Updated: February 22, 2023
Need to get a business up and running in Arizona? It's a lot easier than you might expect - forming an LLC is a lot simpler than most business owners think. There are many numerous benefits that it provides—including personal liability protection and tax advantages that come with a separate entity.
The process of forming an LLC in Arizona is fairly straightforward compared to other states in the United States. If you're looking to start an LLC in Arizona, read on for a guide in this multi-step process. With these clear steps, you'll be ready to take your business to the next level and move forward with your new LLC.
The Monahan Law Firm in Glendale offers legal advice and detailed explanations of the process to help guide you every step of the way. Call us today at (623) 300-2727 to schedule an appointment to talk to one of our skilled business law attorneys.
Create a Business Plan
Before creating an LLC, you should create a business plan that serves as an outline of your current activities and outlines your vision for future success. A well-crafted business plan should provide clear details on what the company intends to do—including both short-term and long-term goals, as well as how it plans to reach those goals.
It should include the premise of the business, its products or services, pricing strategy, marketing strategies, target market segmentation, and positioning, objectives, SWOT analysis executive summary, and a financial plan.
Additionally, your business plan should include detailed information about how you will fund your operations. This could be from personal sources such as funds from family and friends or money borrowed from a financial institution. You need to know how much business funding is required to execute your current plans up until you turn a profit.
When estimating costs you must consider everything from office supplies to software, marketing costs, and staff salaries; this information should support all assumptions made in your financial projections. With a complete understanding of all costs associated with launching your business and keeping it running, you can create a realistic budget that sets forth achievable ﬁnancial goals within defined timelines.
Reserve Your LLC Name With the Arizona Corporations Commission
When it comes to forming an LLC in Arizona, one of the most important steps is choosing a name for your business. The name must fulfill state requirements and comply with all relevant filing procedures. Most importantly, it must include either Limited Liability Company, LLC, or L.L.C, so that potential customers will know the exact nature of your business structure.
Additionally, your selected name should not be in use by another business within the state boundaries. To ensure that this is not the case, a search on the Secretary of State’s website can be conducted to check if another company is using that same name.
On top of making sure that your chosen LLC name follows these rules and regulations, there are other considerations when selecting a brand identity. The name of the company should be easy to remember and easy to spell out so any potential customer can understand what it refers to; if possible, include keywords related to your business type such as “Accounting” or “Investment” for financial services companies.
Keep in mind that once you have chosen and registered your LLC's name with the Arizona Corporation Commission (ACC), you cannot change it at any point. So think carefully before making this crucial decision!
When starting a business, considering your online domain name should be an integral part of the planning process. Even if you don't think you'll need a website right away, it is important to reserve your domain in the event you choose to create a website in the future. Before finalizing your LLC name, check if the corresponding URL is available and consider buying it now if so.
In addition to purchasing and reserving their URLs, setting up an LLC can also benefit from reserving names with local or state authorities. For example, Arizona allows entrepreneurs to reserve their LLC names for up to 120 days by paying a small fee and submitting the proper form.
This precautionary measure provides extra protection against someone else claiming your business's name before being able to register as an LLC. Both URL availability and name reservation are helpful measures that provide additional consideration when starting a business and creating an LLC.
Designate a Statutory Agent
Choosing a statutory agent for an LLC in Arizona is an important legal requirement that must be met before the LLC can be formed. The statutory agent granted this power to receive service of process and other official legal documents and notices on behalf of the business. Furthermore, the statutory agent must meet certain criteria - they must provide registered agent services, and have a physical street address located within Arizona.
When forming an LLC in Arizona, it is important to select a Statutory Agent who meets the state's requirements and can provide the necessary services for your business. The Statutory Agent serves as the point of contact for service of process and other official LLC documents. This selection has an impact on both your privacy and whether you need to meet the newspaper publication requirement.
You have three options when selecting your LLC’s Statutory Agent: you can be your own agent, ask a friend or family member, or hire a Registered Agent Service. Being your own agent may cost less in the short term, but hiring a professional Registered Agent Service is recommended if you want to keep your address off public records or don’t have an address in Arizona.
File Articles of Organization
The Articles of Organization is a single document that officially establishes an LLC business. It contains basic information about the workings of the business including its name and address. This document must be properly filed with the Arizona Corporate Commission. The process is relatively easy, requiring only the completion of a simple online filing form or a form by mail. Filing time and filing fees may vary based on the county you're located in.
In order to prepare the Articles of Organization, you will need certain essential pieces of data such as your LLC's name and physical address. Once this information has been collected, it needs to be submitted through either an online form or by post in paper form. After filing them with the proper authorities and paying the filing fees, your LLC business will officially exist on paper and abide by state laws governing LLCs in Arizona.
Then, the state will issue you a certificate after the LLC formation documents have been filed and approved. This is to confirm the LLC officially exists. The certificate is a vital document that allows the LLC to gain access to certain rights and privileges, such as applying for an Employer Identification Number (EIN), obtaining business licenses, and opening a business bank account. It also serves as evidence for third parties when doing business transactions with your LLC.
Having an official state-issued certificate of formation can also help to protect your personal assets from any liabilities incurred by your business. Without it, creditors may seek recourse from other sources of payment such as personal investments or possessions.
An authentic certificate confirms that you have abided by all rules and regulations set forth in making an LLC and can prove it. As such, asserting yourself properly with this appropriate paper trail serves as a great way to maintain expected ethical behavior between businesses.
Create an Arizona LLC Operating Agreement
An operating agreement is a vital legal document that outlines the rules, regulations, and principles governing the operations of an LLC. Having a written document reduces potential disputes between members in an LLC and provides specific guidance in case such situations arise.
Without the guidance of an operating agreement, state laws would be used to settle any disagreement between members or to resolve any other dispute. In addition, having this written agreement ensures that all involved parties understand their respective roles and expectations within the LLC’s corporate structure.
Among other things, an operating agreement should outline the LLC's name, principal business address as well as its members and/or managers (if they exist). Other important elements include stating how profit will be shared among members, how accounting is to be handled, the voting rights of each member on decisions regarding company transactions, and more.
By signing this document, each signor agrees to abide by the terms detailed in it. This prevents minor disagreements from escalating into much larger issues down the line. For example, it's essential for a business to have an operating agreement, which maintains limited liability status.
in order to open a bank account or complete other legal tasks, to prove that your business is a separate entity. Investing time upfront to create this essential document for your LLC may save time and money if any legal issues arise later on.
Publish a Notice of Formation
Arizona has established publication requirements for all Limited Liability Companies (LLCs) formed within the state. All LLCs are required to publish a Notice of Formation in an approved newspaper in the county of the LLC's principal office.
The notice must run for three consecutive weeks and must list
- The name of the LLC
- The name and address of the statutory agent
- A description of the business address and location
- Whether the LLC is manager-managed or member-managed, and
- The name and address of each manager or member.
Notably, this requirement does not apply to LLCs formed within Maricopa county or Pima county.
Failure to adhere to Arizona’s publication requirements can result in fines, penalties, and even voidance of any contracts affiliated with LLCs that do not meet these requirements. Furthermore, all members should be aware that failure to properly publish a Notice of Formation or Notice of Publication, can lead to delaying major corporate activities such as purchasing property or authorizing contracts with outside entities.
As an LLC owner in Arizona, it's vital that you are aware of your responsibilities under the law when publishing your Notice of Formation. For this reason, it's important to consult a professional business attorney to ensure that you are following the proper procedure.
Get a Federal Employer Identification Number (EIN)
An Employer Identification Number (EIN) is a nine-digit number issued to business entities operating in the United States by the Internal Revenue Service (IRS). Applying for an EIN is one of the initial steps taken when a business is formed, as it serves several important purposes.
In particular, businesses that have employees must obtain an EIN; without it, employers are not able to withhold and report payroll taxes from their employee’s paychecks. Additionally, an EIN can be used to open a business bank account, which facilitates paying employee wages, registering for business licenses and permits, establishing retirement plans, and contracts with vendors or other businesses.
The application process for an EIN is relatively simple and available online or through the mail. In either case, applicants should be mindful of required documents such as articles of incorporation as well as know how many owners are in their LLC and how much gross income they anticipate their business will earn in the upcoming year.
Furthermore, it's essential to keep track of this information at all times since businesses with multiple owners must have the same ownership percentages listed on their applications and tax returns. To obtain the necessary documentation relative to your LLC’s ownership structure, you may need to reach out to a qualified attorney in Arizona.
Comply With Arizona's Tax Requirements
Arizona does not have a general state sales tax, making it one of the more attractive states for business owners. However, businesses that do generate taxable sales need to apply for and collect state taxes known as Transaction Privilege Tax (TPT).
This includes retail stores, restaurants, bars, and contractors who are required to pass on TPT charges to their customers. Arizona's Department of Revenue has detailed information on how businesses can register and pay withholding additional taxes.
For LLCs that pass through income via another governing entity, such as an S corporation or partnership, both business owners and members are required to pay an income tax directly to the state of Arizona. These individuals will include this filing requirement when preparing their personal taxes each year. Depending on their earning amounts, tax brackets, and other factors set by the state, they may be eligible for certain deductions which could significantly reduce their overall income tax burden.
The most important thing is that you comply with Arizona's tax requirements. Failing to adhere to the rules and failing to pay required additional taxes can endanger your business. If you have questions about Arizona's tax requirements, consulting with a business law attorney can provide clarity and help you in filing your corporate taxes.
Understand Your Ongoing Annual LLC Fees
When setting up a business entity in Arizona, you may be surprised to learn that no LLC Annual Report is required by the Arizona Corporation Commission (AZCC). Unlike most states which mandate that LLCs file an Annual Report and pay an annual fee, the AZCC has no such requirement.
This helps make setting up a business entity in Arizona more affordable than in other nearby states because skipping this step eliminates additional paperwork and fees.
Though no LLC Annual Report is required in Arizona, this doesn't mean you are disregarding all obligations with the state altogether. Tax returns must still be filed with the Arizona Department of Revenue each year and any applicable corporate taxes will need to be paid on schedule.
Additionally, foreign LLCs relocating to Arizona must pay registration fees with the AZCC when they register their businesses with the state. These steps will keep your business compliant and help ensure its success going forward.
What To Do After Setting Up Your LLC
Once you have established your LLC, you can relax. Now that you have an LLC, instead of a sole proprietorship, your personal accounts and business accounts are now separate entities. Keeping your personal finances and business finances separate has finally been achieved and the additional steps moving forward with your LLC are minimal. They include maintaining legal requirements, marketing your LLC, and insuring your business.
Maintain Legal Requirements
In order to establish its legal standing, registering an LLC is a very important first step in taking your business to the next level. Once registered, it’s critical to maintain the legal requirements that come with having an LLC according to your state's regulations and website.
This includes making quarterly tax payments and ensuring that key information such as your registered physical address and the address of your statutory agent have been updated.
For example, while Arizona does not require its LLCs to file an annual report, they still need to have a statutory agent on record which acts as a receiving point for official state documents such as summonses or notices of tort claims.
Market Your LLC
Creating a successful marketing plan for an LLC is essential for gaining recognition in the marketplace and increasing revenue. The first step to take when it comes to marketing an LLC is to launch a website with a domain name that you can use to communicate and promote your business.
A great website should be informative, friendly, and easy to navigate. You should include information about your products or services, any special deals that you offer, contact information and ways to connect with your team, and anything else that may be relevant.
In addition to launching a website, you should also consider traditional forms of advertising such as taking out ads in local publications or online, sending out mailers in your community that advertise the business and any related promotions, creating social media accounts on popular networks such as Facebook and Instagram so you can reach potential clients quickly, and getting involved in community events where you can promote the business with flyers or word-of-mouth.
With all these strategies combined together in an effective plan, your LLC will soon have increased visibility in the marketplace and more customers ready to purchase its goods or services.
Evaluate and Choose Business Insurance Options
In Arizona, businesses must obtain certain types of insurance in order to protect their operations, employees, and customers. For example, businesses are required to have Workers' Compensation Insurance if they employ staff in the state. This type of insurance helps cover medical bills and lost wages when injuries occur while on business premises or while performing work-related activities.
Additionally, Arizona business owners should consider obtaining liability insurance and commercial property insurance to protect against legal claims or damages to physical items such as buildings or equipment.
Liability insurance could provide coverage for the cost associated with vendor or customer lawsuits resulting from mistakes made by a business owner during operation. Commercial Property Insurance will protect any equipment used for business purposes such as furniture, computers, and vehicles. You, as a business owner, should evaluate your personal risk exposures in order to determine what type of coverage is necessary for your individual needs.
How an Attorney Can Help You Create an LLC
Maybe you've had a sole proprietorship of your business and you're looking to change to an LLC in order to gain personal asset protection. If this is your case, creating an LLC in Arizona can be a complex endeavor due to the many legal and financial aspects involved. An experienced attorney can help guide you through the entire process - explaining the tax forms, processing times, and licensing requirements to ensure that your LLC is created correctly and meets all state requirements.
If you have any additional questions about tax liability, LLC Articles of Organization, or other general inquiries, our business formation lawyers at Monahan Law Firm in Glendale can provide help guide you through the whole process. Call us today at (623) 300-2727 to schedule an appointment with one of our business attorneys to set up your Arizona LLC today.