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How to start a business in Arizona

Dreaming of starting a business but not sure how to do it? In our step-by-step 2020 guide we teach you how to launch your own business in Arizona.
7. feb. 2020 • prebere se v 12 minutah
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Everything you need to know to start your business in Arizona

Choosing the best business structure for your startup can be a very confusing process. In this post we will introduce you to all the business structures available in Arizona and give you step-by-step instructions for establishing each of them. 

Startup ecosystem in Arizona

Before launching a business in any location, it's important to have an understanding of its startup ecosystem. Let's have a look at some important startup statistics in Arizona:

Arizona startup stats infographic

Planning your business in Arizona

Your first step should be to verify the demand for your business idea with effective market research . Once that's done, the next step is to create a solid business plan.
A business plan logically lays out your plan for establishing your startup, and it also makes your venture very appealing to potential investors!
A typical business plan is comprised of the following components:
Value proposition
Market opportunity
Target market
Competitor analysis
Funding required
Sales and marketing
Financial projections
Milestones
Your team
Thankfully, we've written an in-depth guide to crafting a winning business plan .

Structuring and registering your business in Arizona

There are 6 main business structures, and all are applicable to both brick and mortar businesses and e-commerce businesses:
Sole Proprietorships
Partnerships
C-Corporation
S-Corporation 
Limited Liability Company (LLC)
Nonprofit
If you're uncertain about which structure best suits you, read our in-depth guide on structuring your business for success.

General procedures for all business types in Arizona

The following key steps need to be completed regardless of which business structure you choose:
Get your EIN
Sole Proprietors and Partnerships that don't plan on hiring employees do not need an Employer Identification Number (EIN), but it's still wise to get one in case you do bring on employees in the future.
All other business structures must get an EIN in order to register their business.
You can apply for an EIN online , or download the form and mail it to:
Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999
Register a business name with the state of Arizona
If you want to give your business a unique name that is different to your own full name, you will need to register it with the State of Arizona.
Before registering a business name, you should check its availability .
Get your licenses and zoning permits
Certain businesses in Arizona require a special license to operate. To check if your business type requires a license,, search for your business type on the Arizona Department of Revenue website. 
The location of your business may also restrict business activities. This may especially be the case if you plan to run a home-based business. Contact your local Arizona county's office to find out whether you need to apply for a zoning permit.
More details on business licenses and zoning permits can be found on the U.S Small Business Administration website .
Open business banking accounts
This isn't necessarily a requirement, but highly recommended to keep business transactions separate from personal transactions.
Submit New Hire Reports
It's both a Federal and Arizona state requirement for all employers to report new hires to both the Arizona New Hire Reporting Center and the IRS .
File a business annual report in Arizona 
The following business structures in Arizona need to file an annual report to the Secretary of State to ensure their contact details are kept up to date:

Tax details for all businesses in Arizona

All businesses in Arizona must register with the Arizona Department of Revenue to file their State Tax documents and register for State taxes.
You can find up-to-date tax information for all business structures on the Arizona Department of Revenue website as well as on the IRS website .
It is important for you to submit all state and federal tax filings in a timely manner. Failure to submit on multiple occasions may result in the automatic dissolution of your business.

Domestic vs Foreign business in Arizona

To make sure you are accessing the correct business setup forms, it's important to understand the distinction between a domestic and foreign business in Arizona
A business in Arizona is classified as a domestic if it is headquartered within the state. Foreign businesses, on the other hand, are headquartered outside of Arizona.
Now let's discuss the processes of establishing each individual business structure.

How to start a Sole Proprietorship in Arizona

Most Solopreneurs in Arizona launch their business as a Sole Proprietorship due to its simplicity of set up and cost effectiveness. You're always free to upgrade to a more advanced business structure (such as an LLC or Corporation) at any time as your business grows.
If your business solution poses any level of financial risk to your clients, it is better for you to settle with a business structure that offers a higher level of personal asset protection, such as an LLC or Corporation.
If you've already completed all the general steps for launching a business in Arizona there's nothing more you need to do to register your Sole Proprietorship.

How to start a Partnership in Arizona

A Partnership is the simplest business structure that accommodates two or more cofounders.
There are four different types of partnerships structures in Arizona

General Partnership (GP)

This is the default type of partnership. All business debts are equally shared amongst General Partners. A general partnership is considered a 'pass-through-entity' which means the business is only taxed once at each member's personal tax income level.
How to form a General Partnership in Arizona
No specialised forms need to be submitted to form a General Partnership in Arizona. The process of establishing this business entity is the same as the process for establishing a Sole Proprietorship.

Limited Partnership (LP)

A Limited Partnership is comprised of both General and Limited members. Limited members limit their personal liability to the extent of their monetary investment in the business.
Limited partners don't have as much jurisdiction over business decisions as general partners, they function more like investors.
How to form a Limited Partnership in Arizona
To register a Limited Partnership, a Certificate of Limited Partnership needs to be submitted to the Secretary of State. Make sure you include one copy and one original document in your submission.
Filing Fee: $10 (+$3 for each additional page).
Processing time: 2 to 3 weeks (or 3 - 5 days for an additional $25 expedited service).
A separate form should be submitted for Foreign Limited Partnership registrations , alongside a certificate of good standing from the foreign businesses home State Secretary.

Limited Liability Partnership (LLP)

Limited Liability Partnership members are not held responsible for any financial negligence or fraud committed by other members.
How to form a Limited Liability Partnership in Arizona
If your business is currently a Limited Partnership and you wish to change to a Limited Liability Partnership, you will need to submit a Statement of Qualification to be a Limited Partnership .
Filing Fee: $3 per page.
Processing time: 2 to 3 weeks (or 3 - 5 days for an additional $25 expedited service).
If you wish to form an LLP and you don't have any other forms of partnerships already registered, you will need to submit a Combined Certificate of Limited Partnership & Statement of Qualification to be a Limited Partnership .
Filing Fee: 
$10 + $3 per page +
$3 Statement of Qualification + $3 per additional page 
Processing time: 2 to 3 weeks (or 3 - 5 days for an additional $25 expedited service).
Foreign Limited Liability Partnerships should use this registration form and use this annual report document .
Limited Liability Partnerships in Arizona are required to submit an annual report to keep their State records up-to-date.

Limited Liability Limited Partnership (LLLP)

In a Limited LIability Limited Partnership, LLLP members are not held financially responsible for any negligence or fraud committed by other members.
How to form a Limited Liability Limited Partnership in Arizona
If you currently have a Limited Partnership on file, to form an LLLP, you will need to submit a Statement of Qualification to be a Limited Liability Limited Partnership ,
Filing Fee: 
$3 Statement of Qualification to be an LLP +
$3 Statement of Qualification to be an LLLP +$3 per page 
Processing time: 2 to 3 weeks (or 3 - 5 days for an additional $25 expedited service).
If you do not have any other partnerships registered, you will need to submit this form to register your LLLP.
Filing Fee: 
$10 + $3 per page +
$3 Statement of Qualification + $3 per additional page 
Processing time: 2 to 3 weeks (or 3 - 5 days for an additional $25 expedited service).
Limited Liability Limited Partnership in Arizona are required to submit an annual report to the Secretary of State.
Foreign LLLP's should submit this registration form and also use this annual report .

Create an Arizona Partnership Agreement 

Though this isn't a State requirement, it is highly recommended to ensure all partnership members remain aligned
A Partnership Agreement as an internal document all members sign to indicate their agreement with set business procedures. To save time you can use a partnership agreement template

How to form an LLC in Arizona

An LLC offers a superior level of personal asset protection to its members. LLCs can either be run by managed by members or a designated manager.

Naming an LLC in Arizona

The names of all LLCs in Arizona need to end in any of the following:
L.L.C
LLC
Limited LIability Company
Before registering your business name you should verify its availability

Appoint a Statutory Agent in Arizona

All LLC's in Arizona are required to nominate a Statutory Agent. A Statutory Agent accepts all mail on behalf of the business in order to guarantee that the business receives any important legal correspondences.
All registered agents in Arizona must meet the following criteria:
Be located in the state of Arizona
Accept mail via a residential or business address (not via a PO BOX).
Guarantee availability during business hours.
Guarantee the timely forwarding of all accepted mail to respective business owners. 
Should you be your own Statutory Agent in Arizona?
You can legally appoint yourself (or a cofounder) as your own registered agent. However, this is not recommended because, as busy business owners, you can't guarantee your availability during business hours to accept mail.
Alternatively you could appoint a friend, relative or any of the following professional registered agents in Arizona:
You will need to nominate your selected Statutory Agent in a Statutory Agent Acceptance form . This form will need to be submitted alongside your Articles of Organization (see below). 

Submit Arizona Articles of Organization

Once this document is approved, your LLC is officially registered in the State of Arizona.
You can either file your Arizona Articles of Organization online or by mail .
Articles of Organization Filing Fee: $50 (additional $35 for an expedited service).

Create an operating agreement

An LLC operating agreement is not an Arizona State requirement, but highly recommended. It contains all the rules and procedures that will govern your LLC.
You can design this agreement however you like or use an LLC operating agreement template
All members should sign this document during the initial corporate meeting.

Host initial Corporate meeting

This is an opportunity for all members to plan the company's launch as well as complete the following procedures:
Vote for initial term directors to serve
Distribute stock certificates 
Complete settlements for high-value business purchases
Create a list of corporate laws that will govern the business (Bylaws)

Arizona LLC Publication Requirements

Newly formed LLCs in Arizona are required to publicise their business once it is formed.
This publication process differest depends on which county you are located in:
LLC's based in Pima or Maricopa counties do not require any specific publication efforts, the Arizona Corporations Commision will publicise all new LLC's in this region on its website.
LLCs based in other counties are required to publicise their new business in a newspaper from the county they are located in, for three consecutive publications. The first publication needs to be done within 60 days of the LLC Articles of Organization being approved.

Foreign LLCs in Arizona

To establish a Foreign LLC in Arizona, you need to submit an Application for Registration of a Foreign Limited Liability Company , as well as a certificate of Good Standing from your home State Secretary.

How to form a Corporation in Arizona

A Corporation is the most sophisticated business structure available in Arizona. This structure offers the most superior level of personal asset protection to its members.
A Corporation can be very complicated to set up on your own, so you might want to get help from an attorney.
There are two different types of corporate structures in Arizona:

C-Corporation

This is the default corporate structure. There's no limit to the number of members a C-Corporation can have and they can issue all classes of stock.
The primary downside of C-Corporations is the double taxation process that takes place at both the corporate and personal income level of their members.

S-Corporation

An S-Corporation is classified as "pass-through-entity," so they're only taxed once at the personal income level of their members.
To elect to be an S-Corporation, you need to submit Form 2553 with the IRS.
S-Corporation can only distribute one class of stock and are limited to 100 members.

Naming your Corporation in Arizona

All Corporations in Arizona must append any of the following entity identifiers to the end of their business name:
Association
Company
Corporation
Limited
Incorporated
Corp
Co
Inc
Ltd
Be sure to check the availability of your prospective business name.

Appoint a Statutory Agent for your Corporation in Arizona

The process of appointing a statutory agent for Corporations is the same as the process for LLCs.

Submit Arizona Articles of Incorporation

To register a Corporation in Arizona you must file your Articles of Incorporation alongside a Statutory Agent Acceptance form
FIling Fee: $60 (additional $35 for expedited service).

Host a Corporate organizational meeting

The following procedures should be completed during this organizational meeting :
Initial directors that will serve during the first term should be appointed
All members should agree upon a set of bylaws that will govern the Corporation 
Stock certificates should be distributed to members
Finalization of important business purchases
Meeting minutes should be recorded and stored in a Corporate Records Book alongside all other important business documentation

Arizona Corporation Publication Requirements

Within 60 days of receiving an approval for your Articles of Incorporation, you must publicise the a copy of your Articles of Incorporation. Detailed instructions on how to do this will be mailed to your appointed Statutory Agent by the Arizona Corporations Commision.
Proof of publication must then be presented to the Arizona Corporation Commision .

Foreign Corporation in Arizona

To form a foreign corporation in Arizona, you need to lodge an Application for Authority to Transact Business or Conduct Affairs in Arizona alongside a Certificate of Good Standing from your home Secretary of State.
Filing Fee: $175 

How to form a Nonprofit in Arizona

If your business solution is focused on improving the wellbeing of others, you should consider choosing a nonprofit structure. 

Naming your Nonprofit in Arizona

Nonprofits in Arizona do not require to append their business name with a specific entity identifier (such as Corp, Company, Incorporated etc)

Appoint a Statutory agent in Arizona

The process of appointing a registered agent for nonprofits is the same as the process for LLCs.

Submit Arizona Nonprofit Articles of Incorporation 

To register your non profit, you need to submit the Arizonan Nonprofit Articles of Incorporation . Detailed instructions on how to fill out this document can be found here .
If you plan to also apply for Federal tax exempt 501(c)(3) status, you must include specific IRS standard statements in your Nonprofit Articles of Incorporation. For guidance, refer to the section "Articles of Organization" on page 25 of this IRS document .

Host initial Corporate Meeting

All members should collaboratively create the bylaws that will govern the nonprofit, finalise any business transactions and settle any matters that require attention prior to officially launching the business.

Apply for nonprofit tax exemption in Arizona

To obtain a 501(c) federal tax exemption with the IRS, nonprofits in Arizona need to file Form 1023 with the IRS. Smaller nonprofits may be eligible to submit the simpler Form 1023-EZ .
Arizona state tax exemptions are only granted to certain nonprofits in Arizona .
Protecting your business in Arizona
Some recommended insurance policies for your startup in Arizona are:

Business owners policy (BOP)

This type of insurance policy combines both business property insurance and business liability insurance.
This policy can protect business owners from theft, fire, loss of income, lawsuits and data breaches.

Commercial property insurance 

This policy protects your business furniture and inventory in the event of a fire and theft

General liability insurance 

A general liability insurance policy protects your business against reputational damage, property damage, personal injury and copyright infringement claims from any advertising.

Business income insurance 

This insurance policy supplements any lost income you sustain while your business recovers from any damage to its processes.

Workers compensation insurance

This will ensure your employees get compensated in a timely manner in the event of any work related injuries.

Helpful resources for businesses in Arizona

Access business formation forms for different structures.
An online portal to lodge business registrations.
Submit tax returns and check the latest tax rates.
This is a great resource for small business news, tips and advice, market research and industry-specific links.
The US Small Business Administration offers advice, advocacy and instruction for small businesses across the country.
Our own guide to launching your startup will walk you through every step of starting a business, from concept to execution.
 

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