Starting an LLC in Arizona? Here’s a Formation Guide

12/08/2023 04:48 PM

All you need to know to navigate Arizona LLC formation online or by mail.

Starting an LLC in Arizona begins with confirming that the LLC formation structure is the best option for your new company. If the legal advantages of establishing an Arizona LLC meet your business needs, you can then take the steps outlined below to meet all of the Arizona LLC filing requirements relevant for your company.

Choosing to register a business in Arizona can be an intimidating task, but the work of starting an LLC in Arizona doesn’t have to be stressful. Ask yourself the following questions about how to get an LLC in Arizona. Answering them and following the guidance below will empower you to realize your vision of becoming a business owner in Arizona. To form your Arizona LLC, you will need to:

Name your LLC
Appoint a statutory agent
File articles of organization
Apply for a federal business ID number
Formalize an operating agreement
Publish your notice of LLC formation

Is Starting an LLC in Arizona Right for Your Company?

Before you go through the work of starting an LLC in Arizona, it’s important to make sure that this unique business structure meets your company’s needs. There are four main business structure types that you can choose from when launching your company:

Corporation
Sole proprietorship
Partnership
Limited liability company.

There is no one “right” business structure for every company. When considering what kind of structure to form, weighing how the pros and cons of each could affect your business will help you to make an informed decision.

Corporations

This structure is usually best suited for larger operations looking to raise capital fast and to expand as quickly as their business model will allow. These entities are owned by shareholders, who have an interest in the company relative to the percentage of shares they own.

A significant benefit of the corporate structure is that it allows a business to be taxed as a distinct entity. It also insulates shareholders from personal liability if the company is sued or falls deeply into debt. On the downside, corporations take a lot of work to form and are subject to stringent reporting requirements. Additionally, corporate operations are governed by a board of directors. Some aspiring business owners like this model but some prefer to take a more flexible approach to centralized control.

Sole Proprietorships and Partnerships

These structures work well for owners who like to run company operations without interference from a board of directors and don’t want to be beholden to the interests of stockholders. Arizona doesn’t require sole proprietorships or partnerships to formally register their businesses, so launching these entities tends to be very easy.

However, there are a few drawbacks to these types of businesses. First, they’re taxed on the personal returns filed by their owners, which means that you’ll need to take extra care to keep your business finances and personal finances separate. Second, these structures won’t protect your personal property or assets if your company is sued or becomes liable to repay debt.

Limited Liability Companies

If you like the idea of a more flexible approach to management of your company but you want personal liability protection if something goes wrong at your company, starting an LLC in Arizona may be your best option. Limited liability companies can be taxed on personal returns or as a corporation, depending upon the preference of you and your fellow LLC members (owners). If you want to run your business on your own, you can. The process of how to start an LLC in Arizona can be navigated by one member or many members.

There is no rigid management structure required to operate an LLC. Arizona state reporting requirements for LLCs are minimal once your business is established. But the biggest draw of operating an LLC is that members are afforded significant personal liability protection by virtue of this corporate structure.

Note that if you’re planning to offer professional services through your company, you can choose to form one of the other types of LLC in Arizona: A PLLC. To take advantage of the professional limited liability company option, you’ll need to outline the nature of your professional services in your articles of organization (discussed below) and submit a special form. You may also need to secure a permit from the organization that governs your profession in Arizona.

Step-by-Step Guide: Arizona LLC Formation

1. Name Your LLC

A consequential (and maybe even a little bit fun) step to starting an LLC in Arizona involves choosing a company name. Many new business owners opt to register both a formal legal name and a trade name with the state. Legal names must meet all of the naming requirements imposed by the state.

For example, your legal name must contain one of the following terms or abbreviations: “Limited liability company,” “limited company,” “L.L.C.,” “L.C.,” “LLC” or “LC.” It also can’t contain any of the following words or abbreviations for these words: “Corporation,” “incorporated” or “association.”

Consider a Trade Name

If you don’t like the idea of naming your LLC in accordance with these conventions, don’t worry. While you’ll need to register a formal name that is fully compliant, you can also register a trade name with the Secretary of State, also known as a “doing business as” (DBA) name, for a less formal version of your LLC’s legal name.

Let’s say your LLC’s legal name is Huey, Dewey, and Louie, LLC. You could opt to register for the shortened Huey, Dewey & Louie or HD&C as trade names. That way, your branding efforts can be a little more consumer friendly.

Before you commit to a legal name and trade name(s), you’ll need to search the Arizona entity database to make sure that no other company operating in Arizona is using your name(s) of choice. This LLC search tool is easy to navigate, so taking this step shouldn’t take long.

Make Your Name(s) Distinguishable

You’ll also want to make sure that your preferred names are distinguishable from those that are already in use. Say that HD&C (our fictional duck LLC from the example above) is a name already in use. You won’t be able to register HDandC as an alternative because it isn’t different enough from the company name that’s already protected. If your preferred names aren’t available and distinguishable, you won’t be able to register them.

Reserve and Trademark Your Choices

Once you’ve landed on a name that can be registered in Arizona, you can reserve this name for up to 120 days. During this reservation period, you can conduct a trademark search for the name on a nationwide scale. This effort can help you to avoid intellectual property run-ins with companies that may use your preferred name in another state. If your name is available nationally, trademark it on both the federal and state level so that no other company can lawfully compromise your intellectual property rights and steal your company’s creative vibe.

2. Appoint a Statutory Agent

Next up in navigating the process of how to form an LLC in Arizona, you’ll need to decide who should act as the statutory agent for your LLC. Arizona requires every LLC to appoint a statutory agent to receive official paperwork, including correspondence from the government and papers served in the event of a lawsuit. In many states, this point of contact is referred to as a “registered agent.”

You can appoint either an Arizona resident or a company that has a physical Arizona address to serve as your LLC’s registered agent. Even an out-of-state company can serve in this capacity as long as it maintains a business office in Arizona. The statutory agent of your choice must complete an acceptance form that you can file simultaneously with your LLC’s articles of organization.

3. File Articles of Organization

Starting an LLC in Arizona requires alerting the state to the existence of your business. The Arizona Corporations Commission won’t be officially notified of your pursuits until you submit articles of organization to the ACC office. Once this form is authorized, your LLC will be officially created. To complete this form, have the following information ready:

The legal, registered name of your LLC
The name and physical street address of your statutory agent
Confirmation of whether you’re filing an LLC or a PLLC
The principal address for your LLC
Whether you’re forming a manager-managed LLC or member-managed LLC

4. Apply for a Federal Business ID Number

Individuals are often asked for their Social Security numbers for identification purposes in highly-sensitive situations, such as filing taxes and applying for a marriage license. Similarly, businesses that need to verify their identity in sensitive situations, such as opening a business bank account and filing taxes, are asked for their federal employer identification number (EIN). Once your business is authorized to operate in Arizona, you’ll need to apply for this number. It’s a quick online process marked by a surprisingly fast turnaround time.

5. Formalize an Operating Agreement

If you’re starting an LLC in Arizona owned by more than one member, you’ll want to at least consider working with an attorney to draft an operating agreement. This document acts as a contract between you and your fellow LLC members and formalizes your collective understanding of how your LLC will run. Taking this step will help to protect everyone’s interests in the event of a dispute between members.

Common issues addressed in LLC operating agreements include:

Taxation structure: Corporate or personal
Division of ownership percentages
Rights, powers, responsibilities, duties and restrictions of members, managers and investors
Procedures for meetings, buyouts and LLC dissolution
Distribution rights
Liability and indemnification concerns

6. Publish Your Notice of LLC Formation

Each newly formed LLC in Arizona is required to announce its formation within 60 days of receiving articles of organization authorization. A notice of LLC formation must be published in a state-approved newspaper distributed in the county where your LLC’s principal address is. You’ll need to publish this announcement for three weeks consecutively to meet these notification requirements.

In your newspaper notice, you’ll need to disclose all of the information listed on your articles of organization alongside the names and addresses of either the manager of your LLC or each of your LLC’s members.

Inside Scoop: The only exceptions to this rule involve LLCs formed in Pima and Maricopa counties.

Starting an LLC in Arizona FAQ

Does Arizona allow professional members to form PLLCs?

Professional services are those that cannot be legally offered to the public unless the individual and/or business providing those services is properly licensed or authorized to offer them. Some states don’t offer a professional limited liability company business structure. But, in Arizona, professionals such as lawyers, accountants, physicians and architects are empowered to form PLLCs if they’d like to. Each member of a PLLC who’ll be providing professional services must be licensed by the state to do so.

To formally name a PLLC, you’ll need to include one of the following terms or abbreviations within that name: “Professional limited liability company,” “P.L.L.C.,” “PLLC,” “P.L.C.” or “PLC.” To register a PLLC, you’ll need to file articles of organization with the Arizona Corporation Commission detailing, in part, the kinds of professional services that’ll be offered by your PLLC.

If you’ve secured a domain with a business name, does that entitle you to register it?

Domain names are important branding tools and, as a result, you should treat the process of registering a domain for your LLC seriously. However, you’ll want to wait until you’ve confirmed that the business name(s) you want to use are available for registration before committing to a domain name.

Registering a domain does not entitle you to a related business name registration. The state of Arizona doesn’t sell domain names, so it can’t guarantee that if you’ve purchased a URL, the name of a business associated with that URL will be available for registration.

What's the difference between LLC managers and LLC members?

Individuals and entities who have an ownership interest in an LLC are referred to as “members.” Managers oversee the operations of an LLC, like a board of directors does for a corporation. Managers can be members of an LLC but they don’t have to be. Similarly, an investor in an LLC can be a manager, a member or a standalone investor without ownership interest or an operations role in the company.

Once Your LLC Is Registered, What’s Next?

Now that your company has received formal recognition from the state, it’s time to start preparing to open your doors. Once you’re in compliance with all legal requirements, you can turn your attention to the practical foundations required to run a new business successfully.

Secure Necessary Funding

Starting an LLC in Arizona can be an expensive undertaking. Don’t box yourself into the idea that securing a loan from a bank is the only way to fund your new enterprise. You can apply for grants, research incentives, explore non-traditional lending opportunities and even tap into existing enthusiasm for your vision by crowdsourcing. Don’t open your doors until you’ve created a solid financial foundation you can build on.

Get Insurance and Open a Bank Account

Once you have your EIN number in place, you’ll want to open a business-only bank account and a business credit card. Even if you’re operating a single-member LLC, you’ll need to keep your business finances separate from your personal accounts.

Additionally, you’ll need to purchase business insurance, even if you aren’t opening a storefront or operating premises away from your own home. Business insurance safeguards against all kinds of legal and financial liability. While your LLC structure will safeguard your personal assets in the event that natural disasters, lawsuits, or business debt affect your company, you need to take steps to safeguard your company’s legal and financial vulnerabilities too.

Develop a Marketing Strategy

Cultivating a winning marketing strategy is essential for Arizona business development. Without a plan, you likely won’t reach your target customer base. To get started, consider connecting with your local Chamber of Commerce. Their resources may be able to connect you with the community and help you to understand your local Arizona market better than generalized marketing research.

Build an Online Presence

Even if your LLC will only operate locally, it’s important to develop a strong online presence. Not so long ago, customers in need of goods and services browsed through the yellow pages of a local phonebook. Now, they turn to the internet. Make sure to register a memorable domain name, cultivate social media accounts, and put some effort into your online branding.

Navigate the Process of Starting an LLC in Arizona

If you’re ready to register your new LLC, consider using an online LLC filing service to streamline many of the steps detailed above. An online LLC formation service can empower you to launch your LLC quickly and effectively.

Legal Disclaimer: This article contains general legal information but does not constitute professional legal advice for your particular situation and should not be interpreted as creating an attorney-client relationship. If you have legal questions, you should seek the advice of an attorney licensed in your jurisdiction.