In Arizona, forming a limited liability corporation (LLC) provides tax benefits as well as personal liability protection at a low cost. Many prospective and potential business owners are anxious about forming a legal corporation, but the rewards are generally well worth the effort. If you’re wondering how to start an LLC in Arizona, here are the steps to take your business from conception to existence.
A limited liability company (LLC) in Arizona is a corporate structure that protects its owners from personal liability in the event of a lawsuit. Your personal assets (such as your home, vehicles, and bank accounts) will be safeguarded if your Arizona LLC is accused. Anyone can utilize an Arizona LLC to run a business or to buy assets like real estate, autos, ships, and planes.
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Arizona is experiencing significant growth in the economy. As a result, there has been a significant increase in hiring and new entrepreneurial pursuits across the state. If you are looking for how to start an LLC in Arizona, now is the best time to do it. If you want to get more information on how to start an LLC in any state, you can read our complete guide on How To Form An LLC.
Luckily, forming a limited liability company (LLC) does not have to be complicated. You can set up your Arizona LLC in no time with the correct planning and this helpful step-by-step guide. We’ll walk you through the entire process of how to form an LLC Arizona.
Before we start, here are the top picks for LLC formation services in Arizona :
What Are The Benefits Of An LLC In Arizona?
- Limited liability protection will be available to Arizona LLCs, which ensures debtors can sue the LLC but not the owner or investors
- Corporations must comply with more regulations than LLCs.
- Profits from an LLC are not taxed twice as much as earnings from a C-corporation.
- If you form a new business in Arizona as a C Corporation, you’ll be able to raise money through stock sales.
- It integrates the limited liability characteristics of a corporation with the partnership’s flow-through tax treatment of revenue and losses
- An Arizona LLC has the benefit of being able to select different forms of distribution of profits
In Arizona, LLCs are the most common structure for small businesses. That’s because forming and operating a limited liability corporation (LLC) is simple and has lots of advantages. A unique aspect may be a positive or a disadvantage depending on what type of company structure you’re choosing. Here are the following benefits of how to set up an LLC Arizona. Let’s have a look at some of the benefits of LLC in Arizona:
1. Pass-through taxation
If you form a new company as an S corporation in Arizona, the company or firm will not have to pay any taxes. Instead, the corporation’s profit or loss will be distributed to its stockholders. Earnings are taxed before being dispersed to owners, and profits are taxed again when owners declare their part of the profits on their personal tax returns.
2. Limited Liability Protection
“Personal liability protection” is one of the most significant benefits of forming an Arizona LLC. As the proprietor of an LLC, you will not be held personally liable for any of the company’s debts. Your personal assets, such as your automobile, property, and bank accounts, will be protected from LLC creditors.
3. Independent life
When you set up a new business as a Corporation in Arizona, it will be self-contained. This means that a stockholder’s incapacity or death would not have a serious effect on the company’s activities.
4. Flexible Taxation
A limited liability business (LLC) can pay income tax in one of three ways. Being taxed as an S company is one alternative. An S corporation is a tax structure, not a specific sort of corporate entity.
5. Increased Credibility
Incorporating a limited liability company (LLC) gives your company more legitimacy. A limited liability company (LLC) is considered a more corporate management structure than a sole privately owned company. Customers and partners will recognize you as a respectable company if you include LLCs in your company.
6. Ownership Flexibility
There are limited constraints on how you can arrange the management and ownership of an LLC in Arizona:
- You can form a single-member LLC or a multi-member LLC.
- Members can control a Multi-Member LLC, which is referred to as member-managed.
- Manager-managed LLCs are those that are controlled by a manager who is appointed by the members.
7. Perpetual Existence
A new company incorporated as a Corporation in Arizona will have perpetual succession. This means that a stockholder’s incapacity or death would not have a serious effect on the company’s activities.
Limited liability businesses in Arizona are simple to start and maintain, requiring minimal paperwork and cost. LLCs, unlike C companies, are not obliged to designate formal officer responsibilities, have annual meetings, adopt bylaws, or keep track of business records and decisions.
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Disadvantages Of Forming An LLC In Arizona
- Incorporation is a time-consuming and expensive process when compared with other types of company formations
- Unlike the company and partnerships rules, which have evolved over time in Arizona, LLC laws and regulations are new and largely unproven.
- An LLC can’t issue shares, making it more difficult to raise funds from investors
There are various disadvantages while forming an LLC In Arizona, which include the following:
- Since LLCs, like sole proprietorships, are pass-through businesses, LLC owners must pay taxes on their portion of the LLC’s net income, whether or not they get a payout.
- High registration cost compared to sole proprietorships and general partnerships
- An LLC, unlike a corporation, cannot raise funds by issuing stock
- Members of an LLC found it more difficult for obtaining loans compared to a corporation
Steps For How To Start An LLC In Arizona
In Arizona, forming an LLC is not exceptionally difficult or expensive, but it is a multi-step procedure that necessitates the use of certain specialized forms. If you make a mistake or don’t meet all of the conditions, you’ll have to start the procedure all over again, which will cost you time and money. To ensure that you’ve done everything correctly, you need to follow some specific steps. This procedure will be assisted by the following step-by-step instructions. Let’s get started with how to register a business in Arizona.
Here are the steps you need to take to form an LLC in Arizona which will get you started today:
1. Choose A Name For Your Arizona LLC
The first step in forming an LLC in Arizona is deciding on a name. You won’t be able to proceed without a name because it will appear on all of your formal formation documentation. Every LLC operating in Arizona is required to have a distinctive name. For branding considerations, your business name should be distinctive, as well as legal. The name of your LLC must be distinct from the names of other businesses registered with the Arizona Secretary of State. For more information, check Arizona Naming Guidelines.
If you search the company database and discover that a name is available, Arizona allows you to reserve it for up to 120 days. The filing fee is only $45. Filling out this form ensures that the name you want will be available when you complete the other processes of incorporating an LLC in Arizona.
The following are the Arizona LLC naming guidelines:
- The phrase “limited liability corporation” or one of its derivatives must be in your name (LLC or L.L.C.)
- Your LLC’s name cannot contain any words that could be mistaken for a government department (FBI, Treasury, State Department, etc.)
- Restricted words (e.g., bank, attorney, university) may need additional paperwork and the inclusion of a licensed professional in your LLC, such as a doctor or lawyer
- Your business name must be distinct from any other limited liability company, corporation, limited liability partnership, or limited partnership in Arizona.
- Check Name Availability: Do a name search on the State of Arizona website to be sure the name you choose isn’t already used.
- Reserve Your LLC Name: It’s a great idea to reserve your LLC name with the Arizona Secretary of State as it protects the name from being used by another company before your LLC is formally incorporated in the state.
Read our guide on Top Business Name Generators that will help you to name your business and create a free logo with the best logo makers.
2. Appoint A Registered Agent In Arizona
Before you can legally file to form your Arizona LLC, you’ll need to choose a registered agent in the state. Your LLC must maintain an Arizona Registered Agent at all times in order to do business in the state. A Registered Agent in Arizona is a person or business that receives legal mail and papers directed to your Arizona LLC. You can act as your own registered agent or hire any professional registered agent service.
Legal documentation and tax notices will be accepted on your LLC’s behalf by your Arizona registered agent. When you submit your Certificate of Formation, you will identify your registered agent.
An Arizona registered agent must meet the following criteria such as:
- The Registered Agent for your Arizona LLC must have a physical address in the state
- If your LLC’s Registered Agent will be a single person, he or she must be at least 18 years old and an Arizona resident
- If a person or company is based outside of the Arizona business office
- A designated registered agent must provide an address of a registered office in Arizona and must be found during normal business hours
- In order to be eligible as a registered agent in Arizona, the business must already be operating in the state when the LLC is formed.
3. File Your Arizona LLC Articles Of Organization
In Arizona, a limited liability company (LLC) is founded by filing Articles of Organization with the Secretary of State. The Certificate of Organization is the paperwork you’ll submit to the Department of State to formally register your LLC. When you’re ready, submit Articles of Organization to the Arizona Secretary of State to formalize your LLC.
The articles can be filed either online or by mail. If you file by mail, the charge is $10, if you file online, the fee is $45 ($10 filing fee plus $35 expedite fee).
The following information must be included in the Articles of Organization:
- Name of the LLC, address of the principal office, email address (optional), and phone number
- Name and address of the registered agent
- Articles that are out of date are no longer effective (if not immediate)
- Names and addresses of the Articles’ signatories
- A member’s, organizer’s, or their representative’s signature
4. Establish Company Records
Your LLC’s books and records must be accurate and comprehensive. The articles of organization you filed are the initial documents in your LLC’s file. Many more public documents will be created by your LLC, including:
- Minutes of the meeting
- Operating Agreement
- EIN Verification Letter
- Throughout the LLC’s existence, amendments and other filings are made
5. Receive a Certificate From the State
Articles of Organization have often been approved quickly in Arizona. Approval applications are only accepted online. After the LLC’s creation paperwork is filed and approved, the state will provide you with a certificate confirming the LLC’s formal existence. The materials for approval will be forwarded to your email address.
The LLC will be able to obtain an Employer Identification Number (EIN), business licenses, and a business bank account with the help of this certificate.
6. Obtain An Arizona Business License
In order to operate in Arizona, certain sectors will require a company registration. You may require one or more types of licenses, including:
- Licenses issued by your city or county.
- Certain skilled vocations require professional licenses.
- Environmental permits.
- Licenses for health and safety.
- Permits are required by zoning.
- Liquor licenses, for example, are regulatory permits.
- Sales tax exemptions are available.
7. Prepare Arizona LLC Operating Agreement
Although preparing a detailed LLC operating agreement is not a legally required step for incorporating an LLC in Arizona, it is strongly suggested for all emerging limited liability businesses. You should consider developing an operating agreement as part of your LLC strategy. The purpose of this paper is to establish how your firm will operate.
The operating agreement is the basic document that spells out the members’ rights, powers, responsibilities, debts, and obligations to one another and to the LLC. The agreement is strictly internal and has not been lodged with the Secretary of State.
If an LLC does not establish an operating agreement, the articles of organization, rules, and/or member control or limited liability company agreement will serve as the operating agreement.
The following should be included in the operating agreement:
- Define the business structure of the LLC.
- Determine each LLC member’s particular roles and obligations.
- Describe how the LLC will be managed.
An LLC may suffer substantial legal and operational challenges if it does not have an operating agreement that spells out the precise responsibilities of its members.
8. Hold The Organizational Meeting
The organizational meeting is the LLC’s initial gathering of members. To hold this meeting, you’ll need your filed articles of incorporation and your operating agreement. This meeting’s minutes should be kept and filed in your company’s record book.
9. Get An Arizona LLC EIN
In the United States, all newly created LLCs must get an Employer Identification Number (EIN) from the Internal Revenue Service. The nine-digit EIN is a company’s equivalent of a social security number, and it’s required to pay income taxes, submit tax returns, open corporate bank accounts, and do a variety of other activities. Your Arizona LLC’s “social security number” is a Federal Tax ID Number. For taxation and reporting purposes, the IRS uses it to identify your LLC.
You can apply for EIN online, by fax, or by mail. Federal tax ID numbers are free and don’t charge anything.
You will need an EIN number for the following:
- Open a business bank account
- Register for business licenses and permits
- Transact business with other companies
- Taxes are filed and managed at the federal and state levels
10. Comply With Arizona Employer Obligations
In addition to the steps outlined so far, Arizona LLCs with employees must also comply with the following requirements:
- Employers are required by state and federal law to report new employees to the Arizona Department Of Employment Security within 20 days of their hire date.
- Employers in Arizona are required to withhold state and federal income taxes from their employee’s paychecks. Employers must remit withheld taxes to the state on a regular basis.
- Employers are liable to compensate unemployment taxes in Arizona. Every firm is allotted a tax rate depending on its age, industry, and history of unemployment insurance claims.
- A small-business owner in Arizona is required to acquire workers ’ compensation as soon as they recruit their first employee. Employers can self-insure or obtain workers’ compensation coverage from a private insurer or the state insurance fund.
11. Comply With Federal Requirements
In Arizona, LLCs must follow both state and federal regulations. Most LLCs are treated as pass-through entities under federal law, just as they are in most states. On their personal income tax returns, LLC members disclose their portion of LLC income. The LLC does not have to pay federal income taxes.
An LLC’s members can choose to have it taxed as a C-corporation at the federal level, in which case the LLC will pay a flat federal corporate tax of 21%.
Important Steps After Forming The Arizona LLC?
After registering your Arizona LLC, you need to follow some important responsibilities. Here are some important steps you need to consider, after forming an LLC in Arizona:
- Open a business bank account: A business bank account lets you keep personal and business costs separate, which is necessary to keep your LLC’s corporate entity intact. In the event that your LLC or business is sued, a corporate veil shields your personal assets from creditors. Also read, How To Open A US Bank Account As A Non-Resident?
- Get a business credit card: A company credit card will help you separate personal and business costs while also creating a credit record for your firm.
- Hire a business accountant: An accountant for your business can help you save money on taxes and prevent penalties and fines. Accounting and payroll are made easier with the help of an attorney.
- Get Business Insurance For Arizona LLC: Risk management is aided by business insurance. General liability, professional liability, and workers’ compensation are the most prevalent types of business insurance.
Keep Your Company Compliant
- You need to research and get an Arizona license and permits
- File your Arizona annual reports statement online with the Arizona Department of State at the end of the month in which the LLC was formed
- In the next step, you need to understand Arizona sales tax requirements and seller’s permits
- Understand the federal tax requirements to report income to the IRS each year using Form 1065 Partnership Return
LLCs are less complicated to form than other business arrangements. Small firms, particularly start-ups, can simply form an LLC in Arizona for too little money. LLCs benefit from a ‘pass-through taxation’ advantage, which allows them to avoid paying some taxes. Limited liability businesses require far fewer documentation and legal procedures to form.
It takes time and effort to form an Arizona LLC, but once you have everything in place, you can rest assured that your company is ready to flourish. Several aspiring entrepreneurs may have wondered how to register an Arizona limited liability company (LLC). You must follow a multi-step process that includes everything from naming your business to obtaining a designated person, as well as a multi-member operating agreement.
We strongly recommend Incfile, a popular business formation service that makes starting and operating your own private limited company simple. It’s completely free to form an LLC with Incfile, and it only costs $125 to file the formation and recruiting application. If you’re seeking a quick and easy LLC formation, ZenBusiness is the way to go.
Are you ready to start an LLC in Arizona? If you have any questions just leave them in the comment section below! Our experts will reach you soon!
Frequently Asked Questions (FAQs)
1. How much does it cost to make an LLC in Arizona?
In order to form an LLC in Arizona, you must first file Articles of Organization. Articles of Organization can be submitted either by mail or online. Both have the same filing fees of $50 for ordinary filing and $85 for expedited filing. The filing fee is non-refundable.
2. How long does it take to form an LLC in Arizona?
In Arizona, the LLC paperwork usually takes three weeks to get completed. For an extra cost, expedited processing is available, which reduces the filing period to 7–10 working days.
3. Do I have to renew my LLC Every year in Arizona?
Arizona, unlike the rest of other states, does not require LLCs to produce annual reports.
4. What is the cost of forming an LLC in Arizona in a year?
The Articles of Organization must be filed with the Arizona Corporations Commission for a fee of $50. Expedited processing costs an extra $35. If you want to reserve your LLC name before completing the Articles of Organization, it will cost $10 to file a name reservation application by mail or $45 to register a name online.
5. Do I need an operating agreement for my Arizona LLC?
Although operating agreements are not required in Arizona, they are strongly recommended. An operating agreement will assist protect your limited liability status, eliminate financial and management misunderstandings, and ensure that you, not state law, choose the rules that govern your business.
6. What is the tax structure for an Arizona LLC?
It is, in general, a standard tax structure for LLCs. Once you’ve received your EIN, you’ll be presented with a number of tax structure alternatives from which to choose. S Corp is sometimes chosen by LLCs to minimize federal tax costs.
7. How do I file an LLC in Arizona?
Send the Arizona Corporation Commission your finished Articles of Incorporation by mail or fax. Domestic LLCs pay $50, while international LLCs pay $150. There are no refunds on any filing fees.
8. Can I file an LLC in Arizona by myself?
If you live in Arizona, you can form your LLC on your own. However, when it comes to legal complications, paperwork, and other documentation, it is always better to hire an expert rather than do it yourself.
9. Do LLC pay taxes in Arizona?
The state of Arizona does not apply a state-level income tax on your LLC if it is taxed in its default position with the IRS. Instead, the revenues from your LLC will flow through to the owners, and you will be responsible for personal state income taxes.
10. How long does an LLC last in Arizona?
Your LLC was formed when you filed the required formation paperwork with the state, and it will be dissolved after you file the appropriate dissolution document. In Arizona, for example, you must file a termination certificate with the Arizona Corporation Commission.