When you think of a startup company in Arizona you will be confronted with several questions like, is setting up a business in Arizona a profitable venture? Are there any incentives for businesses? What is the tax situation? These questions might cause concern and hence the following information is an effort at alleviating your fears enlisting certain advantages or benefits that you or your business entity may derive in this state.

Business Growth Incentive for New Businesses

As one of the top registered agents in the state, we can help you register a new business in Arizona so that your business entity can benefit from several benefits, incentives, and advantages that the state has to offer. These will ensure long term growth and profitability for Corporations, LLC, Partnerships etc. Let’s take a look at some of the advantages:

Advantage#1: Salient benefits of Corporation or LLC formation

Corporation

• Limited Liability: In an Arizona corporation, the shareholders will enjoy limited liability where the corporation’s debts are concerned and will be protected from any judgments made against the corporations.
• Additional Funds: When you register a new business in Arizona as a corporation, you will be able to raise additional funds through sales of stock.
• S Corporation: At any given point in time, you can convert from a C Corporation to S Corporation status through a proper process. This election will enable your business entity to be taxed in a similar way as a partnership.

LLC

• Limited Liability: As an owner of an LLC, you will be able to enjoy limited liability protection similar to what a corporation enjoys.
• No Minutes of meetings: Unlike a corporation, an LLC startup company in Arizona will not be required to maintain any minutes of the meetings or resolutions.
• Flexible Profit Distribution: An LLC has the benefit of being able to select different forms of distribution of profits.
• Flow through Taxation: When you register a new company in Arizona, an LLC can benefit from the process of flow through taxation that will ensure there are no double taxations.

Advantage#2: Enterprise Zone Program

This is one of the most rewarding programs for a startup company in Arizona or new businesses registered in the state. The primary goal of the “enterprise zone program” is to ensure there is improvement in the economies of some of the distressed areas of the state. There is a range of incentives as well as initiatives being provided by the local government of each Enterprise Zone to encourage businesses to relocate to Arizona as well as grow in the proposed zone. The incentives and initiatives vary from financial or economic incentives to providing improved infrastructure, increased public services, regulatory simplification, and structural rehabilitation. Let’s look at some examples of incentives for businesses situated in the Enterprise Zones:

In Pinal County, incentives provided to businesses include – Low-interest business financing through the Pinal County Industrial Development Authority (IDA), Targeted Community Development Block Grant (CDBG), Rural Development (RD) funds, and Job Training Partnership Act (JTPA) among others.

Download Arizona Enterprise Zone Guideline​​

Advantage#3: Incentive Programs

If you register a new business in Arizona then you can take advantage of various incentives being offered by the state. Some of the important ones include:

• Angel Investment Tax Credit Program: This program provides income tax credit to those “qualified investors” who invest in the early-stages of a “qualified small business.” The income tax credit can be equivalent to almost 30% of the investment amount, and it increases to 35% for those investments, which have been made in “bioscience enterprises” as well as a Startup Company in Arizona situated in rural Arizona.
• Arizona Innovation Challenge: This is an Innovation Grant Program that is meant to enable the growth of early stage tech ventures. If you register a new business in Arizona, you will be able to benefit from the $1.5 million in grant funds made available by the American Recovery and Reinvestment Act (ARRA).
• Variety Programs: When you register a new company in Arizona, a range of other incentive programs can be benefited from including AZFAST Grants for Small Business Innovation Research (SBIR), Arizona Innovation Accelerator Program, Arizona Job Training Program under A.R.S. §41-1541 et seq., Foreign Trade Zone Program, Healthy Forest Enterprise Incentives Program (HF), and Pollution Control Tax Credit among others.

Are there any Disadvantages of Incorporating in Arizona?

When you register a new business in Arizona, you can benefit from the variety of incentives and business targeted programs but are there any disadvantages as well? There are a few disadvantages. For instance, the process of incorporation is time consuming and is more expensive compared to other types of business entities. Incorporation can also lead to higher overall taxes and also LLC’s will get dissolved if a member dies or the business is declared bankrupt. When you weigh the advantages and disadvantages however, the former is much more high and business growth oriented.

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You are all ready to start a business in Arizona and are looking forward to a fruitful journey but have you considered the fact that you may require a business license in Arizona? Yes, as a matter of fact, you would require a business license to conduct business in the state but the license rules are quite different from that of other states.

Types of Business Licenses in Arizona

If you are planning to establish a small business in the state of Arizona then you may or may not require a business permit or a license. It all depends on the type of business you are setting up (industry) and the county or city your business is situated in.

There are 2 types of Arizona company licenses to choose from and they are:

Business License

In the state of Arizona, businesses are not required to hold a state business license and the state doesn’t issue any licenses. At the same time, most city/county/towns issue licenses as well as permits for specific businesses. Some counties or cities have laws where certain types of businesses situated within their jurisdiction have to obtain a license in order to conduct business.

Let’s look at an example to understand this in a better way:

Example: Phoenix

If you are planning to set up your business in the city of Phoenix, then it’s important to know that the city does not issue a general business license. At the same time, certain business activities are regulated and will require a license.

Some of the businesses that qualify for an Arizona company license in Phoenix include:

• Amusements like Concessionaires, Pool Halls, Coin Operated Games etc.
• Auction Houses and Auctioneers
• Escort Bureaus & Escorts
• Massage Establishments & Managers

The license fee varies according to the type of Phoenix business license in Arizona. The application fee for an auction house is $135.00, while the license and permit fee is $30.00. Similarly the application fee for massage establishments is $550.00, while the license and permit fee is $30.00. The license term status for either type of license is “Annual – prorated”

The application form for each of the above businesses is different and is available at the Phoenix County City Clerk Office. You can check the amusement business license here.

Transaction Privilege Tax (TPT) License

In the state of Arizona, if you are planning to set up a business for either selling a product or engaging in an activity that is subject to Use tax or Transaction Privilege tax, then you will be required to obtain a state transaction privilege tax (TPT) license. This type of business license in Arizona is also referred to as a tax license, sales tax license, wholesale license, resale license, or vendor license.

Let’s look at an example to understand this in a better way:

Example: Phoenix

The city of Phoenix requires those business entities to obtain a ‘Privilege Tax License” that use tax liability or a privilege (sales) tax liability within the city. It is important to understand that all types of businesses or business activities don’t require an Arizona company license for Phoenix.

According to the Chapter 14 of the Phoenix City Code, some of the businesses or business activities that are required to obtain a state transaction privilege tax (TPT) license include Advertising, Construction Contracting, Mining, Jet Fuel Sales, Publishing, Hotel / Motel / Transient Lodging, Restaurants and Bars, Retail Sales, Telecommunication Services, and Utility Services among others.

The business license fee is $50.00 for a business activity. This excludes residential or commercial rental. It is important to note that if a business entity is unable to pay the license fee in full, then a 50% late fee amounting to $25.00 will be assessed. The license will be renewed annually and the fee for the same is $50.00. It is due on January 1 of each year.

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Arizona is definitely the destination that is just perfect for small businesses. There is no better way to define company formation in Arizona than by seeing the numbers. According to U.S Small Business Administration, Office of Advocacy, 538,552 small businesses exist in Arizona and that accounts for 99.4% of the total businesses.

This is not all, in the second quarter of 2015, almost 3,745 start-up businesses were formed in the state leading to the creation of 15,538 new jobs as compared to the 3rd quarter of 2014, when new establishments created 14,628 new jobs. So, there is a definite increase in the number of company formations in Arizona.
If you are planning to form an Arizona business, the process may seem like an exhausting one but when you hire a top Arizona registered agent like us, we will ensure, the entire process will be simple and quick.

Arizona LLC Registration and Formation

LLC company formation in Arizona is done in accordance with the Arizona Limited Liability Company Act, Chapter-4: Section 29-631. The process for registration and formation of LLC is as follows:

Step#1: Hire a registered agent

In the state of Arizona, a business corporation or LLC is required to hire a “Statutory Agent”, authorized to transact business in the state. This is a mandatory process, where the agent in accordance to A.R.S. §§ 29-604, 29-606 will accept the service of process (lawsuit papers or legal documents) on behalf of the LLC. We would take this opportunity to share with you the fact that we are one of the top registered agents in the state and have been responsible for over 11,494 company registrations.

We are here to help you form an Arizona business!

Step#2: Choose LLC Name

If you are planning to form an Arizona business LLC, it is important to reserve and/or register LLC name. According to ARS Section 29-602 of Arizona Limited Liability Company Act, the name of an LLC should contain words like words “Limited Liability Company” or “Limited Company” or abbreviations like “L.L.C.”, “LLC”, “L.C.”, or “LC”. You can reserve a name under section 10-402 for a period of 120 days or register LLC name under section 10-403.

How would you know that the name chosen by you is unique? In order to find out, you can conduct a name search from here.

Step#3: Application for Registration

It is important to understand that if you are planning to form an Arizona business LLC, the registration forms are different for domestic and foreign LLC’s. Domestic LLC will require “Articles of Organization” (L010 form) along with a cover sheet. According to A.R.S. § 29-802, foreign LLC will have to first apply to the Arizona Corporation Commission for a “Certificate of Registration” in order to transact business in the state. You will be required to submit several documents along with the Application for Registration of a Foreign LLC (L025 form) and they include a cover sheet and a Certificate of Existence.

You can select the ONLINE submission option or we can complete the entire procedure on your behalf.

In case, you have any questions, feel free to call us on 702-871-8678.

Arizona Corporation Registration and Formation

If you are planning to form a Corporation in Arizona then the procedure for registration and formation is as follows:

Step#1: Hire a registered agent

In order to form a Corporation in Arizona and transact business in the state, a corporation is required to appoint a Statutory Agent in the state of Arizona in accordance to A.R.S. §§ 10-501 (for-profits corporation), 10-3501 (nonprofits corporation), and 10-1507 (foreign corporation).The primary duty of a registered agent is to fulfill the purpose of accepting service of process (legal documents or lawsuit papers) on behalf of the business entity.

As one of the top registered agents in Arizona, incparadise.net, will provide everything under “service of process” in the state. We would take this opportunity to share with you the fact that we are one of the top registered agents in the state and have been responsible for over 11,494 company formations in Arizona.

We are in compliance with all regulations in the State of Arizona.

Step#2: Name Reservation

In order to form a Corporation in Arizona, one of the primary steps is to identify a name for the business entity and then reserve or register it. According to A.R.S. §§10- 401 and 10-1506 (for-profit) and A.R.S. §§10-3401, 10-3301, and 10-11506 (non-profit), a corporate name shall contain words like “Corporation”, “Company”, or “Incorporated”, or an abbreviation of any of the above words. You can reserve the name for your corporation for a period of 120 days by submitting the “Application To Reserve Corporation Name” (form C006) and you can register by submitting an “Application to Register a Foreign Corporation Name” (form C007).

How would you know that the name chosen by you is unique? In order to find out, you can conduct a name search from here.

Note: All naming forms have to be submitted along with a “Cover Sheet”.

Step#3: Certificate of Formation/Certificate of Authority

You can form a Corporation in Arizona through a process but it is important to identify the type of corporation you want to register. The registration documents and other criteria change according to the type of corporation. You can set up a professional corporation, domestic or foreign corporations, “Subchapter S” and “C Corp”, for-profit and non-profit corporations. The process of forming a corporation in the state can be initiated by submitting “Articles of Incorporation” (C010) with the Arizona Corporation Commission. You will be required to submit a cover sheet and “Certificate of Disclosure” along with the registration form.

You can select the ONLINE submission option or we can complete the entire process on your behalf.

If you have any questions regarding Arizona Incorporation or LLC formation, you can simply visit the Arizona Business formation page.

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Why is Arizona an attractive place for setting up new businesses? We are talking of a state whose current-dollar GDP was $305.8 in 2016 indicating a growth of 2.6 percent. The largest industries in Arizona instrumental in driving Arizona GDP include insurance, finance, rental, real estate, and leasing. Businesses like Avnet Inc., set up a company in Arizona and has recorded $26.2 billion revenue and is currently ranked 108 on the Fortune 500 list. Some of the other Arizona businesses featuring the Fortune 500 list include Freeport-McMoRan Inc., Insight Enterprises, and Republic Services of Phoenix.

Why Choose Arizona for Incorporation?

Is company incorporation in Arizona a beneficial decision? Definitely! Arizona has seen a rise in the numbers of small and medium sized businesses being formed in the state. There are approximately 519,504 small businesses in the state and they account of 97% of Arizona Businesses. This increase in business formations in the state can be attributed to a variety of benefits and advantages. Let’s look at some of them.

Tax Climate

In 2017, in a move to support incorporation in Arizona by larger number of businesses, the corporate income tax rate was reduced from 5.5 to 4.9 percent.

Tax Relief

There is a variety of tax relief programs offered to businesses in Arizona. Some of the most popular programs include:

• Quality jobs tax credit: The primary goal is to encourage incorporation in Arizona, business investments as well as creation of employment opportunities in the state. Businesses can get tax credits of up to $9,000 spread over a 3-year period for each new quality job.
• Foreign trade zone: If you set up a company in Arizona and if it is situated in a zone or a sub-zone under a FTZ (foreign trade zone) then the business will be eligible for a maximum of 72.9 percent reduction in their personal and real property taxes. The FTZ zones or sub-zones are situated in Phoenix, Tucson, San Luis, Naco, and Nogales.
• Sales tax exemptions: The state of Arizona offers new businesses, and sales tax exemptions on any equipment or machinery used directly in their manufacturing processes, research and development process, smelting operations, and production and transmission of electrical power.

How do you incorporate in Arizona?

Planning to set up a company in Arizona? The first thing that you need to know is how to incorporate your business. There are several processes involved in the registration of your business in the state. We at incparadise.net have a team of specialists who can guide you through setting up an Arizona C Corporation, S Corporation, and LLC in the shortest possible period.

Let’s take a quick look at how to incorporate in Arizona

• Type of Business: You can form different types of business entities under domestic or foreign entities and this includes Limited Liability Companies (LLC), Business Trusts, Limited Partnerships (LP), General Partnerships, (GP), C and S Corporations, Closed Corporation, Professional Corporation, and Sole Proprietorship. It is important that you identify the type of business you want to set up in the state.
• Business Entity Name: The next most important step is to “name” your business. The “Statutory Name Requirements” will be different for different business entities and needs to be considered in order to proceed towards incorporation in Arizona. Whether you are forming a Corporation or a Limited Liability Company (LLC), it is important to ensure that the names contain specific words like “LLC”, Limited Liability Company”, “inc.”, “corp.” etc. You need to also ensure the name is distinguishable from other entity names that are currently on file with the Arizona Secretary of State and the Arizona Corporation Commission.
• Registered Agent: According to A.R.S. §§ 10-501 (for-profits), 10-3501 (nonprofits), 10-1507 (foreign corps), 29-604 (LLCs), 29-806 (foreign LLCs), if you are planning to set up a company in Arizona, you are required to appoint a statutory agent in the state. The primary duty of a registered agent is to fulfill the purpose of accepting service of process (legal documents or lawsuit papers) on behalf of the business entity. As one of the top registered agents in Arizona, incparadise.net, will provide everything that under “service of process” in the state for you.
• Certificate of Incorporation: Incorporation in Arizona involves the filing of “Articles of Incorporation” for a Professional Corporation or For-Profit Corporation. The articles need to be submitted to the Arizona Corporation Commission and should include documents like Cover Sheet, Director Attachment (if applicable), Incorporator Attachment (if applicable), Statutory Agent Acceptance, and Certificate of Disclosure with any applicable attachments. You can submit it through mail, deliver it in person, or submit online. We can always file on your behalf through the standard process online or through expedited process.
• Date Stamped Copies: As a part of the process of company incorporation in Arizona, we will ensure, you receive a Certified Copy of your documents and a Certificate of Status confirming the state of Arizona has filed as well as formed your corporation.

Costs and Fees associated with Arizona Incorporation

What would it cost to set up a company in Arizona? Check Fees here!

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Business Information & Rankings

• Arizona ranked 1st as the Hotest State for Entrepreneurs. (Entrepreneur & NPRC, 2005)
• Phoenix, AZ ranked 16th in the overall category and 6th in the large city category for Best Places for Doing Business in America. (Inc. Magazine, 2005)
• Ranked 4th by CEOs as the Best State to Do Business. (Chief Executive, 2005).

Cost of Living Index

Crime Rate

In 2003, Arizona had the highest crime rate in the nation, fueled largely by the high property crime rate. In addition, Arizona was ranked 13th in violent crimes. (Arizona Criminal Justice Commission)

Fees & Taxes

Business Inventory Tax
Arizona does not have a business inventory tax.

Corporate Income Tax
Arizona has a corporate income tax rate of 6.968% with a minimum tax of $50.

Personal Income Tax
Varies starting at 2.87% for the first $20,000 up to 5.04% for income over $300,000. Note that personal income taxes have been reduced for each of the past five years.

Real & Personal Property Tax
Taxable. The average is $12.70/$100.

State Sales and Use Tax
Base Rate: 5.6 %
Machinery Rate: None

Exemption for machinery or equipment used directly in manufacturing, processing, fabricating, job printing, refining or metallurgical operations.

Almost all services are exempt from sales tax.

Transaction Privilege & Use Tax
This tax is a tax on the privilege of doing business in the State. The tax ranges from 5.6% – 9.0% with a state average of 8.3%.

Unemployment Insurance
Arizona’s new employers’ tax rate is 2.7% for 2 years.