Sole Proprietorship in Arizona

Arizona is a growing and fast paced economy as is evident from the state’s real gross domestic product (GDP), which was $414.27 billion in 2023. You will be surprised to know that a large contribution to the GDP is from small businesses including sole proprietorships. There are over 650 thousand small businesses in this state evolving and growing in several key industries. One of the top industries that is home to sole proprietorships in Arizona is food and agricultural exports, and the growth of this has exceeded $1.4 billion. The state also provides several advantages if you are planning to start a new business. You can benefit from a strong infrastructure, robust transportation and logistics network, a highly skilled workforce, low cost of living, and technology hubs like Phoenix.

What is a sole proprietorship in Arizona?

If you are wondering how to start a sole proprietorship in Arizona then let us first try and understand the type of entity structure it has. In fact, a sole proprietorship is known to have the simplest structure as there is a single owner. Hence, it is also known as a sole trader. As opposed to corporations and LLC, this type of company requires minimal documentation. This entity is not considered to be a legal entity and hence you are not required to file any formation documents with the state. This makes it easier to start a sole proprietorship in Arizona. A sole tradership business has different taxation rules and you will not be required to file any federal or corporate taxes.

Important features of sole proprietorship in Arizona

A sole proprietorship in Arizona is a preferred entity structure for start-ups and even home-based businesses. There are several features that make this type of an entity so popular amongst first time business owners. Let’s take a look at some of the top features including the various benefits you may derive.

• The foremost feature of a sole proprietorship is that it is a one-man or single-owner organization. This means that decision making lies in the hands of the owner.
• If you search sole proprietorship in Arizona for laws, you will realize that this entity is considered as a natural person and not as a legal entity. The bottom-line is that the business and the owner are the same unlike in corporations.
• A sole proprietorship in Arizona does not have to be registered or incorporated. This makes it the ideal choice for operating a small or medium scale business.
• This type of entity has simple formation requirements. Similarly, closing a sole proprietorship is also very simple. There are hardly any legal processes involved and no requirement of any certificate of cancellation, termination or dissolution.
• As a business owner of a sole trader, you will not be required to share your profits unlike in other forms of entities.
• Sole proprietorship taxes are filed under the owner’s income tax return

Steps to Start Sole Proprietorship in Arizona

If you are wondering how you can start a sole proprietorship in Arizona then the important thing here is to understand the various steps you may need to take to make your business operational. There are some basic areas to focus on initially, like naming your company, getting business licenses for operations, ensuring you have a proper bank account etc. Let’s look at some of these important or core areas that will help you to start a sole proprietorship in Arizona with ease.

1. Prepare a business plan

Having a great business idea is the starting point but moving from here towards actually establishing and conducting a business is the real challenge. This is where a good business plan will come into play. It is also known as a strategic plan and encompasses several facets of running a company. This is the first goal in the how to start a sole proprietorship in Arizona checklist.

• Executive Summary
• Company Description
• Core Concept of your business
• Initial goals
• Long-term objectives
• Product and Services
• Target audience
• Competition and Market analysis
• Marketing Plan and Sales Tactics
• Operating plan
• Financial Plan and Projection

2. Choose an Arizona business name

You can start a sole proprietorship in Arizona only after you have named your company. This stands true for any form of business. The importance of a company name lies in the fact that it will not only communicate with your customer but also enable your business to stand out amidst competition. It is considered as the cornerstone of any brand and hence is integral to your marketing strategy. The business name is often also used for several other purposes like obtaining licenses and permits, registering an office, and applying for a bank account among others. Here are some tips to consider before you can choose and file an Arizona trade name.

• Follow the naming guidelines as provided in the Arizona Revised Statutes
• It is important to ensure your company name is not similar to that of your competitor
• Avoid business names that are hard to spell or pronounce
• Your chosen name should have a high recall value amongst prospective customers
• The name should be relevant to the product or services being offered
• After choosing a name, check for its availability as a domain name for your website
• If you want to keep short names then online business name generators can be quite helpful

3. File a Trade name and incorporation

If you have taken a decision to operate a sole proprietorship in Arizona then a business name is of utmost importance. You can either use your legal name as the business name or file an Arizona trade name also known as DBA (Doing Business As) name. The DBA or trade name will allow you to conduct your business under any name other than your legal name.

Do you want to start a sole proprietorship in Arizona?

4. Get EIN

Arizona is considered to be a community property state and hence even a couple (husband and wife) are allowed to operate a sole proprietorship company. Hence, if you form a sole proprietorship in Arizona, there will be no formal or state filings whatsoever but you may need to apply for an Employer Identification Number (EIN). This is also known as the Tax ID number or the Federal Tax Identification Number (TIN). This number is used for identifying a business entity.

• If you have hired at least one employee
• If you are planning to operate as a corporation
• If you are planning to operate as a partnership
• If your company is required to file a federal Employment tax return
• If your company is required to file excise tax return
• If your company is required to file Alcohol, Tobacco, and Firearms tax return
• You apply for a Keogh plan
• You are involved with entities like estates or trusts or plan administrators

5. Obtain necessary licenses and permits

If you are wondering how to start a sole proprietorship in Arizona and make it operational then it’s important to focus on business licenses. Any new or existing entity in the state including sole proprietorships will need to apply for and obtain relevant operational licenses in this state. It is important to note that if you start a home-based business then your company may be exempt from specific permit requirements. This rule may vary from one county or city to another. Business licensing in the state of Arizona can be categorized as under:

• Arizona transaction privilege tax (TPT)
• Professional or Occupational License
• City or County licenses and permits
• Regulated licenses
• Zoning permits

6. Open a bank account for your Arizona business

Whether you start a small business like a sole proprietorship or form a large corporation, there will be profits and losses. This is one of the primary reasons why your company would need to manage its finances properly. There are times when accepting business payments in personal savings accounts can lead to chaos especially in the tax season. The IRS and finance experts hence recommend that every company should have a business bank account. This will enable you to keep your personal gains separate from business gains. You can open this type of banking account before or after you form a sole proprietorship in Arizona.

7. Report and pay taxes

Once you have formed any business entity in the state of Arizona including a sole proprietorship, you will need to maintain compliance with the state. These are also known as annual maintenance requirements. Although sole proprietorships are not required to file an annual report, you will still have to file taxes. If you search sole proprietorship in Arizona for taxes then the primary would be a personal income tax return.

Ready to Start a Sole Proprietorship Business in Arizona

If you have decided to start a sole proprietorship in Arizona then it’s a good decision. This type of entity is easy to form and uncomplicated in terms of operations. You will not be required to submit any formation documents with the state. However, you will need to maintain annual compliances and your company will need to obtain relevant business licenses and permits. This will help you to enjoy a good standing with the state.

Business License in Arizona

In order to make your business operational in Arizona, there are several requirements that you will need to fulfill. These include registering your company with the state, paying taxes and obtaining an Arizona business license. Identifying the right license according to industries and jurisdictions can be quite tricky as the rules, requirements, and fees vary from city to city or county to county. You might not see a clear way forward. Nevertheless, if you fail to obtain an Arizona business license then that can be a costly affair for your company. Operating without the required license may lead to penalties including fines and lawsuits and in extreme cases, even dissolution of your company.

Who needs an Arizona business license?

Whether you form a sole proprietorship, LLC, corporation or any other form of domestic or foreign entity, Arizona business licenses and permits are mandatory. There are certain processes and steps you must follow to procure these licenses and permits. As a business owner, you will need to conduct a detailed Arizona business license search to identify the licenses required by your company. There are basically three forms of licenses –

• Federal Licenses and Permit
• State Licenses and Permit
• Local Licenses and Permit

What business license do I need in Arizona?

Many states in the USA have a common or general license for all types of entities. A general license is a basic license for operating within the state. The state of Arizona doesn’t have this general license also known as a statewide business license. Instead, you may need to obtain an Arizona business license and permit based on your primary business activity and location of the business. It is also important to note that there are several cities as well as counties where you need to apply for a local license prior to beginning operations. This is especially required when planning to operate within the city or county limits or jurisdiction.

Type of Business Licenses in Arizona

If you are planning to start an LLC or a corporation in Arizona then you would need to apply for different types of licenses or permits. You may be required to obtain an Arizona business license at the state level and the county level. Let’s take a look at the important licenses.

State Transaction Privilege (Sales) Tax (TPT) License

One of the most commonly required licenses in the state is the Transaction Privilege (Sales) Tax (TPT) License. This is a license based purely on business activity. If your company is into specific activities especially those connected to selling a specific product or engaging in a service then you will require this license. The Arizona Department of Revenue is responsible for issuing this license. You can conduct an Arizona business license search with the Arizona Department of Revenue or the Arizona Commerce Authority to identify if your business activity qualifies for this license. Some of the common activities requiring this license include Advertising, Feed at Wholesale, Transient Lodging (hotel/motel), Residential Rental, Restaurants and Bars, and Retail Sales Food for Home Consumption among others.

Business License/Local Licenses/Permits

You have registered a new business in Arizona. Its office is situated in the town of Queen Creek. This is a typical scenario in which a business will need to apply for state licenses as well as local licenses and permits. The local licenses are mandatory in some cities and counties. Hence, it is important to conduct an Arizona business license search to identify the specific permits or licenses required in the county or city or jurisdiction in which you are operating. The licensing regulations, requirements, and fee will vary from one jurisdiction to another.

Regulatory (Professional/Special) Licensing Permits

The third type of Arizona business license is known as the regulatory licenses or permits. This type of license will be required by your company if the primary activity requires supervision or regulation by single or multiple state, municipal, and federal government agencies. Some of the activities are defined under the professions and occupations category of the Colorado Code – Title 12. You may even need to apply for and obtain a special Arizona business license and permit or even certification wherever required. This is apart from the state and local licenses. Your business may require all three forms of license depending on the business activity.

Need any Assistance in Obtaining Your Arizona Business License?

If you are planning to establish an LLC or any new company in the state of Arizona then there are certain compliances to adhere to. These are also considered as state annual maintenance requirements. One such important requirement is obtaining an Arizona business license. This will help your company to become operational in the state. If you operate without the relevant licenses then you will be penalized. The type of Arizona business license and permits will vary according to business activity and location. Hence, it is important to conduct in-depth research of the state laws and local zonal requirements.

Arizona Business Entity Search

It is not far-fetched to say that a company can ride its way to success using a brilliant or creative company name. Yes, a business name plays a crucial role when it comes to attracting customers, creating meaningful vendor relationships, and promoting the various products or services of a company. A strong brand can even help in attracting investors. This is one of the many reasons why it is important to conduct an Arizona business name search. This is a specialized search that will help you to ensure your chosen name can become the company name permanently. Essentially, a business name can vary from something as creative as Adidas to an acronym like IBM (International Business Machines). At the same time, it is vitally important to maintain compliance with the Arizona business name rules.

• It’s important to go with a company name that is easy to spell or pronounce like Levis
• Always try to ensure that your chosen name is easy to remember
• The company name should be in-sync with the products or services being offered like Brad’s Software
• It is also important to follow the Arizona business name rules and state guidelines
• Your business name should be readily distinguishable from any other LLC or Corporation name in the state database
• Try not to keep a name that is similar to your competitor’s name
• Make certain that your company name is web-friendly
• Always conduct an Arizona business name search prior to finalizing the name

What is an Arizona business name search?

Business name search or entity search is a process through which any company can identify whether their chosen name has already been taken by another company or not. This search is recommended only after you have identified the proper business structure. The reason being that if you want to start a limited liability company then your business name will indicate the same. Hence, you will have to conduct an Arizona LLC name search.

Naming your Arizona LLC

If you have decided to form an Arizona limited liability company then there are several processes that you may be required to follow for successfully establishing your business. One of the first steps is naming your LLC. You will not be able to register your company without the business name. If you have thought of a creative business name then it will help influence your clients as well as prospective customers. When choosing a name, you can conduct an Arizona LLC name search for company name ideas and also to check availability of the said name. Let’s look at the two important aspects to consider when it comes to naming your limited liability company.

General LLC naming rules

One of the most important areas to focus on during naming of your limited liability company is LLC rules and guidelines according to state law. The LLC name guidelines are regulated by 2019 Arizona Revised Statutes, Title 29 – Partnership, Chapter 4 Arizona Limited Liability Company Act, Article 1 General Provisions. The general Arizona business name rules for an LLC name are:

• Your chosen name should have words like Limited Liability Company, limited company or abbreviations like LLC or L.L.C. pursuant to AZ Rev Stat § 29-602 (2019)
• Your company name should not contain certain words like association, corporation or incorporated or abbreviations of these words.
• According to the restricted words list, you cannot include words like bank, deposit, credit union, trust or trust company. They cannot be used in combination or separately.
• Ideally, your chosen name should be distinguishable from any other name in the Database. If it is not distinguishable and you want to still use it then you will need to apply to the Arizona Corporation Commission for relevant authorization.

Search LLC name availability on the Arizona Corporation Commission’s website

If you have established an LLC name that is compliant with the Arizona business name rules then the next step is to ensure you are able to reserve this name. In order to reserve or register the name with the state, you will need to first conduct an Arizona LLC name search. There are different options for conducting this search and they are:

• Search by Name
• Search by Entity Number
• Search by Statutory Agent
• Search by Principal Name

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Naming your Arizona Corporation

If you are planning to start a domestic corporation in Arizona then the first important step will be to identify or choose a corporate name. The importance of a company name lies in the fact that it helps in creating an emotional connection with partners, vendors, and consumers. The name thus plays a key role in defining the brand and increasing its visibility and recognition. Hence, you need to ensure that the corporate name is compliant with all Arizona business name rules. Once a name has been finalized, an Arizona Corporation name search will help you to ensure availability of such a name for reservation. Let’s look at the important aspects to consider when it comes to naming your business corporation.

General Corporation naming rules

If you are planning to register a domestic or foreign corporation then you will need to reserve a corporate name first. Either way, you will need to conduct an Arizona business entity search before you can reserve or register the name. The state guidelines for naming a corporation is governed by 2019 Arizona Revised Statutes, Title 10 – Corporations and Associations. Some of the important aspects to consider are:

• Your corporate or company can contain the words company, corporation, limited, incorporated or association. It can also contain an abbreviation of any of these words like Inc., Corp, or Ltd pursuant to AZ Rev Stat § 10-401 (2019).
• The name should not contain any language that states or implies that your corporation has been organized for a purpose other than that has been permitted by AZ Rev Stat § 10-301 (2019).
• The Arizona business name rules state that there are certain words that cannot be used in the corporate name. They are also known as restricted words and include bank, deposit, credit union, trust, and trust company.
• Your corporate name also should not contain words or abbreviations like Limited Liability Company, limited company, L.L.C., L.C., or LLC.
• The corporate name chosen by you should be distinguishable from the names of any other company formed or incorporated in this state.

Search Corporation name availability on the Arizona Corporation Commission’s website

Once you have picked out a brand name or company name in compliance with state naming rules and guidelines, the next step is to look for an Arizona business name availability. This is facilitated by the online portal of the Arizona Secretary of State as well as the Arizona Corporation Commission. There are several options available but the one recommended for a corporate name search is “Search by Name”.

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Need any Assistance in an Arizona Business Name Search?

Business name or corporate name is an identity that will create a bridge between the company and your future customers, clients, vendors, and partners. An Arizona business name search is a process that clears the way for you to reserve the chosen company name. This further makes it easier to register your LLC or incorporate your company. Company name reservation also simplifies several other important processes like opening a checking account and issuing of business licenses.

Arizona LLC Annual Filing Requirements

The Arizona LLC annual requirements will be applicable only after you have registered your company. The annual requirements for a limited liability company may be different from that of a corporation or any other business structure. The annual requirements are governed by 2019 Arizona Revised Statutes. The essence of fulfilling the annual requirements lies in the fact that it will ensure your company enjoys a good standing with the state. If you start a limited liability company in this state then the important annual requirements are categorized as under.

No Arizona LLC Annual Report

One of the first annual requirements for an LLC in any state is that of an annual report. Unlike other states, there is no requirement of an Arizona annual report. It simply means that if you form an Arizona limited liability company then you don’t need to file any annual reports with the state.

Arizona LLC Taxes

There are different forms of LLC taxes in Arizona and filing of the same is important towards ensuring annual compliance. The state taxes are governed by the 2019 Arizona Revised Statutes, Title 42 – Taxation. A limited liability company has a tax status of a pass-through entity by default. Hence, the responsibility of filing taxes passes through from the LLC itself to the individual members of the company. Thus, the LLC doesn’t pay income taxes, but their members have to file the individual tax return. The members of an LLC will be taxed at a rate of 15.3 percent. If you have elected S Corporation Status for your LLC then you will be taxed at 4.9 percent.

Arizona Employer Taxes

One of the important Arizona LLC annual requirements is that of filing state employer taxes. Here, the employer is considered to be the company. If your limited liability company has employees then pursuant to the Internal Revenue Code, you will be required to withhold federal income tax from the wages you are paying to your employees. Apart from the federal tax, as an Arizona employer, you will be required to pay the following taxes.

• State Withholding Tax – As an employer, you must withhold Arizona income tax from your employees whose compensation is being given for any and all services provided within Arizona. The state income tax withholding is considered to be a percentage of your employee’s gross taxable wages pursuant to U.S. Code § 3401. In order to file the withholding LLC taxes in Arizona, you will need to register your Employee Identification Number (EIN) with the Arizona Department of Revenue (ADOR). The form used for this registration is known as the Arizona Joint Tax Application (Arizona Form JT-1). You can file this tax monthly, quarterly or annually depending on the amount of Arizona taxes withheld.
• Unemployment insurance (UI) tax – If you have employees in your company then you will be required to file unemployment taxes. This is also known as the state UI tax (SUTA) and is handled by the Arizona Department of Economic Security (DES). You will be able to register for LLC taxes in Arizona by filing an Arizona Joint Tax Application. This tax is normally filed on a quarterly basis.

Arizona Sales Tax (Transaction Privilege Tax)

Most states in the USA have certain common taxes like the sales tax. The sales tax is known as the Transaction Privilege Tax (TPT) in the state of Arizona. This is one of the important Arizona LLC annual requirements. This tax will be applicable on your company for the privilege of doing business in this state. It is important to note that there are certain business activities that will be subjected to the transaction privilege tax.

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Arizona Corporation Annual Filing Requirements

One of the top business structures is the corporation. If you have decided to incorporate in Arizona then there are different state requirements and regulations that you need to adhere to. The Arizona Corporation annual requirements are one of the most essential mandatory state obligations to be fulfilled. This includes knowing when to file the Arizona Corporation annual report. The annual requirements will be applicable for both domestic and foreign corporations. It is governed by the 2019 Arizona Revised Statutes, Title 10 – Corporations and Associations. Let’s look at the various annual requirements in detail.

Arizona Corporation Annual Report

The Arizona Revised Statutes requires all corporations as well as other associations registered with the state to file an Arizona annual report. If you incorporate a new company then unlike a limited liability company, your corporation will have to file the annual report pursuant to AZ Rev Stat § 10-1622 (2019). Normally, an annual report is considered to be a financial document. This report may contain detailed financial information about small and large corporations. Although, different states require corporations to provide particulars other than financial information as well.

What does it include and how to file it?

An Arizona annual report for corporations require the following information pursuant to AZ Rev Stat § 10-1622 (2019) –

• Name of the corporation and the state law under which it has been incorporated (Arizona)
• Address of its known place of business
• Name and address of its Arizona statutory agent
• Address of its principal office
• Name and address of the principal officers or directors
• Names of shareholders
• Brief description of nature of business
• Total number of authorized shares along with class and series
• Issued and outstanding shares
• Certificate of disclosure

What is the due date for filing?

Normally the due date for an annual report filing may depend on the entity structure and whether your corporation is a domestic or foreign entity. The 2019 Arizona Revised Statutes states that you need to file an Arizona Corporation annual report by the registration anniversary date. This means that the filing date for this report will not be the same for all corporations. You can find the due date for your corporation by checking your company’s record on the eCorp Search page. An Arizona annual report can be filed 30 days prior to the due date. The processing fee is $45 and if you opt for an expedited service then there will be an additional fee of $35.
If you have hired IncParadise as your Registered Agent for Arizona Corporation then you can take advantage of our entity management software. This software will help you to file the annual report on time, which is on or before the due date. This will ensure your company is in compliance with Arizona Corporation annual requirements.

Penalties if you fail to file

If your company or any corporation is unable to deliver the Arizona annual report within the time specified in AZ Rev Stat § 10-1622 (2019), you may be subjected to penalties. The penalty charged will be $9.00 per month. Your corporation will be sent a delinquency notice almost 90 days after the due date. Your company status will be changed to Pending Inactive. If you are unable to file an Arizona Corporation annual report 60 days after receiving the first delinquency notice then your corporation may receive a Notice of Pending Administrative Dissolution/Revocation.

Thinking of filing an Annual Report for Arizona Corporation!

Arizona Corporation Taxes

When you incorporate in this state, you will have to ensure complete compliance with Arizona Corporation annual requirements. One such requirement is that of filing taxes. There are different forms of taxes in this state but it is not necessary that your company will be required to file all of them. As a corporation, one of the most important would be to file a federal corporate tax return (form 1120/IRS) on all your profits. This can be filed in the form of quarterly payments to the IRS. If you own stock in the corporation then you will be required to file individual income tax on your salary and bonus. Apart from these corporation taxes in Arizona, you may be required to file taxes on dividends. This is also known as double taxation.

Arizona Sales and Use Tax

One of the important Arizona Corporation annual requirements is that of filing sales and use tax. Most states in the USA have sales tax and use tax filed separately or together. This type of tax is based on business activity and location of a business. In the state of Arizona, the sales tax is also known as the state transaction privilege tax (TPT). The TPT rate or the corporation taxes in Arizona rate is 5.6 percent. This is a state sales tax rate and there is also a combined state and local sales tax rate of 8.38 percent. It is important to note that the use tax rate can vary from one county or city to another. For example: The use tax rate for Retail Sales in Apache Junction is 2.40 percent and is 3 percent in Coolidge.

Employee and Employer Taxes

As an employee in a corporation, the most important tax would be the individual income tax. If you are an employee and a shareholder or owner then you will also have to file taxes on the dividends earned on shares or stock. This also brings us to payroll taxes, which is another important type of corporation taxes in Arizona. The employers of a corporation have to withhold taxes from the employees being paid for any work done within this state. There is an exception though for remote workers.

Need any Assistance in Filing the Arizona Corporation Annual Report?

The Arizona LLC annual requirements or those for a corporation are different especially when it comes to filing taxes and annual reports. The annual report is one of the most important documents although LLC’s are not required to file. Taxes on the other hand have to be filed by both types of entity structures i.e., LLC and corporations.

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.

Form your new LLC in Arizona Today!

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.

Register a Corporation in Arizona with ease!

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.

Arizona Corporation

If you are planning to form a corporation in Arizona then it’s one of the best business structures. This type of structure has its own advantages. Apart from that, as a corporation, you will be able to leverage a robust state infrastructure, strong logistics platform, and even apply for a wide variety of business incentives. The entrepreneurial community in the state is driven by technology and innovation and hence is considered one of the best states for testing and launching new ideas and startups. One of the benefits of incorporating in Arizona is that you will have access to a highly-skilled and educated employee pool.

What is an Arizona Corporation?

One of the most popular forms of business is the C Corporation. There is also an S corporation but that is considered by the Internal Revenue Service (IRS) as a special tax status. You can register a corporation in Arizona and just like in any other state, there are different types of corporations to choose from. A C-corp shares certain similarities with limited liability companies (LLCs) but is a separate legal structure with distinct advantages. A corporation undergoes a different tax treatment and limits the overall liability of firm owners and shareholders or investors. You can register an Arizona Corporation online or offline. The different types of corporations to choose from are:

• Domestic and foreign C Corporations (C-Corp)
• S Corporation (S-Corp)
• Domestic and foreign nonprofit corporations
• Professional Corporations
• Business Development corporations
• Benefit Corporations
• Statutory Close Corporations

What are the benefits of incorporating in Arizona?

Entrepreneurs prefer to incorporate in Arizona as a traditional C Corporation has several advantages over other types of entities. Some of the advantages are:

• Securing your assets – One of the benefits of incorporating in Arizona is that owners will be able to enjoy limited liability protection. This simply means that they will not be personally responsible for any debts of their corporation. As a result, creditors will not be able to claim your car or home for payment of business debts.
• Tax breaks – When you form a corporation in Arizona, you will be able to acquire tax advantages. Certain components like life insurance, savings on self-employment taxes, and health insurance premiums can be written off.
• Establishes credibility – One of the important benefits of incorporating in Arizona is that it may help your company to establish a certain degree of credibility in the market and with vendors, employees, partners, and potential customers.
• Easily transfer ownership – If you register a corporation in Arizona today and want to transfer ownership in the near future then it will be possible. In fact, transferability of ownership can take place easily as compared to other entity structures.

Starting an Arizona Corporation

Arizona does not only provide a competitive environment to a new business owner but also provides support in the form of infrastructure, and tax credit programs. The state has a vibrant economy driven by highly advanced multi-faceted industries and these play a key role in driving overall growth. The question is how can you form a corporation in Arizona? There are several processes involved and different types of documentation will be required. Let’s take a leap into the different and important aspects of new business formation.

1. Name Arizona Corporation

If you are planning to incorporate in Arizona then one of the first things to do is identify a business name. A business name is important as it helps in creating first impressions, communicating business strategy to end users, provides legal protection, and ultimately shapes your brand. In order to finalize a corporate name, you will need to ensure compliance with state naming guidelines as provided in AZ Rev Stat § 10-401 (2019). It states that a corporation should use words like “corporation”, ” association”, “incorporated”, ” limited”, or abbreviations like “corp.”, or “inc.”

2. Appoint Arizona registered agent

One of the important aspects of forming a new business in Arizona is hiring a registered agent. Most states have made this a mandatory requirement. This is because, a statutory agent is responsible for handling service of process, which entails accepting all legal mail or documentation on behalf of your corporation pursuant to AZ Rev Stat § 10-504 (2019). You can form a corporation in Arizona only if you hire and maintain a registered agent in the state pursuant to 2019 Arizona Revised Statutes, Title 10 – Corporations and Associations, Chapter 5 – Office and Agent.

3. File Articles of Incorporation with the Arizona Corporation Commission

The most important part of the process of forming a corporation in Arizona is submitting the documents needed for incorporation. You will be required to prepare and submit the Articles of Incorporation pursuant to AZ Rev Stat § 10-202 (2019). You will be required to provide information in the Articles pertaining to the total number of shares of each class that your corporation is authorized to issue. You will also be required to submit a Certificate of Disclosure ((Form C003) and this is mandatory.

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4. Prepare bylaws for Arizona Corporation

If you have decided to incorporate then there are certain requirements specific to this type of structure that need to be fulfilled. One such requirement is that of corporate bylaws. Whether you register an Arizona Corporation online or offline, you need to prepare company bylaws. This is an internal document and is not required to be shared with the state. According to the 2019 Arizona Revised Statutes, AZ Rev Stat § 10-206 (2019), the board of directors will have to adopt bylaws.

• Statement of Purpose
• Shareholders owning stock in the company
• When and where shareholders and directors meetings will be held
• Issuance and transfer of stock certificates
• Titles of the officers of the corporation
• Procedures for retaining profit and issuing dividends
• Committee and committee members
• Powers of director or officer
• Corporate book and information entailed in it
• Amendment to the Bylaws
• Conflict of interest

5. Appoint initial directors & hold an organizational meeting

Once you have decided to form a corporation in Arizona, one of the important steps in the incorporating process is appointing a board of directors. It is a requirement by law for a corporation to appoint an initial board of directors as they will represent the company. They will also be responsible for making decisions on behalf of shareholders. They will be required to make decisions regarding issuance of shares, strategic growth, and adding new products.

• Establishing a corporate structure of the company
• Election of officers
• Presenting stocks of certificates
• Authorize issuance of shares
• Establish principal place of business
• Approve business banking account
• Approving the corporate seal
• Special resolutions if any

6. Get an EIN

There are several aspects of new business formation and one such aspect is obtaining an Employer Identification Number (EIN). When you register a corporation in Arizona, you will need to be compliant with the state annual requirements and this includes filing of business taxes. According to the Internal Revenue Service (IRS), a C corporation may be liable to file employment taxes, corporate taxes and excise taxes. The type of tax may differ from one state to another. Hence, it is important to apply for and obtain the unique 9-digit Employer Identification Number (EIN). It is also known as the Federal Employer Identification Number (FEIN) and will allow corporations to open business bank accounts.

7. Open a bank account

A corporate account is a type of business bank account that can be opened by an individual in the name of a company. This type of banking account is used for facilitating different types of transactions including for receiving income, making payments, and saving funds. Once you incorporate in Arizona, you will have to make both personal and business transactions. This is where a corporate bank account can be quite beneficial. It will ensure your personal expenses and gains are kept separate from business expenses and gains. A business bank account also has several benefits and comes with numerous features like credit and loans, ease of filing taxes, and automated payments among others.

8. Comply with other tax and regulatory requirements

Once you form a corporation in Arizona, you will have to comply with various annual maintenance requirements of this state. One of the important requirements is that of an annual report. According to Arizona Revised Statutes, AZ Rev Stat § 10-1622 (2019), each domestic and foreign corporation authorized to transact business in this state will be required to file an annual report. It has to be filed with the Arizona Corporation Commission – Corporations Division, along with a fee of $45. Failure to file this report can lead to penalties.

Know more about starting an Arizona Corporation

If you have decided to register an Arizona Corporation online but are faced with several queries then this section will help address such queries. The section deals with queries specific to various aspects of incorporation like S Corporation, starting costs, foreign corporation, and dissolution among others.

How do I form a “C” corporation and an “S” corporation in Arizona?

If you are puzzled by the query of how to form a corporation in Arizona, especially a C and S Corporation then it is important to understand the difference first. A Corporation is a traditional corporation that can be formed by submitting the Articles of Incorporation pursuant to AZ Rev Stat § 10-202 (2019). Once you have formed a C Corp, you can elect for S Corporation status. An S Corporation is not a business entity but a tax status. You will have to submit a completed IRS Form 2553 (Election by a Small Business Corporation).

How much does it cost to start a corporation in Arizona?

If you want to incorporate in Arizona then you will be required to submit Articles of Incorporation for a domestic entity. The initial cost to register an Arizona C Corporation is $60. If you want to expedite the process then there will be an additional fee depending on the expedited service chosen. Apart from this initial incorporation cost, there will be other costs like cost for publishing notice of incorporation, reservation of corporate name, Articles of Amendment, application for business licenses and permits, and filing of annual report among others.

How do I look up a corporation in Arizona?

You will need to first reserve a business name and then apply for incorporation of your business. This starts with identifying a name that is compliant with state naming guidelines. The next step would be to conduct an Arizona Corporation search also known as name availability search. This process will ensure that your chosen name is available for reservation.

Do I need a business license for my Arizona Corporation?

Yes. You may require single or multiple business licenses depending on the industry, the location of your company, and the primary business activity.

Can I register a foreign Corporation in Arizona?

Yes. You can incorporate in Arizona as a foreign company and this process is known as foreign qualification. You will need to submit a Foreign Registration Statement pursuant to AZ Rev Stat § 10-1501 (2019). This application is also known as the Application for Authority to Transact Business in Arizona. The application has to be submitted with the Arizona Corporation Commission – Examination Section along with a fee of $150. You will also be required to officially publish a notice in top local newspapers within 60 days of incorporation verification.

How do I dissolve a corporation in Arizona?

Once you register an Arizona Corporation online, it becomes operational. If you want to dissolve this company then you will have to file the Articles of Dissolution pursuant to AZ Rev Stat § 10-1401 (2019). This is also known as the Application for Withdrawal and you will need to submit a Tax Clearance Certificate (Certificate of Compliance) along with it. There is a filing fee of $25.

Ready to Start an Arizona Corporation?

There are different types of business structures that you can choose to form in the state of Arizona. One of the most favored is a C Corporation. If you form a corporation in Arizona then you can leverage the many benefits of this type of entity as well as assistance and resources offered by the state. If you want to incorporate in this state as a domestic or foreign entity then IncParadise can assist you with the process of incorporation.