How to Form an LLC in Arizona

The following are some important steps and considerations — described in greater detail below — when organizing or forming an Arizona LLC:

  1. Choose LLC Name
  2. Choose Statutory Agent
  3. Draft & File Articles of Organization
  4. Publish Formation & File Affidavit of Publication
  5. Execute Operating Agreement
  6. Choose Federal & State Taxation
  7. Open Bank Account

1. Choose LLC Name

Although an Arizona LLC is organized pursuant to Arizona law, specifically Arizona's Limited Liability Company Act, an Arizona LLC's name is governed by both Arizona and federal law.

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The name must contain the words "Limited Liability Company" or "Limited Company" or the abbreviations "L.L.C.", "L.C.", "LLC" or "LC".

Arizona Law

As of August 2013, Arizona's LLC Act requires that an LLC's name meet following requirements:

A. The name of a limited liability company as set forth in its articles of organization shall:

1. Contain the words "limited liability company" or "limited company" or the abbreviations "L.L.C.", "L.C.", "LLC" or "LC", in uppercase or lowercase letters.

2. Not contain the words "association", "corporation" or "incorporated" or an abbreviation of these words.

3. Not include the words "bank", "deposit", "credit union", "trust" or "trust company" separately or in combination to indicate or convey the idea that the limited liability company is engaged in banking, credit union or trust business unless the limited liability company is to be and becomes actively and substantially engaged in the banking, credit union or trust business or the limited liability company is a holding company holding substantial interest in companies actively and substantially engaged in the banking, credit union or trust business.

B. Except as authorized by subsections C and D of this section, the name of the limited liability company shall be distinguishable from all of the following:

1. The corporate name of a corporation incorporated in this state or a foreign corporation authorized to transact business in this state.

2. A corporate name reserved under section 10-402 or registered under section 10-403.

3. A fictitious name adopted by a foreign corporation under section 10-1506.

4. The corporate name of a nonprofit corporation incorporated in this state or a foreign nonprofit or not for profit corporation authorized to conduct affairs in this state.

5. The partnership name of a limited partnership organized and registered under the laws of this state or of a foreign limited partnership authorized to transact business in this state.

6. The name of a limited liability company organized in this state or a foreign limited liability company authorized to transact business in this state.

7. A trade name registered pursuant to title 44, chapter 10, article 3.1.

8. The name of a registered limited liability partnership organized in this state or a foreign limited liability partnership authorized to transact business in this state.

C. A limited liability company may apply to the commission for authorization to use a name that is not distinguishable from one or more of the names described in subsection B of this section. The commission shall authorize use of the name applied for if either:

1. The other entity consents to the use in writing and submits an undertaking in a form satisfactory to the commission to change its name to a name that is distinguishable from the name of the applying limited liability company.

2. The applicant delivers to the commission a certified copy of the final judgment of a court of competent jurisdiction that establishes the applicant's right to use the name applied for in this state.

D. A limited liability company may use the name, including a fictitious name, of another domestic or foreign entity that is used in this state if the other entity is incorporated or authorized to transact business in this state and the limited liability company that proposes to use the name has either:

1. Merged with the other entity.

2. Been formed by reorganization of the other entity.

3. Acquired all or substantially all of the assets, including the name, of the other entity.

E. This chapter does not control the use of fictitious names.

ARS § 29-602.

When choosing an Arizona LLC's name, perhaps one of the most important requirements set forth in the statute above is that of distinguishability. The standard of distinguishability used by Arizona's Corporation Commission is fairly low, however, it doesn't allow a finding of distinguishability based upon: (1) spaces between words, (2) punctuation, (3) capitalization, (4) arabic numerals, (5) articles, or (6) entity identifiers.

As a result of this low standard, the Corporation Commission may accept a particular name that infringes upon another protected under other Arizona law.

Federal Trademark/Servicemark Law

Even if an Arizona LLC's name meets the requirements set forth by Arizona's LLC Act, and even if that name does not infringe upon the name of another pursuant to Arizona law, the name may still run awry of federal trademark and service mark law.

Federal trademark/service mark law requires that a mark must be: (1) in use in commerce (subject to exceptions)  and (2) distinctive. For more information about federal trademarks/service marks, see the following blog post: Trademarks, Service Marks & Trade Names.

Because these laws are federal, they supersede state laws pursuant to the supremacy clause in the United States Constitution. As a result, it is generally necessary to search federal trademarks/servicemarks to determine if the proposed name infringes upon any registered trademarks or service marks.

2. Choose Statutory Agent

Arizona's LLC Act requires that each LLC select and maintain an agent to receive service of process on behalf of the company. While in some states, this agent may be know as a registered agent, such an agent is generally called a statutory agent in Arizona.

The relevant provision of Arizona's LLC Act sets forth the following requirements for a statutory agent:

2. A statutory agent for service of process on the limited liability company that is either an individual resident of this state, a domestic corporation, a limited liability company or a foreign corporation or limited liability company authorized to transact business in this state.

ARS § 19-604(A)(2).

In addition to aforementioned requirements, a statutory agent must have a valid street address not a P.O. Box.

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3. Draft & File Articles of Organization

Arizona's LLC Act requires that Articles of Organization state:

1. The name of the limited liability company.

2. The name, street address in this state and signature of the agent for service of process required to be maintained by section 29-604.

3. The address of the company's known place of business in this state, if different from the street address of the company's statutory agent.

4. The latest date, if any, on which the limited liability company must dissolve.

5. Either of the following statements:

(a) Management of the limited liability company is vested in a manager or managers.

(b) Management of the limited liability company is reserved to the members.

6. The name and address of either of the following:

(a) If management of the limited liability company is vested in a manager or managers, each person who is a manager of the limited liability company and each member who owns a twenty per cent or greater interest in the capital or profits of the limited liability company.

(b) If management of the limited liability company is reserved to the members, each person who is a member of the limited liability company.

ARS § 29-632(A)(1)-(A)(6).

Filing of articles of organization can either be standard or expedited. While the filing times can vary substantially depending upon any backlog at the Corporation Commission, standard filing often takes at least 30 days while expedited filing generally takes between five (5) and ten (10) business days. Arizona's Corporation Commission, charges an additional fee for expedited filing.

The articles of organization must be filed, along with any applicable filing fees, with Arizona's Corporation Commission at either of the following addresses:

1300 West Washington 1st Floor
Phoenix, AZ 85007-2929

400 West Congress
Tucson, AZ 85701-1347 

4. Publish Formation & File Affidavit of Publication

After an LLC's articles of organization have been accepted by the Corporation Commission, they must be published in accordance with the following provision from Arizona's LLC Act:

F. Within sixty days after the commission approves the filing, a copy of the articles of amendment or restated articles of organization shall be published in a newspaper of general circulation in the county of the known place of business for three consecutive publications. An affidavit evidencing publication may be filed with the commission. Publication is not required if amendments to the articles of organization or restated articles of organization only change any of the following:

1. The name or address of members or managers.

2. The known place of business address.

3. The name or address of the statutory agent.

ARS § 29-633(F).

While not required, an affidavit of publication can be filed with the Corporation Commission.

5. Execute Operating Agreement

While Arizona's LLC does set forth various laws regarding the relationships of the LLC's members one to another and to the LLC and any creditors, such laws are often a bare minimum and an operating agreement is often necessary to more fully protect the interests of the LLC members. For more detailed information about Arizona LLC Operating Agreements, see the following blog post: Arizona LLC Operating Agreements.

6. Choose Federal & State Taxation

Federal Taxation

An LLC is perhaps the most flexible of any U.S. limited liability entities in terms of federal taxation. An Arizona LLC, can elect federal taxation as either, a(n): 

  1. Disregarded Entity
  2. Partnership
  3. S-Corporation
  4. C-Corporation

The Internal Revenue Service ("IRS") automatically classifies single-member LLCs as "disregarded entities" and attributes all income earned by such LLCs directly to their owners. This means, among other things, that the LLC does not need to file its own tax return and there is only one level of taxation, i.e. pass-through taxation. Single-member LLCs that accept this classification do not need to apply for an Employer Identification Number ("EIN") with the IRS.

The IRS automatically taxes multiple-member LLCs as partnerships pursuant to Subchapter K of the Internal Revenue Code ("IRC"). Subchapter K is quite flexible and provides pass-through taxation, however, it can be quite complex -- in particular Section 704.

If an LLC's members do not wish to accept the default classification by the IRS, the members may elect taxation under either Subchapter S or Subchapter C. For more information about LLC taxation under Subchapter S, see the following blog post: Self-Employment Tax: LLC v. S-Corporation.

Multiple-member LLCs, LLCs taxed as S-Corporations, and LLCs taxed as C-Corporations likely need to apply for an Employer Identification Number ("EIN") with the IRS.

State Taxation

Depending upon the particular activities of an LLC, it may be subject to various state taxes, e.g. Arizona's Transaction Privilege Tax, that require additional steps and/or registrations.

7. Open Bank Account

In order to avoid so-called "piercing the corporate veil," i.e. court imposition of an LLC's liabilities upon an LLC's members, an LLC likely needs to have its own bank account -- even for single-member LLCs -- so as not to commingle the LLC's funds and those of any LLC members.

This brief overview of some important considerations associated with organizing an LLC in Arizona is by no means comprehensive. Always seek the advice of a competent professional when making important financial and legal decisions.

Arizona LLC AttorneyDouglas K Cook is an Arizona llc attorney with over 40 years of experience as a practicing attorney. Although Douglas K Cook's office is located in Mesa, Arizona, he represents clients throughout the Phoenix, Arizona Metropolitan area including the following east valley cities: Scottsdale, Paradise Valley, Tempe, Chandler, & Gilbert.

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