Steps to Forming an LLC
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How to Form an LLC in Arizona
Forming an LLC in Arizona will help protect your personal assets from lawsuits and judgments against your business. An LLC is a business structure that separates your business and personal assets. By not having your business in a separate legal structure, you can be held personally liable for certain debts and lawsuits incurred by the company. Forming an Arizona Limited Liability Company does not require an attorney and you can save a lot of money if you do it yourself with the six simple steps below.
Before getting into the step-by-step guide to forming an Arizona LLC, here are a few things to know.
The formation and registering of a Limited Liability Compny is handled by the Arizona Corporations Commission. Note: Arizona is one of the few states that require “publication” notice of all new LLC and corporation formation. After filing your formation papers–whether you incorporate your Arizona LLC online or by paper–you must publish notice of your LLC formation in a newspaper.
How Much Does It Cost to Create an LLC In Arizona?
The filing fee for an Arizona Limited Liability Company is $50, payable to the Arizona Corporation Commission and accompanies your Articles of Organization.
In addition to the filing fee for the Articles of Organization, there is also a publication requirement, where a notice is filed in the Arizona county where the LLC is based for three consecutive weeks. There is an exception where LLCs in Maricopa or Pima counties do not have to publish a notice as the Corporations Commission uses the state database.
A list of approved newspapers is available from the Arizona Secretary of State.
How Long Does it Take to Form an LLC in Arizona?
Normal processing is 10-15 business days.
Expedited service costs an additional $35.00.
Arizona Annual Report and Annual Fees
Arizona requires all LLCs to file an annual report in order to stay in good standing with the state of Arizona. The filing fee for an Arizona LLC annual report is $45.00, payable to the Arizona Department of Revenue.
- Minimum Number – one or more
- Members/Managers- at least one is required to be listed in the Articles of Organization
- Residence Requirements – none specified
- Age Requirements – none specified
In addition to forming your LLC, you will need to check for Arizona business licenses and permits such as registering for the Transaction Privilege Tax with the Arizona Department of Revenue. The TPT is a tax on the privilege of doing business in the state.
Steps to Forming an Arizona LLC
Step 1. Naming Requirements
Arizona LLC Name Search
Before settling on a business name, you want to be sure nobody else is using it as each LLC name must be distinguishable from other LLC names. Here’s how to search available LLC names in Arizona. You can also visit our page to do a free Arizona LLC name search to see if the business name is available.
Your business trade name must end with the words Limited Liability Company or an abbreviation of these words (“LLC,” “L.L.C.,” “limited,” “ltd.,” “ltd”.). Check out our article on naming your LLC for all requirements that must be followed when naming an LLC.
Also, there are some words that aren’t allowed to be used in the state, like those that could refer to a state agency or that require licensing from the state.
Step 2. Choosing a Statutory Agent
What is a Statutory Agent?
A statutory agent is what most states call a registered agent and is the central point of contact for the LLC, that can be either an individual or business entity, that receives important legal documents, tax notices or communications with the state.
Statutory Agent Requirements
The statutory agent must have a physical presence in Arizona and have a physical street address and be available during normal business hours to accept delivery of documents. A Post Office Box or personal mailbox is not acceptable. The address is not required to be the business address.
If the registered office includes a suite number it must be included in the registered office address. Unlike many states, an Arizona Statutory Agent must be available during normal business hours between 9am and 5pm to accept legal correspondence. If your LLC is served and the state is unsuccessful in reaching your agent, the LLC may be involuntary dissolved.
Who can be a Statutory Agent in Arizona?
A statutory agent in Arizona can either be a resident of the state or a corporation authorized to do business in the state.
Provided you as the business owner have a physical presence in Arizona, you can be the registered agent however, there are some privacy benefits to having a third-party registered agent.
Check out our article on LLC Statutory Agents for more details.
Step 3. Filing the Articles of Organization
The Arizona LLC Articles of Organization is a legal document that is used to form an LLC with the state. This is the most important step and many people believe that you need an attorney to file.
While we don’t discourage having an attorney, LLC formation can be done by most people, but you can save considerable money over an attorney and make sure everything is filed correctly by using a formation service such as ZenBusiness.
Within 60 days of filing, you must also publish a notice of the filing in a newspaper of general circulation in the county of the known place of business in Arizona, for 3 consecutive publications. A list of acceptable newspapers in each county will accompany the approval letter and is posted on the Commission website. Do not publish your documents until they have been approved. Depending on where you file, expect to spend between $40 and $300 to publish the notice.
Step 4. Newspaper Publication Requirement
After formation, the Secretary of State will send a Notice of Publication to the address of the Statutory Agent.
Unless the LLC is located in Maricopa or Pima County is required to publish a notification of formation is one newspaper that is located in the same county as the LLC for three consecutive publications. This notice shows in the legal section in the paper and must be published within 60 days of forming the LLC.
Step 5. Creating an Operating Agreement
An LLC operating agreement is not required in Arizona but is typically a good idea, especially for an LLC owned by multiple people. The primary function of the operating agreement is to govern the relationship between the owners of the business, but also outlines the duties of the LLC members, how profits or losses are distributed and the operating procedures of the LLC. This is an internal document and not filed with the Secretary of State.
Find more information about the Arizona LLC operating agreement.
Step 6. Obtain an EIN
What is an EIN?
The Employer Identification Number (EIN), or Federal Employer Identification Number (FEIN), is used to identify a business entity. It is essentially a social security number for the company.
In addition to the EIN being an identifying number for the LLC it serves a few other purposes such as:
- Opening a business bank account
- Federal and State tax purposes
- The business account to pay payroll taxes for employees paid by the company
How to Register an EIN for an Arizona LLC
To get an EIN for your LLC, visit the Internal Revenue Service (IRS) or obtain the SS-4 form. They show the steps on how to apply, but here is a video on how to apply for an EIN for more details. In about five minutes, you will have your number free of charge. Be sure to wait until your LLC is approved before applying for your EIN as the name that is registered for the LLC must be the same as the EIN.
Step 7. Selecting the Tax Status of the LLC
In addition to the personal asset protection of the LLC, another advantage is the flexibility in taxation as there are four ways an LLC can be taxed, compared with two ways for a corporation. While it is a little confusing to see the names of other business entities, these are just refer to the LLC tax. Regardless of which election is made, the LLC’s personal liability protection is still the same.
- Single Member LLC – An LLC with one member automatically becomes a single-member LLC with the IRS. The owner simply files their Schedule C with their 1040 at the end of the year. Filing as a single-member LLC means the entity does not pay federal income tax and is instead paid by the owners which is called pass-through taxation. The owner pays self-employment taxes on the net profit of the LLC, which while simpler to handle taxes, may be more costly.
- Partnership LLC – An LLC with two or more members is automatically considered a Partnership with the IRS and will file Form 1065. Like the sole-proprietorship as a pass-through entity, the LLC taxed as a Partnership pays no income tax and profit and losses flow to each member’s Form 1040s via Schedule K-1 of Form 1065.
- C Corporation LLC – An LLC can elect to be taxed as a C Corporation by filing IRS Form 8832. The major difference as an LLC that is taxed as a C corporation is that now the LLC pays tax on the profits and losses and are not directly passed down to the members. Most, but not all will find filing as a C Corporation will cost more in taxes as now the LLC has double taxation where there is a tax on the profits and dividends.
- S Corporation LLC – To get S Corporation status, you will file Form 2553 with the IRS. What makes the S Corporation attractive unlike the sole proprietorship or partnership is that you can potentially shield some of the profits from being subject to self-employment taxes. Dividends aren’t typically subject to self-employment taxes which is a large potential savings. There will be more work in accounting an LLC that elected S Corporation status.
Each of the four ways for an LLC to be taxed in Arizona can have a major impact on the taxes that are charged depending on the business and the member’s personal finances. It’s a very good idea to work with an accounting professional to see which one is most efficient for the business and members.
Don't want to go it alone but don't want the expense of an attorney? Another alternative is to use an LLC formation service that will do the formation at a low cost.
ZenBusiness has a special offer right now to form an LLC for $49 plus the cost of the state fees.
Step 8. Open a bank account for your business
Opening a separate LLC bank account is important as it establishes a clear division between your personal and business finances. Should the LLC be sued and you are using a personal bank account for your LLC’s finances, that would be considered a commingling of funds, which may make it difficult to maintain the liability protection of the LLC.
To open a bank account for your LLC, you will need to bring the following with you to the bank:
- Form of identification for each member, such as a driver’s license
- Copy of the Certificate of Formation
- LLC operating agreement
- Employer Identification Number – If you are a single-member LLC with no employees, you can simply use your Social Security Number
A bank resolution may be needed depending on the bank and the tax election of the LLC. A banking resolution is a formal document that provides authorization for who has access to the LLC bank account.
Learn more about opening a bank account for an LLC
Step 9. Obtain a sales tax permit (optional)
If your business sells a taxable product or service you will also need to apply for Arizona Sales Tax Permit. This can be obtained through the Arizona Department of Revenue.