How to Start a Business in Arizona

Arizona is a prime hub for entrepreneurs looking to start a business in the US. The state’s pro-business climate affords new business owners several advantages. This includes low tax and regulatory burdens, sound fiscal policies, a diverse business ecosystem, and a skilled talent pool. All these contribute to a vibrant economy that supports small business innovation and growth.

Arizona Economy Trends

Regardless of the business structure, a new business owner in Arizona must comply with the applicable business regulations and laws. Often, a business owner will need to complete the following steps: 

Step 1: What Kind of Business Should I Start in Arizona?

The starting point for any business idea or venture is identifying what to sell or offer. Gaps between consumer demand and existing products can create opportunities to introduce an exciting and valuable product/service. Furthermore, a founder’s passions and resources, the industry trends, and the economic dynamics factor into the type of business a person should establish. Therefore, aspiring business owners in Arizona are advised to research their consumer market, industry, and business environment before setting up shop. 

The following industries are popular in Arizona: 

Sports & tourism, agriculture, mining, and real estate are also notable business sectors in Arizona.

How to do Market Research in Arizona

Business owners can conduct either primary (direct) or secondary (indirect) market research when contemplating how to start a business in Arizona. Primary market research retrieves real-time, firsthand answers from consumers and is often performed before secondary market research. It utilizes tools such as surveys, focus groups, interviews, and observation to identify and understand potential customers for a product or service, including: 

On the other hand, secondary market research draws from existing data sources to answer consumer/market questions. Examples include the SBA’s resource guide, the City of Chandler’s Market Research, the Data & Maps repository (if relevant), and the Arizona Commerce Authority’s research resources. A local library can also offer useful resources for conducting market research in Arizona.

In addition to the research, business owners should conduct a competitive analysis to understand their competitors and discover market opportunities, advantages, and barriers. By leveraging these tools, new business owners can obtain relevant data to make informed decisions and create practical strategies for their own business.

Step 2: How to Write a Business Plan in Arizona

A well-written business plan communicates a business idea to others. It describes a company’s present state (where it is), products/services (what it sells), and vision (where it is going). This document is a valuable tool for securing funding and investments, building a team, attracting business partners, clarifying business goals or objectives, and monitoring progress. 

Business plans come in various formats and lengths. The traditional business plan, the more common template, typically comprises the following sections: 

In sum, the executive summary overviews a company’s story, what it does, where it is going, and how it will be taken there. It should be at most two pages long. It should also be written last, although it will be viewed first and normally receives the most scrutiny.

Although a business plan should be thoughtfully written, it does not have to be complex or overly extensive. The bare minimum for any business plan is that it should evaluate a business’s feasibility and profitability.

Budding business owners who need help writing a business plan in Arizona can always speak to a private business consultant or contact a local Small Business Development Center (AZSBDC) for no-cost guidance. Countless free business plan resources, templates, and samples are also available online. For example, the Arizona Commerce Authority (ACA) provides business plan resources to aspiring entrepreneurs. 

Step 3: Do I Need a Business License in Arizona?

Yes, in most cases. In Arizona, the term “business license” is used generically to refer to any license one must obtain for business. However, there is no singular business license or permit that business owners must get to maintain compliance. There is also no central agency that issues business licenses in Arizona. Instead, different kinds of business licenses and permits are issued by various government agencies. The type of license or permit a business owner needs will depend on their industry, the business structure, location, and product/service. 

Business licenses in Arizona are broadly categorized into three types:

Not all small business owners need a license or permit in Arizona, but some will require more than one. New business owners can use the Arizona Commerce Authority’s Small Business Checklist to determine licensing requirements based on their company type, location, and service.

How Much Does a Business License Cost in Arizona?

Arizona’s legislature does not specify or recommend a standard fee for business licenses and permits issued in the state. Business licenses in Arizona may cost tens of dollars or higher—in some cases, a government agency may issue a license or permit at no charge. As a result, business owners are encouraged to contact the relevant licensing body to determine the agency’s fee structure and fee waivers (if any). 

How to Register for a Seller’s Permit in Arizona

A seller’s permit is referred to as a Transaction Privilege (Sales) Tax (TPT) in Arizona. The Arizona Department of Revenue (ADOR) issues this permit to businesses that engage in an activity or sell a product subject to the TPT (sales) or use tax. However, Arizona’s TPT is not a true sales tax but a tax imposed on vendors for the privilege of doing business within state limits. (See TPT exemptions.)

To apply for a TPT license, a business owner must submit a Joint Tax Application (JT-1) to the Arizona Department of Revenue. The form can be submitted electronically or in paper format (by mail or in person). 

Electronic submissions can be made via one’s AZTaxes.gov account (Account Set-Up instructions) or the Arizona Business One Stop portal. The One Stop portal redirects to AZTaxes.gov, however (see user guide).

On the other hand, applicants who prefer or are mandated to submit a paper application should fill out Form JT-1 and mail it to the address below.

License and Registration 

Arizona Department Of Revenue 

PO Box 29032

Phoenix, AZ 85038-9032

The form can be hand-delivered to any of the following locations: 

Phoenix Office

1600 W. Monroe

Phoenix, AZ 85007

Mesa Office

55 N. Center

Mesa, AZ 85201

Tucson Office

400 W. Congress

Tucson, AZ 85701

The processing time for an online application is the same day, but the license certificate is mailed to the applicant within 7 to 10 business days. Mail requests take two weeks to process, and in-person applicants can receive their licenses on the same day.

Note the following JT-1 application requirements: 

The state fee for a new TPT license is $12 plus any applicable city fees. ADOR can be contacted at (602) 255-3381 for inquiries. Interested persons can also take TPT tutorials on ADOR’s website.

Step 4: How Much Does it Cost to Start a Business in Arizona?

The cost implications for starting a business in Arizona vary. Some businesses need a lot of capital to start, and others can be formed with little or moderate funds. All the same, these are common expenses a business owner may encounter: 

Incorporation fees in Arizona may range from $40 (at the b to some hundred dollars. A business license or permit may cost $10 upwards. Other costs vary widely based on a business’s location and requirements.

It is advised that each aspiring business owner create a detailed budget to determine where they will need to spend money. Individuals who want to structure their business as an LLC or partnership can estimate startup expenses using a tool on the Arizona Business OneStop Portal. The Small Business Administration also offers a tool to help entrepreneurs calculate startup costs.

How to Get Business Funding in Arizona

A startup in Arizona has several funding options, including:

Pages 25 to 33 of the ACA’s Entrepreneur’s Edge (a resource guide) contain useful information about a company’s funding options in Arizona.

How to Self-Fund a Business in Arizona

When a business owner self-funds, the party draws from personal resources to finance their business venture. Self-funding is a common financing method in Arizona and may involve tapping into a savings or retirement account, selling assets, taking a second job to generate capital for a business, or offering pre-order sales. Self-funding may also involve getting money from family and friends.

The self-funding model allows a business owner to retain full control over their business, and business owners who self-fund can avoid debt, as, in most cases, the only person affected if the business fails will be them. Self-funding also shows investors and lenders—if that option will be explored—that a business owner is serious about their business. However, because self-funding can be risky and limits the funds available to a business, it is important that each business owner creates a clear budget and optimizes their business operations to cut down on unnecessary expenses or waste. The self-funding option may be a good fit for a small-scale business.

How to Find Investors in Arizona

The term “investor” refers to an individual or entity that contributes financially to a business venture to help it succeed. Besides capital, investors can also provide expertise, industry connections, and mentorship to a business. Typically, these benefits are offered in exchange for compensation, such as ownership shares, profit, dividends, interest, strategic partnership, or a board seat.

To find investors in Arizona, a business owner can attend industry events or conferences, leverage their local network, seek out investor groups or platforms, or contact local agencies that provide business help and resources. For example, the Arizona Commerce Authority’s funding resources page has some information about finding investors in Arizona. However, it is important to prepare a persuasive pitch that outlines the company’s market potential, value proposition, and growth plan.

Note that there are different kinds of investors in Arizona, including angel investors, venture capitalists, and crowd funders. The most suitable one will depend on the company’s circumstances and what the owner is willing to give in exchange.

How to Get a Loan to Start a Business in Arizona

Arizona business owners often seek funding through a loan from a bank or credit union. However, other non-traditional options exist, including peer-to-peer (P2P) lending, microloans from nonprofit community-based lenders, loans from non-financial companies, and supplier financing. As a result, the loan terms and approval processes differ across providers. 

However, people seeking traditional loans in Arizona must prepare certain documents for a lender. The Arizona Commerce Authority lists the following documents as being commonly requested by lenders:

In essence, an applicant will need to state the exact loan amount needed, provide significant personal investment (usually up to 50% of the loan being requested), show the company’s financials, demonstrate their creditworthiness, provide collateral, and explain how the money will be spent and repaid.

Business owners having trouble getting a loan from the bank can explore SBA-backed loans, which are loans granted by a bank but guaranteed by the U.S. Small Business Administration. 

The Arizona Commerce Authority provides loan programs and loan resources online for Arizona business owners.

How to Find Arizona Business Grants

Arizona businesses can obtain a grant from a government, private, or nonprofit organization as a source of external funding. The money supports a business project, initiative, or objective without the business owner needing to pay it back. Grants are often an attractive funding source for business owners, but each grant program has different eligibility criteria, application and review procedures, and rewards. Further, a business owner may have to meet certain post-grant requirements. As a result, it is crucial to research thoroughly before applying.

One way to find business grants in Arizona is through the ACA. The Arizona Commerce Authority’s Small Business Checklist provides some grant resources. An individual can also peruse the list on page 31 of the ACA’s Entrepreneur’s Edge guide. It may also be worthwhile to contact a local business development center or query a state or local agency. For example, individuals can find grant information or programs on the websites of the City of Phoenix, City of Maricopa, Department of Housing, and Department of Agriculture.

Can I Start a Business with No Money in Arizona?

No. Any prospective business owner needs some funds to get their business off the ground in Arizona. The capital required will depend on the business’s startup expenses and regulatory requirements. 

Step 5: Choosing a Business Structure in Arizona

One of the foremost decisions a prospective business owner in Arizona must make is choosing a business structure (also called a legal structure). A firm’s legal structure influences how the business will be run/managed, what taxes will apply, the extent of the owners’ liability to business debts or liabilities, the company’s funding options, and the business’s registration requirements. 

There are several business structures in Arizona, including:

Each legal structure has different tax and legal advantages. As such, business owners need to pick the most suitable for their business operations or activities. The SBA offers some tips on which structure may fit a business. A business owner can also speak to a tax accountant, attorney, or business consultant. 

How to Start a Sole Proprietorship in Arizona

A sole proprietorship is easily the most popular business structure in Arizona. It is owned and managed by one person who assumes complete responsibility for the business’s profits and losses. For tax purposes, the business is treated as the owner’s income, and in the event of a lawsuit, the business is treated as its owner. 

Sole proprietorships do not require formal registration in Arizona. Also, registering a business (trade) name is optional for a sole proprietorship. However, it is good practice for a sole proprietor to search registered names to ensure they do not use another firm’s name. For example, an individual can search the Arizona SOS database, county databases, and other places to avoid trade name infringement. A sole proprietor who will not use their name for business may register a trade name with the Secretary of State for $10. A trade name is effective for five years from the registration date in Arizona, but the name can be renewed for extra five-year terms.

Depending on one’s business operations or location, a sole proprietor may also require a license from the Arizona Department of Revenue or another government agency. 

How to Start a Corporation in Arizona

A corporation is a business entity that is distinct from its owners (known as “shareholders”). Compared to other business structures, it is the most complex entity type to establish. 

An individual can either form a for-profit or nonprofit corporation in Arizona. The designations “C.”, “S,” or “501c3” corporation are only code references the IRS uses for federal taxation. 

To start a for-profit corporation in Arizona, a person must first confirm their business name availability through the ACC’s Business Entity Search portal. Next, the business owner can reserve the name for 120 days for a fee or file Articles of Incorporation with the Arizona Corporation Commission immediately. The name reservation fee for a corporation is $10 for a mail or in-person (paper) application or $45 for an online application ($10 base fee plus a $35 fee for expedition). Note that certain businesses may have special instructions. 

Arizona Articles of Incorporation can be filed in the following ways: 

Arizona Corporation Commission 

Corporations Division

1300 W. Washington Street

Phoenix, Arizona 85007

It costs $60 to file Articles of Incorporation for a for-profit corporation in Arizona. This non-refundable fee covers regular processing (13 to 15 days). Persons who want expedited processing (3 to 5 days) pay $95. Two-hour, same-day, and next-day processing are also offered. Review the ACC’s acceptable payment methods and applicable processing times.

Persons filing by mail or fax must complete the paper form and note the following:

Furthermore, persons who want to elect for a “Subchapter S” corporation tax status must file Form 2553 with the IRS after their formation process is completed, provided they qualify.

Note that a foreign for-profit looking to transact business in Arizona must complete and submit an Application for Authority to Transact Business or Conduct Affairs instead. 

How to Start an LLC in Arizona

A limited liability company (LLC) is a legal enterprise with corporation and partnership features. LLCs have the liability protection of a corporation, as well as the tax benefits and management flexibility of a partnership. As such, owners are protected from business debts or liabilities like a corporation, but the company has fewer paperwork requirements. Further, LLC owners (called “members”) can enjoy pass-through taxation like a partnership, as well as versatility in their management structure.

Here’s how to form an LLC in Arizona:

It costs $50 to file Articles of Organization with the ACC. All the same, applicants can choose expedited processing, which costs $85 per application (see payment information). The ACC also provides next-day, same-day, and two-hour processing (LLC schedule of fees).

How to Start a Business Partnership in Arizona

A partnership is a business entity with two or more owners. Partnerships are primarily categorized as general or limited in Arizona. 

How to Start a Limited Partnership in Arizona

Arizona has Limited Partnerships (LPs), Limited Liability Partnerships (LLPs), and Limited Liability Limited Partnership (LLLPs). To create either of them, a person must file a Certificate of Partnership (for a domestic entity) or Foreign Partnership Registration (for a foreign entity) with the Arizona Secretary of State.

A limited partnership has at least one general partner and one or more limited partners. The general partner bears full personal liability for the partnership’s debts and obligations. Meanwhile, the limited partners enjoy limited personal liability but have restricted management rights.

A limited liability partnership consists of all limited partners who have liability protection over the firm’s debts and liabilities.

A limited liability limited partnership consists of two or more general and limited partners who are protected from business debts or liabilities.

Partnership forms and filing fees are available on the Arizona SOS’s forms page, and filings are made to the address below.

Secretary of State

Attn: Partnerships

1700 W. Washington Street, Floor 7

Phoenix, AZ 85007-2808

How to Start a General Partnership in Arizona

A general partnership is a business owned and managed by two or more persons who share the profits and losses. Each partner may contribute money, skills, or time to the venture.

Usually, general partnerships in Arizona are formed by filing a written agreement (called a partnership agreement) with the recorder’s office in the county where the business is located. The agreement outlines how the company will be run, the partners’ rights and powers, each partner’s share of profits and losses, the transfer of partnership interests, and methods of dissolution and termination, among other details. It is advisable to obtain legal help to draft the document. 

While not legally required, a general partnership can also register a trade (business) name with the Secretary of State for $10. The name may be needed to obtain a license or open a business bank account.

How to Start a Nonprofit in Arizona

A nonprofit is a corporation formed for a purpose besides profit, such as social welfare, charity, education, public safety, or another philanthropic objective. 

The procedure for starting a nonprofit corporation in Arizona is the same one used to start a for-profit corporation. All nonprofit corporations must file with the Arizona Corporation Commission and pay the necessary filing fees. 

However, the fee to incorporate a nonprofit is lower: $40 for regular processing, and $75 for expedited processing, although the fee for a two-hour ($400), same-day ($200), or next-day ($100) service is the same. Further, while persons can submit formation papers through the ACC’s eCorp platform, individuals filing via mail or fax use the Articles of Incorporation – Nonprofit form. Note that a foreign nonprofit looking to transact business in Arizona must complete and submit an Application for Authority to Transact Business or Conduct Affairs instead.

To obtain tax-exempt status, a nonprofit corporation formed in Arizona must apply to the Internal Revenue Service. 

Additional information about creating nonprofits in Arizona can be obtained from the Arizona Commerce Authority’s Small Business Checklist.

Step 6: Choosing a Business Location in Arizona

New business owners in Arizona can choose among four location set-ups for their businesses: brick-and-mortar, online, home, or mobile. However, the choice of location goes beyond determining whether a business will sell from a physical store. A business’s location affects its success. Thus, prospective entrepreneurs should also consider: 

Altogether, it is crucial to adequately weigh the benefits and cons of opening a business in a particular location.

What Kind of Business Can I Run From Home in Arizona?

Determining the kind of business to run from home in Arizona is not entirely up to the business owner. Local regulations affect the type of business that can be set up as a Home Occupation (home-based business) in any Arizona county. As a result, it is important to review one’s ordinances, check with local homeowners’ associations, and check one’s lease/deed to determine relevant restrictions. 

Generally, if a home-based business will not negatively affect a neighborhood’s quality of life or character and will not violate zoning restrictions, then it can be permitted. Commonly prohibited businesses include beauty salons, barbershops, tattoo parlors, welding services, veterinarian services, and auto repair and service.

How Do I Start A Small Business From Home in Arizona

Home businesses in Arizona are subject to the same legal conditions required of other businesses located at commercial sites. This means a home business owner must file formation documents (if necessary), get the applicable licenses or permits, and meet other legal requirements for their business type. 

In addition, the business owner must obey their town, city, or county’s zoning regulations. In many cases, the aspiring entrepreneur must apply for a Home Occupation Permit, which the local government uses to assess the applicant’s eligibility to run a particular home business. For the relevant regulatory requirements, it is best to contact one’s town, city, or county of business. 

Starting a Business Online in Arizona

Starting an online business in Arizona is the same as starting any other business in Arizona, only that the business will be run over the Internet. Any online business owner must comply with the relevant license/permit requirements, as well as choose a name, select a legal structure, file formation paperwork (if required), obtain an EIN (if needed), and so on. 

The Arizona legislature does not restrict who can start a business in the state. However, each business must comply with regulations outlined in the state’s revised statutes and local ordinances. For example, Title 10 – Corporations and Associations, Title 44 – Trade and Commerce, and Title 29 – Partnership.

The legal requirements applicable to a new business rests on several factors, including the firm’s product or service, business location, legal structure, and industry. Notwithstanding, each new business owner in Arizona must submit documentation to a relevant government agency to legally establish and operate their business, such as formation paperwork, license/permit requests, and tax filings. 

How to Get an EIN Number in Arizona

Arizona business owners obtain Employer Identification Numbers (EINs) from the Internal Revenue Service (IRS). Otherwise called a Federal Employer Identification Number or FEIN, the nine-digit number is used by the IRS to identify business tax accounts. Each business can only have one EIN/FEIN, and the number does not expire unless a firm’s ownership or structure changes. 

Generally, the IRS accepts online, mail, and fax EIN applications. Telephone EIN applications are provided only to international applicants. All applications require the name and Taxpayer Identification Number (ITIN. SSN, or EIN) of a company’s principal officer, grantor, owner, general partner, or trustor (known as a firm’s “responsible party”). The responsible party must be a natural person unless the applicant is a government entity. 

To apply for an EIN online, one should access the IRS EIN Assistant. EINs requested through the portal are issued immediately upon completion of the application. However, only entities whose principal business, office or agency, or legal residence (as for an individual) is within the United States or its territories can apply for an EIN online.

Mail/fax EIN applications require the completion of Form SS-4 and submission of the form to one of these addresses: 

For Business Entities within the United States or territories

Internal Revenue Service

Attn: EIN Operation

Cincinnati, OH 45999

Fax: (855) 641-6935 

For Foreign Business Entities (no local principal place of business, office/agency, or legal residence in the U.S. or territories)

Internal Revenue Service

Attn: EIN International Operation

Cincinnati, OH 45999

Fax: (855) 215-1627 (within the U.S.)

Fax: (304) 707-9471 (outside the U.S.) 

Note that not all businesses in Arizona require an EIN. Non-employer sole proprietorships, for example, do not need to apply, as they can use their owners’ Social Security Numbers on official filings. The IRS has a questionnaire business owners can answer to determine their EIN requirement. One can also review the IRS EIN publication.

How to Get an Arizona Registered Agent 

A registered agent is an individual or firm responsible for accepting legal mail on a company’s behalf. In Arizona, registered agents (officially called “statutory agents”) are not a legal requirement for every business, only those that must register with the state to be formed or authorized to do business. Such registered businesses are corporations and limited liability companies (LLCs). Failing to appoint a registered agent will cause the Arizona Corporations Commission (ACC) to administratively dissolve a defaulting business.

Registered businesses appoint a registered agent on their formation paperwork. Below are Arizona’s eligibility requirements for registered agents: 

In either case, the agent must accept their appointment by signing a Statement of Acceptance. No form is required if a company’s formation paperwork is submitted online via the ACC’s eCorp system. The agent can accept the appointment through their eCorp dashboard. However, if a paper filing is submitted to form a business, then the agent must complete and sign a Statement of Acceptance form. Anyone can deliver the form in person, by mail, or via fax to the ACC at: 

Arizona Corporation Commission

Examination Section

1300 W. Washington Street

Phoenix, Arizona 85007

Fax: (602) 542-4100

There is no fee to submit the form. However, a non-refundable fee applies to expedite the ACC’s processing time, normally 13 to 15 days. Individuals can obtain information about the expediting timeframes, fees, and payment methods from the ACC’s instructional manual.

Patents, Trademarks, and Copyrights in Arizona

Patents, trademarks, and copyrights are types of intellectual property (IP) rights granted to creators and inventors.

A patent provides exclusive property rights to an invention. It excludes others from using, making, or offering for sale the invention for a limited timeframe. U.S. patents are administered by the United States Patent and Trademark Office (USPTO) under Title 35 of the United States Code and generally have a term of up to 20 years, which can be renewed.

A trademark protects any symbol, name, phrase, text, design, or combination of these elements that distinguish a brand from another. Trademarks are administered at the federal and state levels in Arizona. The USPTO handles federal trademarks, which last a holder 10 years from the registration date and are subject to renewal. Meanwhile, the Arizona Secretary of State oversees state trademark registrations, as directed under A.R.S §§ 44-1441 – 44-1456. An Arizona trademark costs $15 and lasts 10 years from the receipt date, subject to renewal from up to six months before expiration. 

Lastly, a copyright protects the original expressions of an author or artist from being copied, displayed, or used by others without permission. The U.S. Copyright Office issues copyrights in Arizona per Title 17 of the U.S. Code. A copyright generally lasts for the life term of an author plus 70 years after their death, but there are exemptions. For more information on filing a copyright, one can visit the Copyright Office’s website.

Arizona Business Tax

Businesses established in Arizona are subject to several taxes administered by the Department of Revenue and other government agencies, such as: 

Detailed information about Arizona business taxes can be obtained from the Department of Revenue’s A Guide to Taxes for Arizona Business and Summary of Arizona Taxes publications. 

Additional tax resources and publications are available on the Arizona Commerce Authority’s checklist website, ADOR’s publications page, and pages 53-55 of the ACA’s resource guide for entrepreneurs. A business owner may also consult a tax accountant. 

Are Business Records Public in Arizona?

Yes. Under Arizona’s Public Records Law, any record created, collated, or maintained by an Arizona government entity while conducting public business is a public record. This includes business filings and records in the custody of the Arizona Corporations Commission, the Secretary of State (SOS), a County Recorder’s Office, the Department of Transportation (e.g., vehicle liens), the State Archives, and other government agencies. 

As a result, an interested member of the public can inspect or copy business records by contacting/visiting the relevant agency. Some government agencies also provide online portals to submit public record requests. For example, the Entity Search portal provided by the ACC. 

However, the Arizona Public Records Law contains some exemptions to the public’s access. For example, personal or sensitive information like SSNs, financial account numbers, and trade secrets are ordinarily not disclosed to the public.