The Limited Liability Company (LLC) is a popular business structure for many businesses starting in Arizona. The LLC provides asset protection, protection from business debts, and can save money on taxes. With a little research, you can learn how to form an LLC in Arizona without an attorney.
Unlike a sole proprietorship or partnership where the small business owner can be held personally liable for lawsuits against the business, the LLC is a separate legal structure, protecting the business owner’s personal assets.
Besides the liability protection, the Limited Liability Company provides several other benefits over the sole proprietorship, partnership, and corporation because of the multiple tax options, ease of administration, and management flexibility.
Steps to Form an Arizona LLC
To form a Limited Liability Company in Arizona, the Articles of Organization are filed with the Arizona Corporation Commission. The LLC filing fee for both online and by mail is $50 for standard filing, which takes around three weeks. For faster filing and the expedited fee of $35 reduces the filing time to 7 – 10 business days.
Total Time: 10 minutes
Step 1: Choose an LLC Name
The first step in forming an Arizona Limited Liability Company is to make sure the name you want is available. There can’t be another LLC in Arizona with the same name as the one you want. If you pick a name that already exists, a message will pop up, saying, “The entity name is not available.” If there is a conflicting Trade Name, you must choose another entity name; otherwise, the system won’t let you move forward.
There are a few requirements to note when naming an LLC in Arizona.
For starters, the legal name of the LLC must include the following words or abbreviations at the end of the name:
– Limited Liability Company
– Limited Company
Additionally, the name may not contain the words or abbreviations; “association,” “corporation,” or “incorporated” or use words such as “bank,” “deposit,” “credit union,” “trust,” or “trust company” unless the LLC is registered to operate as such. See the full list of Arizona LLC name requirements before finalizing your name.
If you have a name you like, but aren’t ready to file for the LLC, a name reservation can be made for up to 120 days before filing the LLC. To do so, fill out the Application to Reserve Limited Liability Company Name with the Arizona Corporation Commission. The cost to reserve the name is $10.
Another consideration when selecting a business name is also searching to be sure a domain name is also available.
Step 2: Arizona Statutory Agent Information
A Statutory Agent (referred to as a Registered Agent or Resident Agent is some states) is an individual or company with a physical presence in the state of Arizona. The Statutory Agency acts as a point of contact to receive legal documents, tax notices, summons, subpoenas, etc. on behalf of the LLC.
Any individual can be the Arizona LLC Statutory Agent. This can be the owner, family member, accountant, employee, etc., provided they are at least 18 years old, have a physical street address in Arizona, and are generally available to receive service of process during normal business hours. The agent ensures that the company receives all important documents such as tax forms, summons, summons, and other legal documents in a reasonable time frame.
Any individual meeting the above requirements can be the agent, however, the agent’s name and address become public record, and with that comes a loss of privacy. This is more important for some entrepreneurs, especially when they are doing business from home or still employed. Hiring a Statutory Agent service like Northwest Registered Agent to be the Registered Agent will reduce the number of unwanted phone calls and mailings.
The Arizona Statutory Agent must accept the confirmation email or accept the appointment in writing. This will be completed by submitting the Statutory Agent Acceptance form from the Arizona Corporate Commission within seven days of receipt. Not confirming will delay the filing of the LLC until accepted.
Learn more about the requirements for a Statutory Agent in Arizona
Step 3: File the Articles of Organization
The paperwork to create an LLC in Arizona is called Articles of Organization.
All faxed and mailed Articles of Organization will need to be sent with a cover sheet. A PDF of the required cover sheet can be found on the Arizona Corporation Commission website in the “Miscellaneous Forms” section.
Turnaround time for approving the Articles of Organization is typically around three weeks.
If you have questions, contact the Arizona Corporation Commission.
Phone Number: 602-542-3026
When filing out the Articles of Organization, there are a few sections that may be unfamiliar. Let’s go over a few of those sections.
Effective Date – By default, the LLC is effective on the date submitted. If you prefer to have the LLC officially start at a later date (up to 90 days), enter that date in the field
Character of Business – Here, you can select the activities the business will be engaged in. If you can’t find one that is relevant or want to keep options open, choose “Any legal purpose.”
Duration – Most businesses intend to exist forever and would suggest “perpetual.” If you have a specific end date in mind (typically used for investment-related businesses), choose the close date.
Known Place of Business – Include the physical address for the LLC. This has to be a physical street address in Arizona and not a PO Box or personal mailbox service. The known place of business can also be the same as the Statutory Agent’s street address.
Member Structure – The Manager/Member Information section asks if the LLC is Member-Managed or Manager-Managed.
Member-Managed LLCs have an active involvement in the day-to-day operations of the business.
Manager-Managed LLCs are managers of the LLC hired by the members to run the business, similar to a CEO of a corporation.
Most LLCs elect a member-managed management structure.
You don't have to form your LLC by yourself or pay an attorney!Forming an LLC is a little intimidating, especially when it’s your first time. Professional entity formation services help guide you to make sure it’s done right. Check out our reviews of popular LLC formation services to learn more.
You have an Arizona LLC! Now what??
Once the LLC has been formed, there are a few additional steps to take care of. Below is a list of the most common tasks.
After the LLC is approved, it is typically necessary to publish an ad in a newspaper (Notice of Publication) to complete the registration process. There is no publishing requirement for businesses whose principal address is in either Maricopa County or Pima County. LLCs in other counties are required to publish an ad in the legal section of a newspaper with general circulation in their county within 60 days of filing the Articles of Organization. The newspaper has to be located in the same county as the LLC’s Known Place of Business, and an ad has to run in 3 consecutive weeks.
After the ad has run, an Affidavit of Publication will be sent, which should be kept with your business records. Although it’s optional, it’s generally recommended to record the Affidavit of Publication with the Arizona Corporations Commission.
The Arizona Secretary of State has a list of approved newspapers.
Prepare an Arizona LLC Operating Agreement
The operating agreement is an internal document that governs the framework of an LLC. This document covers ownership percentage, ownership rights, member responsibilities, how profits and losses are distributed, and more.
There is no state law requiring an Arizona LLC to have an operating agreement, but it is still worth considering. Without an operating agreement:
- The LLC could be subject to generic state rules that may be detrimental in the event of a lawsuit.
- Member’s personal liability protection may be diminished.
- Members may not fully understand their roles and responsibilities, which could lead to costly disputes in the future.
Learn more about the Arizona LLC operating agreement
Obtain an EIN
The EIN or Employer Identification Number (also called a Federal Employer Identification Number or FEIN) is a unique 9-digit tax identification number assigned to a business by the Internal Revenue Service (IRS). Similar to a social security number for an individual, the EIN identifies business entities for tax purposes. The EIN will be needed to hire employees, open a bank account, register for business licenses and permits, file tax returns, and more.
There is no cost for the EIN when registering through the IRS. The number is available immediately when applying through the IRS website; however, you can register by phone, fax, or mailing IRS Form SS-4.
Related: How to Register for an Arizona EIN
Elect the LLC’s Form of Federal Income Taxation
One of the major benefits of the Limited Liability Company is the tax flexibility it provides. When applying for the Employer Identification Number, you will choose how the entity will be taxed for federal income tax purposes. While there are some limitations, an LLC may be classified for federal income tax purposes as a:
- Sole proprietorship
While this may sound confusing, this refers to how the LLC is taxed, not the legal structure.
Related: How can an LLC be taxed?
By default, LLCs are pass-through entities. Instead of the LLC paying taxes on profits, the profits or losses flow through to the members.
Single-member LLCs will, by default, be taxed as a sole proprietorship. The members can elect to be taxed as a C-corporation or an S-corporation.
Multi-member LLCs will, by default, be taxed as a partnership. The members can elect to be taxed as a C-corporation or an S-corporation.
In general, the difference between being taxed as a corporation and being taxed as a sole proprietorship or partnership the profits and losses are passed to the member’s federal income tax returns based on their percentage of ownership. As a result, the owner will pay self-employment taxes on all business profits. As an alternative, electing to be taxed as a corporation allows the members to take a reasonable salary and then pay payroll taxes. Any remaining profits are distributed and aren’t subject to payroll taxes, resulting in potential tax savings.
Before electing how your LLC will be taxed, be sure to talk with an accountant to assess which one will be best for you.
Open an LLC Bank Account
Opening a bank account for your LLC is important for liability protection as the account separates the business’s funds from the member’s personal funds.
Several documents will be needed to open a business bank account, such as:
- A banking resolution is a document that authorizes the members to open a business bank account on behalf of the LLC.
- Copies of the original formation paperwork from the state showing the creation of the LLC.
- Driver’s licenses of the members.
- Depending on the LLC age, an Arizona Certificate of Good Standing may be needed to prove the LLC is active and in good standing with the state.
Apply for Business Licenses and Permits
Depending on what your business does and where it is located, there will likely be various business licenses and permits to register for before starting. Some common registrations include:
- Business License – Some cities require businesses to obtain licensing before they can start.
- Professional License – Certain services such as barbershops, accountants, salons, and others must be licensed.
- Transaction Privilege Tax License (TPT) – Sometimes referred to as a sales tax, the Transaction Privilege Tax is a tax on businesses from the Arizona Department of Revenue for the privilege of doing business in Arizona.
File Annual Reports
An annual filing requirement for Arizona LLCs to file an annual report with the Arizona Corporation Commission. The annual report updates ownership information and other details.
Related: How to File an LLC Annual Report
Common Questions To Starting an LLC in Arizona
How much does it cost to start an LLC in Arizona?
There is a state of Arizona filing fee of $50. In addition a Notice of Publication must be run in a local newspaper, which should cost between $60 – $130.
Is there a yearly fee for an LLC in Arizona?
There are no recurring fees to keep the LLC active, however an Annual Report must still be filed.
How long does it take to start an LLC in Arizona?
It normally takes around three weeks for the the LLC to be approved in Arizona, though expedited processing is available for an additional fee.
Do I have to pay to hire a Statutory Agent?
Anyone can act as a Statutory Agent, provided they are at least 18 years old, reside in the state, and are generally available during normal business hours.
If I have an LLC, is a business license required?
It’s sometimes thought that the LLC and business license are the same, but they aren’t. An LLC is referred to as the business entity, which is how the business is organized to conduct business. A business license is an approval from a government entity to legally operate.
What is a Foreign Limited Liability Company?
An LLC that is physically operating in states outside of where it was formed. Physically operating means having a presence such as having an office or employee. The LLC will need to register as a foreign LLC in each state that it plans to operate.
What is a Professional Limited Liability Company?
Businesses that require state licensing such as accountants, attorneys, podiatrists, physical therapists, acupuncturists, etc. often must file as a Professional Limited Liability Company (sometimes referred to as a Professional LLC or PLLC) instead of an LLC. Filing for a PLLC is very similar to that of the LLC.