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Forming an LLC in Arizona
Arizona is a great place to start a business. The state has worked hard to establish an inviting business climate, and entrepreneurs have taken note. In fact, Arizona is one of the fastest-growing states in the nation, with a low unemployment rate. Additionally, its low tax rates, business credits, and limited regulations, along with sunny weather and a low cost of living, have made it a big draw for businesses.
Small business owners across the state are encouraged by these healthy indicators, ready to seize new opportunities and pursue economic growth. So, let’s dive into how to start an LLC in Arizona step by step.
Table of contents
- Forming an LLC in Arizona
- Choose a Business Entity for Your Arizona LLC
- Arizona State Filing Fee
- Create a Business Name
- Arizona LLC Registration
- Arizona LLC Operating Agreement
- Get Your Employer Identification Number or EIN
- Appoint a Statutory Agent
- Open a Business Bank Account
- Publication Requirements
- Tax and Regulatory Requirements
- Getting Started with Your Arizona LLC
Choose a Business Entity for Your Arizona LLC
To understand how to start a business in Arizona, you need to understand entity formation. Limited Liability Companies (LLCs) and Corporations are the most popular business types.
Business formation is important because it sets your company apart as a professional company and not just a hobby.
A corporation is a legal entity created separately from those who own and operate it. A corporation’s debts and taxes are separate from its owners, thereby offering the greatest personal liability protection of all business structures. The two most common types of corporations are S and C corporations.
Limited Liability Company
LLCs are the most popular business structure, blending the aspects of corporations, partnerships, and sole proprietorships into a simple and flexible business entity. Like corporations, LLC formation protects the owner’s personal assets and also shields them from personal liability similar to a corporation. They also possess the “pass-through” tax benefits of a partnership.
There are two types of LLCs. LLC run by just own person (single-member LLC) and LLCs run by multiple people (multi-member LLCs)
Starting an LLC in Arizona can be difficult and confusing, especially as a first time business owner. But with a company like Inc Authority in your corner, you’ll not only have your LLC formed for you, but you’ll also get expert guidance beyond business formation, so you never have to wonder or worry about what to do next!
What About DBAs?
DBAs (which stands for “doing business as”) grant business owners the ability to conduct business under an assumed name. A DBA is also referred to as a fictitious business name and is an authorization by the state for your business to operate under an assumed name.
For sole proprietors and owners of LLCs, DBAs offer an affordable way to gain legal recognition for the secondary name of your choice.
- Sole proprietors: For sole proprietors starting a new business, DBAs are a budget-conscious way to gain legal status and work under a creative company name.
- LLC owners: If the name on your LLC paperwork and your business name differ, DBAs offer the opportunity to operate as an LLC under a different legal name.
A DBA provides privileges like the ability to open a bank account, create enforceable contracts and establish federal employer tax status (getting an EIN). It’s possible to file multiple DBAs, allowing a single LLC to operate different businesses under the same legal umbrella. If you’re starting a business or expanding your LLC in Arizona, get the proper legal recognition early on to start off on the right legal footing.
Arizona State Filing Fee
The Arizona Corporations Commission charges a $50 fee to file the Articles of Organization. It costs an additional $35 for expedited processing. In addition, it costs $10 to file a name reservation application by mail or $45 to reserve a name online, if you wish to reserve your LLC name prior to filing the Articles of Organization. When you compare this cost to Massachusetts’ $500 filing fee, you’ll realize how lucky you are to be in such an affordable state.
Create a Business Name
Under Arizona law, an LLC’s name must contain the words “Limited Liability Company” or the abbreviations “LLC,” “L.L.C,” “L.C.,” or “LC.” A professional LLC’s name must contain the words “professional limited liability company” or the abbreviations “P.L.L.C.,” “P.L.C.,” “PLLC,” or “PLC.”
Your LLC’s name must be distinguishable from the names of other business entities already on file with the Arizona Corporations Commission. Names may be checked for availability by searching the Arizona Corporation Commission business name search database.
An available name may be reserved for 120 days by filing an Application to Reserve Limited Liability Company Name with the Arizona Corporation Commission (available on the Corporation Commission website). The form may be completed and filed online or by postal mail. The filing fee is $10 if done by mail or $45 online ($10 filing fee, plus $35 expedite fee).
Using a Trade Name
You don’t have to use your LLC’s official legal name registered in your Articles of Organization when you do business. Instead, you can use a trade name, also called a “DBA” (short for doing business as), assumed name, or fictitious business name.
To do so in Arizona, start using the trade name to identify your LLC in the state. You may register the trade name online with the Arizona Secretary of State for a $10 fee. Registration is not mandatory or confers any legal rights, but does alert others the name is in use in Arizona.
Arizona LLC Registration
Let’s take a look at how to register a business in Arizona, including payables such as the cost, government fees, and so on.
File Articles of Organization
An Arizona LLC is created by filing Articles of Organization with the Arizona Corporation Commission. The articles must include:
- appropriate checked box showing if the LLC is a regular LLC or professional LLC
- the LLC’s name
- description of services of professional LLC, if applicable
- statutory agent’s name and address
- LLC’s business address
- whether the LLC will be member managed or manager managed, and
- signature of LLC’s organizer.
The articles may be completed and filed online. Alternatively, you can obtain a copy of the Articles of Organization form on the Arizona Corporation Commission website and file it by postal mail. Be sure to submit the Statutory Agent Acceptance form with your Articles of Organization. The filing fee is $50 (an additional $35 fee is charged for expedited processing).
Arizona LLC Operating Agreement
An LLC operating agreement is not required in Arizona, but creating one is highly advisable. The Operating Agreement is the primary document that establishes the rights, powers, duties, liabilities, and obligations of the members among themselves and to the LLC.
The Operating Agreement is an internal document and is not filed with the Department of State. If an existing or newly created LLC does not adopt an operating agreement, its existing articles of organization, bylaws or operating agreement, and/or its member control or limited liability company agreement will collectively become its operating agreement.
Issues that should be defined by your LLC Operating Agreement include:
- Member powers
- Rules for meetings
- Members’ voting rights
- How your LLC will be managed
- Guidelines for losses and profits
- Buyout provisions
Once the operating agreement has been adopted, it will provide protection for the members of your LLC. When the members of your LLC have agreed on the terms of your operating agreement and have signed the document, you should keep the agreement in a secure location.
Inc Authority can remind you to do or do for you if you choose to have us handle the paperwork.
Get Your Employer Identification Number or EIN
The next step you’ll want to tackle is getting your EIN or Tax ID number (TIN). This number is like your business’s social security number, separating you from your business. This protects you from fraud and identity theft.
Additionally, an EIN is required by your bank to open a Business Checking Account, file federal income tax returns, obtain payroll services and credit cards, and pay for any LLC cost that Arizona laws require.
To apply for your EIN, you’ll need to complete form SS-4, which can be found on the IRS website.
Appoint a Statutory Agent
Every Arizona business must have a statutory agent (most other states call this a registered agent). A statutory agent is an individual or business entity that agrees to accept legal documents on behalf of the LLC.
The statutory agent can be: (a) an individual who is a permanent, full-time Arizona resident, (b) a domestic corporation or an LLC, or (c) a foreign corporation or an LLC authorized to do business in Arizona. The statutory agent must have a physical street address in Arizona. The statutory agent must accept the appointment in writing, which is done by completing and submitting the Statutory Agent Acceptance form with the Articles of Organization.
Open a Business Bank Account
To keep your personal and business expenses separate and to stay in good standing with the Internal Revenue Service (IRS), you need to open a business bank account for your LLC or corporation.
Setting up a separate bank account for your company makes it easier to for you do business, manage a cash balance, complete, and file your income tax returns with the Department of Revenue, deduct business expenses for taxes, conduct proper accounting, and execute employee payroll. Bank accounts also provide better protection in the event of legal action.
Additionally, business bank accounts create historical relevance through the relationship established with the bank, and can create unrestricted access to long-term funding options, business credit cards, and other financial solutions.
Types of Business Bank Accounts
Not all business bank accounts are created equal. That’s why it’s important to distinguish between the good, the bad, and the best business bank accounts.
A business checking is the most common type of business bank account and the first one you’ll want to open for your business. This because business check accounts allow you to:
- Accept deposits (over-the-counter cash, checks, credit card, and electronic deposits).
- Pay for business-related expenditures (payroll, taxes, business insurance, vendors, lenders, and everything imaginable that you’ll need to operate your business).
- Keep detailed records of all expenses and income.
- Protect your money. This account is Federal Deposit Insurance Corporation (FDIC) insured, meaning you’re covered up to $250,000 by the federal government should anything happen to the bank or your money.
- Support dual signatures. If you have a partnership or employees, you may wish to make it required that two signatures be present whenever a withdrawal or deposit is made.
This one should come as no surprise. A business savings account (like a personal savings accounts) lets you safely save money in a bank. You don’t need this right away though, only when you have an abundance of capital sitting in your business checking account, will you need to open a savings account. It allows you to:
- Make saving money a habit. The most successful companies (think blue chips like Wal-Mart, Amazon, General Mills, Hershey’s, and General Electric) all have solid reserves of capital.
- Protect your business during a cash-crunch. Incidentally, 80% of businesses fail because of cash flow problems.
- Save money so that you don’t have to take out expensive business loans.
- Maintain liquidity. With a business savings account, you can liquidate assets to buy equipment, purchase real estate, and make other big purchases for your business.
- Build business credit. Yes, having a business savings account can actually help you establish and build business credit.
Business Certificate of Deposits
A business certificate of deposit (CD) is a term account that offers maximum security and a guaranteed rate of return. You agree to lend your business’s money to the bank for a set period of time at an agreed-upon interest rate. The interest rates are usually higher than you’d receive from a business savings account or interest-bearing business checking account.
Here are the main features of a business certificate of deposit:
- It pays out 1% or more in interest. Some CDs pay over 2% in interest
- You cannot liquidate the account until the term expires. This means you can’t spend the money.
- The longer the term, the higher the interest rate.
- Different banks offer different term limits. Some CD terms are for a week, months, or even years.
Money Market Accounts
This is a lesser-known type of business a bank account and isn’t for every business owner. You’ll want this type of account if you have a lot of money saved, want higher interest rates than a business savings account or interest-bearing business checking account, but still want some access to your money.
Here are the main features of a business money market account:
- Six withdrawals per month.
- Deposit money anytime.
- Deposit as much money as you like.
- Higher interest rates (currently between .1% and 1.6% APY)
- Require a minimum balance.
- Penalties if you withdraw more than six times in a month. Ask your banker what the penalty is if you withdraw more than six times.
How to Open a Business Bank Account
Opening a business bank account is as simple as gathering some information together and completing an application. Here are the steps to open a business checking account:
- Do your due diligence. Research different banks and discover what each one offers. Then decide which one will work best for your business type. An easy way to do this research is to check out some of our business bank reviews.
- Get a tax ID number. You can get one free EIN from the IRS. If you think you already have one, here’s how to look up an EIN.
- Gather your business formation documents.
- Gather your business license or business name filing paperwork.
- Call the bank and find out what other items you’ll need to open a business bank account. Every bank has different requirements, so make sure you check with them first before attempting to open a business bank account. Sometimes this information will be listed on the bank’s website.
- Go in person or online to complete all necessary paperwork and submit your business documents.
At Inc Authority, we make getting a business bank account easy. How so? Well, when you form your business with us, you gain access to a free Bank of America business checking account. So, don’t wait! Form your LLC in Arizona today!
There is no newspaper publication requirement for LLCs based in Maricopa or Pima counties. The Corporations Commission publishes LLCs formed in these counties on its website, which automatically satisfies the publication requirement.
For LLCs based in other counties, a Notice of LLC Formation must be published within sixty 60 days after the Corporations Commission approves the filing of your LLC’s Articles of Organization. The notice must be published in a newspaper of general circulation in the Arizona county where it does business for three consecutive publications. The LLC may be subject to dissolution if it fails to publish. Filing an affidavit of publication is not necessary.
Tax and Regulatory Requirements
Additional tax and regulatory requirements may apply to your Arizona LLC. These may include:
EIN: If your LLC has more than one member, it must obtain its own IRS Employee Identification Number (EIN), even if it has no employees. If you form a one-member LLC, you still need to obtain an EIN or elect to have it taxed as a corporation instead of a sole proprietorship (disregarded entity). You may obtain an EIN by completing an online EIN application on the IRS website. There is no filing fee.
Business Licenses. Depending on its type of business and where it is located, your LLC may need to obtain other local and state business licenses. For local licenses, check with the city in which the business is located (or county if you are in an unincorporated area). For state licenses, check the Arizona Department of Commerce Licensing Guide.
State taxes. In some cases, for example, if you will be selling goods and collecting sales tax or if you have employees, you need to register with the Arizona Department of Revenue (DOR). For most purposes, you can register online or on paper (Form JT-1/UC-001, Arizona Joint Tax Application).
Getting Started with Your Arizona LLC
Forming a professional LLC or corporation in Arizona is an exciting opportunity, but like starting any business it can be overwhelming. Why not let the business experts at Inc Authority do all the heavy lifting for you?
We’ll form your LLC or corporation, run a business name check, get your EIN, and make sure you have all the licenses and permits needed to run your new LLC. We can also advise you on the things you need to pay, such as LLC cost, Arizona state fees, and other payables.
Not to mention we offer a ton of free management and report tools to help make running your business as simple as possible. Please contact us or visit our website today to get started!
Incorporating is the most powerful thing you can do to legitimize your business. And at IncAuthority.com, our setup LLC services are 100% free. Always. So, don’t wait. Form your free LLC today and enjoy the protection due to you and your business under the law.