How to Form an LLC in Arizona
A limited liability company (LLC) is a type of legal structure popular among small businesses. LLCs provide several advantages. These include limited liability protection, pass-through taxation, and a flexible structure. To start your LLC in Arizona, follow the step-by-step guide below.
Steps to Form an LLC in Arizona
Name Your LLC
It would help to choose 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."
Research Name Availability. 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.
Research Domain Name. It's a good idea to check for domain name availability. Conduct an internet search to see if your business name is available as a domain name. Type the company name into an internet search engine to see if another business uses your name. If your domain name is unavailable, it may be necessary to rethink your LLC name.
Research for Trademark Infringement. 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.
Reserve Your Business Name. 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.
Get a Statutory Agent
All Arizona LLCs must name a statutory agent. Other states refer to a statutory agent as a registered agent. A statutory agent accepts legal papers for the LLC. This includes service of process if someone sues the LLC.
In Arizona, your statutory agent must be:
- An individual who has a residential address in Arizona
- A business entity with a physical address in Arizona
Your statutory agent must have a physical street address, not a P.O. Box. 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.
File Your Articles of Organization
Arizona LLC formation takes place when you file a legal document called articles of organization with the Arizona Corporations Commission. The articles of organization are like a charter that formally establish 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 the following information:
- 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's website. Before proceeding, you will need to log in or create a new account on the website.
Draft an Operating Agreement
Although you are not legally required 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 to open a business bank account or provide you with services.
Get an EIN
You must file for an Employer Identification Number (EIN) if you have a multi-member LLC or plan to hire employees. An EIN is a tax identification 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. Applying for an EIN with the IRS is easy and free by fax, mail, or online.
Set Up Business and Tax Accounts
Your tax obligations and licensing needs 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. You should check the Small Business Administration (SBA) website to see if you need federal licenses. You can find out which types of business activities are federally licensed. Visit the IRS website to learn more about your LLC's federal tax obligations.
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 resides. 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 will be if your statutory agent is in Maricopa or Pima county. The Corporation Commission automatically publishes a notice on its website for those counties. In doing so, it fulfills your requirement.
When business owners start an LLC in Arizona, they must register for LLC tax and business accounts in the state. Arizona has a Joint Tax Application (Form JT-1) to apply for a transaction privilege tax (TPT), use tax, employer withholding, and unemployment insurance.
State Business Tax
If the LLC elects for pass-through taxation, the LLC profits go on the member's personal tax returns. Only if the LLC elects corporate status does the LLC have to pay Arizona corporate taxes on the LLC income.
State Employer Tax
You must set up employer withholding accounts and unemployment insurance if you have employees. You can set up these accounts when registering your new business with the Arizona Department of Revenue. Additionally, you must:
- Report new hires within 20 days of their hire date with the Arizona Department of Economic Opportunity
- Provide worker's compensation to employees
Transaction Privilege Tax
If you are a vendor, you may need to apply for the transaction privilege tax (TPT) with the Arizona Department of Revenue. The TPT is not exactly a sales tax but a tax for the privilege of selling in Arizona. You can register for a TPT account when you set up your new business with the Arizona Department of Revenue.
Business Licenses and Permits
Depending on your business operations and location determines the licenses and permits your business needs. Arizona does not have a state business license. However, your LLC may need to register for a business license or permit in the city and county in which it operates. The Arizona Commerce Authority has more information about the licenses and permits for your business.
Registration in Other States
If you want to do business in another state, contact that secretary of state's office to register as a foreign LLC. They may request a certificate of good standing to prove your LLC is compliant with Arizona's corporate laws. The fee for a certificate of good standing is $10.
The Arizona Corporation Commission does not require your LLC to file annual reports or pay annual fees to keep your LLC in good standing.