What are the benefits of an LLC in Arizona?
Starting a new business is a huge step forward: always exciting, sometimes terrifying, and rarely predictable. Launching your business the right way starts with choosing the best structure. For many small businesses and startups, the limited liability company (LLC) structure is the clear winner.
Once you settle the question of structure, you need to decide where your business will “live.” Arizona is an attractive place to start a business (whether you live there or not) because of low taxes and business-friendly policies. That’s why many founders, startups, and remote businesses choose Arizona for their LLCs.
Here’s everything you need to know about setting up your LLC in Arizona.
Key benefits of forming an LLC in Arizona
Arizona is an attractive state for business formation, and many small and medium businesses — from solopreneurs to startups to remote companies — choose to structure their business as an LLC, thanks to the protections and conveniences that come with it.
Here are the top reasons why creating an LLC in Arizona could be the right next step for you and your new business.
Limited liability protection
The main reason for forming an LLC is to limit personal liability so your personal assets aren’t at risk during business disputes or legal proceedings. If you’re operating as a sole proprietor without an LLC, the US government and the state of Arizona don’t distinguish between you and your business. You’re a single entity for tax and legal purposes.
Suppose someone takes legal action against your business or you have a costly accident. If your business assets aren’t enough to cover business debts or settlements, lawyers and banks can come after your personal assets, like your car, property, or home.
Forming a limited liability company legally separates you and your business. In most legal situations, an LLC is enough to protect personal assets during business disputes or legal actions.
Tax flexibility
Forming an LLC gives you options when tax time comes. If you’re a solopreneur or solo business owner, your LLC can file as a sole proprietorship and enjoy tax benefits like pass-through taxation (where your business income is taxed as personal income on your personal tax return). This is one of the biggest advantages of an LLC over a C corporation: you can avoid double taxation.
If it makes sense for your business, you can also file as an S corporation. Doing so adds additional complexity and expense, but some business owners (especially single-member LLCs) can significantly lower their self-employment taxes by filing as an S corp.
If you’re not the only owner of an Arizona business, you may choose to structure your business as a partnership. Multi-member LLCs can also be treated as partnerships for tax purposes.
No publication requirements in Pima or Maricopa counties
Several states require owners to publicly announce new business entities or new Doing Business As names. Arizona used to require this of all businesses, but not anymore — at least for most businesses.
If your business is located within Maricopa or Pima counties (which includes most of greater Phoenix, Scottsdale, Mesa, and greater Tucson), you don’t need to worry about publication requirements.
However, if your business’s address is in another county, you do need to publish a formation notice within 60 days of the Arizona Corporation Commission (ACC) approving your articles of organization.
To satisfy this requirement, you must publish a notice in a newspaper for three consecutive publications.
Low startup and annual costs
Many startups and remote businesses choose Arizona for LLC formation because Arizona is a business-friendly state that keeps the process affordable. According to the ACC’s Schedule of Fees, regular processing for reserving an LLC name is $10, and the filing fee for Articles of Organization is $50. And Arizona doesn’t have annual franchise taxes (taxes some states charge for the privilege of doing business within the state).
One more way to save: If you set up your business as an Arizona LLC with pass-through taxation, you’ll pay the fairly low 2.5% state income tax, not the 4.9% corporate income tax.
Privacy protections
You’ll need a registered agent who can act as your business’s representative for receiving legal and tax-related mail. In Arizona, these are called statutory agents. You can be your own statutory agent if you live in the state, but if you use a virtual address for your LLC and live in a different state, you’ll need someone in Arizona to act as your statutory agent.
What’s unique to Arizona is a statute that allows businesses to list the statutory agent’s information when registering a business instead of the business owner’s information, adding an additional layer of privacy for you and your business.
Many service providers offer statutory agent services for a monthly fee. Stable’s virtual address service includes the option to add the registered agent/statutory agent service in any U.S. state or territory where you need one.
Learn more about Stable’s registered agent service.
Business-friendly state programs
Arizona offers business owners and would-be founders a wide range of programs and support. Businesses can utilize the skilled workforce program through the Workforce Innovation and Opportunity Act (WIOA), and the state boasts a number of business incubators and entrepreneurial support programs.
Arizona’s geography provides advantages as well. Proximity to bigger business ecosystems in California and Texas can be advantageous, especially for tech and tech-adjacent businesses. Having a headquarters and address in Arizona unlocks connection with central Sunbelt states, even if you work remotely.
Considerations before forming an Arizona limited liability company
Even though Arizona has a lot to offer, it isn’t right for every business. The same goes for the LLC structure itself. Before you create an Arizona LLC or change your LLC address to be located in the state, be aware of these possible drawbacks.
Registered agent requirement
All Arizona LLCs must maintain a registered agent (or statutory agent) with a physical address in the state. This isn’t a big deal if you run your company in Phoenix and want to be your own registered agent, but it can create challenges for remote companies and companies with operations in multiple states.
If you choose a Stable virtual address in Phoenix, you can add our registered agent service for Arizona and any other states where you need one.
Ongoing compliance and reporting obligations
Starting an LLC in Arizona is simpler than in many other states, but you still have rules to follow and obligations to track. To start an Arizona LLC, you’ll need to file Articles of Incorporation, and certain changes to your business require additional paperwork and fees.
You’ll also need to pay state and federal taxes, comply with regulations unique to your industry, and, in some cases, procure and maintain a business license.
Potential limitations for venture-backed startups
If you plan to raise capital for your startup, an LLC probably isn’t the right structure. This is also true if you plan to bootstrap your startup, but may want to change your mind down the road.
While it’s not illegal or impossible for an LLC to receive venture funding, investors tend to prefer the equity structure and governance of corporations. For example, LLCs can’t issue stock or go public, which could complicate growth and limit ROI for your investors.
How to get an Arizona LLC set up
Setting up an LLC in Arizona is a pretty simple process most of the time. Small business owners and remote entrepreneurs in particular can benefit from this structure without much added complexity.
If forming an LLC is the right move for your business, follow these five straightforward steps to get started.
Choose a unique business name
Whether your business already has a recognizable name and brand or you’re starting something from scratch, the first step to setting up shop in Arizona is making sure the name you want is available.
Go to the ACC’s entity search page and enter your desired business name in the Entity Name field. Click “Name Availability Check,” and you’ll get a response confirming whether the name is available.
If there’s already an entity that’s an exact match, you’ll need to keep brainstorming (or find a way to contact the entity owner and see if they will agree to a Notice of Transfer of Limited Liability Company Name Reservation).
Once you’ve settled on a name and confirmed it’s available, you’re ready for the next step. To be clear, you haven’t officially reserved or gotten the name yet. That comes later.
Appoint a statutory agent
Every LLC in Arizona must designate a statutory agent who has a physical address in the state. (In other states and in federal sources, this role is called a registered agent.) Now is the time to decide who that will be — or what company you’ll designate to take care of statutory agent duties for you.
Stable offers a professional registered agent service as an affordable add-on to our Phoenix virtual address services. Despite the slight difference in name, this service fulfills Arizona’s statutory agent requirement. And whether you live in the state or not, you can register your LLC in Arizona using a professional business address.
File Articles of Organization
With a name selected and a statutory agent appointed, you’re ready to officially form your LLC. You do this by submitting an Articles of Organization document to the Arizona Corporation Commission, either by mail or through the commission’s website.
This document will include your desired entity name and your statutory agent, along with other details. Once your Articles of Incorporation is approved, you’re the proud owner of a new LLC!
Not sure where to start on creating this document? Check out our free Articles of Incorporation template.
Create an operating agreement
Arizona doesn’t legally require operating agreements, but creating one is a good idea if your LLC is anything larger than a solo business. An LLC operating agreement defines roles and responsibilities within the organization. Getting this information in writing early can help you avoid costly and complicated disputes.
Apply for an EIN
Most LLCs will need an Employer Identification Number (EIN) from the Internal Revenue Service, so if you don’t have one, now is the time to apply. You can get an EIN in just a few minutes. Banks often require an EIN to open business bank accounts, and you’ll likely use it to handle business taxes.
Is an Arizona LLC right for your business?
Ultimately, the choice of business structure is up to you. Whether you choose an LLC or another structure, Arizona has a lot to offer, no matter where you live.
Stable offers premium virtual addresses, a virtual mailbox, and registered agent services for all types of businesses. Think of us as your partner when forming your business and beyond.
We guide remote founders, digital entrepreneurs, and anyone else seeking privacy and convenience to a better way of handling business mail. Our virtual address location in Phoenix is a safe and convenient way to increase your business’s credibility, and we help businesses outside Arizona register within the state to take advantage of business-friendly policies.
Ready to level up with effortless mail handling, reliable compliance, and secure business operations? Get started with Stable today.
Disclaimer: Stable is not a legal or accounting firm; therefore, we cannot provide tax or legal advice. You should consult legal and tax professionals for advice on how to meet ongoing obligations that apply to you and your company.
