Arizona is a stunningly beautiful state filled with a variety of people, languages, and cultures. There is a market for almost anything in Arizona if you know where to look. Forming an LLC can be a great way to start a business in this growing southwest state.
Once you start reading up on the process, though, you might be a bit confused. There’s a lot of information out there. Not all of it is up to date, and it’s hard to know what exactly applies to you. That’s why we’re here — to strip away the confusing stuff you don’t need and distill the process into simple, easy-to-follow steps.
In this article, you’ll find all the tools you need to start an LLC in Arizona, including:
- Tips on drafting and filing the legal documents you need for your Arizona LLC formation
- Guidelines for staying within state and federal law
- The actual laws and rules you need to follow
Step 1: Name your Arizona LLC
No matter how great your business plan is, you can’t do anything until you have a good name for your LLC. While you have a great deal of freedom to pick the name you want, you still must follow Arizona law, starting with Arizona Revised Statutes section 29-3112.
Words You Have to Use
First, your chosen name must contain the words “limited liability company” or “limited company.” You can shorten those words if you like. (For example, “LLC” and “LC” are fine.)
Second, the name of your company has to be distinguishable from the names of other people and entities doing business in the state. In other words, your name has to be different enough that people can tell the difference and a search for your entity doesn’t turn up another’s records. Most often, this means adding words to a company name.
Let’s say you want to open up a business called “Rising Phoenix, LLC.” When you search the Arizona Corporation Commission’s (ACC) website, though, you find a company called “Rising Phoenix! Inc.” Under the statute, neither the exclamation point nor the “Inc.” make the other company’s name distinguishable from yours.
The easiest way to fix the situation would be to add words to your LLC’s name. Thus, “Arizona’s Rising Phoenix, LLC” would probably be okay. Under Arizona’s guidelines, changing the word order might work too, so “Phoenix Rising, LLC” could be okay.
Words You Can’t Use
Section 29-3112(E) contains a list of the words you can’t use when forming an LLC in Arizona. These include:
- Names or abbreviations of other business types, like “association”, “corporation”, or “incorporated”
- Words indicating your LLC is in the banking business, like “bank”, “deposit”, “credit union”, “trust”, or “trust company” unless your LLC is a regulated bank, credit union, trust company, or similar business
To use any of the banking industry words, your LLC will need permission from the Arizona Department of Financial Institutions. While the statute does not specify further restrictions, it is always a good idea to check with the government entity that licenses your business and the ACC to make sure that your name is okay under their rules.
The big rule is this: if you need a license to do your job, double-check with the ACC to make sure your company name complies with the law.
Research the LLC Name You Want
Once you’ve picked a good name, you should check to make sure that name is available in Arizona. The ACC has a free, robust Business Entity Search that you can use for this task. Just type in your desired name and click the “Name Availability Check” button.
We also suggest that you run a few other word searches and combinations to make sure that the name you pick is distinguishable from the names of all other entities in Arizona.
Arizona DBA: Using a Fictitious Business Name
After you’ve picked a name for your LLC that complies with the law, you may not be entirely happy with it. Maybe you had to add or drop words you wanted, or your business name sounds too much like that of a competitor.
If so, don’t worry. You can apply for a trade name, also known as a “doing business as” name (DBA) or fictitious business name. It’s a very common process, and not hard to get.
Arizona Revised Statutes section 44-1460 states that, to get a DBA, you’ll have to file a document with the Secretary of State that has the following information:
- Your LLC’s name
- Your email address and business address
- The trade name/DBA you want
- Your LLC’s line of business
- How long your LLC has used the DBA it is registering
- The signature of you or another member of your LLC
Trade name/DBA registrations last for five years and can be renewed. The filing fee is $10. You can apply on the Secretary of State’s website.
Step 2: Appoint a Statutory Agent for Your LLC
Arizona Revised Statutes section 29-3115 requires your LLC to have a statutory agent in the state. (Though the statute uses the term “statutory agent,” you should know that this means the same thing as “registered agent” in other states. The terms can be used interchangeably.)
A statutory agent or registered agent is your LLC’s point of contact for the public. That agent is the recipient of “any process, notice or demand” directed to your company. These documents are sometimes also referred to as “service of process.”
Service of process is a legal term for business letters or legal papers. In other words, your agent is there for the state or the public to communicate with you.
If your LLC is sued, your Arizona statutory agent should be served with it under Arizona Rule of Civil Procedure 4.1(i). Your company’s statutory agent and office are listed on the ACC’s Business Entity Search website for this purpose.
If you are late responding to a lawsuit or, worse, don’t respond at all, you could lose the lawsuit by default judgment. This is a harsh result, but it illustrates how important it is for you to retain a good statutory agent for your LLC.
The law gives you options about whom you can appoint as your agent. You can name an individual Arizona resident or an entity doing business in the state as your agent. You could even be your LLC’s statutory agent. Just because you can, though, doesn’t mean you should.
Often, hiring a company is the smarter move. A statutory/registered agent service lets your LLC use its company’s address to receive service of process. The agent then forwards those documents to you.
You might be thinking that the job doesn’t sound hard enough to justify hiring someone else. Being your LLC’s Arizona statutory agent can be tempting for a few reasons:
- It’s cheap: You’re not paying someone for something you can do yourself.
- It’s simple: The only address and contact information you have to keep current is your own.
- It’s reliable: You will receive all important papers personally.
Those are solid points. But there are also a lot of reasons not to do it yourself:
- No privacy: Your name and address will be public on the ACC’s Business Entity Search website.
- Junk mail/spam: You will get a ton of junk mail in addition to a small amount of real mail and any service of process.
- No breaks: Agents must be open for service during all business hours. They don’t get time off.
- Business interruptions: If your agency address is the same as your business address, your clients may be interrupted by people serving lawsuits. That could be embarrassing or hurt your reputation.
- It’s your fault if you miss something: You always have to make sure your agency address is correct and up to date. If you make a mistake or miss something, that’s on you.
Statutory agent companies are an easy way to avoid these issues. They aren’t pricey, either. They usually cost around $100 per year. Their name and address, not yours, are publicly listed. Depend on your agent to make sure you don’t miss anything. That way, you can focus on your business.
If you are looking for a professional statutory agent service, take a look at our Best Registered Agent ranking for some of our recommendations.
A professional service can also help if your LLC will do business in multiple states and you need to register as a foreign LLC. Just find a company that does business in all those states, pay them a single fee for multiple agents and offices, then let them worry about the details.
Step 3: File Your Arizona LLC Articles of Organization
Under Arizona Revised Statutes 29-3201, your LLC doesn’t legally exist until you deliver your articles of organization to the ACC for filing. This legal document is short but important. Because it’s the birth certificate for your company, you have to make sure it’s done right.
If you would like to avoid the hassle of handling your LLC filing yourself, you can also use a professional LLC formation service. Check out our Best LLC formation services article for some of our suggestions.
What to include in my Arizona Articles of Organization?
The statute says that your articles must contain the following:
- Your LLC’s name
- Your LLC’s principal address, which can be the statutory agent’s address
- The name and address of your LLC’s statutory agent
- Whether your LLC is managed by its members or a non-member manager
- If your LLC has managers, include the name and address of each manager and the name and address of each member that owns 20% or more of the LLC
- If your LLC is member-managed, include the name and address of each member
You can include further matters in your articles if you wish, but keep in mind that those additional matters must still comply with Arizona law. If you think you need more items in your articles, talk to an Arizona lawyer about how best to do this.
If you’d like to keep things simple, Arizona offers a simple fill-in-the-blank form on the ACC website.
Arizona LLC Filing Fee
According to the ACC fee schedule, the required filing fee for articles of organization is $50.
Arizona LLC Processing Time
The ACC website regularly updates its processing times for business filings. Currently, the regular processing time is estimated to be 13-15 business days. Because that time could translate to as long as three weeks, you might want to get your articles done a bit more quickly.
Fortunately, the ACC offers a few different options to speed things up. The first is expedited service. For an extra $35, you can shorten the processing time for your articles to 3-5 business days.
If you need processing even more quickly than that, the ACC also offers next-day, same-day, and two-hour service, but those options are pricey:
- Next-day service: $100. The articles must be received by 5:00 p.m. to secure service by the next business day.
- Same-day service: $200. The articles must be received by 10:00 a.m. to secure service by 5:00 p.m. on the same business day.
- Two-hour service: $400. The articles must be received by 3:00 p.m. to secure two-hour service.
Step 4: Fulfill Arizona’s LLC Publication Requirement
Within 60 days of the filing of your LLC’s articles of organization, Arizona requires you to take an unusual step: publication of your LLC’s formation.
Arizona Revised Statutes section 29-3201(G) provides two ways this can happen:
- You can file a notice in the newspaper of the county where your statutory agent is located. The notice has to have the same information that the state required in your articles. It must be published in the paper three times in a row. Once this is done, you should file an affidavit with the ACC saying you did it.
- If your agent is located in a county with a population greater than 800,000 (e.g., Maricopa or Pima), then this requirement is fulfilled by the ACC. In this case, it will put the information about your LLC formation into its electronic database.
If you have to publish in a newspaper, the cost can run between $30 and $300. There is no cost if you live in one of the larger counties because you don't need to print a notice of publication.
This rule may seem a bit odd. It’s a throwback to a pre-Internet age when the only way the public could learn about new companies was through the local newspaper.
This law also prevents you from forming companies in secret to hide assets from a spouse or creditor. (If you are going bankrupt or getting a divorce, the court needs to know what all your assets are.) In any case, it’s an ancient rule that does not have a lot of use today, but Arizona is one of the few states that use it.
Step 5: Draft your Arizona LLC Operating Agreement
Operating agreements are contracts between you and the other members of your LLC.
Arizona doesn’t force you to have a written operating agreement, but we strongly recommend you make one. An operating agreement states your company’s rules and can help settle disputes. It also tells you how to let in new members, let existing members exit, and manage a variety of other unexpected events.
Every company’s needs are different, so every operating agreement should be different. This is your chance to set down the rules that will govern your livelihood for a long time.
Keep in mind that if you don’t make your own rules with an agreement, Arizona statutes will determine the rules. You might not like those results, so it’s best to think about them now.
Arizona Revised Statutes section 29-3105 sets down a broad range of things that your agreement can cover:
- Relations among the members as members and between the members and the LLC
- Rights and duties of an LLC manager
- What the LLC can do, and how it does it
- How the operating agreement can be amended
A good operating agreement should have all up-to-date facts about your LLC. If you are forming your company with other people (LLC members), you likely each have your own job at the company. The agreement outlines all the jobs and sets standards to make sure everyone is doing their best.
When LLCs draft their operating agreements, those contracts typically perform some or all of these functions:
- They outline what the LLC is legally able to do. The operating agreement should also set down how the company is allowed to conduct its business from day to day.
- They say what the manager has the right to do. Managers also have special duties to the company and the members. The operating agreement should state these.
- They determine the rights and duties of LLC members. If one LLC member is responsible for running the business or managing the books, the operating agreement should say so.
- They say how new members can join the company. They also have rules about how existing members can leave or how they can transfer their interest to someone else.
- They set down how and when profits are paid to members. They can also create different types of membership and payment schemes.
- They say whether members or managers are in charge. They also say how to hire and fire managers.
- They say how and under what circumstances the LLC should end. You might not want to dissolve your business now, but you might in the future. It’s best to think about it and plan before it becomes an issue.
- They say how to change the rules. You may need to amend your operating agreement in the future. The operating agreement should set down the rules for making changes.
As you consider your options, here is one last thing to keep in mind. Unlike your articles of organization, the operating agreement is a private contract. It doesn’t need to be filed with the state, and it can be amended as you and the other members of your LLC like.
Step 6: Get an EIN (Employer Identification Number) for Your Arizona LLC
When you file your personal income tax return, you use your social security number for identification. Companies don’t have social security numbers, but it’s just as important that the government keeps track of where their money is. The way it does that is by issuing EINs.
Not all LLCs need an EIN. Here are the most common times when you need an EIN:
- Does your LLC have more than one member?
- Does your LLC have any employees?
- Is your LLC taxed as a C corporation or S corporation?
If the answer to any of the above questions is yes, you will need an EIN. Also, note that most banks will require an EIN to open a bank account for your LLC.
The good news is that it’s not hard to get an EIN. The IRS has a detailed website on the topic and allows you to apply online. An application takes about five minutes. If you don’t want to go online, you can also file IRS form SS-4 via mail or fax.
Because it’s so simple, you should never pay anyone to get an EIN for you unless they are throwing it in as part of a bigger service package.
First Tasks After Registering your Arizona LLC
The LLC is formed, and you’re ready to go. But before you start, there are still a couple more things that you need to handle.
Open a Business Bank Account
The first thing you need to do is stop by the bank. You need to open a separate account for your LLC. Even though it’s not a requirement to form your company, there are three solid reasons to do it:
- Accounting: You’re in business to make money. You can’t tell if you’re making money unless you know how much your company spends and deposits every month.
- Credit: Even successful companies need to borrow money. You don’t want to use your personal credit, though, for a business expense. Keeping LLC money separate helps it build up credit that it can use for its own needs.
- Personal Asset Protection: Keeping your company’s money separate from your own is the whole point of even forming an LLC instead of operating as a sole proprietorship. Without a business bank account, you risk losing that protection.
If you care about proper accounting (and you should), getting an account is crucial. Running a business means keeping detailed financial records about expenses and income. You can’t do that if you don’t keep your business and personal finances separate. The easiest way to do that is to use different accounts.
Even if you don’t plan on it now, it’s important to consider that there might be times when your company might need to draw on credit. A few years down the road, you might need to make improvements, sign a new lease, or invest in new technology. When that time comes, the LLC should do the borrowing, not you.
The liability protection of an LLC is perhaps the most important reason for separate bank accounts. If someone sues it, your own assets are not at risk, and you won’t be liable for business debts. This company/individual separation is called the corporate veil. (Even though an LLC is not a corporation, it’s still called a “corporate” veil.)
If you treat your company’s assets like your own, the veil can be pierced. That means you would lose all liability protection. So, for example, if you are taking the company’s money and using it to pay your household bills, you could lose a key benefit of your LLC!
We can’t stress this enough: don’t mix your personal assets with those of your company. Nothing good will come of it. Get an LLC bank account as soon as possible.
Get Business Insurance For Your Arizona LLC
Nobody enjoys buying insurance, but you’ll be glad it’s there when you need it. Just like your health, car, and home, your new business needs to be protected.
There are lots of types of insurance to think about. Here are some more common policies businesses get.
- General liability insurance: You’ll need this if there’s an injury on your property. It pays for damages and a lawyer if you need one.
- Commercial automobile insurance: This works like your own car insurance. It covers company drivers and vehicles.
- Workers compensation insurance: If your LLC hires employees, it must carry workers’ compensation insurance to pay for on-the-job injuries. LLC members don’t have to count as employees but may if they wish to be included for workers' comp purposes.
- Commercial property insurance: This protects from losses due to property damage. Flood insurance is often a separate policy.
- Professional liability insurance: Lawyers, doctors, architects, and other professionals need this insurance. It provides coverage and legal defense in the event of a malpractice case.
- Business income insurance: If you have to close for some time, business income insurance can pay back the loss of income. Policies vary, though. Make sure that you know what kinds of losses will be covered.
Keep Your Arizona Company Compliant
Once you have followed the steps above, you are well on your way. Just remember that you still have obligations to your local, state, and federal governments. Set some reminders on your calendar to consider these issues so you don’t let them lapse.
Arizona Business Permits and Licenses
According to the Arizona Commerce Authority, Arizona does not have a statewide business license. However, your city and county governments likely do, so you should check with them to see what their requirements are. Here is a partial list of governments you might need to contact.
Also, keep in mind that many types of businesses will require you to have professional licenses. Check with the government entity that issues those types of licenses for more information.
Arizona Tax Requirements
Because LLCs are “pass-through” entities by default, they are usually not taxed directly on their income. Rather, members are taxed on the income they each receive from the company.
If you elect for your LLC to be taxed like a corporation, it will likely pay a 6.968% net income tax, with a minimum tax of $50. For tax and legal advice on your choices, talk with an Arizona lawyer or accountant.
Federal LLC Tax Filing Requirements
Your LLC is considered a pass-through business entity for federal tax purposes. Profits or losses from your LLC should be on Schedule C of your personal income tax return.
Annual Report and Other Filing Requirements
Arizona doesn’t require your LLC to file an annual report as many other states do. Keep in mind, though, that you do need to make sure that your LLC’s principal address and statutory agent information need to be current with the ACC. It is very cheap to file statements of change with the ACC ($5), so it’s not a great burden.
Arizona Business Formation Quick Links
- ACC — Business Entity Search
- ACC — Determining Distinguishability of Entity Names
- ACC — Expedited and Same Day/Next Day Service
- ACC — Fee Schedule
- ACC — Form Articles of Organization
- ACC — Form Statement of Change
- ACC — Processing Times
- Arizona Commerce Authority — Business Licensing
- Arizona Commerce Authority — City/Town Offices
- Arizona Department of Revenue — Employer Withholding Filing Obligations
- Arizona Department of Revenue — Transaction Privilege Tax
- Arizona Professional Licenses
- Arizona Secretary of State — Apply for a Trade Name/DBA
- Arizona Revised Statutes section 44-1460 — Trade names/DBAs
- Arizona Revised Statutes Title 29, Chapter 7 — Arizona Limited Liability Company Act
- Arizona Workers’ Compensation Insurance — Employers’ FAQs
- Internal Revenue Service — apply for an EIN online
- IRS information regarding the federal tax treatment of LLCs
Arizona LLC FAQs
How much does it cost to start an Arizona LLC?
It costs $50 to file your articles of organization. Expedite fees can run from $35 to $400.
What is the processing time to form my Arizona LLC?
Regular processing time is 13-15 business days. If you want it done faster, you can pay between $35 and $400 to expedite the processing of your articles or organization.
What are the benefits of an Arizona LLC?
An Arizona LLC protects your personal assets while giving you favorable tax treatment. You can also use an operating agreement to customize your business structure so it best serves the needs of you and the other LLC members.
Where do I check if my Arizona LLC name is available?
Use ACC’s free online Business Entity Search. Make sure you check multiple words and phrases from your proposed name to distinguish it from reserved names and the names of other companies doing business in the state.