How to Form an LLC in Arizona
A limited liability company (LLC) is a type of legal structure common for small businesses. LLCs provide several advantages. These include limited liability protection, pass-through taxation, and a flexible structure.
If you would like the personal liability limitations, tax treatment, and simplicity of an LLC, you can create one yourself. Just follow along with the six simple steps below.
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Step One: Choose a Unique Name for Your Arizona LLC
It would help if you chose a unique and memorable name for your LLC to make it stand out from the competition. According to the Arizona Limited Liability Company Act, your name must:
Be available: Your LLC name cannot be the same as any other business name registered in Arizona.
Designate your business as an LLC: Your name must contain language that illustrates that it's an LLC. You can use "limited liability company" or "limited company" in your name. Or, if you prefer, you can use the abbreviation "L.L.C.," "LLC," "L.C.," or "LC."
To find out whether your name is available, you should do a name search of the Arizona Corporation Commission's business entity database. If there are any matches, you should choose a new business name.
After making sure that your LLC name is available in Arizona, you should continue by conducting an internet screening search. Just type your desired name into your favorite search engine to see if another business uses your name outside of Arizona. If there are still no matches, you should perform a trademark search. You can run this search quickly and easily on the United States Patent and Trademark Office (USPTO) trademark database. This is a crucial step to help you avoid legal trouble for trademark infringement.
Finally, it's a good idea to check for domain name availability. If your domain name is already taken, it may become challenging to create a website that your customers can easily find online. In that case, it may be necessary to rethink your LLC name.
Step Two: Choose an Arizona Statutory Agent
All Arizona LLCs must name a statutory agent. A statutory agent is usually called a registered agent in other states. Their duty is to accept legal papers for the LLC. This includes service of process if someone sues the LLC.
In Arizona, your statutory agent can be:
- An individual who has a residential address in Arizona
- A business entity with a physical address in Arizona
You cannot use a P.O. Box for this purpose. Your statutory agent must have a physical street address. They must also sign a Statutory Agent Acceptance form. This form certifies that they accept the appointment. After they sign it, you should mail or fax it back using the contact details listed on the form. There is no associated fee.
Step Three: File Your LLC Articles of Organization
Arizona LLC formation takes place when you file a legal document called articles of organization with Arizona. The articles of organization are like a charter that formally establishes your LLC as a legal entity. This is not a complex document to draft. The state of Arizona even provides a fill-in-the-blank form for this purpose. To complete your articles of organization, you will need to provide:
- Your LLC's name and principal address
- Your statutory agent's name and address
- A statement on management structure (whether the LLC is member-managed or manager-managed)
- A $50 filing fee
You can file your articles of organization by fax or mail by filling out a hard copy of the form. You will then mail or fax it back to the Arizona Corporation Commission. If you prefer, you can file this form online at the Arizona Corporation Commission website. You will need to log in or create a new account on the website before proceeding.
Step Four: Create an Operating Agreement
Although you are not required by law to have an LLC operating agreement, it's wise to create one. The operating agreement is a crucial legal document. It forms a contract among your LLC members. In it, you will agree on issues like:
- LLC management
- Ownership percentages
- Member rights and responsibilities
- Voting procedures
- Procedures for adding or removing members
- Anything else that's important to your business
An operating agreement promotes more organized operations within your business. Clear LLC rules can help to prevent future disputes among members too. Even single-member LLCs should have an operating agreement. This document helps to show that you treat your LLC as a legal entity separate from yourself. Financial institutions and professionals may also ask to see your operating agreement. You might need to show it to them before they will open a business bank account for you or provide you with services.
Step Five: Comply With LLC Tax and Regulatory Requirements
Your licensing needs and tax obligations will depend on the location and nature of your business. It's vital to follow licensing and tax laws to keep your business in good standing and avoid legal hassles down the line.
The Arizona Department of Revenue provides consolidated information about business taxes and licensing. Some businesses will not need licenses, but others could need several. These requirements vary based on your industry. If you have further questions on business licenses, you can contact the Department of Revenue by email at LicenseCompliance@azdor.gov.
If you think that you may need federal licenses, you should check the Small Business Administration (SBA) website. You can find out which types of business activities are federally licensed.
You will need to file for an Employer Identification Number (EIN) if you have a multi-member LLC or plan to hire employees. An EIN is a unique number that the Internal Revenue Service (IRS) issues to businesses. They use this number to identify companies for tax purposes. In this sense, it's like a Social Security Number for your LLC. You will need an EIN to open a business bank account, apply for a company credit card, and hire employees. It's easy and free to apply for an EIN with the IRS by fax, mail, or online.
To learn more about your LLC's federal tax obligations, you should visit the IRS website.
Step Six: Publish a Notice of LLC Formation
Although it may seem old-fashioned, Arizona requires LLCs to alert the public of their existence with a newspaper notification.
You will receive an LLC approval letter from the Corporation Commission when they approve your articles of organization. Within 60 days of this approval, you must publish a notice of LLC formation in an Arizona newspaper.
According to Arizona law, your notice must appear in a newspaper generally circulated in the Arizona county where your statutory agent is located. The notice must appear for three consecutive issues. If you have any trouble publishing your notice, you should review your approval letter. The approval letter will contain instructions to help you with the publication requirement.
The exception to the publication requirement would be if your statutory agent is located in Maricopa or Pima county. The Corporation Commission automatically publishes a notice on its website for those counties. This fulfills the requirement for you.
Arizona LLC FAQs
Below are some frequently asked questions about starting an LLC in Arizona.
Why Should I Create an Arizona LLC?
The main advantage of LLCs is the limited liability protection they offer. With limited liability protection, LLC owners' personal assets are not at risk for company liabilities. In other words, if anybody sues your LLC or collects on its debts, they cannot come after your personal accounts, cars, or home to satisfy this liability. You will only be liable for your LLC's obligations up to the amount you invested into the company.
Not all business structures offer this advantage. For instance, if you have a sole proprietorship, your business's creditors could come after your personal property to cover the company's debts. The same is true of a general partnership.
Tax treatment is another benefit of the LLC structure. LLCs have the option of pass-through taxation. This means that LLC members pay taxes on their share of the business's profits through their personal income taxes. On the other hand, corporations can be subject to so-called double taxation. This occurs when a corporation pays taxes on its profits at the corporate level, and stockholders pay taxes on their dividends.
Is an Operating Agreement the Same as Articles of Organization?
No, articles of organization form a legal document that you submit to the state of Arizona to officially create your LLC. This document establishes the basic identifying information about your LLC.
An operating agreement is an internal company document. It forms a contract and establishes rules among your LLC members. Having an LLC operating agreement helps to verify the legitimacy of your LLC as a legal entity separate from the individuals who run it. You may need to show this document to receive professional services from accountants, lawyers, and financial institutions.
Can I Operate My Foreign LLC in Arizona?
Yes, if you started your LLC in another state or country, you can still operate it in Arizona. But you will need to register it with the state first. To do so, you should submit a Foreign Registration Statement and a certificate of good standing from the state or country where you started your LLC. Once complete, you can return the Foreign Registration Statement and the $150 filing fee by mail or in person to the Phoenix Corporation Commission office.
Before submitting your Foreign Registration Statement, you should check to ensure that your LLC name is available in Arizona. You should run a name search at the Corporation Commission's business entity database to check for availability.
If your LLC name is already taken, you will need to operate under another business name (a “trade name") in Arizona. In other states, people may call this a fictitious business name, an assumed name, or a DBA (“doing business as") name.
To register your trade name, you should file a trade name application with the Arizona Secretary of State. The associated fee is $10. Remember that you only need to create a trade name if your LLC name is already used in Arizona. If your LLC name is available, operating under a trade name is purely optional.
Can I Reserve My LLC name?
Yes. If you want to reserve your LLC name before starting your LLC, you can file a name reservation application. This application goes to the Arizona Corporation Commission. If you file by mail, the fee is $10. Online filings must pay $45 and receive expedited service. By filing this application, you reserve your LLC name for 120 days.
Do I Need to File an Annual Report for My LLC?
No. Unlike most states, Arizona does not require you to file an annual report for your LLC. This will spare you from the hassle and expense of submitting a yearly document to the state.
Note: State laws are always subject to change through new legislation, rulings in the higher courts (including federal decisions), ballot initiatives, and other means. While we strive to provide the most current information available, please consult an attorney or conduct your own legal research to verify the state law(s) you are researching.
Learn More About How to Start an LLC in Arizona: Talk to an Attorney
Fortunately, forming an LLC in Arizona can be a straightforward process with FindLaw's Business Formation Service. If you have questions or would like further assistance with licensing, taxes, or other legal issues, you should speak to a business organizations attorney near you.
Related Arizona LLC Resources
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