Fact checked for accuracy by Billie Anne Grigg, a bookkeeper and Mastery Level Certified Profit First Professional.
An LLC is a limited liability company that allows you to use different regulations to create your own business. This business operates to protect the owners from any debts or liabilities that can occur during their line of work. Limited liability companies are entities that use the best parts of a corporation, such as protection, with that of a sole proprietorship, such as independence.
One of the key steps of creating an LLC is the formation process. Without a guideline on where to begin, how to complete each step, and mistakes to avoid, new businesses would flounder. Plus, the requirements of creating an LLC vary by state – so if you are looking to open an LLC in Arizona vs. California, the rules will differ.
However, knowing the rules pays off. There are many advantages of forming an LLC in the USA, such as reducing personal liability, reducing liability for owners’ partners or investors, creating a beneficial and functional, straightforward business arrangement, and saving money in the long run.
So, how can you form an LLC in Arizona? Are the rules more complicated than the other states in the US? No — they are pretty easy to follow. By using this guideline, you can set up a foolproof LLC of your business plan to get off the ground and start dominating your industry.
The first step of setting up an LLC in Arizona is choosing your name. Do you want to own a restaurant focused on vegetarian food, or do you want to open a gym that solely offers personal training memberships? Finding out the focus of your business can help you come up with a unique name.
Step 2: Check the Availability of Your Chosen Name
If you want to choose a unique name for your business, you have to make sure no other business has selected the name in the past. You can do so by looking at the ACC website to see if the chosen name is available for our business. The ACC also recommends Googling the name, presumably so you don’t encounter issues with similarly-named businesses in other states.
Step 3: Secure the Name
The third step is to secure your chosen name by one of three methods:
- Reserve your name through the ACC.
- Register the name as a trade name through the Secretary of State
- Submit your documents to the ecorp.azcc.gov
The next step of starting an LLC in Arizona is purchasing a domain name. If you do not want to purchase a domain name, you can skip to step 5. However, buying a domain name lets you own the rights of a website offering your products or services.
The third step of owning and opening an LLC in Arizona is choosing an entity type of business. There are three main entity types: limited liability company, corporation, and nonprofit.
Submitting your paperwork through the ACC is the fastest and easiest way to provide your documentation. You can go online and submit your documents to ecorp.azcc.gov and receive approval through email with additional instructions.
The seventh step is to visit the Arizona Department of Revenue through azdor.gov to explore the Arizona Commerce Authority Small Business Services site. This site will tell you whether you need to contact the EDITOR regarding business and privilege tax.
The next step of getting your LLC in Arizona is to evaluate whether you need a business license and have to pay city or county taxes. Registering the business within the city where you are located is essential for tax, business licenses, and occupational licenses.
The ninth step is to visit the Internal Revenue Service website to get an employer identification number to fill out your taxes.
The last step of learning how to get your LLC in Arizona is to open a business bank account for all of your fusional transactions.
As you can see, opening an LLC in Arizona has multiple steps and requires many details to do so correctly. But does this mean it has to be expensive? In short, no — the cost of starting a limited liability company in Arizona is approximately $50 to file the Articles of Organization and $35 for faster processing.
Compared to other states, the filing fees are relatively low. Other states, such as Pennsylvania, Rhode Island, South Carolina, and South Dakota, have LLC filing fees over $100. Some states also have ongoing LLC fees, with states such as Rhode Island costing upwards of $450 per year. For those who live in Arizona, the initial startup cost is meager compared to other locations in the United States.
After you have created your LLC in Arizona and paid the nominal fee, there are specific steps to take so you can begin running your business and making a profit.
- Get a business license and sale permits to work your retail and services
- Obtain a seller’s permit
- Earn your employer identification number through the Internal Revenue Service
- Open your business bank account
- Apply for a credit card for business
- Purchase business insurance
When you own an LLC in Arizona, one of the biggest things to monitor is keeping your business open. If you want to hire new employees to work for your limited liability company, there are certain steps to take to keep your business open and run a tight ship:
- Verify your new employee can work in the US or are US-born citizens
- Report new employees to the state government
- Provide workers’ compensation insurance to all employees
- Withhold and pay for employee taxes
- State the workplace compliance rules
One thing that makes owning and opening an LLC in Arizona easier than in other states is that it does not require anyone to file annual reports. For taxes, most LLC companies are required to file yearly reports based on their earnings and their taxes. However, Arizona does not have this law, making it easier to start and run an LLC with no strings attached.
Arizona does not impose a separate tax or free on LLC businesses within the state. Although some owners may treat their business as a corporation for tax breaks, the majority of LLC owners keep the tax-free benefits of owning an LLC.
Another benefit of owning an LLC in Arizona is that you will not have to pay state employer taxes. Here, the taxes are paid to the Internal Revenue Service, but no additional fees have to be paid to the individual state. To clarify, there is a state unemployment tax in Arizona, and employers have to pay that. However, they do get a credit against their federal liability if they are compliant with state requirements, so it’s essentially a wash.
Owners of an LLC can easily do so by withholding and paying employee income taxes, reconciling the LLC’s tax withholding information, registering to pay state unemployment insurance taxes, and using the Forms UC-018 FF and UC-020FF to report wage and pay taxes.
The average processing time to wait for an LLC in Arizona is around three weeks for the paperwork approval. If you want to pay for expedited processing, which is approximately $35 extra, it will only take between 7-10 business days from the time of submission.
Are you considering opening an LLC in Arizona? If so, you need to find the best tax bracket and structure for your LLC in this state. Since it differs per state, finding the most affordable and lucrative option is key to avoiding paying hefty taxes and fees.
A disregarded entity is an LLC where one member is considered the ‘disregarded entity. If the owner is a person who is involved with the LLC, the IRS will consider the LLC to be a sole proprietorship. If the owner of the LLC is not within the LLC but from another company, then the IRS will treat the LLC as a division of the overarching business.
For this type of tax treatment, the LLC will pay taxes via the personal form 1040 of the tax return. Individuals can use Schedule C to report losses and profits.
The LLC/partnership is for those who have at least two members. During this tax structure, the LLC will be treated as a partnership through the yes to the IRS, and the owner must file the federal return as its own entity.
The benefit of this structure is that individuals can protect their assets. Professionals have stated that most LLC businesses in Arizona should choose the LLC/Partnership path due to:
- Limited liability – don’t have to take responsibility for employees’ actions
- Easy startup and maintenance for long-term growth
- Flexible management style
- Self-employment tax is reduced
- Lower member turnover and long-lasting consequences from low employee satisfaction
- Combines the positives of a sole proprietorship, corporation, and partnership into one
- Less paperwork to fill out and file vs. other taxation structures
The S-Corp classification is for those who want to save money by filing their taxes. This can be a smart move for new business owners who wish to protect their LLC.
The C-Corp Classification is a double-taxed company, so they are significantly rarer, especially with new LLCs struggling to make a profit.
If you don’t want to go through the steps above yourself, consider hiring an LLC service. These companies specialize in forming legal business entities and will make sure you are compliant. For most LLCs, ZenBusiness and Incfile are your best bet. Both companies are relatively cheap and have reliable services for forming LLCs.
To make sure you hire the most reputable and trustworthy option for your LLC formation process, consider looking at businesses that have the following qualities:
- Earned positive online and in-person feedback from current and past customer reviews
- Registered agents who have a history with registering and operating LLCs in Arizona
- Responsive customer support is available at all hours of the day.
- Affordable packages that include different products and various levels
- Free year of service after registering as a new user
- Real-time order tracking
- Accessible online dashboard for additional information
- Name recognition and brand trust
- Extensive legal services to help run your LLC in Arizona
If you are unsure about paying for this top-notch product, trust the professionals who say it is worth it. The average range of services for LLC formation is typically around $120 per year. To compare more options, head over to our guide on the best LLC services.
Filed under: Arizona Business Guides