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Forming a Limited Liability Company (LLC) in Arizona offers tax advantages, personal liability protection and does not cost much. Many new and aspiring business owners are intimidated by the prospect of forming a formal business entity, but the benefits are usually worth it. In this guide to forming an LLC in Arizona, we will explain all the necessary steps.
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Forming an LLC in Arizona is generally easier than forming a corporation and provides more protection for your personal assets than a sole proprietorship or partnership.
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The limited liability company (LLC) business structure offers two important advantages. First, it allows for a so-called “pass-through” tax. This means that the profits made by the LLC are not taxed until they are “passed” to the members as income. On the other hand, the profits earned by the corporation are taxed in the same way as the income received by the members, a system known as double taxation because the profits are taxed twice.
The LLC structure also offers important liability protection by separating your personal and business assets. This means that if your business becomes the subject of a lawsuit, defaults or goes bankrupt, your personal assets cannot be seized to pay compensation. However, if you are a sole proprietor or a partnership, your assets may be at risk, including your home and savings.
Registering an LLC in Arizona provides additional benefits. Unlike most states, you do not need to file an annual return or pay an annual fee in Arizona to maintain an LLC. This means less paperwork and lower costs.
Forming an LLC in Arizona is not difficult or expensive, but it is a step-by-step process that requires special forms. Mistakes and failure to comply with all requirements can result in the process having to be restarted, which means lost time and lost filing fees.
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One thing to note: In addition to regular LLCs, Arizona also has a “Professional” LLC designation. A Professional LLC (PLLC) is formed by a person or persons who wish to provide services that require a license or are authorized by an Arizona licensing authority. Certified public accountants, dentists, veterinarians, attorneys, and architects are some, but not all, of the licensed professions in Arizona.
With our LLC formation service, you can save time and ensure that you have done everything correctly. LegalZoom has helped create more than two million businesses. In addition to registering your business name and filing articles of incorporation for you, LegalZoom can also provide registered agent services, operating agreements, EINs, business licenses, permits and more.
LegalZoom pricing starts at $79 plus state filing fees and has an estimated processing time of 30 days. Other premium packages, Standard ($329 plus state fees) and Express Gold ($349 plus state fees), include additional assistance and expedited processing. Standard is 15 days and Express Gold takes up to 7-10 days with express delivery.
Forming an LLC in Arizona is not difficult, but there are several steps involved in the process. Here, we’ll walk you through the process so you can get started today.
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Carefully consider the name you want to use for your LLC, but try not to get too attached to one name once you’ve used it. The first step is to do a general Google search for the name to see if other companies are using it. If so, try to find a different name to avoid legal complications later.
However, don’t think the game is fair just because your name doesn’t show up in Google searches. Your name may be legally registered to another company, but it is unknown. The next step is to check your preferred name with the Arizona Corporation Commission (ACC) to see if another company, trade name, or LLC is already using it.
This is also the best time to check available domain names and purchase the right ones for your business.
A statutory representative is the person or entity responsible for receiving legal documents and official notices from the Arizona Corporation Commission on behalf of your LLC. In other countries, authorized agents are sometimes called registered agents. If an individual, your agent must be a legal resident of Arizona. If a company, it must be registered to do business in the state of Arizona. In that case, the authorized representative must have a physical address located in Arizona.
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You or someone else in your company can be your agent. However, think carefully before choosing a person over an entity. The name and physical address of the representative will be publicly known and the agent is expected to be available for communication at the address provided during normal business hours.
A professional service operation as your agent usually pays a small annual fee and it can be worth it to make sure it is done right.
The cost of organizing articles is only $50 and you can do it online. The process can take up to 30 days from submission to acceptance. If you’re in a hurry, you can pay an extra $35 to $400 for expedited processing.
Acceptance of Statutory Representative: This document must be signed by the person or entity acting as your agent and officially taking responsibility.
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Attribution of members or management structure: This is a list of all members of the LLC, or in the case of attribution of a management structure, managers and members who own more than 20% of the company’s profits.
Arizona requires all newly formed LLCs to publish a notice of the filing of articles of incorporation in a newspaper of general circulation in the county where your business is incorporated (this rule does not apply to businesses incorporated in Maricopa or Pima counties). The notice must be published in three consecutive publications within 60 days of the day the Corporation Commission approves the filing of your LLC articles of incorporation. Failure to meet this requirement could result in your LLC being dissolved.
Under Arizona law, you are not required to enter into an operating agreement for your LLC, but you should. In the absence of an operating agreement, state law governs how your LLC operates, so an operating agreement gives you more control over your business.
The operating agreement sets out the rights and obligations of all members and managers, and explains how the company will be run. And, like a separate bank account (see step 8 below), it helps preserve your limited liability status by serving as proof that your LLC is a separate entity.
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In addition to liability, operating agreements typically provide for profit sharing, voting rights, the addition or removal of members, and the liquidation process. This information helps your business run smoothly and helps you solve internal problems.
Arizona requires LLCs with more than one member to obtain an Employee Identification Number (EIN). Even if you’re the sole member of an LLC, an EIN allows you to set up a business bank account, which is an important step in keeping your personal and business assets separate.
There’s no charge, you can do it online here, and it usually only takes a few minutes. If you work with a business incorporation service, it may include your company’s EIN.
Arizona has some unique tax laws that are important to know. First, a transaction privilege tax (TPT) is levied on the gross receipts of a business in some industries. The exact amount depends on the commercial classification. All sales subject to TPT are also subject to applicable county excise tax.
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To find out exactly what your tax liability is, contact the Arizona Department of Revenue (AZDOR) and Arizona Chamber of Commerce Small Business Services. You may need to consult with a certified public accountant who understands Arizona tax laws.
You must also register your business in the city or county where your business is located. This is for tax purposes and any business or employment licenses required by the city. The Small Business Service of Commerce has links to websites to learn more about specific locations and licensing requirements.
Keeping your personal and business finances separate is important to maintaining your LLC status. If you mix it up, you can lose the liability protection that an LLC provides. One simple way to support this separation is to set up a business bank account and use that account only for business-related activities. You must select a bank or credit union that is located or has a branch in Arizona.
Consider using only business funds to pay for business-related expenses. If you use personal money, keep track of it and return it yourself. This may seem like unnecessary work if you are the sole owner/partner of your business, but it is an integral part of maintaining your business structure. Getting a business credit card to pay for expenses can speed up the process.
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