How to Start an LLC In Arizona

LLC’s are a popular option for Arizona business owners because of the liability protection, flexible management structure, and advantageous pass-through taxation system that the business structure offers. An LLC offers a balanced approach, combining the simplicity of a sole proprietorship with the liability protection of a corporation. 

The provisions for the formation and operation of an LLC in Arizona are outlined in Chapter 7 of the Arizona Limited Liability Company Act. This Act governs the establishment, management, and dissolution of LLCs in Arizona. It also includes regulations regarding the formation process, the rights and responsibilities of LLC members, operating agreements, taxation, and other important aspects related to LLC operations in Arizona.

Per the Arizona Limited Liability Company Act (Article 2; 29-3201, 29-3206, and 29-3213), the process of forming an LLC in Arizona can be summarized in these steps:

• Step 1: Choose a Name for The LLC: Choose a name for the business entity that complies with Arizona’s naming rules as outlined in Section 29-3112 and check the chosen name on the ACC website to see if it is available.
• Step 2: Appoint a Registered Agent: Designate a registered agent with a physical address in Arizona to receive legal and official documents on behalf of the LLC.

• Step 3: Satisfy All Filing Requirements and Apply for The LLC: Submit the Articles of Organization to the Arizona Corporation Commission (ACC) via mail, in-person, fax, or online, and pay applicable fees as outlined in 29-3213. This document officially forms the LLC and includes essential details about the Company, such as name, address, registered agent, and management structure. 
• Step 4: File For the LLC
• Step 5: Obtain an EIN: Obtain an Employer Identification Number (EIN) from the IRS. This unique identifier is necessary for tax purposes and other business-related transactions. An EIN is also important for obtaining a business bank account.
• Step 6: Register for State and/or Local Taxes and Licensing: The business entity needs to be registered with the city where it operates (or the county if it’s located in an unincorporated area). This registration is necessary for transaction privilege tax purposes and to obtain any required business or occupational licenses mandated by the city. Additionally, completing a transactional privilege tax application with the Arizona Department of Revenue is recommended. 
• Comply with Tax and Reporting Requirements: Understand and fulfill Arizona’s tax obligations. Stay compliant with annual filing requirements, such as filing an Annual Report with the ACC and renewing business licenses.

In Arizona, LLC formation is governed by the Arizona Corporation Commission (ACC). They review and approve business filings, ensuring compliance with state statutes and requirements. The ACC maintains an online database where people can search and access public records of all active LLCs in Arizona. 

What is an LLC in Arizona?

A limited liability company (LLC) is a type of business structure that allows a company to be established as a separate entity, thereby providing liability protection for the owner(s). This means the owner(s) are not personally liable for business debts or liabilities. An LLC combines elements of both partnerships and corporations. It enjoys pass-through taxation, like partnerships, where profits and losses are reported on individual members’ tax returns. Additionally, it provides limited liability protection similar to that of corporations, shielding members’ personal assets from the Company’s debts and legal liabilities. An LLC can be a single-member LLC, owned and operated by one individual, or a multi-member LLC with multiple owners sharing ownership interests.

The Arizona Limited Liability Company Act (Title 29) is a set of statutes and regulations that govern LLC formation and operation in the State of Arizona. This Act authorizes the establishment of LLCs within Arizona and includes:

• Provisions for filing Articles of Organization to form an LLC.
• Designating a statutory agent.
• Complying with annual reporting requirements.

It also provides member rights, operating agreements, and tax treatment guidelines. The Act permits foreign LLCs, which are LLCs formed in another state or country, to conduct business within Arizona. These foreign LLCs can register with the Arizona Corporation Commission (ACC) to obtain the authority to operate in the State. 

Starting an LLC in Arizona requires at least one member or manager. There are no specific residency or age restrictions for members or managers. The Articles of Organization must include the names and addresses of all members or managers. Additionally, a registered agent with a physical address in Arizona must be designated to handle legal and tax documents.

Step 1: Arizona LLC Name Search

To conduct an Arizona LLC name search, use the “Search Corporations and LLCs” feature on the Arizona Corporation Commission’s (ACC) website. A name search can be completed using one of the search criteria of the entity name, registered agent name, principal name, or entity ID.  

The Arizona LLC name search is crucial for two main reasons: legal compliance and business identity. That is why the Arizona Corporation Commission advises LLC applicants to conduct an Arizona LLC name search before filing their application. This is essential to verify that the chosen name is both unique and in accordance with Arizona’s naming regulations for LLCs. According to the naming requirements, an LLC name must include “limited liability company” or its abbreviations “LLC,” “LLC,” “LC,” or “LC” in uppercase or lowercase. The name must be unique and distinct from other business names in the State and not contain any restricted words.

Business owners are advised to check the United States Patent and Trademark Office (USPTO) website to ensure the desired name doesn’t infringe on registered trademarks. If the name is available and meets the State’s requirements, the applicant can reserve it for up to 60 days by submitting a “Reserve an Entity Name” request to the ACC.

Step 2: Choosing an LLC Registered Agent in Arizona

Per Section 29-3115 of the Arizona Limited Liability Company Act, every LLC, whether local or foreign, must appoint a registered agent within the State. This designated registered agent’s recognition is contingent upon the LLC submitting a signed appointment record, which must be accepted by the agent and delivered to the ACC. To qualify as a registered agent, the individual or business entity must have a physical presence, either in the form of a place of business or residence, within the State. Additionally, the registered agent must be either a resident individual of the State or a business entity authorized to conduct business within the State.

The primary responsibility of the registered agent is to receive and promptly forward any legal process, notices or demands about the limited liability company to the appropriate parties.

To find the registered agent of an LLC in Arizona, individuals can use the corporation and LLC database provided by the Arizona Corporation Commission. Users can search using the Company’s name or entity ID to access the company formation documents, such as the Articles of Organization. These documents contain vital information, including the name and address of the LLC’s registered agent.

How Do I Change My Registered Agent for My LLC in Arizona?

An LLC in Arizona can change its registered agent by submitting a statement of change per Section 29-3116. The form, LLC Statement of Change, must be completed with the new agent’s information and address, along with the Company’s name and entity ID.

The statement of change, along with the applicable filing fee of $5, may be submitted in person, by fax, or via mail to: 

The Director

Corporations division

Arizona Corporation Commission

1300 W. Washington Street

Phoenix, AZ 85007-2996

When filing by fax, contact the Arizona Corporation Commission (ACC) to set up a deposit account for the filing fee.

Step 3: LLC Filing Requirements in Arizona

To file for an LLC in Arizona, the following requirements must be met by the Company:

• One or more people must act as members or managers to form a limited liability company.
• The Name of the LLC must be distinctly unique and comply with naming requirements.
• The Company must designate a registered agent.

If the Company is foreign, that is, an LLC formed in another state or jurisdiction, the Company must satisfy the following requirements in addition to the above:

• The foreign LLC must submit a Foreign Registration Statement to the Arizona Corporation Commission (ACC). A foreign registration statement, otherwise known as a foreign qualification for authority, is a legal filing that a foreign LLC submits to seek registration and authority to do business in Arizona.
• The foreign LLC must submit a Certificate of Existence (also known as a Certificate of Good Standing) to the ACC. The certificate of Existence is obtained from the Secretary of State of the foreign LLC’s jurisdiction or office of similar authority. This document confirms that the Company is in good standing and duly authorized to transact business in its home location. 
• The foreign Company may be required to submit a certified copy of its organizational documents.

LLC Articles of Organization in Arizona

Arizona Articles of Organization is a legal document statutorily required to form an LLC in Arizona. The document is filed with the ACC to establish an LLC and typically contains basic information such as the LLC’s name, its purpose, registered agent, and principal place of business. Furthermore, the document discloses whether the LLC will be managed by its owner(s) or by an appointed manager(s). 

To file an Articles of Organization for LLC formation in Arizona, business owners must download the form, complete it with all the necessary information, and then submit it to the Arizona Corporation Commission – either in-person, by mail, or by fax. Additionally, submissions can be made online with an ACC eCorp account.  

LLC Operating Agreement in Arizona

Though not required to be filed with the ACC for LLC formation, an Operating Agreement is an official document that spells out the internal operating guidelines and management structure of an LLC. This document governs the rights and responsibilities of the owners, members, or managers. An LLC operating agreement is not required by Arizona law. Still, it is recommended that LLCs have one in place as it helps prevent disputes among members, clarifies expectations, and offers a solid framework for the LLC’s operations. 

Arizona LLC Statement of Information

An LLC Statement of Information is a periodic filing a company must submit to the government’s business registration authority to maintain its good standing and legal status. This report helps the government regulate businesses, keep accurate public records, and ensure that companies retain their good standing and legal status. However, in Arizona, LLCs are not required to file a statement of information (an annual report).

Do You Need an Arizona Address for an LLC?

Yes, Arizona LLCs must have a principal business address within the State. This address must be listed on the Articles of Organization filed with the ACC. However, where the Company does not have a separate physical location from the statutory agent’s, the registered agent’s address can be used as the principal business address. Alternatively, virtual office or mailbox services for LLCs are other options a company could employ to provide an address for their requirements.

How to Get a Virtual Address for an LLC in Arizona

In Arizona, LLCs can use a virtual address for legal requirements or business operations. A virtual address is a service that typically provides companies with a physical address in Arizona with correspondence handling capabilities without maintaining a physical office presence within the State.

When choosing a virtual address for an Arizona LLC, various options exist. These include:

• Virtual Office Space: Virtual office services that provide a professional business address, mail handling, and access to meeting rooms or shared workspaces when needed.
• Mail Forwarding, Scanning, and Notification Services: In this type of service, the virtual address provider(s) receives mail for the LLC and forwards it to the designated address, or they scan the mail and send digital copies via email, allowing the Company to choose whether to forward or discard the physical mail.

Business owners are advised to properly research virtual mailbox providers, compare pricing and plans, and enlist the services of providers that are suitable for their LLC needs. Although a virtual address can serve as an LLC’s principal address within the State, it cannot be used as a registered agent’s address. Registered agents must maintain a physical street address within the State, as per the legal requirement.

Step 4: How to File for an LLC in Arizona

There are several options for individuals to file an LLC with the Arizona Corporation Commission (ACC). The filing could be done in-person, remotely through the eCorp portal, by mail-in, or by fax. 

Those filing by mail must download and complete the Articles of Organization – Form L010 – and forward it by postal mail to the ACC. The regular filing fee is $50, and there is an additional $35 fee for expedited processing. Fees can be paid through checks or money orders. All mail filings should be addressed as follows:

The Director

Corporations Division

Arizona Corporation Commission

1300 W. Washington Street

Phoenix, AZ 85007-2996

For in-person submissions, individuals must book an appointment and make in-person visits during business hours to submit their Articles of Organization or to collect and fill out Form L010 at the Commission’s office. The filing fee is $50, with an additional $35 for expedited processing. Credit cards can be used to pay filing fees for in-person submittals.

After filing for LLC formation, the ACC examines and approves the documentation if it satisfies all the legal requirements. If approved, the filer will get an approval letter with information and further instructions about the newly formed LLC. If rejected, a letter with instructions on how to resubmit the filing documentation is issued to the filer.

Per Section 29-3201 of the Arizona Limited Liability Company Act – LLCs must file a Notice of Publication within 60 days of formation. However, LLCs operating in Maricopa or Pima counties are exempt.

How to Create an LLC Online in Arizona

To form an LLC online in Arizona, applicants may:

• Go to the ACC homepage and select the “Start a New Corporation or LLC” feature. 
• On the ACC eCorp web page, click the register button, supply all needed information (First and last name, email address, and password), and submit.
• Follow the after-registration instructions to verify the email address supplied and log in to the eCorp portal.
• On the eCorp portal, under “My Dashboard,” select ‘Create a New LLC,’ and on the next page, select ‘Limited Liability Company.’
• If a name was reserved on the entity name, select ‘Yes’ and enter the reservation ID. If the LLC name was not reserved, select ‘No’ and proceed to enter a chosen LLC name in the “Entity Name” portion provided and search to verify its availability. Naming requirements must be adhered to here.
• Once the name is available, continue to supply the LLC’s information:
• Articles of Organization – entity email address, effective date, and character of business 
• Registered agent information 
• Principal business address  
• Principal details – owners’ and managers’ information
• Organizer information, that is, the person signing the LLC’s Articles of Organization.
• After completing all the LLC’s information, upload the completed Articles of Organization form.
• Then Supply the organizer’s digital signature.
• Review all the information supplied to ensure accuracy and no typos. Click the ‘edit button’ where necessary, and if there are no corrections to be made, click on ‘Go to Payment Details’. 
• On the payment page, select and add one of the two processing options to the shopping cart: $50 for normal processing or $85 for expedited processing, and checkout with either a credit card or MOD account.
• After successfully checking out, print, download, or screengrab the confirmation page and wait for the ACC to form the LLC.

After the ACC processes the registration, a confirmation email or notification is sent to the applicant. 

Can You Have Multiple Businesses Under One LLC in Arizona?

Yes. According to the Arizona Revised Statutes, ARS 44-1443, businesses like LLCs or corporations can register fictitious business names (DBAs) and operate under multiple names without forming separate legal entities for each one. This means that an LLC can have several separate business activities by simply registering a DBA for each type of business. To get an Arizona trade name (DBA), an LLC must submit a Trade Name Registration Application to the Arizona Secretary of State and pay the required fee.

Having multiple DBAs allows an LLC in Arizona to run multiple businesses under the same legal entity but with different names. However, separate licenses and permits may be necessary depending on the nature of each business. Additionally, It’s important that separate financial records be maintained for each business activity and that business owners be fully aware of the liability implications of this practice, as the entire LLC and its assets may be at risk in the event of debt or lawsuits.

How Long Does It Take to Set Up an LLC in Arizona?

The time to set up an LLC in Arizona depends on various factors. These include the chosen filing method, the accuracy of the provided information, the Arizona Corporation Commission’s processing time, and name availability. Errors or name conflicts may cause delays in processing time, too. Generally, on regular processing time, it takes about 3 weeks to form an LLC in Arizona if filed online and 4 to 5 weeks if filed by mail. However, for an additional fee of $35, the ACC can expedite the LLC’s processing time to 5 business days.

Step 5: How to Get an EIN for LLC in Arizona

Applicants have several options to obtain an EIN for an LLC in Arizona: online, by mail, or by fax. For online applications, they can use the IRS EIN Assistant to submit the necessary information and receive an immediate EIN after completion. For mail or fax applications, applicants need to download and fill out Form SS-4 and submit it to the address below:

Internal Revenue Service

Attn: EIN Operation

Cincinnati, OH 45999

Fax: 855-641-6935

Applicants who are not residents of the US or have a physical business address or office in the US can forward their applications to:

Internal Revenue Service

Attn: EIN International Operation

Cincinnati, OH 45999

Fax: 855-215-1627 (within the US.)

Fax: 304-707-9471 (outside the US.)

Step 6: Do LLCs Pay Taxes in Arizona?

In Arizona, LLCs have two tax options that determine whether or not they pay taxes:

• If an LLC chooses to be taxed as a corporation, the State will tax its income, and it will pay taxes accordingly.
• By default, Arizona LLCs are treated as pass-through entities. Members report their share of business profits on their individual tax returns, and the LLC itself does not pay taxes.

It is now left to LLC members to decide whether to be taxed as corporations or continue as pass-through entities. As a pass-through entity, members pay taxes on their share of business profits, and the State does not tax the LLC’s income.

How Are LLCs Taxed in Arizona?

1. Pass-Through Taxation: LLCs in Arizona are treated as pass-through entities for federal income tax purposes, meaning that the LLC does not pay federal income taxes. Instead, the profits “pass-through” to the individual members (owners) of the LLC, who report these amounts on their personal tax returns.
2. Arizona State Income Tax: Arizona levies a state income tax on individuals. Since the LLC’s profits pass through to its members, the members must report their respective shares of the LLC’s income on their Arizona state income tax returns and pay taxes at their individual income tax rates. LLC members are subject to a 15.3% tax rate, while LLCs that opt for C-corp status are taxed at 4.9%.
3. Transaction Privilege Tax (TPT): In Arizona, LLCs and businesses may be liable for the Transaction Privilege Tax (TPT), a gross receipts tax imposed on the privilege of conducting business in the State. TPT rates vary based on the locality and the type of business activity performed by the LLC.
4. Employment Taxes: If the LLC has employees, it must withhold and remit federal and State payroll taxes, including income tax withholding, Social Security, and Medicare taxes.

Tax Benefits of an LLC in Arizona

An LLC offers several tax benefits, including: 

• Tax Flexibility: Unlike certain other business structures, an LLC can elect to be taxed in various ways, such as a sole proprietorship, a partnership, a C corporation (C-corp), or an S corporation (S-corp). This tax flexibility allows entrepreneurs to choose the most suitable tax treatment for their specific business needs. For example, a small LLC with a single owner might opt for the simplicity of being taxed as a sole proprietorship, while a multi-member LLC might prefer partnership taxation.
• Avoiding Double Taxation: Double taxation is a major concern for traditional C corporations. However, an LLC can avoid this issue if it elects to be taxed as a sole proprietorship or a partnership. Double taxation happens when a C corporation pays taxes on its profits as a corporation. Then, its shareholders or owners also pay taxes on their returns for their dividends. By choosing a pass-through tax status as an LLC, the Company’s profits “pass-through” to the individual owners, and taxes are paid only once at the personal level. This way, the business avoids the burden of double taxation.
• Pass-through Taxation:  Arizona LLCs enjoy the advantage of pass-through taxation. This means that the profits earned by the LLC are not taxed at the entity level; instead, they “pass-through” to the individual owners’ personal tax returns. By avoiding taxation at the company level, the owners are taxed only once. 
• Flexibility in Income Allocation: Arizona LLCs can allocate income and losses among their members in proportions that differ from their ownership percentages. This financial flexibility allows members to tailor their tax situations according to their specific needs and circumstances. 

Do You Have to Renew LLC Every Year in Arizona?

In Arizona, an LLC is not required to renew its formation yearly. Once an LLC is formed, it remains in Existence until it is voluntarily dissolved or administratively dissolved by the ACC for non-compliance.

To stay compliant, all LLCs must pay filing fees, maintain an Arizona statutory agent, notify the Commission of address changes, and publish after the LLC’s formation – LLCs in Arizona are not required to file annual reports.

How Much Does It Cost To Start an LLC in Arizona?

When registering an LLC in Arizona, there are several expenses involved. The specific costs may vary depending on individual circumstances and whether one handles the filing personally or opts for professional assistance. The following is a breakdown of the expenses likely to be accrued while filing an LLC in Arizona:

• Filing Fee: The filing fee to register an LLC with the State is typically the most significant expense. In Arizona, the filing fee for the Articles of Organization is $50.
• Name Reservation (Optional): If an applicant wants to reserve their desired LLC name before filing the Articles of Organization, there may be an additional name reservation fee. In Arizona, the name reservation fee is $10 per name.
• Registered Agent Fee: If a company doesn’t have a physical address in Arizona, it’d need to hire a registered agent to receive legal documents on behalf of the LLC. Registered agent services can cost around $100 to $300 per year.
• Publication Requirement: In Arizona, newly formed LLCs must publish a Notice of LLC Formation for three consecutive weeks in an approved county newspaper where the LLC’s principal office/registered agent is located. This should be completed within 60 days of formation, with costs ranging from $30 to $300.
• Professional Services: If a company chooses to hire a business attorney or use a professional LLC formation service to help with the process, there will be additional fees. Attorney fees can range from a few hundred to a few thousand dollars, while formation service fees can range from $50 to $500, depending on the level of service.

Taking into account all the above-mentioned fees, the LLC filing and formation process in Arizona typically costs individuals between $250 and $1500.

Can You Form an LLC In Arizona For Free?

No, forming an LLC for free in Arizona is not possible. However, applicants can reduce the cost of LLC formation by handling some or all of the filing process by themselves. 

How to Start an LLC in Arizona For Free or At a Reduced Cost

The ACC requires all business entities to pay a filing fee for LLC formation. The Commission does not offer any waiver or discount on its filing fees. However, to minimize the cost of filing an LCC, applicants are recommended to handle the filing process themselves by filing online via the eCorp portal and paying the standard processing fee of just $50. In addition, applicants can act as their own registered agents if they reside in Arizona. Alternatively, they can seek the assistance of friends or family members who have a physical address in Arizona to serve as their statutory agent. Another option is for a company to obtain a registered agent or principal address in Maricopa or Pima counties, exempting them from the mandatory newspaper publication cost after LLC formation, as these counties do not require such publication.

What Businesses Should Consider Forming an LLC in Arizona?

Many business types will benefit from forming an LLC due to its simplicity, flexibility, and inherent benefits. Small businesses, startups, professional service providers (doctors, lawyers, architects, and accountants), real estate investors, creative and media ventures, retail and service businesses, and technology startups can all find LLCs suitable and convenient. The simplicity, lower administrative burden, management flexibility, and taxation status of the LLC business structure make it appealing to any business type.

What are the Benefits of An LLC in Arizona?

The benefits of forming an LLC in Arizona are as follows:

• Limited Liability: An LLC provides limited liability protection to its owners, which means their personal assets are safe from the business’s debts and liabilities. Even in the event of lawsuits or creditors’ claims, the owners’ personal assets cannot be pursued, reducing their financial risk. The law states explicitly that LLC members are not personally responsible for the Company’s debts and obligations just because they are members of the LLC.
• Management Flexibility: LLCs offer flexibility in how they are managed. Members can manage the LLC themselves or appoint a manager to handle the day-to-day operations. This flexibility allows the LLC to adapt its management structure to the needs and preferences of its owners.
• Ease of Formation: One of the benefits of forming an LLC is the ease of its formation. Compared to other business structures like corporations, LLCs typically have simpler and less cumbersome procedures for establishment. The process involves fewer formalities and paperwork. This allows business owners to get up and running quickly and focus on their core operations without being burdened by complex administrative requirements.
• No Franchise Tax: Franchise taxes are typically imposed on corporations in many states, but LLCs are often exempt from this tax. This results in cost savings for the LLC and its owners by minimizing tax burdens.
• Increased Credibility: Displaying “LLC” in a business name signals professionalism and legitimacy. It indicates that the business is a legally recognized entity with limited liability protection, giving potential customers and partners confidence in its credibility and seriousness.

How Does an LLC Work in Arizona?

An LLC offers limited liability protection to its owners. LLCs combine aspects of both partnerships and corporations, providing flexibility in management, profit distribution, and limited liability benefits. An LLC can function as either a one-member company or a multiple-member company. This unique feature distinguishes LLCs from other business structures, such as sole proprietorships, corporations, and partnerships. In a one-member LLC, the Company is owned and operated by a single individual. This means that all decision-making authority and responsibilities rest with that single member.

On the other hand, a multiple-member LLC is owned and operated by two or more individuals, commonly referred to as members. In this case, the members may have varying degrees of involvement in the day-to-day operations and decision-making, depending on their agreed-upon roles and responsibilities.

To create an LLC, the owners must file Articles of Organization with the ACC. After formation, the LLC is authorized to do business within the State with its legal name, or the owners may register a DBA as a business trademark for their activities. LLCs in Arizona are not required to renew their registration or file reports to maintain compliance.

LLC VS S Corp in Arizona

Limited Liability Company (LLC):

• Ownership and Management: An LLC can be owned and managed by one or more members. Members have flexibility in structuring the management, and they can choose to manage the LLC themselves or appoint managers to handle day-to-day operations.
• Limited Liability: Members of an LLC enjoy limited liability. Personal assets are generally protected from business debts and liabilities. This shield of protection helps safeguard the personal wealth of members of an LLC.
• Taxation: By default, an LLC is taxed as a pass-through entity. This means that business profits and losses pass through to the individual members’ personal tax returns, and the LLC itself does not pay federal income tax.
• Flexibility: LLCs offer greater flexibility in terms of ownership, profit-sharing, and decision-making compared to corporations. There are fewer formalities and paperwork requirements, making it relatively easier to maintain and operate.

S Corporation (S Corp):

• Ownership and Shareholders: S Corporations can have a maximum of 100 shareholders. Shareholders must be US citizens or residents, and there can be only one class of stock, which means all shareholders have the same rights.
• Taxation: S Corporations also enjoy pass-through taxation, similar to LLCs. Business profits and losses are passed through to the shareholders’ personal tax returns, and the S Corporation itself generally does not pay federal income tax.
• Self-Employment Taxes: Unlike LLCs, where all members are subject to self-employment taxes on their share of profits, S Corp shareholders who work for the Company can receive a portion of their income as a salary, reducing the amount subject to self-employment taxes.
• Formalities: S Corps usually have more formal requirements and administrative burdens than LLCs. They must hold regular shareholder and director meetings, maintain corporate bylaws, and keep meeting minutes.

S Corps offers self-employment tax savings through a salary and distribution split. Both LLCs and S Corps have pass-through taxation, but S Corps provide more tax planning opportunities for high-income businesses. S Corps’ corporate structure boosts credibility and allows perpetual Existence, aiding ownership transfer and capital raising. In addition, S Corps may have greater flexibility in deducting employee benefits than LLCs.

While many business owners prefer the simplicity and flexibility of an LLC, they have the option to elect S corporation taxation for specific benefits. By choosing S Corp taxation, LLCs can enjoy advantages such as self-employment tax savings through salary and distribution allocation and more tax planning opportunities, especially for businesses with significant income. This election allows LLCs to combine the limited liability protection of an LLC with the tax benefits of an S corporation. To make an existing LLC an S corporation, business owners must complete IRS Form 2553.

LLC vs. Sole Proprietorship in Arizona

A sole proprietorship is a simple business owned and controlled by one person. However, it lacks limited liability protection, so the owner’s personal assets are at risk if the business faces financial problems or legal issues. Taxes are reported on the owner’s tax return, just like an LLC.

On the other hand, an LLC provides liability protection to its owners, safeguarding their personal assets from business debts and liabilities. It offers tax flexibility and can choose to be treated as a pass-through entity or a corporation. An LLC can have multiple members, which allows for a versatile management structure.

Starting an LLC involves submitting paperwork to the Arizona Corporation Commission (ACC) and paying a fee. In contrast, a sole proprietorship does not require any registration. The big advantage of an LLC is its limited liability, whereas a sole proprietor is personally responsible for business debts.

Many entrepreneurs prefer forming an LLC due to its limited liability protection, where personal assets are shielded from business debts and liabilities. However, a sole proprietorship offers simplicity, lower costs, tax simplicity, control, flexibility, and privacy.

Ultimately, choosing between an LLC and a sole proprietorship depends on individual business needs, risk tolerance, and future plans.

LLC vs. Corporation in Arizona

LLC (Limited Liability Company):

• Offers limited liability protection to owners, protecting personal assets from business debts.
• Provides management and ownership flexibility.
• Blend of partnership and corporation
• Passes profits through to owners’ tax returns, avoiding double taxation.
• Requires fewer formalities and paperwork than a C-corporation.
• Formed when Articles of Organization are filed with the ACC

C-corporation:

• Provides limited liability protection to shareholders, separating personal and business assets.
• Owned by shareholders and exist separately from the owners
• Has a formal management structure with shareholders, directors, and officers.
• Can issue various classes of stock, offering different ownership rights.
• Taxes profits at the corporate level, with dividends subject to individual taxation (double taxation).
• Formed when Articles of Incorporation are filed with the ACC

Business License vs. LLC in State

In Arizona, a business license and an LLC have different purposes and functions. A business license is an official permit that allows an individual or business entity to conduct a type of business within the State or around a jurisdiction. However, an LLC is a business structure created by the Arizona Corporation Commission when the required paperwork is filed and a fee is paid. LLCs are required to obtain the necessary licenses from the appropriate Arizona government agencies.

Do I Need a Business License if I Have an LLC in Arizona?

Yes, most LLCs in Arizona are required to have a business license. However, this depends on the type of business and whether it requires an operating license or not. The Arizona Revised Statutes, specifically Title 32, list all the professions and occupations that need a license. It also mentions the government agency responsible for issuing those licenses.

Business owners who offer professional services will need a license. The State itself doesn’t issue or require business licenses for LLCs, but most city and town offices do. Some places only require licenses for businesses within their jurisdiction, while others demand licenses for any business operating within their city or town limits.

The Arizona Department of Revenue assists business owners in complying with taxes and licenses. They have a guide on their website that explains the types of licenses and taxes in the State. The guide also lists other agencies in each city/county that impose taxes or require licensing. If business owners need help with licensing in Arizona, they can contact License Compliance at LicenseCompliance@azdor.gov.

How to Dissolve an LLC in Arizona

To dissolve an LLC in Arizona, business owners should conduct a dissolution meeting with relevant parties to reach an agreement. Check the operating agreement for specific dissolution requirements and inform third parties about the decision. Close business and tax accounts, settle debts and fulfill tax obligations. File Articles of Termination with the Arizona Corporation Commission, with a $35 filing fee and an additional $35 for expedited processing. The dissolution process takes 15 to 20 business days.