How to Form an LLC in Arizona: The Affordable Way

Author: Mathew Abraham

Looking to graduate your business into the formal market, or launching a brand-new business idea? The very first step would be to form a company for it.

A Limited Liability Company, or an LLC, is one such type of company. An LLC enjoys the taxation structure of a partnership (it isn’t taxed like a company), and at the same time it allows owners to limit their liability and scope of financial responsibility (like in a company). Arizona has its own rule and regulations for forming an LLC, for example, it is mandatory to publish a notice of formation in the state of Arizona and your LLC has no requirement to file annual reports.

Any mistake in the process of forming your LLC could lead to you having to repeat the whole process. There are a few steps you’ll have to understand in order to form your LLC in Arizona.

Name Your Arizona LLC

Your LLC’s name will become its identity in the eyes of the state as well as its customers. An identity that is distinct from the others and reminds one of the works with which your LLC is associated.

Arizona has certain regulations that ought to be followed while selecting a name for your LLC.

Naming Guidelines

To establish that your company is a limited liability company, the LLC’s name should include the phrases limited liability company or limited company. You can also choose to include their abbreviations, e.g., LLC. 

If you want to start a professional limited liability company, the name should include the phrases professional limited liability company or professional limited company, or the abbreviated PLLC, PLC. However, the name cannot contain incorporated, association, or any of their related abbreviations. 

The name of the LLC can include words like bank, attorney, university, etc. But for this, you will have to provide additional paperwork and/or a licensed professional like doctor, lawyer, etc., should be a member of the LLC.

The usage of words and phrases like bank, deposit, credit union, trust, or trust company can be allowed if the company is, or becomes actively involved in, the banking/trust business, credit unions; alternatively, if the company has a substantial holding in companies engaging in these activities. Otherwise, you cannot use such phrases in the name.

The name of the LLC should not include words like treasury, state department, etc., which may confuse your LLC with state organizations.

There are certain exceptions where an LLC can use an existing name. Notably, it involves permission from the owner of the existing name, or in the event of a merger or acquisition.

Does Your Business Require a DBA?

A Doing Business As Certificate, or DBA, is a document that allows your LLC to operate under a different name. 

Your LLC may be entering a new market, or revamping its marketing strategy, for which its registered name may no longer be suitable. A DBA allows the LLC to carry on with its business under another name. A DBA is also commonly known as a ‘trade name’ in the state of Arizona.

Arizona currently only accepts online applications.

HOW TO OBTAIN A DBA IN ARIZONA

Doing a Name Search and Name Reservation

To ensure that the name you have selected is not already in use, you can search the name in the Arizona Business Entity Database

It is not mandatory to reserve your LLC’s name before registration in Arizona. You do have the choice to reserve the name with the state if you are apprehensive that it’ll get taken by your competitors. 

You can reserve that name with the Arizona state for 120 days. Keep in mind that the same person cannot renew a name reservation. 

RESERVE YOUR LLC NAME IN ARIZONA

Option 1: Request a name reservation from Arizona

Apply online – OR –

Option 2: Apply for a name reservation by Mail or Fax

Download form

Mail to:
Arizona Corporate Commission
Corporate Filings Section
1300 W. Washington
St Phoenix, Arizona 85007

Fax: (602) 542-4100

Fee: $10 by mail, $45 online

Registering Your Business Domain

Having a digital presence is becoming crucial for new business day-by-day. Registering a domain name is a good way to ensure that your LLC can have an aptly named website, helping you grow your brand and attract new visitors online. Even if you don’t wish to start a website right away, it’s always good to have an aptly named domain for your LLC registered and ready.

Choose a Statutory Agent in Arizona

Appointing a statutory agent is a requirement under law, and handles your LLC’s communications with the state. A statutory agent would make sure your LLC doesn’t miss important papers it receives from the state. The statutory agent is responsible for receiving legal documents on behalf of the LLC, as well as sending out documents as required.

Who Can Be a Statutory Agent?

A statutory agent in Arizona must meet certain requirements:

  • Must be above the age of 18
  • Must have a street address in Arizona.
  • If it is a business entity, it must be registered in Arizona.

An LLC cannot be its own statutory agent. You can appoint yourself, family, friends, or other members of your LLC, provided they have a permanent address in Arizona and are above 18. 

Individual Statutory Agent v. Commercial Statutory Agent

Keep in mind that missing out on any important legal document can be detrimental to the health of your LLC.

A commercial statutory agent would provide expertise, as well as being able to provide their services in multiple states if you wish to expand in the future. This can cost you a fee, depending on the commercial statutory agent you approach.

The appointment of a statutory agent is only valid if they have signed the document of appointment and the same has been delivered to, and taken on record, by the Arizona Commission.

File Your Arizona Articles of Organization

The Articles of Organization is a document required by the state of Arizona in order to register your LLC on its records. For filing the Articles of Organization, Form L010 needs to be filled. This document contains the following important information: 

  • Nature of the entity: LLC or PLLC.
  • Name of the Entity.
  • Name and address of the statutory agent.
  • The principal address of the entity.
  • Nature of management, i.e. will your LLC be managed by its members, or by employees.

It usually takes Arizona 15-17 business days to process your Articles of Organization.

HOW TO FILE ARTICLES OF ORGANIZATION WITH ARIZONA

Option 1: File the Articles of Organization Online

Apply online – OR –

Option 2: File Articles of Organization through Mail or Fax

Download form

Mail to:
Arizona Corporate Commission
Examination Section
1300 W. Washington
St Phoenix, Arizona 85007

Fax: (602) 542-4100

Fee: Min. $50 for online filing

Expedited Formation

If you want to expedite your LLC’s formation, you have a few options that will cost you more than the base fee. There’s expedited processing which requires an additional $35 and gets processed within 8-10 business days. A next-day service, this requires an additional $100 and gets processed by 5:00 PM MST on the next business day, given that the application is received by 5:00 PM MST. A same day service which requires an additional $200 and gets processed by 5:00 PM MST, given that you apply at 10:00 AM MST. There’s also a two-hour service which requires an additional $400 and gets processed within two hours of submission, given that the application is received by 3:00 PM MST.

Publish a Notice of LLC Formation

Once your application for the LLC is approved, the next requirement is the Publication of a Notice of LLC formation. 

This is to ensure that the information of the LLC is in the public domain. This is also to allow the public to raise any legitimate objections against the formation of the LLC.

It is a mandatory requirement, and non-compliance would result in dissolution. If the address of the business is located in Maricopa or Pima county, the publication requirement does not apply. You will have to choose from a list of approved newspapers.

Create an Operating Agreement for Your Arizona LLC

The operating agreement is an internal document that keeps the LLC members on the same page. As per the law, there is no requirement of filing an Operating Agreement. It helps avoid any conflict that may arise in the future due to misunderstandings regarding the ownership, management, distribution of profits, etc. 

Here are a few of the things mentioned in the operating agreement:

  • the time and location of the formation of the LLC 
  • the owners
  • how the LLC will operate
  • roles and responsibilities
  • limitations on liabilities
  • terms of dissolution (if your decide to close your LLC)
  • how the LLC will be sold in the even of a merger or acquisition

Writing the Operating Agreement Yourself v. Hiring a Service

Your LLC’s operating agreement will dictate the day-to-day operations of your LLC. Beyond that, it will also outline and limit the responsibilities and liabilities of your LLC’s members and employees.

You can draft your own operating agreement, or engage a commercial service to draft it for you. Most commercial statutory agents also provide drafting services for your LLC’s operating agreement.

Limits of the Operating Agreement

The operating agreement outlines roles and responsibilities, making it easier for your business to operate. However, it cannot restrict liability beyond the scope of Arizona’s laws, such as personal taxation and crimes. 

You cannot exempt yourself from the law through your operating agreement. There are generic and broad laws that apply to the operation of the LLC. 

Obtain an EIN

EIN stands for Employer Identification Number. It is a 9-digit number allotted by the Internal Revenue Service and used for taxing the companies. An EIN is also required for obtaining a bank account, credit card, business loans, and other business licenses in the company’s name. It is also required for legally hiring employees. 

GET AN EIN

Option 1: Request an EIN from the IRS

Apply online – OR –

Option 2: Apply for an EIN by Mail or Fax

Download form

Mail to:
Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999

Fax: (855) 641-6935

Fee: Free

File Annual Reports

Unlike other states that ask for annual or biennial report filing along with certain fees to keep their records up-to-date, Arizona has no such provision. 

Tax Liability For Your Arizona LLC

Your LLC will have to pay state and federal taxes, and both depend on a few factors. The process of filing as well as the the amount of tax payable, depends on the business your LLC operates and how you represent it to the IRS.

Federal Tax Liability

Your LLC will, by default, be treated as a sole-proprietorship if it has a single member, and a partnership if it has multiple members. The members will directly be liable to pay federal taxes. 

You do have the option of filing your taxes as an S-Corporation, or C-Corporation, by filing  Form 2553 and Form 8832, respectively. Both entail you and the LLC being taxed separately. Deciding between the two involves how much profit your business makes in a year, you should consult a professional before deciding which to choose.

State Tax Liability

If your LLC is involved in the sale of physical products, it will have to obtain an Arizona Transaction Privilege Tax License, or TPT. This is a sales tax levied on you, for being allowed to do business in Arizona. Keep in mind that the amount of sales tax to be paid is different in each county.

If your LLC plans on employing people, the state of Arizona mandates that you register for Unemployment Tax and Employee Withholding Tax. 

Miscellaneous Taxes

Each county in Arizona would have different tax rates, and may even have their own taxes. It is important to research what taxes your LLC is liable to pay. You should consult a commercial service that offers tax and accounting services to understand your LLC’s tax liabilities in detail.

Permits & Licenses in Arizona

You might require certain state and city/county licenses and permits based on the kind of business your LLC is engaged in, and the place it is formed. You can always look up more details on  taxes and licensing requirements for the state of Arizona, and a complete list of the city/county licensing agencies and offices of Arizona.

A few permits your LLC would be required to obtain, given the relevant kind of business:

  • building permits 
  • health permits 
  • home occupation permits

Certain businesses also need federal licenses and permits if a federal agency regulates them, make sure to check which federal licenses apply to your LLC

Business Bank Account & Phone Number

Opening a business bank account for your LLC is important for safeguarding your personal assets by separating them from the LLC’s assets. Moreover, having a separate bank account helps in record keeping and tax assessment. The bank will require your LLC’s EIN, along with other documents.

Having a separate phone number for your LLC is a good way to free yourself for more important work. It helps your LLC form its own identity, making it easier for you to focus on operating it. Various network carriers offer enterprise/business plans, and would require certain documents regarding your LLC.

Final Thoughts

Make sure you double-check all the information you’ve gathered, along with the respective forms. Forming your LLC carefully will ensure that your business continues to operate and grow smoothly. Arizona does not mandate your LLC file annual reports, however it does mandate that you publish a notice of your LLC’s formation, make sure you do not miss this as without it your LLC will not be considered as registered. Pay your LLC’s taxes on time and keep the state happy, making sure your business continues to grow smoothly. Best of luck!

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