Last Updated on April 22, 2023 by Ewen Finser
Forming an LLC can be a confusing process. Each state has its laws and requirements for starting one. Arizona is a great place to form a limited liability company (LLC) for various reasons. There is no income tax or franchise tax on LLCs based in AZ, and the state has a relatively straightforward process for registration.
The Arizona Corporation Commission offers all the necessary forms to get an LLC set up quickly and easily. In Arizona, LLCs are considered separate legal entities from their members, which gives members limited liability protection from the debts and obligations of the business. If you are considering forming an LLC in AZ, here is what you need to know.
What is an LLC?
A Limited Liability Company is a popular business structure designed for private companies in the United States. It combines aspects of corporations and partnerships while benefiting from the flexibility of sole proprietorships and flow-through taxation. This means that only the business owners pay taxes and not the company.
What is the Cost of Forming an LLC in AZ?
To form a Limited Liability Company in Arizona, you must first complete the Articles of Organization. You are then required to file them with the Arizona Corporation Commission and pay a $50 filing fee. However, if you need the process expedited, you will pay an additional $35.
Once your LLC is approved, you will be required to publish an ad in a newspaper. The ad is known as a Notice of LLC formation, and publication costs vary from $60-$300 depending on the county. Publication must be done within sixty days of formation. Once you have done that, you will not be required to pay any annual fees though you must file a report annually.
The process is quite detailed, as it begins with the completion of the Articles of Organization and ends with acquiring a Certificate of Formation from the Arizona Corporation Commission.
How Long Does it Take to Form an LLC in AZ?
If you are in Arizona, the time it takes to create your LLC depends on how long it takes the Arizona Secretary of State to approve your paperwork. Typically, it takes three weeks for approval. Getting your LLC approved more quickly is also possible with an additional fee – which, if you pay, it will be done within 7-10 business days.
Step by Step Guide on Forming an LLC in AZ
A limited liability company is a type of business entity that is ideal for startups and small- to medium-sized businesses. In Arizona, an LLC provides the security and protection of large corporations but with more straightforward rules. Below are the steps you need to take to form your LLC in AZ.
Choose a name for your LLC
Before you file your LLC Articles of Organization with the Arizona Corporation Commission (AZCC), you must check the state’s database to ensure that your desired LLC name is available. You cannot use a name that is already taken. Your AZ LLC name must be unique and different from other businesses in the state.
The naming guidelines also prohibit you from choosing a name that conflicts with other state agencies such as Treasury, FBI, or State Department. According to Arizona LLC Act section 29-3112, your LLC name must end with a proper designation like the ones below;
- “Limited Company”
- “Limited Liability Company”
Your LLC should not contain the words “incorporated,” “association,” “corporation,” or their abbreviations. In addition, it cannot have “LP” (limited partnership), “LLP” (limited liability partnership), “Non-profit” (or any variations on this word), or “Non-profit Corporation” (or any variations on this word). It cannot include “Bank,” “Deposit,” or “Credit union.”
Choose your LLC Statutory Agent
In AZ, you are required by law to have a statutory agent for your LLC. In other states, they are known as registered agents. The statutory agent is the person who accepts legal papers on behalf of an LLC. They can be either an individual, a domestic corporation/LLC, or a foreign corporation or LLC authorized to do business in Arizona.
If you’re looking for someone to act as your agent, they need to have a physical street address in Arizona. Legal documents can be delivered via post office box, but process servers usually deliver them in person. For this reason, you must designate a physical address for the agent to receive essential paperwork.
The person you appoint as your agent is supposed to signify their acceptance by signing a statutory agent acceptance form. The form is included with the Articles of Organization when registering a company.
File Your Articles of Organization
Once you have secured the services of your statutory agent, the next step is to file your articles of organization with the Secretary of State. Articles of the organization is an important document that legally and officially establishes your new LLC. It includes the following details
- Name and address of your LLC
- The type of LLC – whether it is a single member, multi-member, non-profit, or professional LLC
- Details of your statutory agent
- Your LLC’s address
- Names and addresses of the managers or members at the time of filing
- Signature of the incorporator
You need to file your articles of organization by mail or online. There are two ways to do it. You can either find a copy of the articles of the organization on the Arizona Corporation Commission website, then submit that to them by mail.
Alternatively, you can file it online. If you do this, you have to submit the “Statutory Agent Acceptance” form with your articles of organization.
Create an Operating Agreement
An Arizona LLC operating agreement is an essential legal document outlining the management and ownership of your LLC. In Arizona, it’s not a requirement to file one – but you should do it anyway!
If a dispute or lawsuit arises, you’ll have a point of reference. It’s also a great way to lock in the management structure and ownership rights before issues occur. The operating agreement should highlight the following issues
- The responsibilities of each member
- Procedures for admitting new members
- Guidelines on sharing profits and dividends
- How a member can transfer or terminate their membership
Complete Publication Requirements
Once your Limited Liability Company is approved, you must publish an advertisement in a newspaper within 60 days. Publishing ads usually takes about 1-2 weeks, depending on the newspaper. You are required to advertise in a newspaper located where your Arizona LLC’s Statutory Agent lives.
When your ad is run, the newspaper will send you a document known as an Affidavit of Publication. Later, you can file the affidavit with the AZCC, although it is not a requirement.
Apply for an EIN
After forming your new LLC in AZ, you need to get registered with the federal government to be issued with an Employer Identification Number (EIN). To do this, you will need to register with the Internal Revenue Service (IRS). EIN is also called the Federal Employer Identification Number (FEIN).
You can get your EIN by filing an application on the IRS Website for free. Your EIN will help you when you want to open a bank account for your LLC, hire employees, or file taxes.
What to do After Forming Your LLC
After forming your new AZ LLC, there are a few more essential things to do including;
Open a Bank Account for Your LLC
To ensure liability protection, your company must have a separation between personal funds and business funds. This can be accomplished by opening a bank account for your LLC. Various documents are needed to open an LLC bank account, but the most important ones are listed below.
- The Articles of Organization
- An Operating Agreement
- An Employer Identification Number (EIN)
- A banking resolution
- Members driver’s licenses
Apply for Business Licenses and Permits
LLCs need to get other licenses in some cases. The city or county that your business is located determines the local permits that your LLC needs. Check with your city or county to see what license they need. The Arizona Department of Commerce determines state licenses.
The agency provides an Arizona Department of Commerce Licensing Guide that can help you find out which business license you need for your state.
The state of Arizona has three basic types of licenses, namely:
Local business permits
To operate in any new city or town, you will need to meet the requirements of the city/town’s policies. You can find out if your business needs licenses and how to obtain them at the Arizona Commerce Authority’s Checklist Program website.
Regulatory (Professional/special) permits
State, local, and federal laws vary to regulate businesses. Your LLC may need a license or permit depending on the type of business you are starting. The Arizona Commerce Authority provides a simple checklist website to learn about the licenses and permits your LLC should have.
Statewide Transaction Privilege Tax Permit
The Arizona Department of Revenue requires all LLCs entering into transactions that incur the transaction privilege tax to obtain a Transaction Privilege Tax License. To do so, you will need to provide contact information for your company and business location.
Tax responsibilities for LLCs in AZ
LLCs in Arizona have tax classifications that range from being treated as a corporation, a limited liability partnership, or a single-member LLC. The kind of taxes you need to pay on your LLC depends on its classification. For example, if you are taxed under federal income tax laws. In such a case, the responsibility is determined by the type of taxation you decide to have for your LLC – that is, whether to file as a corporation or a single-member LLC.
- The LLC treated as a Limited Liability Partnership is obligated to file Form 1065 to the IRS and distribute profits, losses, and credit according to a K-1 schedule.
- If you are an LLC classified as a C corporation, your first task is to file Form 8832 with the IRS. On this form, you can request to be treated as a corporation for federal tax purposes. Next, you must file Form 1120, U.S. Corporation Tax Return, with the IRS.
- LLCs treated as S-corporations must fill out Form 1120S. They must also fill out the owner’s report with the IRS, which shows how they are splitting profits, losses, and credit.
- If your company is an LLC and you are considered a sole proprietor, all business income and expenses will be reported via your personal income tax return. You’ll need to file Schedule C (Form 1040) and include the profit or loss from your business.
Registration for state taxes is not one size fits all. Different kinds of businesses are required to pay different types of taxes. Here are some of the taxes you may be required to pay, depending on the nature of your business.
Arizona Employer Taxes
Registering with the Department of Revenue for unemployment tax and employee withholding tax is required for any Arizona LLC with employees.
Arizona Sales Tax
If you sell a physical product in Arizona, you must get a Transaction Privilege Tax (TPT) license. This will cost you money depending on the type of business you operate and where you are located. The Department of Revenue collects the tax for the counties and cities, meaning rates will differ depending on your business type and location.
Question: Are Foreign LLCs Allowed to do Business in AZ?
Answer: A foreign LLC must register with the Arizona Corporation Commission to do business in Arizona. The LLC has to use a registered agent who is physically located in the state. The LLC needs to file a certificate of existence from its home state. To register, you need to fill in and send the application form by post and pay a $150 filing fee.
Before you file for an LLC in Arizona, make sure the name is available. If it’s not, the foreign LLC must adopt a fictitious name. A copy of the company’s resolution adopting the fictitious name must be filed with your application.
Question: What is the Procedure for Removing a Member From my Arizona LLC?
Answer: Your LLC’s operating agreement outlines actual voting and cause-related requirements for removing members. Follow your operating agreement to abide by the removed member’s share procedures, which could be distributed to remaining members or offered on the market for third parties.
Once you have removed a member, you should amend your operating agreement to reflect the change in membership.
Question: How do I Submit my AZ LLC Articles of Organization?
Answer: To file articles of organization in the state of Arizona, you have three methods to choose from: online, by mail, or in person. If filing online, an account is needed with eCorp (the Arizona Corporation Commission online system). Paper filings require a cover sheet that must be submitted to:
Arizona Corporation Commission
1300 W. Washington St.
Phoenix, Arizona 85007
Question: Do I Need to File an Annual Report for my LLC in Arizona?
Answer: Unlike most states, Arizona LLCs do not need to file annual reports with the Arizona Corporation Commission. This is a huge relief and time saver for owners of an LLC in the state.
Forming a Limited Liability Company (LLC) in Arizona will offer protection to you as the owner. It will also shield your assets if any debts are incurred. All profits and losses are reported on personal tax returns. Another benefit of forming your LLC in AZ is that you are not required to pay any renewal fee.
If you want to form an LLC, you might want to be aware of the specific requirements in Arizona. To know what you will need before starting your LLC, you will need to understand the state of Arizona’s regulations.