This is a quick start guide on how to form an LLC in Arizona. An LLC or limited liability company is a way to legally structure a business. It offers limited liability, as with corporations, but keeps the formalities and hassles at a minimum.
As such, LLCs are a popular choice for people making forays into the world of entrepreneurship and business. LLCs are used not just for businesses, but also for holding assets like real estate, vehicles, etc.
So here’s how you can form an LLC in AZ.
1. Choose A Name For Your Arizona LLC
Selecting a name for your LLC is the first order of business. Arizona LLC names should be unique and distinguishable upon record. This means LLC names that are the same as, or very similar to, existing entities won’t be accepted.
A great way to check for name availability is to check the Arizona Business Entity Search Page. This should give you a good idea of the availability of the desired name. Having a few options helps, so you can quickly decide on a name if the top choices are already taken.
Arizona LLC Name Designators
Every Arizona LLC should end its name with a proper designator. The designator is usually ‘limited liability company’ or its legally accepted variations. These include:
- LLC
- L.L.C.
- Limited Liability Company
- LC
- L.C.
- Limited Company
LLC is the most common name designator, though others are valid too.
2. Statutory Agent For LLC In AZ
A Statutory Agent is a person or entity appointed to receive service of process on behalf of your LLC in Arizona. Service of Process includes legal processes like serving notices, summons, lawsuits, subpoenas, and other similar notices. The Statutory Agent may also receive other communication on behalf of your LLC.
This is pretty much the same as the registered agent in most other states. The requirements for qualifying as a Statutory Agent are similar as well:
- They must have a street address in Arizona (PO Box addresses are not acceptable)
- If it’s a person, they must be legal residents of the state
- If the Statutory Agent is an entity, they must be registered to do business in the state
Technically, any adult, legal resident of the state can be your Statutory Agent. Assuming qualification of these requirements, the agent could be you, or your friends and family members.
However, many people choose commercial registered agents. Commercial agents can maintain regular business hours. Moreover, your important communication isn’t likely to be lost/delayed since the commercial agent won’t go off on a vacation like you/friends/family.
Another aspect is privacy. The address and details of a Statutory Agent are part of the public record. By using a commercial agent, you can shield yourself or your friends/family from spam or other problems.
The Statutory Agent will have to provide a signed acceptance form, verifying their consent to serve in that role.
3. Arizona LLC Filing – Articles Of Organization
Your Arizona LLC FIling takes its biggest step with filing Articles of Organization. The acceptance and approval of the Articles of Organization by the state is the final step to creating an LLC in Arizona.
Generally speaking, you can file the document online or via mail. Submitting it online will require registration at the Arizona eCorp website. Once you have login details, you can continue onto submitting the Articles of Organization with the Arizona Corporations Division.
Filing online is easy, convenient, and faster. Once you’re done, you can pay the Arizona LLC cost of $50 through most debit/credit cards.
If you choose to file via mail, you’ll have to download and fill the Articles of Organization form. This, and more forms are available with the Arizona Corporations Division. Or, to be more general, the Arizona Corporation Commission.
The mailing address is:
Arizona Corporation Commission
1300 West Washington Street
Phoenix, Arizona 85007
The Articles of Organization should be accompanied by a check or money order payable to “Arizona Corporation Commission”. The filing fee is $50.
Arizona LLC Requirements For Articles Of Organization
This form requires the following information:
- Name of your LLC
- Name and address of Statutory Agent
- Whether the company’s permanent address is the same as the Statutory Agent
- Whether the LLC is member-managed or manager-managed
- Specify whether the company is a regular LLC or a professional LLC
- Signed Statutory Agent acceptance form
Once the Arizona LLC requirements are covered, you can expect the state to take about 16 business days to approve the LLC. This is true whether you file the form online or via mail.
Should you want to hurry, it’s possible to use expedite services. This can come in handy if you want to be quick to set up the LLC. However, it needs additional expense. For online filing, you can choose to pay $85 (in place of $50) for LLC approval in just one day.
In this case, you won’t have to upload the acceptance form by the statutory agent. Instead, the AZCC will email them a link to accept their position as the statutory agent. Assuming there are no other issues, your LLC will come into existence as soon as the statutory agent clicks the link and accepts their role.
For filing by mail, a payment of $85 will expedite the process and reduce approval time to 7-9 business days.
4. Operating Agreement For Your AZ LLC
An operating agreement is an ‘internal document’ of your LLC. It isn’t filed with the AZCC or any other government agency. Even if it might seem like an optional document, don’t be lax about it, and make it a point to have one for your LLC.
This agreement defines the structure and functioning of your LLC. For multi-member companies, it can provide information on how much of the LLC each member owns, approach to taxation, splitting profits/losses, and general working of the company.
It is a handy document to prove that your assets are indeed separate from the LLC. Additionally, if disputes were to arise between LLC members, the Operating Agreement can serve as the basis for conflict resolution.
Single-member LLCs too will see the benefits of having an operating agreement in place.
5. Federal Tax ID (EIN) For Arizona LLC
The EIN (Employer Identification Number) is a Federal Tax ID used to identify your LLC. Apply for an EIN only after you’ve received approval for your LLC. While there is no immediate requirement to get an EIN, it is always a good idea to get one when you start your AZ LLC.
There is no filing fee for getting an EIN. You can apply for it online with the IRS and receive it rather quickly.
In case the online application isn’t possible, you’ll need to file Form SS-4. It’s possible to submit this form via mail or through fax. Using fax is a better option as it is way faster than mail.
Getting an EIN is important for several business aspects of your LLC. This includes, but is not limited to, opening a bank account for your LLC, processing employee payroll, and getting credit card(s) for your LLC.
6. Annual Reports
Arizona doesn’t require LLCs to file annual reports. There isn’t any associated filing fee either. It’s a huge benefit, considering most other states require these reports.
7. Arizona Newspaper Publication
While Arizona doesn’t use annual reports, the state has stayed on with the antiquated practice of requiring newspaper publication for LLC. Only three states do this, including Arizona and New York.
Within 60 days of receiving approval, most LLCs in Arizona must publish an ad in a newspaper. This ad will last for three publications and can take 1-2 weeks. Once this requirement is complete, the newspaper will provide you with an Affidavit of Publication. This serves as proof that the newspaper publication requirement has been met.
Once you have this document, you should record it with the AZCC. The newspaper that runs the ad should be located in the same county that hosts the address of your statutory agent.
Interestingly, Mipa and Maricopa county don’t have this requirement. If your statutory agent has a physical address in either of these counties, you don’t have to run the newspaper advertisement.
8. Necessary Business Licenses And Permits For Your Arizona LLC
Licenses or permits may be required to do business in Arizona. This depends on the specific industry of your business, location, and other applicable requirements.
For example, the Transaction Privilege Tax is levied on sellers for the privilege to do business in the state of Arizona. Similarly, your county may require a local business license. Other permits and licenses may also be necessary.
9. Taxation For Your AZ LLC
For taxation, you can often take the approach of considering three points. These are:
- Local
- State
- Federal
Local taxes are the ones levied by your city/county of business. State taxes are those that are due to the state of Arizona. These can vary depending on the revenue, location, and industry of your business.
State taxes include personal income tax returns for Arizona residents. These apply to all LLCs whose members are residents. Usually, this requires filing Form 140. The due date for this form usually is April 15.
Similarly, Arizona Partnership Income Tax Return (Form 165) applies to multi-member LLCs. Relevant forms are also applicable to LLCs that choose to be treated as S-corporations or C-corporations.
For federal taxation, the profits/losses from your LLC can be filed as part of your personal tax returns. This is because LLCs are, by default, qualified for pass-through taxation. However, this can change, if you choose to get your company taxed as a corporation.
As we see, taxation is complex and there are several facets involved at various levels of governance. Ensure that you’ve got all bases covered and have no problems with tax compliance.