Are you about starting a business in Arizona and want to form an LLC? If YES, here is the legal requirement to start an LLC in Arizona and how much it cost. This article will show you a step-by-step process on how to create an L.L.C. in Arizona and what you need to do after forming an L.L.C. in the state.
What is an L.L.C.?
L.L.C. is an abbreviation for Limited Liability Company. Creating an L.L.C. is one of the easiest ways to build a wall between your private assets and your company’s financial liabilities. It helps protect your personal assets if someone sues your company. An L.L.C. offers you the protection you simply can’t get as a sole proprietorship or general partnership.
An L.L.C. also has some tax advantages; the business itself is not responsible for taxes on its profit. Instead, the members of the L.L.C. report their share of business profit and loss on their personal tax returns just the way taxes are reported for a general partnership; this is called “pass-through taxation.”
This means a lower tax rate on company profits along with asset protection and tax flexibility. The L.L.C. business structure equally has other advantages including;
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No Residency Required
Owners of an L.L.C. don’t have to be U.S. Citizens or permanent residents.
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Legal Protection
Owners of an L.L.C. are given limited liability for business debts.
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Enhanced Credibility
Partners, suppliers, and lenders may look more favorably on your business when you form an L.L.C.
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Ownership Flexibility
There is no limit on the number of owners an L.L.C. can posses. Additional members can buy equity in the company.
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Less Record Making
With an L.L.C., no annual meeting or minutes books are required.
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Gain Access to Business Loans
When you form an L.L.C., your business will begin to build a credit history. This will aid your business access loans. An L.L.C. combines the asset protection of a corporation with the simplicity of a partnership, which makes it one of the most popular entity structures for small businesses.
Where is the Best Place to Form an L.L.C.?
People venturing into the business for the first time always ask which is the best State to form an L.L.C. There is a lot of hype about creating an L.L.C. in Florida, Alaska, Montana, and Indiana; however, one of the best but less hyped state is Arizona. But it is best you form an L.L.C. in the state where your business will be based.
How to Start an LLC in Arizona in 6 Steps
Forming an L.L.C. in Arizona is a straightforward process and won’t cost you much money. Below are the steps to follow if you want to form an L.L.C. in Arizona.
STEP 1: GIVE YOUR ARIZONA LLC A NAME
Getting a name is the first and most essential step in forming an L.L.C. in Arizona. You should note that you cannot use a name that is similar to an existing registered organization in the united states. Also, ensure the name you choose can be searched easily by potential customers and follows the Arizona naming requirements. Below are some of the naming guidelines for Arizona:
- Your company name should include any of abbreviations L.L.C. or L.L.C. or phrase “Limited Liability Company.”
- The name you choose should not include words that may confuse your company with government agencies like Treasury and F.B.I.
- A Licensed individual and additional paperwork will be required if you intend to make use of restricted words like University, Bank, and Attorney.
- Your company name should not be more than sixty(60) characters
For more information visit Arizona Corporate Commission
How Can You Tell If the Name is Available?
To make sure you are not using another company’s name, it is best you conduct a name search on Arizona eCorp site.
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Check if the URL is available
If you want to give your potential clients a sense of professionalism, it is best you check to see if you can use your company name as a web domain. The customers you need are on the internet, so if you want to expand your brand and build your customers base, a business website is a necessity. With so many people offering the service, building one won’t cost you a pretty penny and would pay off in the long run.
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Set up a professional e-mail account
First impression is critical, especially in business. In this modern era, many people are becoming very selective and conscious when it comes to communication via e-mail. Spam messages from unwanted sources tend to make people scared of opening new messages, and this where a professional e-mail comes into place. Some of the best professional e-mail services you should consider are:
- G suite
- Zoho Workplace
- Rackspace
- Office 365
STEP 2: HIRE A STATUTORY AGENT IN ARIZONA
You are required to hire a statutory agent for your L.L.C. in Arizona. A statutory agent is popularly known as a registered agent in other states.
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What is a statutory agent?
A statutory agent is an individual or organization who sends and receives legal documents on behalf of your L.L.C. In Georgia, New York, and some other states, a statutory agent is known as a registered agent or an agent of service process. Almost every state in the United States requires that an L.L.C. appoints a statutory agent.
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What does a statutory agent do?
An L.L.C. statutory agent will act as your business’ main point of contact with the state. He or she will receive things like compliance information and tax notifications. In other words, in an event your LLC get sued, your statutory agent will receive the service of process papers on behalf of your company.
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Can I be my statutory agent?
Yes, you can be your statutory agent, or you can appoint a member or your L.L.C. or a loved one your trust. However, the person must meet the following requirements:
- He/she must be at least 18 years of age
- He/she must have a physical address in Arizona
- He/she can be reached during working hours
Another alternative is to hire a professional statutory agent service; however, hiring one is quite expensive. Nevertheless, using a quality statutory service helps you prevent any fees or legal troubles caused by missing or late submission of documents.
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Should I use a statutory agent service?
Although using the service of a professional statutory agent is expensive, it comes with tons of benefits. Below are some of the benefits.
- Statutory agent service will help your L.L.C. know the latest on state requirements
- Help you find Legal professionals and seasoned accountants in Arizona for business.
- Safely keep copies of important documents in case of theft or natural disaster.
STEP 3: FILE THE ARIZONA ARTICLE OF ORGANIZATION
To register your limited liability company successfully, you will have to prepare and file the Arizona Articles of organization. The filing can be done by mail, online, or in-person. It is important to note that when filling, you must state whether your L.L.C. will be manager-managed or member-managed. Arizona filing cost is $50 and is nonrefundable. If you want to expand your existing L.L.C. to Arizona, you will be required to form a Foreign L.L.C.
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What is the processing time to create my L.L.C.?
Generally, the processing time to form an L.L.C. in Arizona is 50-55 days by mail or online. However, you can hasten the process with some additional fees.
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What is the difference between a Foreign L.L.C. and a domestic L.L.C.?
An L.L.C. is referred to as a Foreign L.L.C. when an existing L.L.C. intends to expand the business to another state. A Domestic L.L.C. is the one that operates in the state it was established.
STEP 4: COMPLETE PUBLICATION REQUIREMENTS
In Arizona, a newly formed L.L.C. must print a Notice of L.L.C. formation for three straight weeks in an accredited newspaper in the country of the L.L.C.’s main office. Note: this should be done within sixty days of formation. However, a business whose main address is either Pima counties or Maricopa does not have to announce a Notice of L.L.C. formation.
What should my Notice of L.L.C. Formation Include?
You will need to print the following information:
- The name of your L.L.C.
- Complete name and street address of your statutory agent
- The address of your L.L.C.’s main place of operation if it is different from that of your statutory agent.
- State whether your L.L.C. is manager-managed or member-managed
- The complete name(s) and address(es) of each member of your L.L.C. or the manager.
STEP 5: CREATE AN OPERATING AGREEMENT
Even though an operating agreement is not compulsory in Arizona, it is extremely necessary for you to have one.
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What is an Operating agreement?
An L.L.C. operating agreement is a legal document that outlines the ownership and member duties of an L.L.C. Not every state requires an operating agreement, but they are highly recommended.
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Why are operating agreements necessary?
Creating an Operating agreement helps bring credibility to your business. A well-structured operating agreement prevents misunderstanding between members by stating member’s roles and responsibility.
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What does an operating agreement contain?
A well-structured operating agreement contains information about the:
- Organization
- Management and voting
- Capital contribution
- Distribution
- Membership changes
- Dissolution
Do I need to file my Operating agreement with the state?
No. An operating agreement is a document that you should keep for future reference.
STEP 6: ACQUIRE AN EIN
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What is an E.I.N.?
An E.I.N. is essentially your social security number for your business. It is what your business bank account and taxes will be attached to. When you file taxes and make any sort of tax payment, it is all going to be connected to your E.I.N. So you will need to go to the I.R.S. to apply.
This application is known as “SS4”, and that is to obtain your E.I.N. And if you hire employers and start doing payrolls, you will need the E.I.N. to process this payroll taxes. See? Forming an L.L.C. in Arizona is not difficult. But after forming your L.L.C., there are some vital things you need to do. That is what we will be looking at next.
VITAL THINGS YOU NEED TO DO AFTER FORMING YOUR LLC IN ARIZONA
Now you have formed your L.L.C.; you have taken a significant step towards building a legal foundation for your business as well as protecting your personal assets. Since you have set up your L.L.C., you probably would be getting ready to open your doors for business but before you do so, there are some things you need to do.
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Open a Business Bank account
When you form your L.L.C., it is vital you open a business bank account separate from your personal account as it will make it easier for you to track your income and expenses. To open a business bank account, you will be required to provide your E.I.N. Apart from your E.I.N., top banks across the country now ask for an operating agreement.
You should take your time to check several banks before making a choice because some will offer some benefits. While some banks won’t charge you any monthly fee, some might charge you a small amount. What are the benefits of opening a business bank account?
- A business bank account separates your business assets from your private assets
- A business bank account reduces the stress in financial recording and tax filing.
- A business bank account makes your company looks professional and also gain bank relationship
Some of the best banks to open a business account in Arizona include;
- Barclays
- Bank of America
- Chase
- Capital one
- Wells Fargo
- Citi
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Apply for a Business Credit Card
In addition to opening a different bank account, using a business card is a prudent decision. By including every business expense on your business card, you have a quick audit trail of the year(s) expenses when tax time comes knocking. Furthermore, having a business credit card will assist you in making sure your personal assets are well-protected.
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Get Any Necessary Business License and Permits
Many new business owners assume that forming an L.L.C. is synonymous with getting a business license. Soon they realize it is not the same when they are slapped with a hefty fine for operating without a license. Assume it this way: forming an L.L.C. is the initial step and builds a legal foundation for your business while a business license gives you permission to operate.
Depending on the nature of business you intend to operate in Arizona, you may need to get business licenses. Most licenses come at a guilt-free price, so getting one upfront won’t be a hassle, and it will make your business legit.
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Get a Seller’s permit
In Arizona, an L.L.C. that sells taxable goods and services is required to have a seller’s permit. Ensure you get a seller’s permit before you start selling.
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Insure your business
It is a well-known fact that forming an L.L.C. does not help protect your private assets from the liability of the company. It does not also protect your business from any loses. That is why it is essential you obtain a Business Owners Policy (B.O.P.) or General Liability Insurance.
Both policies will help cover your business against injuries, accident, and negligence claims. Furthermore, if you are selling a product, you should consider getting a Product liability insurance. And, if you offer a professional service (i.e., consultants, accountants, lawyers, hair salon, insurance agents), you will need to get a professional liability policy.
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Keep your L.L.C. Compliant
Once you become an L.L.C., you have to carry out your business at the top administrative level you have been used to as a sole proprietor. In Arizona, an L.L.C. is required to file an annual report with the State and also maintain their quarterly tax payments.
You might get caught up in a lot of business and private activities so make sure you mark these dates on your calendar ahead of time. To be on the safe side, you can hire a seasoned statutory agent service. They will automatically notify you ahead of important state and federal filing deadline.