Monahan Law Firm Logo

4 Common Pitfalls When Forming an Arizona LLC

Updated: June 6, 2022

Est. Reading: 2 minutes

Starting a business is an exciting experience. For many people in Arizona, the best way to set up a business is by using an LLC, or Limited Liability Company. While this is certainly one of the best options in many situations, there are also some pitfalls that need to be avoided. Learning about some of the most common problems associated with forming an Arizona LLC will help get your business off on the right foot.

Following Outdated Laws

The governor of Arizona signed SB1353 into law on April 10th, 2018. This effectively repealed the laws on the books since 1992, and replaces them with the new “Arizona Limited Liability Company Act” (ALLCA), which went into effect on September 1st of 2019. This means one of the biggest potential problems business owners could face is following outdated laws. Many ‘self-help’ LLC options, and even some professionals, aren’t up to date on the latest rules and regulations put forth by the ALLCA. 

Failing to Set Up Separate Finances 

Perhaps the most common mistake that business owners make when using an LLC is failing to separate their personal finances from business finances. This can cause a lot of problems, and even negates some of the benefits of using an LLC. When having an LLC created, it is important to also create a business bank account and other financial tools, if one isn’t already in place. Putting this off, or failing to do it entirely, will cause a lot of difficulties down the road. 

Common pitfalls when forming an Arizona LLC

No Signed Operating Agreement

If there are going to be multiple owners of the business, it is a good idea to have a signed operating agreement in place. While not strictly required by law, this agreement is an easy way to prove who owns what percentage of the LLC. It will also place limits on how owners can transfer their membership, as well as stopping them from disclosing confidential information. A good operating agreement isn’t difficult or expensive to set up, and can provide a lot of benefits. 

Trying to Handle It on Your Own

While there are quite a few “DIY” LLC options on the Internet to use, they aren’t able to provide you with the customized solutions that you need. They often use generic laws and processes that apply throughout the country rather than those that are specific for Arizona. Even those that do use local laws can’t offer the same level of service that you’ll get with a business attorney. If you’re thinking about starting an LLC, please contact us to discuss your options and avoid these and other common mistakes. 

Share :
Attorney Patrick Monahan

Patrick Monahan

Patrick Monahan is the managing partner of Monahan Law Firm, PLC. Patrick began his legal career practicing real estate, construction, and general business litigation.
Text Us
tagphone-handsetmap-markerclockcrossmenu linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram