Arizona LLC Costs
- Articles of Organization – $50 state filing fee or $85 expedited fee
- Name Reservation Fee – $10
- Publication costs – Varies by county, but typically $100-$120
- Annual reporting requirement – None
What is an LLC?
A Limited Liability Company (LLC) is a business structure that limits the personal liability of the members (owners) by separating the personal assets of the members from the business. This way if the business is sued, the members are protected personally. The members are also not responsible for the business debts of the LLC, unless they sign a personal guarantee when taking out a loan for the business. The LLC structure is a popular choice for small businesses because of personal asset protection.
The LLC formation process in Arizona is a multi-step process by filing the Articles of Organization with the Arizona Corporate Commission. The steps to forming an LLC in Arizona are listed below.
Steps to Forming an LLC
The LLC is created by filing the Arizona LLC Articles of Organization with the Arizona Corporation Commission. The state filing fee with normal processing is $50 filing, while processing can be expedited for an additional $35 state fee. Normal processing is typically 15 business days.
The articles must include:
- Name of the LLC
- Business address
- Duration of the LLC
- Name of the LLC’s mangers or members
- The contact information of the LLC’s statutory agent
- Signature of the LLC organizer
The articles can be filed online, which is easist and fastest to process. Note that all faxed and mailed Articles of Organization will need to be submitted with a cover sheet.
There are several popular, low-cost entity formation services such as IncFile, ZenBusiness and LegalZoom that help make sure your filing is right.
Step 1: Choosing an LLC name
Selecting a name for your Arizona LLC is an important decision, as every LLC that registers with the state needs to have a unique name. Available names may be reserved for up to 120 days by filing an Application to Reserve Limited Liability Company Name and paying a $10 name reservation application fee with the Arizona Corporation Commission.
One of the primary reasons LLC registrations get returned is because of a conflicting entity name. Before starting do a search for available Arizona LLC names with the Arizona Secretary of State to make sure your name hasn’t already been taken.
In addition to having a unique business name, there are some naming restrictions to be aware of:
The name must use one of the entity designators at the end of the name:
- Limited Liability Company
Since you are forming a Limited Liability Company, you aren’t allowed to use the following designators:
- or any related abbreviation
You are not allowed to use any words that may imply your business is a government agency.
Last, unless your business is licensed by the Arizona Department of Financial Institutions or Arizona Commerce Authority, you are not allowed to use the following words:
- Credit Union;
- Savings Association;
- Building Association;
- Savings and Loan Association;
- Building and Loan Association;
- Savings Bank;
- Trust Company.
One tip when deciding on a name for your business is to verify a domain name is available as an exact match name can be hard to come by.
Also, if you decide to use your LLC as an umbrella and operate multiple businesses or brands underneath it, you will need to also register for a DBA (Doing Business As)
Step 2: Appointing a Statutory Agent
Every Arizona LLC must appoint and maintain a statutory agent, commonly referred to as a registered agent in other states per Arizona law. A statutory agent is an individual or commercial statutory agent service that agrees to accept legal papers, also known as “service of process,” on behalf of the LLC. Since a business entity can have several owners, the agent is required as a single point of contact is necessary should these important documents need to reach the entity.
The statutory agent can be an LLC member, a friend or family member, attorney, etc who has a physical presence in the state of Arizona. To quality they have a physical street address in the state of Arizona (P.O. Boxes are not allowed), generally be available during normal business hours, and must accept the appointment in writing.
One of the downsides to personally being a statutory agent is that their home address is now public information and will be published in the newspaper and on the state’s online entity database. This can be avoided by hiring a commercial service to act as the agent.
Step 3: Selecting the Management Structure
The next step of filing the Articles of Organization is to elect whether your Arizona LLC will be member-managed or manager-managed.
Member-managed refers to the members being active in the day to day management and operations of the business. This is a very common choice for LLCs.
Manager-managed is when the members take a more passive role in the operations and hire a manager to run the entity. The members still have full control of the business, but do not personally make daily decisions.
The statutory agent must accept and file the Statutory Agent Acceptance form
Step 4: LLC Publication
Within sixty days after the Articles of Organization have been approved, a legal ad will need to be publishing in an approved newspaper that has general circulation in the county of the known place of business where the LLC is located for three consecutive weeks. The Arizona Corporation Commission has a list of approved newspapers on their website.
LLCs located in Maricopa or Pima counties do not have to publish as their publishing requirement is accepted through the listing on the state’s online database.
The notice will include:
- LLC’s name
- Statutory Agent’s name and physical address
- LLC address for it’s principal place of business
- Whether the LLC is member-managed or manager-managed
- Names and addresses of the LLC managers and members
Upon approval of the Articles of Organization, a letter will be sent to the LLC’s statutory agent with details of the publication requirements to help with remembering. The proof of publication affidavit) isn’t required to be filed with the state, but it is necessary because if you are asked to show proof and don’t have it, the LLC may be dissolved.
Step 5: Prepare an Operating Agreement
This step is optional but highly recommended for multi-member LLCs. An LLC operating agreement, a legal document detailing the ownership structure and operating procedures of an LLC.
While this document may not be required by the state, most banks will require one if there are multiple members before opening a business bank account.
By having this document written, it will help reduce conflicts. The operating agreement isn’t filed with the state, but each member should be given a copy that is signed by all the members.
The operating agreement will typically have information such as:
- Business name of the LLC
- Purpose of the LLC
- Date of formation
- Names and addresses of the members
- Capital contributions of the members
- Ownership percentages
- Voting rights
- How profits and losses will be distributed
- Indemnification of the members
- Management structure – member-managed or manger-managed
- an explanation of capital contributions, simply states, how much an individual member is depositing into an LLC bank account
- How the LLC will be taxed
- Procedures for removing a member or adding a member
- Procedures for dissolving the LLC
Step 6: Apply for a FEIN
The FEIN or Federal Employer Identification Number (sometimes referred to as an EIN Number or Federal Tax ID Number) is a unique number given to a business entity. An LLC will apply for this number in all cases except where it is owned by a single member (single-member LLC) and there are no employees. In this case, the LLC will be treated as a sole proprietorship for federal tax purposes and will use the owner’s social security number.
Apply for an EIN through the Internal Revenue Service (IRS) at no cost.
Step 7: Register for the Transaction Privilege Tax
If you are selling a product or taxable service, Transaction Privilege Tax (TPT) License from the Arizona Department of Revenue. The TPT is similar to sales tax but is instead a tax on vendors in Arizona.
Step 8: Register for Business Licenses
The LLC, in addition to any business operating in Arizona, will need to check for any required business licenses before operating.