How much does it cost to form an Arizona LLC or Corporation

Arizona LLC or Corporation

Arizona is known for its robust infrastructure, pro-business climate, vibrant industries, and state support programs for small businesses. The cost to form an Arizona Corporation or LLC is also lower compared to several other states. Although, there is an array of entity structures to choose from in this state; entrepreneurs most often than not, opt to form a limited liability company (LLC) or a C corporation. This decision is taken on the basis of several factors that play a key role in the operational and financial aspect of these types of entity structures. A comparative analysis of LLC vs Corporation in Arizona will take into account such factors like taxes, annual maintenance requirements, initial costs, recurring costs, and legal advantages.

Which business entity should I choose for my Arizona business?

You have a great business idea and now you want to form a startup, the first question will be the type of entity structure to choose. It is important to understand that each type of structure has its limitations and advantages. When you choose a structure there are several aspects that come into play. The financial aspect is very crucial as it will determine the initial costs as well as running costs. For example – the cost to form an Arizona LLC might be more than that of a sole proprietorship but less than that of a corporation. Since, a limited liability company and a c Corporation are the most opted for structures, let’s try and look at some of the key aspects.

• Limited Liability – One of the most important aspects that enable good decision making is limited liability. This refers to the fact that the owners of entities offering limited liability will not be personally liable for business debts. Such owners will also not be liable towards any lawsuits made against the businesses. An LLC as well as C Corporation offers limited liability. This may also have a positive impact on the Arizona LLC cost per year.
• Startup costs – This is normally a fixed cost and will vary according to the type of structure chosen. The startup cost will take into account the cost to form Arizona Corporation or LLC like registration costs, business name reservation cost, cost of amendment in articles, and publication cost among others.
• Documentation – Different structures require different types of documents for formation and operation, some of which have to be submitted with the state. An LLC vs Corporation in Arizona comparison reveals that the documentation required by an LLC is lesser than that of a corporation.
• Annual Maintenance – An important precondition for every new and existing business in any state is that of being compliant with annual maintenance requirements. This can vary from one state to another. There is a cost associated with annual maintenance and is considered to be a recurring cost. The annual maintenance cost of Arizona Corporation may be different from that of an LLC or any other form of entity.
• Ownership – Ownership is a key aspect of any legal entity structure. An LLC can have a single owner or multiple owners known as members while a corporation has shareholders who are considered as owners. Ownership can affect the cost to form Arizona LLC or corporation.

Pros and Cons of forming an LLC or Corporation in Arizona

Choosing the right entity structure is paramount to the successful functioning of your company. An entity structure has its flaws and benefits and these can influence day-to-day operations of the company. The forming cost for Arizona Corporation or LLC is also a key factor to be taken into account. If you are planning to form an LLC or incorporate in Arizona, then it is essential for you to identify the pros and cons of each entity.

Pros of an LLC or Corporation

• The Arizona LLC cost per year is less than that of a corporation
• A Limited Liability Company enjoys pass-through taxation on its profits
• An LLC formed in Arizona is not required to submit an annual report
• You can start an LLC with a single owner or multiple owners
• Venture capitalist (VC) firms prefer corporations as compared to other entity structures
• A Corporation enjoys perpetual life
• A corporation or an LLC can opt to be taxed as an S Corporation
• An LLC enjoys a lot of flexibility in management
• A business corporation can issue stock

Cons of an LLC or Corporation

• The overall cost to form Arizona Corporation is higher than the formation costs of any other entity
• A corporation undergoes double taxation on the profits earned by the company
• A corporation needs to make bylaws, elect initial directors, and submit a lot of paperwork
• It is difficult for an LLC to raise capital vis à vis a corporation
• Whether you form an LLC or incorporate in Arizona, you will be subjected to transaction privilege tax (TPT)
• A limited liability company doesn’t enjoy perpetual existence
• Depending on the state of formation, LLC members may be subjected to self-employment tax

Arizona LLC Cost

An Arizona Limited Liability Company is considered as one of the best operating legal structures by first time business owners. You can establish an LLC as a small business as well as a medium sized enterprise. There are numerous benefits of forming an LLC including the overall cost to form an Arizona LLC. The costs involved may vary based on several factors and processes. Let us take a look at the various costs you may incur.

Cost for forming Arizona LLC

When you look at an LLC vs Corporation in Arizona, the formation cost plays a crucial role. This may include both one-time and recurring costs. The important costs are:

• The LLC registration processes and fees are an important component of cost to form an Arizona LLC. The first cost component is that of Name Reservation. There is a fee of $10 although if you file online then the fee would be $45.
• The second cost component is that of hiring a registered agent. The state has made it mandatory to hire and continuously maintain an Arizona LLC registered agent pursuant to AZ Rev Stat § 29-604 (2019). The cost or fee would vary according to the RA service chosen by you.
• The third and most important Arizona LLC cost per year is the registration cost. You will have to file an Article of Organization along with a filing fee of $50.
• Once you have filed the registration documents, you will need to publish this information in a local newspaper. The cost of publishing the notice will vary according to the newspaper chosen.

Annual maintenance cost for Arizona LLC

Once you have filed Articles of Organization for a limited-liability company in Arizona, it is important to ensure compliance with all annual state requirements. This is also known as annual maintenance and is considered to be the Arizona LLC cost per year. These costs can be one-time or recurring in nature. The costs involved are as under:

• Annual Report – Currently, a limited liability company in the state of Arizona is not required to file an Annual Report, hence there are no costs attached with the same.
• Taxes – A limited liability company in Arizona is considered to be a “Pass-through Entity”. Hence the company will not be required to file any taxes but the members have to. This type of cost to form an Arizona LLC is a recurring cost as the taxes have to be filed each year. You may also be required to file other taxes as well, like the transaction privilege tax (TPT). Taxes are variable costs as each year, the amount of taxes being filed will be different.
• Business Licenses – One of the important Arizona LLC costs per year is that of business licenses. Once you have applied for and obtained necessary licenses, you will be required to renew them each year. As a result, this becomes a recurring cost. The fee for licenses and permits will vary according to the type of license and the number of licenses or permits applied for.

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Arizona Corporation Cost

Entrepreneurs planning to form medium sized or large companies normally prefer to form a C Corporation. You can always choose an S Corporation tax status after incorporating your business. This type of entity structure has several advantages especially when it comes to raising capital. If you have taken a decision to incorporate then it is time to understand the cost to form Arizona Corporation and make it operational. Let us look at the important cost components.

The Cost of forming Corporation in Arizona

The forming cost for Arizona Corporation is dependent on several factors. The cost may also vary depending on whether you want to form a domestic or a foreign entity. Some of the important cost components are:

• If you are planning to incorporate in Arizona then one of the first components is associated with name reservation. You will need to choose a company name and then reserve pursuant to AZ Rev Stat § 10-401 (2019). There is a fee of $10 for the same. If you choose to register a trade name also known as DBA (Doing Business As) then the cost would be $10.
• There is also a cost component associated with hiring an Arizona Registered Agent. You will need to hire and maintain a registered agent for service of process pursuant to AZ Rev Stat § 10-504 (2019). This is an important cost to form an Arizona Corporation and will vary according to the service chosen by you.
• The most important forming cost for an Arizona Corporation is the registration of your company. You will have to file Articles of Incorporation pursuant to AZ Rev Stat § 10-202 (2019). There is a fee of $60 for the same.
• There is an additional cost to form an Arizona Corporation and that is related to the publication of a notice. You will need to publish the notice of incorporation in top local newspapers for three consecutive issues. The cost will vary according to the newspaper chosen.

Annual maintenance cost for Arizona Corporation

Apart from the initial cost to form Arizona Corporation, there will be other cost components as well. They are associated mostly with annual requirements of your company in this state. The costs involved are as follows:

• Annual Report – Whether you start a domestic or a foreign corporation in the state of Arizona, you will be required to file an Annual Report. The fee for the same is $45. This report has to be filed each year and hence this recurring cost is a component of the annual maintenance cost of an Arizona Corporation.
• Taxes – Once you incorporate in Arizona, you will need to file all taxes applicable at the Federal, state, and local level. The first form of tax is known as the corporate income tax and is charged at a flat rate of 4.9 percent. Apart from this, there is the Transaction Privilege Tax. There are other forms of taxes as well that have to be filed each year to maintain a good standing in the state. This is considered as a recurring cost to form an Arizona Corporation.
• Business Licenses – The final component of the annual maintenance cost of an Arizona Corporation is associated with obtaining business licenses and permits. These licenses will help your company to operate in the state. These are considered recurring costs as licenses and permits have to be renewed each year.

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Need any Assistance in Forming Your Arizona LLC or Corporation

You can form different entities in the state of Arizona. You can also register a foreign corporation or move your existing LLC to this state. Whatever type of entity structure you choose, there will be an initial cost followed by recurring costs. The cost to form Arizona LLC or corporation will be driven by different elements right from name registration to taxes. We, at IncParadise can provide valuable assistance by handling requirements pertaining to new business formation or incorporation in the state.