Everything you need to know to start your business in Arizona
Choosing the best business structure for your startup can be a very confusing process. In this post we will introduce you to all the business structures available in Arizona and give you step-by-step instructions for establishing each of them.
Startup ecosystem in Arizona
Before launching a business in any location, it's important to have an understanding of its startup ecosystem. Let's have a look at some important startup statistics in Arizona:
Planning your business in Arizona
Your first step should be to verify the demand for your business idea with effective
market research. Once that's done, the next step is to create a solid business plan.
A business plan logically lays out your plan for establishing your startup, and it also makes your venture very appealing to potential investors!
A typical business plan is comprised of the following components:
Thankfully, we've written an in-depth guide to crafting a winning
business plan.
Structuring and registering your business in Arizona
There are 6 main business structures, and all are applicable to both brick and mortar businesses and e-commerce businesses:
Limited Liability Company (LLC)
General procedures for all business types in Arizona
The following key steps need to be completed regardless of which business structure you choose:
Get your EIN
Sole Proprietors and Partnerships that
don't plan on hiring employees do not need an Employer Identification Number (EIN), but it's still wise to get one in case you do bring on employees in the future.
All other business structures must get an EIN in order to register their business.
Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999
Register a business name with the state of Arizona
If you want to give your business a unique name that is different to your own full name, you will need to
register it with the State of Arizona.
Get your licenses and zoning permits
Certain businesses in Arizona require a special license to operate. To check if your business type requires a license,, search for your business type on the
Arizona Department of Revenue website.
The location of your business may also restrict business activities. This may especially be the case if you plan to run a home-based business. Contact your
local Arizona county's office to find out whether you need to apply for a zoning permit.
Open business banking accounts
This isn't necessarily a requirement, but highly recommended to keep business transactions separate from personal transactions.
Submit New Hire Reports
File a business annual report in Arizona
The following business structures in Arizona need to file an
annual report to the Secretary of State to ensure their contact details are kept up to date:
Tax details for all businesses in Arizona
You can find up-to-date
tax information for all business structures on the Arizona Department of Revenue website as well as on the
IRS website.
It is important for you to submit all state and federal tax filings in a timely manner. Failure to submit on multiple occasions may result in the automatic dissolution of your business.
Domestic vs Foreign business in Arizona
To make sure you are accessing the correct business setup forms, it's important to understand the distinction between a domestic and foreign business in Arizona
A business in Arizona is classified as a domestic if it is headquartered within the state. Foreign businesses, on the other hand, are headquartered outside of Arizona.
Now let's discuss the processes of establishing each individual business structure.
How to start a Sole Proprietorship in Arizona
Most Solopreneurs in Arizona launch their business as a Sole Proprietorship due to its simplicity of set up and cost effectiveness. You're always free to upgrade to a more advanced business structure (such as an LLC or Corporation) at any time as your business grows.
If your business solution poses any level of
financial risk to your clients, it is better for you to settle with a business structure that offers a higher level of personal asset protection, such as an LLC or Corporation.
If you've already completed all the general steps for launching a business in Arizona there's nothing more you need to do to register your Sole Proprietorship.
How to start a Partnership in Arizona
A Partnership is the simplest business structure that accommodates two or more cofounders.
There are four different types of partnerships structures in Arizona
General Partnership (GP)
This is the default type of partnership. All business debts are equally shared amongst General Partners. A general partnership is considered a 'pass-through-entity' which means the business is only taxed once at each member's personal tax income level.
How to form a General Partnership in Arizona
No specialised forms need to be submitted to form a General Partnership in Arizona. The process of establishing this business entity is the same as the process for establishing a Sole Proprietorship.
Limited Partnership (LP)
A Limited Partnership is comprised of both General and Limited members. Limited members limit their personal liability to the extent of their monetary investment in the business.
Limited partners don't have as much jurisdiction over business decisions as general partners, they function more like investors.
How to form a Limited Partnership in Arizona
To register a Limited Partnership, a
Certificate of Limited Partnership needs to be submitted to the Secretary of State. Make sure you include one copy and one original document in your submission.
Filing Fee: $10 (+$3 for each additional page).
Processing time: 2 to 3 weeks (or 3 - 5 days for an additional $25 expedited service).
Limited Liability Partnership (LLP)
Limited Liability Partnership members are not held responsible for any financial negligence or fraud committed by other members.
How to form a Limited Liability Partnership in Arizona
Filing Fee: $3 per page.
Processing time: 2 to 3 weeks (or 3 - 5 days for an additional $25 expedited service).
Filing Fee:
$10 + $3 per page +
$3 Statement of Qualification + $3 per additional page
Processing time: 2 to 3 weeks (or 3 - 5 days for an additional $25 expedited service).
Limited Liability Partnerships in Arizona are required to submit an
annual report to keep their State records up-to-date.
Limited Liability Limited Partnership (LLLP)
In a Limited LIability Limited Partnership, LLLP members are not held financially responsible for any negligence or fraud committed by other members.
How to form a Limited Liability Limited Partnership in Arizona
Filing Fee:
$3 Statement of Qualification to be an LLP +
$3 Statement of Qualification to be an LLLP +$3 per page
Processing time: 2 to 3 weeks (or 3 - 5 days for an additional $25 expedited service).
If you do not have any other partnerships registered, you will need to submit
this form to register your LLLP.
Filing Fee:
$10 + $3 per page +
$3 Statement of Qualification + $3 per additional page
Processing time: 2 to 3 weeks (or 3 - 5 days for an additional $25 expedited service).
Limited Liability Limited Partnership in Arizona are required to submit an
annual report to the Secretary of State.
Create an Arizona Partnership Agreement
Though this isn't a State requirement, it is highly recommended to ensure all partnership members remain aligned
A Partnership Agreement as an internal document all members sign to indicate their agreement with set business procedures. To save time you can use a
partnership agreement templateHow to form an LLC in Arizona
An LLC offers a superior level of personal asset protection to its members. LLCs can either be run by managed by members or a designated manager.
Naming an LLC in Arizona
The names of all LLCs in Arizona need to end in any of the following:
Limited LIability Company
Appoint a Statutory Agent in Arizona
All LLC's in Arizona are required to nominate a Statutory Agent. A Statutory Agent accepts all mail on behalf of the business in order to guarantee that the business receives any important legal correspondences.
All registered agents in Arizona must meet the following criteria:
Be located in the state of Arizona
Accept mail via a residential or business address (not via a PO BOX).
Guarantee availability during business hours.
Guarantee the timely forwarding of all accepted mail to respective business owners.
Should you be your own Statutory Agent in Arizona?
You can legally appoint yourself (or a cofounder) as your own registered agent. However, this is not recommended because, as busy business owners, you can't guarantee your availability during business hours to accept mail.
Alternatively you could appoint a friend, relative or any of the following professional registered agents in Arizona:
You will need to nominate your selected Statutory Agent in a
Statutory Agent Acceptance form. This form will need to be submitted alongside your Articles of Organization (see below).
Submit Arizona Articles of Organization
Once this document is approved, your LLC is officially registered in the State of Arizona.
You can either file your Arizona Articles of Organization
online or by
mail.
Articles of Organization Filing Fee: $50 (additional $35 for an expedited service).
Create an operating agreement
An LLC operating agreement is not an Arizona State requirement, but highly recommended. It contains all the rules and procedures that will govern your LLC.
All members should sign this document during the initial corporate meeting.
Host initial Corporate meeting
This is an opportunity for all members to plan the company's launch as well as complete the following procedures:
Vote for initial term directors to serve
Distribute stock certificates
Complete settlements for high-value business purchases
Create a list of corporate laws that will govern the business (Bylaws)
Arizona LLC Publication Requirements
Newly formed LLCs in Arizona are required to publicise their business once it is formed.
This publication process differest depends on which county you are located in:
LLC's based in Pima or Maricopa counties do not require any specific publication efforts, the Arizona Corporations Commision will publicise all new LLC's in this region on its website.
LLCs based in other counties are required to publicise their new business in a newspaper from the county they are located in, for three consecutive publications. The first publication needs to be done within 60 days of the LLC Articles of Organization being approved.
Foreign LLCs in Arizona
How to form a Corporation in Arizona
A Corporation is the most sophisticated business structure available in Arizona. This structure offers the most superior level of personal asset protection to its members.
A Corporation can be very complicated to set up on your own, so you might want to get help from an attorney.
There are two different types of corporate structures in Arizona:
C-Corporation
This is the default corporate structure. There's no limit to the number of members a C-Corporation can have and they can issue all classes of stock.
The primary downside of C-Corporations is the double taxation process that takes place at both the corporate and personal income level of their members.
S-Corporation
An S-Corporation is classified as "pass-through-entity," so they're only taxed once at the personal income level of their members.
To elect to be an S-Corporation, you need to submit
Form 2553 with the IRS.
S-Corporation can only distribute one class of stock and are limited to 100 members.
Naming your Corporation in Arizona
All Corporations in Arizona must append any of the following entity identifiers to the end of their business name:
Appoint a Statutory Agent for your Corporation in Arizona
The process of appointing a statutory agent for Corporations is the same as the process for LLCs.
Submit Arizona Articles of Incorporation
FIling Fee: $60 (additional $35 for expedited service).
Host a Corporate organizational meeting
Initial directors that will serve during the first term should be appointed
All members should agree upon a
set of bylaws that will govern the Corporation
Finalization of important business purchases
Meeting minutes should be recorded and stored in a Corporate Records Book alongside all other important business documentation
Arizona Corporation Publication Requirements
Within 60 days of receiving an approval for your Articles of Incorporation, you must publicise the a copy of your Articles of Incorporation. Detailed instructions on how to do this will be mailed to your appointed Statutory Agent by the Arizona Corporations Commision.
Foreign Corporation in Arizona
Filing Fee: $175
How to form a Nonprofit in Arizona