Incorporating in Arizona

What is an Arizona LLC?

A Limited Liability Company (LLC) is a flexible business structure that combines personal liability protection with pass-through taxation. It’s the most popular entity type for small businesses in Arizona.

Key Features

• Liability Protection: Your personal assets (home, car, savings) are protected from business debts and lawsuits
• Tax Flexibility: Default pass-through taxation (profits taxed once on your personal return), or elect S-corp/C-corp taxation
• No Annual Reports: Unlike corporations, Arizona LLCs have no annual report requirement or fee
• Flexible Management: Member-managed (owners run it) or manager-managed (hire managers)
• Minimal Formalities: No required annual meetings or corporate minutes

Best For

• Small to medium businesses
• Real estate investors (hold properties in separate LLCs)
• Consultants and professionals
• E-commerce and online businesses
• Anyone seeking simplicity + liability protection

Requirements

• Name: Must include “Limited Liability Company,” “LLC,” or “L.L.C.”
• Articles of Organization: Filed with Arizona Corporation Commission ($50)
• Statutory Agent: Must have Arizona address and accept service of process
• Operating Agreement: Not required but highly recommended
• EIN: Required if multi-member or has employees; recommended for all

Ongoing Costs

• State fees: $0 after formation (no annual report!)
• Registered agent: $125-150/year if using professional service
• Taxes: Arizona income tax (depends on income); no franchise tax

What is an Arizona Corporation?

A corporation is a separate legal entity owned by shareholders, managed by a board of directors. Best for businesses planning to scale, raise capital, or eventually go public.

Key Features

• Strong Liability Protection: Shareholders, directors, and officers are protected from personal liability
• Unlimited Shareholders: Can have unlimited domestic and foreign shareholders
• Investment-Friendly: Preferred by venture capital and angel investors
• Stock Issuance: Can issue multiple classes of stock (common, preferred)
• Perpetual Existence: Corporation continues even if owners change

Best For

• Tech startups seeking venture capital
• Businesses planning to scale rapidly
• Companies planning eventual IPO
• Businesses with multiple investors
• Professional service firms (can elect professional corporation)

Requirements

• Articles of Incorporation: Filed with Arizona Corporation Commission ($60)
• Corporate Bylaws: Internal rules for governance (not filed publicly)
• Board of Directors: At least one director required
• Corporate Officers: President, secretary, treasurer (can be same person)
• Annual Report: Must file every year with ACC ($45)
• Publication: Must publish notice in newspaper for 3 consecutive publications within 60 days
• Corporate Records: Must maintain minutes of board meetings and shareholder meetings

Ongoing Costs

• Annual report: $45/year
• Registered agent: $125-150/year
• Publication: $100-300 (one-time, required within 60 days of incorporation)
• Corporate taxes: Arizona corporate income tax applies

C-Corp vs. S-Corp

C-Corp: Default tax status. Corporation pays taxes on profits; shareholders pay taxes on dividends (double taxation). Can have unlimited shareholders of any type.

S-Corp: Tax election (not entity type). Pass-through taxation like LLC. Limited to 100 U.S. citizen/resident shareholders. File Form 2553 with IRS.

What is an Arizona Benefit Corporation?

A benefit corporation is a for-profit entity that legally commits to creating positive social and environmental impact alongside profit. Arizona adopted benefit corporation legislation under A.R.S. §§ 10-2401 through 10-2442.

Key Features

• Dual Purpose: Legally obligated to consider impact on society and environment, not just shareholder profit
• Legal Protection: Directors and officers protected when making mission-driven decisions that may not maximize short-term profits
• Attract Impact Investors: Growing pool of investors seeking companies with social/environmental missions
• Transparency: Must publish annual benefit report describing social/environmental performance
• For-Profit Status: Can distribute profits to shareholders (unlike nonprofits)

Best For

• Social enterprises (e.g., fair trade, sustainable products)
• Mission-driven startups (clean energy, education technology)
• Businesses committed to ESG (Environmental, Social, Governance) principles
• Companies seeking B Corp certification
• Entrepreneurs who want legal protection for prioritizing mission over profit

Requirements

• Articles of Incorporation: Must state it is a “benefit corporation” ($60)
• General Public Benefit: Must pursue positive impact on society and environment
• Specific Public Benefit (Optional): Can identify specific mission (e.g., “reduce carbon emissions”)
• Annual Benefit Report: Must file with ACC annually in addition to standard annual report
• Third-Party Standard: Benefit report must assess performance against recognized third-party standard (e.g., B Lab, GRI)
• Publication: Same as regular corporations (3 consecutive newspaper notices within 60 days)

Ongoing Costs

• Annual report: $45/year (same as C-corp)
• Annual benefit report: Filed concurrently with annual report (same filing)
• Registered agent: $125-150/year
• Third-party assessment (optional): If seeking B Corp certification, $1,000-$50,000+ depending on company size

Conversion to Benefit Corporation

Existing Arizona corporations can convert to benefit corporation status by amending articles of incorporation. Requires approval by:

• Minimum of 2/3 of outstanding shares entitled to vote (unless articles specify higher threshold)
• 2/3 of outstanding shares of each class/series (if multiple classes exist)

What is an Arizona Nonprofit Corporation?

A nonprofit corporation is organized for charitable, educational, religious, scientific, or other public benefit purposes—not to generate profit for owners. Most nonprofits seek 501(c)(3) tax-exempt status from the IRS.

Key Features

• Tax-Exempt Status: With IRS 501(c)(3) approval, exempt from federal and Arizona income tax
• Tax-Deductible Donations: Donors can deduct contributions on their tax returns
• Grant Eligibility: Can apply for government and foundation grants
• No Owners: Governed by board of directors; no shareholders or stock
• Asset Lock: Assets must be used for nonprofit purposes; cannot be distributed to individuals

Best For

• Charitable organizations (food banks, homeless shelters)
• Educational institutions (schools, tutoring programs)
• Religious organizations (churches, temples)
• Arts and culture organizations (museums, theaters)
• Scientific research organizations
• Social advocacy groups

Formation Requirements

• Articles of Incorporation: Filed with Arizona Corporation Commission ($40)
• Nonprofit Purpose: Articles must state nonprofit purpose and include dissolution clause (assets go to similar nonprofit)
• Board of Directors: At least one director required (recommend 3+ for IRS 501(c)(3))
• Corporate Bylaws: Internal rules for governance (not filed publicly)
• Publication: Must publish notice in newspaper for 3 consecutive publications within 60 days (unless Maricopa/Pima County—different rules apply)
• EIN: Obtain from IRS (required for bank account and tax filings)

501(c)(3) Tax-Exempt Status

Forming an Arizona nonprofit corporation does NOT automatically grant federal tax-exempt status. You must apply separately to the IRS:

• Form 1023 (large organizations): Gross receipts typically >$50,000/year. Filing fee $600. Detailed application (50+ pages).
• Form 1023-EZ (small organizations): Gross receipts <$50,000/year and assets <$250,000. Filing fee $275. Simplified 3-page form.
• Processing time: 3-6 months (sometimes longer)

Ongoing Requirements

• Annual Report: File with Arizona Corporation Commission ($10/year)
• IRS Form 990: Annual information return (990, 990-EZ, or 990-N depending on size)
• Board Meetings: Must hold regular board meetings and maintain minutes
• Conflict of Interest Policy: Required by IRS for 501(c)(3) status
• Public Disclosure: Must make Form 990 and Form 1023 available for public inspection

Restrictions

• No Profit Distribution: Cannot distribute profits to members, directors, or officers (can pay reasonable salaries)
• Political Activity Limits: 501(c)(3) nonprofits cannot endorse candidates or engage in substantial lobbying
• Dissolution: If nonprofit dissolves, remaining assets must go to another 501(c)(3) organization

Ongoing Costs

• Annual report: $10/year (Arizona Corporation Commission)
• Registered agent: $125-150/year
• Publication (one-time): $100-300
• Accounting/tax prep: $500-$3,000+/year depending on size

LLC vs. Corporation: Decision Framework

Choose LLC if:

• You want simplicity and minimal ongoing compliance
• You prefer pass-through taxation (avoid double tax)
• You don’t plan to raise venture capital
• You’re a small business, real estate investor, or consultant
• You want to avoid annual reports ($0 ongoing state fees)

Choose Corporation if:

• You plan to raise venture capital or seek angel investors
• You want to issue stock options to employees
• You’re building a scalable tech or high-growth company
• You plan to go public (IPO) eventually
• You need multiple classes of stock (common, preferred)

For-Profit vs. Benefit Corporation

Choose Benefit Corporation if:

• Your business has a social or environmental mission alongside profit
• You want legal protection to prioritize mission over short-term profit
• You’re seeking impact investors or B Corp certification
• Transparency and accountability to stakeholders (not just shareholders) matter to you

Stay standard C-Corp if:

• Your primary focus is maximizing shareholder value
• You want flexibility to pivot strategy without mission constraints
• Annual benefit reporting is burdensome for your operations

For-Profit vs. Nonprofit

Choose Nonprofit if:

• Your organization serves a charitable, educational, or religious purpose
• You want donors to receive tax deductions for contributions
• You plan to apply for grants from government or foundations
• You’re comfortable with restrictions on political activity and profit distribution

Choose For-Profit (LLC, Corp, or Benefit Corp) if:

• You intend to distribute profits to owners
• You want flexibility to engage in political advocacy
• Your mission is social impact but you need profit for sustainability (consider Benefit Corp)

Still Unsure?

Schedule a 30-minute consultation to discuss your specific situation. I’ll help you understand tax implications, investor requirements, and long-term strategic considerations. Email me or book a call.

Required for all Arizona entities. Includes:

• Physical Arizona street address (Phoenix or Tucson)
• Business hours availability for service of process
• Mail forwarding and digital scanning
• Annual report filing reminders (corporations/nonprofits)
• Secure online portal access

Renews annually. I send a reminder 60 days before expiration.

Attorney-drafted document tailored to your business needs:

• LLC: Multi-member or single-member operating agreements
• Corporation: Comprehensive corporate bylaws
• Profit/loss allocation provisions
• Management structures and voting rights
• Buy-sell provisions and succession planning
• Dispute resolution mechanisms

Delivery: 3-5 business days after consultation. Includes one round of revisions.

Arizona corporations must publish notice of incorporation in a newspaper for 3 consecutive publications within 60 days of formation. I handle:

• Selection of approved newspaper in your county
• Draft and submit publication notice
• Coordinate with newspaper for 3 consecutive publications
• Obtain and deliver Affidavit of Publication
• Filing affidavit with Arizona Corporation Commission

Note: LLCs are exempt from publication requirement. Only required for corporations and nonprofits.

For corporations and nonprofits (LLCs exempt):

• Preparation and filing with Arizona Corporation Commission
• Payment of state fee (included): $45 corporations, $10 nonprofits
• Confirmation and certified copy delivery
• Due date tracking and advance reminders (90 days prior)

Due date: Anniversary date of formation. Late filing results in penalties and potential administrative dissolution.

If your entity was formed in another state but you want to do business in Arizona, you must register as a “foreign” entity. I handle:

• Application for Certificate of Authority
• Registered agent appointment in Arizona
• All required state filings and fees
• Coordination with home state documentation
• Ongoing compliance reminders

State fees: Foreign LLC $150 ($185 expedited), Foreign Corporation $175. Not included in service fee.

For nonprofits seeking federal tax-exempt status:

• Consultation to determine eligibility
• Preparation of IRS Form 1023 (large orgs) or 1023-EZ (small orgs)
• Financial projections and budget preparation
• Narrative descriptions of programs and activities
• Conflict of interest policy drafting
• Response to IRS questions or requests for additional information

IRS filing fees: $600 (Form 1023) or $275 (Form 1023-EZ) not included. Processing time 3-6 months.

Schedule a call to discuss:

• Entity selection (LLC vs. Corp vs. Benefit Corp vs. Nonprofit)
• Arizona vs. other states for your situation
• Tax implications and structure optimization
• Operating agreement or bylaws provisions
• Compliance requirements and ongoing obligations

Format: Phone or Zoom. Book via Calendly or email owner@terms.law.

Arizona LLCs have no annual report requirement. While formation is cheap ($50), the real savings come over time:

• Delaware: $300/year franchise tax
• California: $800/year minimum franchise tax
• Nevada: $350/year business license fee
• Arizona LLC: $0/year (no annual fee to the state)

Over 5 years, Arizona saves you hundreds to thousands in state fees compared to other popular business states.

No. You can form an Arizona entity from anywhere in the world. You don’t need to visit Arizona, have a physical office there, or be a U.S. citizen. You just need:

• A statutory agent with an Arizona address (we provide this)
• A mailing address (can be anywhere)
• EIN from IRS (we help with this)

However, if you physically operate your business in another state (employees, office, inventory), you may need to register as a foreign entity in that state and pay taxes there.

Arizona is unique: the Arizona Corporation Commission (ACC) handles entity formations, not the Secretary of State like most states.

• Corporation Commission: Files LLCs, corporations, and nonprofits; handles annual reports
• Secretary of State: Files trade names (DBAs), trademarks, and notary commissions

For company formation, you work exclusively with the ACC. I handle all ACC filings as part of my service.

Yes, Arizona allows entity conversions. If your business grows and you need to raise venture capital or issue stock, you can convert your LLC to a corporation by filing Articles of Conversion with the ACC.

Conversion process:

• File Articles of Conversion with ACC
• Transfer assets and liabilities from LLC to new corporation
• Maintain same EIN (no need for new tax ID)
• Dissolve old LLC (or keep both if using holding company structure)

I can assist with entity conversions ($750 service fee + state filing fees). Contact me for details.

Arizona State Taxes

• Corporate Income Tax: 2.5% flat rate (one of the lowest in the U.S.)
• Personal Income Tax: 2.5% flat rate (as of 2024 tax reform)
• Sales Tax: 5.6% state rate (plus local taxes, varies by city)
• No Franchise Tax: Unlike California, Texas, or Delaware

How Entities Are Taxed

• LLC (default): Pass-through taxation. Profits taxed once on your personal return at 2.5%
• LLC (S-corp election): Pass-through taxation with potential self-employment tax savings
• C-Corporation: Corporation pays 2.5% on profits; shareholders pay 2.5% on dividends (double taxation but low rates)
• Nonprofit (501c3): Exempt from Arizona income tax

Important: If you operate in other states, you may owe taxes there too. Consult a CPA for multi-state tax planning.

LLCs: NO publication required.

Corporations (including benefit corps and nonprofits): YES, publication required.

Publication Requirements for Corporations

• Must publish notice of incorporation in a newspaper of general circulation in the county of known place of business
• Must publish for 3 consecutive publications
• Must complete within 60 days of filing Articles of Incorporation
• Cost: $100-$300 depending on newspaper and county
• After publication, obtain Affidavit of Publication and file with ACC

My publication service ($250): I handle everything—newspaper selection, submission, coordination, and affidavit filing. No hassle for you.

Timeline Breakdown

• Name check: Same day
• Document preparation: 1-2 business days
• ACC filing (standard): 2-3 weeks
• ACC filing (expedited): 5-7 business days (+$35 state fee)
• Publication (corporations): 2-4 weeks (can be done concurrently with formation)
• EIN from IRS: Same day (online application)

Total Timeline

• LLC (standard): 3-4 weeks from start to finish
• LLC (expedited): 1-2 weeks
• Corporation (standard): 4-6 weeks (including publication)
• Corporation (expedited): 2-3 weeks (including publication)

Need it faster? Expedited processing (+$35 state fee) gets ACC approval in 5-7 days instead of 2-3 weeks.