Your LLC's Name
The name you select for your new Arizona LLC must not sufficiently distinguishable from any other business entity registered or reserved with the Arizona Corporation Commission. The LLC name must contain, as the last words of the name, one of the following terms: "Limited Liability Company"; "LLC" or "L.L.C."; "Limited Company"; "LC" or "L.C."
The name may not, however, include the words "association," corporation," "incorporated," and any abbreviations thereof.
Differences that aren't different enough to your LLC's name distinguishable include: the way LLC status is indicated; the use of symbols instead of words to designate numbers in the name (or vice versa); different articles used as introductory words (such as "the" instead of "a"); and variations in punctuation, spelling, or word order.
An LLC may apply, however, to use a name that is not distinguishable from another business entity's name if the other entity agrees in writing to the use and submits a formal request to the state to change its own name to make it distinguishable from the startup LLC. The new LLC may also use a name that is not distinguishable from some other entity if a court has established the applicant's right to use the name applied for.
An available LLC name can be reserved for up to 120 days for $10.
Articles of Organization
Getting authorization for your LLC go be up and running in Arizona requires filing articles of organization by at least one of the organizers with the Arizona Corporation Commission, along with a $50 fee. An organizer may be any individual, partnership, domestic or foreign LLC, corporation, trust, business trust, real estate investment trust, estate, or other association. The articles of organization must include:
- The LLC's name
- The name and in-state address of the LLC's registered agent
- The registered agent's signature
- The LLC's principal place of business, if different from the agent's address
- The latest date on which the LLC must dissolve if it is not perpetual
- Whether the LLC will be manager- or member-managed
- If manager-managed, the names and addresses of all managers, as well as members who own a 20 percent or greater interest
- If member-managed, the names and addresses of all members
It may also include other provisions that the members choose to set forth (as long as they are not inconsistent with state law), even ones that are also included in the operating agreement.
Your LLC is considered "organized" once the articles of organization are received and approved by the state. A notice that the LLC's articles of organization have been filed must be published within 60 days of filing in a newspaper of general circulation in the LLC's county. The notice must appear for three consecutive issues of the publication. An affidavit proving the required publication must then be filed within 90 days after filing of the articles of organization.
Registered Agent and Office
Every Arizona LLC must have a statutory agent in the state who is designated to receive official state administrative and legal correspondence (called a "registered" agent in most other states). The statutory agent may be an individual state resident whose business office is the same as the "known place of business" (called the "registered office" in most other states), or a company authorized to conduct business in Arizona whose business office is the same as the registered office.
The known place of business may be the same as the LLC's office.
Operating Agreement
After its articles of organization, an LLC's most important document is its operating agreement, which can be amended or repealed as allowed by the agreement or applicable state law. Just like a corporation's bylaws, this isn't mandated by the state-but it's a critical internal document that officially documents how the LLC will run. It should list the members, how much each member has invested, how profits will be divided, and how much weight each member has when matters come to a vote.
It may also specify meeting requirements (notice, quorum, voting rules, etc.) and so on, but it is not required to. Normally, however, the operating agreement does include state-mandated requirements. It can contain restrictions or prohibitions on the power of the members to adopt, amend, or repeal an operating agreement. If there is more than one member, the operating agreement has to initially be approved by all the members in writing.
Designation, election, replacement, and removal of managers proceed according to rules set out in the operating agreement. If all managers resign and the operating agreement is silent on how to elect new ones, a majority of members may elect a new manager or managers.
Membership in the LLC
An LLC must have at least one member. Each member must be a natural person. A member may acquire an interest in the LLC either directly from the company-by being identified as a member in the initial articles of organization-or being identified as a member in and signing the operating agreement.
After the LLC's initial articles are filed, a new member may be admitted if:
- They acquire an interest directly from the LLC under the provisions of the operating agreement
- On the consent of all members
- If the person is an assignee of all or part of a member's interest under the terms in the operating agreement
A member can only resign from the LLC in the method laid out in the articles of organization or operating agreement. Unless the operating agreement states otherwise, a member may not resign before the LLC is dissolved and its affairs wound up. The company may seek damages or other remedies from a resigning member if his or her resignation violates the LLC's operating agreement.
Ongoing Requirements
Unlike corporations (and even LLCs in most other states), Arizona LLCs are not required to file an annual report with the state. In fact, there are six things that an Arizona corporation must do that an Arizona LLC does not have to do:
- Hold annual shareholders meetings
- Hold annual board of directors meetings
- Document the meetings of shareholders with minutes or resolutions
- Document the meetings of the board of directors with minutes or resolutions
- File an annual report with the Arizona Corporation Commission
- Pay a $45 annual fee to the Arizona Corporation Commission
Despite the fact that it's not a requirement, it's still a good idea for your LLC to keep minutes of the proceedings and committees of the owners or members.
Dissolution
An LLC is dissolved when any one of the following events occurs:
- At a time or upon the occurrence of an event(s) specified in the articles of organization or operating agreement as requiring dissolution
- Written consent to dissolve by more than half the members, including one or more members whose interest(s) in the LLC total more than 50 percent
- Event that makes it illegal for the LLC to continue
- Withdrawal of the last remaining member unless all assignees agree in writing within 90 degrees that at least one member continues the business of the LLC
- Court order ordering dissolution
Taxes
An LLC offers some tax advantages over a corporation, including the availability of more deductions. Additionally, an LLC is not required to be a separate tax entity like a corporation. Instead, it can be a "pass-through entity" when it comes to taxes, so that the LLC owners report business losses or profits on their personal tax returns, in the same manner as a partnership.
The tax rate for Arizona LLCs varies, based on Arizona taxable net income.
Choosing a Corporation Name
Your new corporation's name must be distinguishable from the name of any other registered or reserved Arizona business entity. It must also contain the words "association," "company," "corporation," "incorporated," or "limited," an abbreviation of one of these terms, or an equivalent in another language.
Your new Arizona corporation's name may not contain language stating or implying that it is organized for a purpose other than one permitted by state law or stated in its articles of incorporation. The name is not permitted to include the terms "bank," deposit," "trust," or "trust company," either separately or in combination, to state or imply that the corporation will be engaged in the banking or trust business unless it is to be and becomes actively and substantially engaged in the banking or trust business.
If your corporate name is not considered to be distinguishable from one already on file, it's usually not enough to just change some punctuation, a definite or indefinite article (such as "a," "an," or "the"), or the status designator ("corporation," "company," "incorporated," "limited," etc.).
Corporate names can be reserved with the state for up to 120 days at a time for $10.
Articles of Incorporation
Arizona requires that a new corporation's articles of incorporation must be filed by one or more of the incorporators (there must be at least one), along with a $60 fee, with the Arizona Corporation Commission. There are no eligibility prerequisites for an incorporator, and the incorporator's only duty is to deliver the articles of incorporation and a certificate of disclosure to the Arizona Corporation Commission.
A Certificate of Disclosure for Business Corporations must be signed by the incorporator and submitted with the articles of incorporation. This document asks for information about criminal convictions, civil fraud actions, and prior corporate bankruptcies relating to any of the corporation's founders, as well as the corporation's fiscal year end.
The articles must include:
- Name, address, and signature of each incorporator
- Names and addresses of directors
- Name, address, and signature of the corporation's statutory agent
- Street address of the corporation's known place of business (if different from that of its statutory agent)
- Number of shares the corporation is authorized to issue
- Statement of specific type of business the corporation will be involved in
Examples of other items that are not required, but are allowed to be included in the articles of incorporation are:
- Director eligibility requirements
- Circumstances where shareholders might be liable for corporate debts
- Provisions for managing the business and regulating the affairs of the corporation.
- Provision(s) eliminating or limiting a director's liability in certain circumstances
- Provision(s) allowing or mandating indemnification of a director for liability in certain circumstances.
Arizona requires new domestic corporations to publish their filed articles of incorporation in an approved general circulation newspaper, within 60 days of filing, in the county where the principal business office is located. This publication must be made in three consecutive issues. Then, within 90 days of filing, the new corporation must file an affidavit of publication with the state.
Registered Agent and Office
Every Arizona corporation must have a "statutory" agent in the state (called a "registered" agent in most other states)-a natural person with a primary residence in Arizona, or a registered business entity authorized to conduct business in the state. The statutory agent is designated as the official recipient of administrative and legal correspondence from the state.
Arizona also requires that all corporations maintain a "known place of business"-called a "registered office" in most states-which may be the address of its statutory agent.
Bylaws
A corporation must maintain its bylaws at its main executive office, but is not required to file them with the state. The incorporators or board of directors should adopt the corporation's bylaws at its initial meeting-insuring that they do not conflict with the articles of incorporation-and keep them updated as time goes on. Bylaws describe the corporation's basic operating principles from both the managerial and legal perspectives, and should include as a minimum:
- How, when, and where shareholders and directors meetings are held
- What authority directors have, how many there are, and how long they serve
- How consensus on major decisions is reached with and without meetings
- Duties and responsibilities of officers and how long they serve
- How stock is issued
- Requirements for providing annual financial information to shareholders
Directors and Officers
The board of directors is responsible for making major decisions for the corporation. Your Arizona corporation must have at least one director. The articles of incorporation and/or the bylaws will often specify qualifications for directors. A director does not have to be a state resident or a shareholder of the corporation unless the articles of incorporation or bylaws so prescribe.
Corporate officers' positions and their duties are set forth in the bylaws, or else appointed by the board of directors in accordance with those bylaws. A duly appointed officer may appoint as many officers or assistant officers as are permitted by the bylaws or by the board of directors. One of the corporation's officers is required to have the responsibility of preparing minutes of directors' and shareholders' meetings, as well as for authenticating the corporation's records. An officer is allowed to simultaneously hold more than one office in a corporation.
Required Reports
Arizona corporations must file a report annually with the Arizona Corporation Commission in their anniversary month of the original filing. This report must include:
- Corporation's name and state (or country) of incorporation
- Address of its known place of business
- Name and address of its in-state statutory agent
- Its principal office address
- Nature or purpose of its business
- Names and addresses of directors and principal officers
- Total number of authorized shares, itemized by class and series within each class
- Total number of issued and outstanding shares, itemized by class and/or series within each class
- Certificate of disclosure
- Names of shareholders of record who hold more than 20 percent of any class of shares
- Statement that all required corporate income tax returns have been filed
Taxes
Arizona has both a corporate income tax and a sales tax for businesses; actual rates depend on the type and amount of business activity. Arizona's corporate tax structure consists of a flat rate of 6.968% on all corporate income, ranking 26th among states levying corporate income taxes.
"S corporation" status is recognized by the State of Arizona. A "subchapter S" corporation or "S-Corporation" is one that chooses to be treated as a pass-through entity (the same way as a sole proprietorship or partnership) for tax purposes, meaning that the tax-related information for the "S-Corp" is filed as part of the owner's individual income tax.
