How to start an LLC in Arizona
How to start an LLC in Arizona
Arizona is quite popular amongst first time business owners as it has a very pro-business environment as well as regulations. You can form several types of businesses in the state although entrepreneurs prefer to start an Arizona LLC. A limited liability company provides a variety of advantages from the ownership as well as operational perspective. Hence, we have created this article to provide you all necessary information that will help you to fulfill your Arizona LLC filing requirements. The article covers areas like registration process, business name, business licenses and permits, operating agreement, and LLC bank account among others.
LLC in Arizona
If you have a business idea and want to start a company then a limited-liability company would be a good choice in terms of structure. You can opt for Arizona LLC filing online or offline. Apart from advantages to this type of entity structure, you can even leverage state business incentive programs. The state of Arizona provides several useful and important resources that will assist you to grow your business and minimize initial startup costs. The state is home to diverse industries and so you can file an LLC in Arizona for any of the top and advanced industries. The state is also home to innovation hubs, technology parks, and research centers that encourage collaboration amongst existing and new businesses.
What is Arizona LLC?
An Arizona limited liability company (LLC) is a type of corporate structure that protects its owners in many ways. As the name suggests, this type of private company limits the possibility of its members or owners to be held personally liable for the debts of the company. When it comes to taxes, the IRS defines a limited-liability company as a “pass-through entity”. This is also known as a flow-through entity and it simply means that the individuals will be taxed on the revenue and not the entity or LLC. You can start an Arizona LLC in the form of a single-member LLC or a multi-member LLC.
Benefits of forming an LLC in Arizona
An Arizona limited liability company has lower formation costs as compared to those formed in several other states. The formation and operations are governed by the Arizona Revised Statutes. If you want to file an LLC in Arizona then it is important to identify the benefits of this type of structure. Let’s look at some of the top advantages:
- Limited Liability – If you are planning to file an Arizona LLC application then one of the top advantages of this structure is a limited liability protection. This simply means that the private assets of owners and members will be protected if the LLC incurs a debt or faces a lawsuit. The personal assets cannot be seized when there is a legal claim.
- Separate legal identity – One of the salient highlights of a limited liability company (LLC) is that it is separate from its owners. When you file an LLC in Arizona, it will have its separate legal identity, rights, liabilities, and responsibilities. The company will also be able to purchase, own, and even use its own personal or real property.
- Perpetual existence – One of the less talked about advantages of an LLC is perpetual existence. This means that if the owner or member of an LLC retires or dies then this will not trigger a dissolution. The LLC will not cease to exist or operate. It will exist unless specified in the article differently.
Start an LLC in Arizona
Once you have taken the decision to form a limited liability company, there are several processes and steps to consider. You can opt for Arizona LLC filing online in accordance with the state laws. You will need to fulfill different Arizona LLC filing requirements in order to conduct business in this state with ease. Let’s take a look at some of the important aspects of starting your LLC in this state.
1. Choose Arizona LLC name
If you have a strong business idea then it’s time to establish a company. If you want to form a limited liability company then conducting an Arizona LLC search for a business name becomes important. This is because the name of your company will play a key role in registering the business, applying for licensing and permits, and for marketing and branding. The chosen name will be the identity of your business.
When thinking of a name, it is important to ensure it is compliant with the 2022 Arizona Revised Statutes, Title 29 – Partnership, § 29-602 Limited liability company name. Some of the Arizona LLC filing requirements for a business name will include –
- According to AZ Rev Stat § 29-602 (2019), the name of a limited liability company should contain the words like “limited liability company” or “limited company”. It may also contain abbreviations like “LLC”, “L.L.C.”, “LC”, or “L.C.”.
- The state provides a list of restricted words and you need to ensure such words are not used in the business name as a part of Arizona LLC filing requirements for name reservation.
- The company name should be unique or distinguishable from any other name in the records of the state. This is possible through conducting an Arizona LLC search also known as name availability search.
If the chosen business name is available then you need to file the “Application To Reserve Limited Liability Company Name” along with a filing fee of $10. The fee for online name reservation is $45.
2. Choose Arizona LLC registered agent/statutory agent
If you want to file an Arizona LLC application or register your business then you will be required to follow Arizona statutes. One of the important laws is to hire and continuously maintain an Arizona LLC registered agent pursuant to AZ Rev Stat § 29-604 (2019). The primary role of your registered agent in this state will be to provide service of process.
IncParadise can be your Arizona LLC registered agent in the state. We are committed to providing service of process as well as all important services like assisting with Arizona LLC filing online and helping you fulfill other state annual requirements like submission of annual reports.
3. File an Article of Organization
Once you have reserved your business name and hired an Arizona LLC registered agent in this state, the next step is to register your business. You can opt for Arizona LLC filing online or even submit a paper form offline. In order to form a limited-liability company, you will need to submit the Articles of organization pursuant to AZ Rev Stat § 29-632 (2019). The articles have to be submitted with the Arizona Corporation Commission – Examination Section along with a fee of $50. It is important to note that you will need to also submit the Statutory Agent Acceptance (form M002) along with the Articles of Organization.
Form an Arizona LLC Today!
4. Prepare Arizona LLC operating agreement with the Arizona Corporation Commission
An Arizona LLC Operating Agreement is one of the important business documents for any limited liability company – domestic or foreign. If you want to start an Arizona LLC then it is essential to draft this document. It is a legally binding agreement where-in the organizational structure of your business will be established. This document also sets forth other procedures that the LLC will be required to follow like operating procedures, decision-making processes, and management structure. The Arizona Revised Statutes provides a brief insight into the LLC operating agreement and is governed by AZ Rev Stat § 29-682 (2019). This is an internal document and is not submitted with the state. Some of the important sections that the agreement includes are as follows:
- Statement of intent
- Members’ ownership or ownership percentages
- Duty of members and member benefits
- Management and their powers and responsibilities
- Distribution of profit and loss
- Voting rights
- New member admissions
- Tax considerations
- Transfer provisions
5. Complete publication requirements
Once you file an LLC in Arizona, it is important to issue a notice of existence of the said limited liability company. This is also known as the publication requirement and includes a short summary of key LLC information. You will need to publish this information in a local newspaper prior to transacting business in this state. This requirement is governed by AZ Rev Stat § 29-3201(G). You will have to publish this notice within 60 days of receiving the approval letter. It is also important to note that this notice has to be published in 3 consecutive issues of an ACC-approved newspaper like the Arizona Daily Sun especially in the county or city where your registered agent is based.
6. Obtain EIN for Arizona LLC
An Employer Identification Number (EIN) is a unique nine-digit number that is assigned to an Arizona limited-liability company by the Internal Revenue Service (IRS). It is also known as the Federal Employer Identification Number (FEIN). A single-member LLC may not be required to apply for this number or if the said LLC doesn’t have any employees. Once you start an Arizona LLC, you will need to file different business or state taxes and the EIN will be required for filing the same.
Do you want to obtain an EIN in Arizona?
7. Check local licenses and permits
Once you file an LLC in Arizona, it is time to make your business operational. Legally, this would be possible only if you possess the necessary state licenses and permits. Some states have general state licenses but Arizona doesn’t have any statewide general licenses. Instead, operating in this state will require you to apply for a variety of licenses or permits. You can conduct an Arizona LLC search for types of licenses based on your occupation and location. Your company may require a single or multiple licenses based on certain factors. Let’s take a look at the applicable licenses in this state.
- Transaction Privilege Tax License – This type of license is also known as a sales tax license or vendor license. When you start an Arizona LLC and if your primary activity revolves around selling, wholesale, or vendor then you will need this license. Products sold or services rendered by you will be subject to transaction privilege tax in the state.
- Professional or Occupational License – You may be required to apply for a professional or occupational license in the jurisdiction you are operating from. This is applicable if your business activity focuses on a specific profession or occupation. It is important to remember that different boards or government agencies are responsible for issuing licenses based on profession. For example – if you file an LLC in Arizona as a law firm then the Certification and Licensing Division of the Arizona Judicial Branch will be responsible for issuance of the relevant licenses.
- City or County License – Whether you opt for Arizona LLC filing online or offline, you may be required to apply for local licenses. The type of license will vary predominantly according to business activity and location or jurisdiction. For example – If you start a public service franchise in Maricopa County then you will need to obtain a business license pursuant to A.R.S. §40-283. This license will be issued by the Maricopa County Clerk of the Board.
The Arizona LLC filing requirements for business licensing including the application process may be quite extensive for a first time entrepreneur. A top Arizona LLC registered agent like IncParadise can provide meaningful assistance through the “Business License Research Report” service. This is basically a detailed report containing a list of filing instructions, supporting document requirements and fees for all business licenses and permits in this state.
8. Open Arizona LLC bank account
Banking is crucial to businesses. Many business owners prefer to use their personal bank accounts to accept and make payments, which can be troublesome especially in the tax season. Maintaining a personal savings account can be quite inconvenient too as it will be difficult to separate personal and business expenses. Hence, it is highly recommended to open a separate business bank account before or after you file an Arizona LLC application. This will help make your LLC tax preparation smooth by automating bookkeeping.
Now, you can even open an LLC account online through Cheqly. This account can be opened remotely and the salient benefit is that it is a US business bank account. This business banking account works just like any other checking account. You can also use their physical or virtual debit cards to make payments with ease.
9. Comply with taxes and other regulations
Once you file an LLC in Arizona, it will be treated as a pass-through entity. This is the default tax status of a limited liability company. As a result, the owners or members of the LLC will be taxed instead of the company. LLC members will be taxed at a rate of 15.3 percent. In addition to this, an LLC may be required to file other taxes depending on primary business activity and location. Some of the taxes include transaction privilege tax, industry-specific taxes, and city or county taxes.
When you start an Arizona LLC, you will be required to maintain compliance with all state annual requirements. Most states require new and existing businesses to file annual reports. Arizona is an exception as LLC’s are not required to file annual reports. Another annual requirement is that of renewal of business licenses.
Know more about starting an LLC in Arizona!
An Arizona LLC registered agent can provide necessary guidance and assistance towards forming a limited liability company in this state. Even then, you may have several queries regarding this type of entity. Hence, we have created a special section of “Frequently Asked Questions” for addressing some of these queries.
Is Arizona a good state to form an LLC?
The state of Arizona is one of the top states for starting a new business. Once you file an Arizona LLC application for new business registration, you will be able to leverage the several benefits offered by this state. Some of reasons why entrepreneurs prefer to form an LLC here are:
- Arizona is ranked 6th in the nation in terms of business friendliness
- The state is ranked 7th in terms of human capital and small business growth
- Overall cost of doing business is much lower as compared to several other states
- The per-capita income going to taxes is 8.4% as compared to the national average of 9.9%
- The state has business friendly and streamlined regulation
- Arizona boasts of an outstanding infrastructure that provides access to major world markets
- The state is home to a high workforce
How do I know if my Arizona LLC name is available?
Once you have identified or chosen a business name in compliance with the state naming guidelines, you need to conduct an Arizona LLC search. This is basically a name availability search in the database of Arizona Corporations Commission. If the chosen name is available then you can go ahead and reserve the same.
How much does an LLC cost in Arizona?
If you want to file an LLC in Arizona then you will have to submit Articles of Organization. The state fee for the same is $50. You will have to publish an announcement regarding formation of your LLC in a local newspaper and this cost can vary from $50 to $300. You will also have to reserve an LLC name and the fee for the same is $10. Apart from this, there is a cost associated with business licenses, statutory agent fee, and Certificate of Good Standing among others.
Do I need a business license for my Arizona LLC?
Yes. A business license is required for making your LLC operational. You may have to incur a penalty if you conduct business without proper licenses or permits.
Can I set up a single-member LLC in Arizona?
Yes. You can set up a single member LLC (SMLLC) in Arizona. As the name suggests, a single-member LLC has one owner or member. The documentation required will remain the same as that of a domestic LLC. You will need to reserve a business name after conducting an Arizona LLC search. You will then be required to file articles of organization and apply for relevant licenses.
What taxes does an LLC pay in Arizona?
Since you want to file an LLC in Arizona, you will be subjected to personal income tax. This is because an LLC is a pass-through entity. You may be required to file other taxes applicable in the state depending on the primary business activity like transaction privilege tax (TPT).
Can I register a foreign LLC in Arizona?
Yes. You can register and operate a foreign LLC in the state of Arizona. The registration of a foreign LLC will be governed by 2019 Arizona Revised Statutes, Title 29 – Partnership, Chapter 4 – Arizona Limited Liability Company Act, Article 9 – Foreign Limited Liability Companies. You will have to file a Foreign Registration Statement along with a fee of $150.
How do I dissolve my Arizona LLC?
Once you start an Arizona LLC, you may have reasons for dissolving the said company. According to state laws, AZ Rev Stat § 29-3702 (2023), you will be required to file Articles Of Termination – Limited Liability Company along with a non-refundable fee of $35. It has to be submitted with the Arizona Corporation Commission – Examination Section.
Ready to form an Arizona LLC?
A Limited Liability Company is considered as one of the popular structures in the nation due to the many advantages it has over other structures. You can form a single-member or a multi-member LLC as well as a domestic or foreign entity in the state. If you want to file an LLC in Arizona then IncParadise can assist you with the entire process of registration of your LLC in the state.
IncParadise is a highly reputable statutory agent and we have helped with the registration of hundreds and thousands of businesses. We also offer a wide variety of additional services like foreign qualification, EIN assistance, and certificate of good standing among others.