Limited liability company is a legal business structure where the personal assets are protected from business liabilities and lawsuits. By default, LLC follows the flow-through entity, which reduces the double taxation burden on its members. The geographic site of Arizona bestows enormous business opportunities to entrepreneurs of the city and beyond.
The advantages of having an Arizona LLC are:
- the State does not require you to file an annual report, and thus, no yearly LLC fee has to be paid.
- Filing document is easy with additional tax advantages.
Creating an LLC in Arizona with five simple steps
Step 1: Name your Arizona LLC
The first step, to begin with, is to name your company. While brainstorming the name, be sure you select a name that aptly explains the goal of your company and is easily accessible to potential clients. It should meet the Arizona state law requirements.
Follow the below guidelines while naming your LLC:
- The name must be distinctive from any already registered domestic or foreign business entity in the state of Arizona.
- The name must have the phrase “limited liability company”, “Limited Company”, or one of its abbreviations: “L.L.C.”, “LLC”, ”LC”, or “L.C” to make it clear that your company is an LLC. A professional limited liability company’s name must contain the phrase “professional limited liability company” or one of the following abbreviations: “P.L.L.C.”, “P.L.C.”, “PLLC”, or “PLC”.
- The name should not have business entity identifiers such as “limited liability partnership”, “corporation”, “incorporated”, or the abbreviations of these words(“Inc.”, or “Ltd.”) if the business is not incorporated.
- The name should not misinform the public by implying a purpose other than stated in its Articles of Organization.
- The name cannot include words that indicate a government agency such as FBI, State Department, etc.
- State prohibited words such as insurance, trust, attorney, etc., cannot be used unless a licensed individual such as a lawyer is a part of your LLC or your LLC is permitted to operate as such.
- Here is how to do an Arizona LLC name search – To make sure that your desired name is available in the state for use, do preliminary research on the Arizona Corporation Commission website for ‘business name database’.
- (Optional) Check availability of a suitable URL – The Internet has a wide range of potential clients spread across the world. You may want to have access to a relevant domain name for your company’s website. Before selecting your company name, check if the name is available on the web domain, if not, we recommend you reconsider your options.
Note: You can reserve an available name if you do not want to register it right away. This is done by filing an “Application to Reserve Limited Liability Company Name” and paying $10 if done via mail or $45 if performed online to the Arizona Corporation Commission. The name gets reserved for 120-days.
- Do I need “Doing Business As” or Trade Name Registration for my business?
The state of Arizona does not expect you to register a DBA. However, if you do business with a name other than the one registered in your articles of organization, you will want to officially assert your right over it to avoid any discrepancy. This is an advisable business practice. You can register it online by paying $10 to the Arizona Corporation Commission.
Step 2: Choose a statutory agent
A statutory agent is also known as a registered agent in other states. First, you must understand what a statutory agent is. A statutory agent is a person or a business entity that has been appointed by the LLC to receive service of process, official tax, and legal documents from the government on behalf of your business. The statutory agent is the point of contact between your business and the State.
All LLCs in Arizona must have a statutory agent available during conventional business hours at the registered address. Your statutory agent must have a physical street address in Arizona or be an entity authorized to transact business in the state; this address will be put up in public records of Arizona as your statutory agent. An individual or business entity with a P. O. Box as the only address cannot serve as a statutory agent.
Your statutory agent has to accept the appointment by filling out the Statutory Agent Acceptance form, which has to be attached to the articles of organization.
Advantages of having a statutory agent:
- Handles lawsuits privately and responds on time, keeping you compliant and in good standing before the State
- Available during conventional business hours
- You could focus entirely on building your business
Download form: Statutory Agent Acceptance
- Can I be my own statutory/registered agent in Arizona?
Yes, any individual, including yourself or a member of your LLC, can become a statutory agent for your Arizona LLC if you have a physical street address in Arizona, and are available during conventional business hours.
Step 3: File the Arizona Articles of Organization
To officially register your Arizona LLC, you will have to file the Articles of Organization with the Arizona Corporation Commission. This document briefs the government about the key aspects of your LLC and can be filed via postal mail by paying $50 or online by paying $85(additional $35 for expenditure processing). This is a one-time process, and the fee is non-refundable.
A foreign LLC must be filed if you are branching out your existing LLC to Arizona, along with a Certificate of Good Standing attached to your articles of organization.
Following specifications are required to fill the Articles of Organization:
- Name of your LLC
- Statutory agent acceptance form
- Name and physical address of the statutory agent
- Principal office address of the LLC
- Management-type of LLC
- Signature of organizer
Download form: Articles of Organization
Mailing address is mentioned in the articles of organization form.
- What is the difference between manager-managed or member-managed LLC?
- Manager-managed: The administrative powers are focused on one or more managers for everyday events. The decision-making authority is centralized in the hands of the manager(s).
- Member-managed: The administrative powers are dispersed among the members of the LLC for everyday events. Every member’s vote counts in the decision-making. This is decentralized management.
- How much does it cost to start an LLC in Arizona?
The cost to start an LLC in Arizona is $85 (expenditure cost included) online or $50 via postal mail. This fee is to be paid when filing the articles of organization document to the Arizona Corporation Commission along with the statutory agent acceptance form.
- What is the difference between a domestic LLC and a Foreign LLC?
An LLC is domestic if it executes its business in the same state where it was formed, whereas a foreign LLC refers to the LLC formed when the existing LLC expands its business to another state. A Certificate of Good Standing, issued by your domestic LLC state, is required to start a foreign LLC.
- How much time is needed for the processing of my Arizona LLC?
The LLC forms immediately if the payment is made online or takes up to 30 business days if done via mail.
- How to order a Certificate of Good Standing in Arizona?
A Certificate of Good Standing signifies that your business is compliant with state regulations. You can request a Certificate of Good Standing from the Arizona eCorp website online by paying $45 or by mailing the Record Request Form at the cost of $10 to the A.C.C.
Step 4: Arizona LLC Publication Requirement
Arizona law requires every LLC in the state to publish a “Notice of LLC Formation” ad for three consecutive runs (takes 2-3 weeks) in an approved newspaper. The newspaper must be located in the same county as your LLC’s principal office address. This must be done within 60 days of your LLC formation.
List of approved newspapers: Approved newspapers.
The notice should have basic information such as your LLC name, address of your statutory agent and principal office (if different), membership interest, etc. Fees may vary from county to county. Look for approved newspapers and reasonable prices before choosing the newspaper.
Failure to fulfill this publication requirement can lead to strict legal actions or automatic dissolution of your LLC.
Exception: If the principal address of your business is in either Maricopa or Pima counties, you do not have to publish any Notice of LLC Formation.
Step 5: Drafting an Arizona LLC Operating Agreement
An operating agreement is an internal legal document that structures the working procedure of an LLC. Operating agreement manages the internal affairs and thus prevents friction between the members. Arizona does not demand LLCs to have an operating agreement. However, it is recommended to have one for brief anatomy about the company’s functioning. This agreement instructs about the finance capital and effective working details of the business. It need not be submitted to the Arizona Corporation Commission or any other governmental agency.
Every member must have a copy of the document. In situations of conflict of interest or call for amendments, the operating agreement may be looked up for structural proceedings.
The below points are advisable to be included in your Arizona LLC operating agreement:
- Distribution of assets and profits among the members
- Voting structure for decision-making
- Membership interests
- Rights and duties of members
- Dissolution process
Step 6: Get an EIN
EIN stands for Employer Identification Number. It is often referred to as a Federal Tax Identification Number(FTIN). Different states refer to EIN with different names. It is a nine-digit number for your LLC assigned by the Internal Revenue Service (IRS). Having an EIN paves the way for enormous options beneficial for your company. It also provides legitimacy to your business. The IRS uses EIN to keep track of your employment tax returns. You can keep your Social Security Number(SSN) private after acquiring an EIN thus avoiding the chance of identity theft. LLCs with more than one member or LLCs with at least one employee must have an EIN. Applying for an EIN is free of cost and can be done online or via postal mail, or by fax.
Here is a list of benefits of having an EIN:
- You can open a business bank account
- Get a business credit card
- Get business loan
- File and manage Federal and State taxes
- Apply for a business license
- Enables you to separate personal and business finances
- Hire employees in Arizona
Apply online: Online EIN
Apply via mail or fax: Download application for EIN
Mail to: Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999
Fax: (855) 641-6935
- How much time does it take to get an EIN?
The number gets assigned immediately online. The mail-in process takes about 4-8 weeks, and the fax arrives in 4-7 business days.
- What to do if I already have an EIN for my sole proprietorship?
The IRS demands sole proprietorships to get a new EIN while converting to an LLC. It is easy and free of cost.
- How can I file an EIN without a Social Security Number?
Social Security Number is not required to get an EIN unless you are applying online for it. You can fill out IRS form SS-4 via mail or fax to get an EIN for your LLC without SSN.
- Which tax structure should I choose for my Arizona LLC?
IRS taxes an LLC by the number of members in it. While applying for an EIN, you inform the IRS about the number of LLC members in your LLC. Accordingly, you will be informed about the different tax classification options available. There are several factors to consider, such as financial plans, the objective of your company, etc., before choosing the tax status for your LLC. We recommend you speak to a tax professional to discuss thoroughly every aspect before making the final call.
- Do I have to register my LLC with the Arizona Department Of Revenue?
Yes, you must register your LLC with the Arizona Department of Revenue before conducting any taxable business.
- Which license and permits are necessary for business in Arizona?
Arizona does not have a state-wide general business license. Depending on the type and location of your business, one can acquire necessary local and state business licenses.
- How to dissolve an LLC in Arizona?
To dissolve an LLC in Arizona, follow these steps:
- Refer to your operating agreement or articles of organization – One of these documents might have dissolution procedures stated in it: outlining essential points considering asset distribution among the members, settling business debts, notifying creditors, etc. A voting process to dissolve your LLC will be the first step.
- Close your business tax accounts, cancel licenses and permits – Before you dissolve your LLC, you must pay off all taxes, debts, and fines (if any) associated with your LLC to various tax accounts under the Arizona State Government. Cancel every license and permit or transfer if you are entering into a new LLC or business entity.
- “Winding Up”
As per Arizona’s LLC Act, the winding up tasks are as follows:
- Discharge company’s obligations, debts, or liabilities;
- Liquidate and distribute assets among the members;
- Transfer properties of LLC;
Distribute the company’s assets and properties among the LLC members after paying off all the taxes and debts(if any).
- Filing Article of termination
Articles of termination has to be filed with the Arizona Corporation Commission. This document contains basic information about your LLC:
- Name of the LLC to be dissolved
- Signature claiming that all the assets and properties have been applied and distributed among the members
- Signature and contact details of an authorized person
Download: Articles of Termination
The document is filed to the Arizona Corporation Commission with a $35 fee. The processing time is 20 business days following the date of submission of a receipt. Expedited processing happens in 2-3 business days with an additional $35 fee. All the documents must be submitted in a cover sheet.
Note: You will have to file termination forms in every state where your business has its presence. You will be entitled to pay business taxes and file annual reports if you do not file for termination/dissolution in that state.