even the closure of your business.
Below are the top five legal mistakes Utah small business owners commonly make—and what you can do to avoid them.
1. Not Choosing the Right Business Structure
Many Utah entrepreneurs start their business as a sole proprietorship or a partnership because it seems simple and inexpensive. But here’s the problem: those business structures offer no personal liability protection.
That means if your business gets sued or goes into debt, your personal assets—your home, car, and savings—could be at risk.
A better option for most small businesses is forming a Limited Liability Company (LLC) or a corporation (S-Corp or C-Corp). These structures can protect your personal assets, make tax planning easier, and help you build credibility with clients and investors.
In Utah, forming an LLC or corporation requires filing specific documents with the Utah Division of Corporations and Commercial Code and maintaining annual renewals. Failing to do so can result in penalties or even the state dissolving your business entity.
Tip: Talk with an attorney before choosing your business structure. A little planning now can save you major headaches later.
2. Skipping Written Contracts
Utah law generally recognizes verbal contracts, but enforcing them can be difficult and expensive. Many business owners rely on “handshake deals” with clients, partners, or vendors. That’s risky.
Without a clear, written agreement, you may find yourself in a “he said, she said” argument if something goes wrong. A good contract lays out each party’s responsibilities, deadlines, payment terms, and what happens if someone doesn’t hold up their end of the bargain.
Common contracts Utah businesses often need include:
- Service agreements for clients
- Employment or independent contractor agreements
- Non-disclosure and non-compete agreements
- Partnership or operating agreements
- Lease agreements
Tip: Don’t copy a contract from the internet. Many online templates don’t comply with Utah law and can create more problems than they solve. Have an attorney draft or review your contracts to make sure they’re enforceable and protect your interests.
3. Not Understanding Employment Law
As your business grows, you’ll likely need to hire employees. That’s where things can get complicated fast. Utah businesses must comply with both state and federal employment laws, including rules about wages, discrimination, safety, and terminations.
Common employment law mistakes include:
- Misclassifying workers as independent contractors when they’re actually employees
- Failing to provide proper wage and hour documentation
- Not having written employment policies or handbooks
- Firing employees without following lawful procedures
These mistakes can lead to complaints filed with the Utah Labor Commission or even lawsuits.
Tip: Make sure every employee has a written job description, a clear pay structure, and access to your company’s policies. Having an employment lawyer review your hiring practices can prevent future disputes.
4. Ignoring Intellectual Property (IP)
Your business name, logo, product designs, website content, and even your social media posts are intellectual property. Failing to protect these assets—or accidentally using someone else’s—can lead to serious legal trouble.
Utah businesses often overlook these key steps:
- Registering a trademark for their name or logo with the U.S. Patent and Trademark Office (USPTO)
- Protecting creative work (like photos, videos, or code) with copyrights
- Using proper licenses for software, images, and other materials
- Checking for existing trademarks before launching a brand
If someone else uses your logo or company name, you could lose customers and damage your reputation. Likewise, if your business uses someone else’s intellectual property without permission, you could face a lawsuit.
Tip: Conduct a trademark search before naming your business and register your mark as soon as possible. Protecting your brand now can save you thousands later.
5. Neglecting Ongoing Compliance and Recordkeeping
Many business owners form an LLC or corporation and think the job is done. But in Utah, you must maintain proper records and file required documents every year.
Failing to stay compliant can result in fines, loss of liability protection, or dissolution of your business. Common compliance tasks include:
- Filing annual renewals with the Utah Division of Corporations
- Keeping accurate financial records
- Holding and documenting annual meetings (for corporations)
- Maintaining a registered agent with a valid Utah address
Poor recordkeeping can also make tax season stressful and cause problems if your business is ever audited or sold.
Tip: Keep your records organized, and work with a Utah attorney or accountant to ensure your business stays in good standing with state and federal authorities.
Bonus: Not Planning for the Unexpected
A final but often overlooked mistake is failing to plan for what happens if something goes wrong—like a business partner leaving, a major lawsuit, or the owner becoming ill or passing away.
An attorney can help you create:
- A buy-sell agreement that spells out what happens if an owner leaves
- A succession plan for who runs the business after you
- An estate plan to protect your business interests and family
Without these, your business could be thrown into chaos, leaving your family or employees scrambling.
How Walker Law Firm of Cache Valley Can Help
At Walker Law Firm of Cache Valley, we help Utah business owners protect their hard work from legal risk. Attorney Matthew A. Walker has years of experience guiding clients through:
- Business formation and governance
- Contract drafting and review
- Real estate contracts and lease agreements
- Employment and HR compliance
- Estate planning and business succession
- Civil litigation and appeals
Whether you’re just starting your business or have been running it for years, a short consultation can reveal hidden risks and opportunities to strengthen your legal foundation.
Let us help you protect what you’ve built. Call Walker Law Firm of Cache Valley today to schedule a consultation and get the peace of mind your business deserves.
Walker Law Firm of Cache Valley
Trusted legal guidance for Utah businesses, families, and individuals.