It can be difficult to start a business if the business structure doesn’t fit with your business size or type.
For small businesses with just one or two employees, the LLC (limited liability company), the business structure is popular and simple to use.
LLCs aren’t subject to a lot of complex rules, which is great news for small businesses.
A lot of times, the LLC filing process can be handled by the Arizona business owner without the need to hire professionals.
Starting an LLC in Arizona
The Arizona Corporation Commission oversees the management of LLCs in Arizona. It offers assistance to people who are interested in starting businesses.
The ACC makes it easy to file an LLC in Arizona. Some work can be done online, while others may need to be completed on paper.
Filing fees are low
Arizona’s filing fees for an LLC are lower than average when compared with other states. This is a great advantage for small businesses that need to keep track of every expense.
Arizona doesn’t require an LLC to file an annual report or apply for a state license. These items can be costly in some states.
Hire an LLC service to help with filing
Arizona has many business entities that can assist new business owners in completing the necessary forms to start an LLC. These entities can be hired. These are many of the same entities business owners can hire as statutory agents (registered agents). We’ll talk more about this later.
For the full services of this entity, businesses may be charged anywhere from a few hundred dollars to several hundred dollars annually.
The Best LLC Services in Arizona
Simple Business Structure
New business owners in Arizona will love the simplicity of an LLC structure over other options such as corporations when starting a business.
LLCs are not required to comply with Arizona’s rules regarding ownership structure or regular filing of reports. The state doesn’t have any ongoing obligations once the Articles of Organization are filed by the business. This gives the business owner more time for the company.
Simple Taxation Requirements
An LLC’s taxation requirements are much simpler than those of a corporation. LLCs don’t pay taxes. This is in contrast to a corporation that must pay income taxes.
The LLC’s profits flow directly to its owners. This money is then reported by the owners on their personal income tax statements. This is much easier than trying to navigate the complex business tax laws at both the state and federal levels of Arizona.
How to Start an LLC in Arizona: The Important Parts
The LLC structure may not work for some businesses. Arizona’s laws regarding LLC formation can make it difficult for some businesses.
While it is possible to create an LLC in Arizona online, there are some forms that can only be printed. This can slow down the entire process. It can be frustrating that some forms must be printed and mailed while others can be electronically filed by the state.
Locating a Statutory Agent
Arizona’s statutory agent, also known as the registered agent in many other states, must sign and submit a form that indicates that the entity or person agrees to act as an agent. This extra form is not required in many other states and doesn’t require a separate signature.
Employer Benefits Taxable
Your LLC must provide benefits to employees if it hires staff. The employees must include the value of the benefits in their income tax calculation. This is different from a corporation where most employee benefits aren’t taxable.
This can cause confusion for employees. This can also hinder an LLC’s ability to hire employees since potential employees might not want to pay taxes on their benefits.
Step 1: Decide the type of LLC
Two types of LLCs are officially recognized in Arizona. The right option for your business will depend on your specific needs.
Both types of LLCs have the primary benefit that they allow business owners to separate their personal and legal affairs from those of the business. The settlement does not include the personal assets of the LLC owners if the LLC defaults on a loan or becomes the subject of litigation.
These two types of LLCs are simply different in how they support business models.
A majority of Arizona residents will choose a general LLC structure to establish a limited liability company. An LLC can be used for nearly any type of business and almost every kind of market.
A PLLC stands for Professional LLC. Arizona licensees may prefer to form their businesses as PLLCs, instead of LLCs. Doctors, dentists, and lawyers are some of the professions that might choose a PLLC structure.
A PLLC has the advantage that if one owner is sued for malpractice or personal injury related to their work, all other owners are not liable.
Every member of an LLC’s ownership group must have the appropriate professional license to file for a PLLC. To operate a business in Arizona as a PLLC, some people will need to be authorized by their Arizona professional boards.
Those who file as a PLLC don’t need to complete any additional forms for Arizona Corporation Commission. To qualify as a professional limited liability company, however, they will need additional information on the Articles of Organization form.
Step 2: Choose a name for your LLC
It takes some time to choose the perfect name for your Arizona small business. It must adhere to the ACC’s rules and guidelines for naming LLCs. It is not possible for business owners to assume that they can choose any name they like.
Picking a Unique Name
Arizona requires that each LLC registered in the state has a unique name. These names are assigned on a first come, first served basis. You may think you have the perfect business name, but if another person files it with ACC a day earlier than you, then you will be out of luck.
The state might reject your LLC filing if you choose a name owned by another company. Most likely, you will not be able to get a refund for your filing fee.
Business owners who want to create a new LLC can search for existing business names. The ACC Business Name Database lists all currently registered business names in the state.
This database is free to search for new business owners. They can search for business names that exactly match the search terms. They can also search for names that include a search term. This resource can be used to ensure that your LLC’s name remains unique.
Use the Correct Naming Convention
Arizona requires that new LLCs include the word “LLC” (or “Limited Liability Company”) somewhere in their name. Some minor variations of the initial phrase or acronym are allowed in Arizona, such as “L.L.C.” and “Limited Liability Co.”
PLLCs must include in their names the phrase “Professional LLC” and the acronym “PLLC”.
The ACC will deny any application if the name is not in compliance with this rule.
Reserve a Name
Potential business owners can reserve a name through the ACC for up to 120 calendar days before they file the forms necessary to form an LLC or PLLC.
If the business owner has an idea for a name, but isn’t yet ready to file an LLC application, this feature may be useful. While the business owner prepares the necessary work, including securing a domain name that matches the business name, the name can be reserved.
You can complete the process to reserve a name online by filling in a form for $45 or using postal mail for $10. You can reserve the name online immediately.
The reserved business name becomes available to another person after 120 days if the owner decides to stop using it. The reservation fee will not be refunded to the person who booked it.
Step 3: Choose a Statutory Agent
Arizona LLCs and PLLCs must have a statutory representative. This individual or entity acts as the legal representative of the LLC for legal documents. You may be familiar with the process of starting an LLC in another state.
Arizona’s public records will include the name and contact information of the statutory agent. This gives people and government officials who have to send legal forms to the LLC a clear point to contact. The person could receive:
- Notification of a lawsuit
- Forms and documents relating to taxes
- Documents legal
- Correspondence of the government concerning legal matters
To officially accept the role of agent for the LLC, prospective agents must sign the Statutory Agency Acceptance form. This form is submitted by the LLC along with the Articles of Organization (which we’ll discuss later).
There are a few options available to LLCs when it comes to choosing a statutory agent.
Selecting an Individual
Only one person can act as the statutory agent of an LLC. The statutory agent must be a resident of Arizona and have an address.
If they wish, the business owner can act as their own statutory representative. An owner can also choose to have another employee serve as their agent.
The agent must be present at the address listed during normal business hours. It is better to choose another person or entity as the statutory agent if the business owner is not available at all or only part-time.
Selecting an entity
An LLC can choose to hire an entity that will act as its statutory agent in Arizona. This entity is likely to be a business that acts as an agent for several companies.
The LLC owner does not have to list their address in order to be the public contact person for the LLC. Instead, the entity will list their physical address. The physical address for the statutory agents does not need to be the same address as the business.
An entity that serves as the statutory agent for an LLC could cost between $50 and $200 per year to be hired by the LLC.
Step 4: Fill out the Articles of Organization
Arizona requires LLCs that they file Articles of Organization in order to create an LLC. These forms can be filed by business owners for $50
A cover page from the ACC must be included with the filing. This document explains whether or not the business owner wants to expedite the processing of the Articles of Organization. It also contains contact information as well as payment information. The cost of expedited processing of the Articles of Organization is $35-$400
Type of entity
The first step for business owners is to clarify whether they will file the form as an LLC, PLLC, or both.
The business owner of a PLLC must describe the professional services that the company will offer.
Name of the business
After finding a business name that is available (as described in Step 2) the LLC will request the name of the ACC via the Articles of Organization form. It is important to list the name exactly how the business owner would like it to appear with the state.
Information about Statutory Agents
The Articles of Organization contain a section in which the LLC will list contact information for the statutory agents. This section differs from the Statutory Agent acceptance form (as discussed below in Step 3). This acceptance form must be submitted by the LLC along with the Articles of Organization.
Types of management
A manager-operated structure is one option for an LLC in Arizona.
The LLC owners will employ someone to manage their business in a manager-operated arrangement. The LLC is managed by its members. This means that the LLC owners also have to manage their day-to-day operations.
The business owner must determine which type of management they want and attach a separate document with additional information. This form is also known as the Manager Attachment Form L040 for manager-managed or L041 for member-managed.
Step 5: Final Tasks
After the Articles of Organization are accepted by the ACC, the LLC owner will need to complete a few more steps in order to close the process.
Complete the Publication Requirement
The Notice of LLC Formation must be published in a local newspaper in certain Arizona counties for at least three weeks. The newspaper must be located in the same county where the LLC’s primary residence is.
The notice must include the name, address, and contact information of the statutory agent.
The ACC keeps a list if there is a publication requirement in Arizona. It also maintains a list if approved newspapers available in those counties. It typically costs between $60-200 to publish.
This must be completed within 60 days after the approval of the ACC. Failure to finish it on time could lead to the dissolution or bankruptcy of the LLC.
Make an Operating Agreement
Arizona doesn’t require LLCs to file operating agreements with the ACC. The business might want this document. It outlines the business’s plans and the relationships among its owners.
An operating agreement covers important topics such as voting rules, responsibilities, profit distribution, and the power and duties of owners. It also describes how to buy out or bring in a new member.
The operating agreement is a contract once all members have signed it. Although it is not required by Arizona for LLCs, it is strongly recommended. It protects the LLC’s status and protects your business against being subject to the state’s rules regarding LLCs.
Business808, a renowned consulting organization that aids startups in scaling and growing, is led by Andy Brooks as Editor-in-Chief.
Andy has over 12 years of consulting experience and is a pro at creating and managing profitable businesses. He has experience working with several LLCs and Registered Agent services and has a degree in business management. He has assisted clients in achieving their objectives.
In addition to writing for Business808, Andy is a well-known author and speaker, and an active contributor to several online business publications, imparting his knowledge on how to grow an LLC.