How to Form an LLC in Arizona

Forming an LLC in Arizona can provide a number of legal benefits.  

Freedom of Contract

The Arizona LLC Act gives LLC members contractual freedom to customize their Arizona LLC Operating Agreements with regard to contributions, rights, duties, and distributions of profits and losses. In addition, Arizona law gives members contractual freedom to establish classes of membership interests with different rights, and it allows members to protect their control of an LLC.

The Arizona LLC Act enables members to create classes of membership. An LLC agreement may establish classes of membership interests with different rights, powers, and duties, including Voting and non-Voting interests. Section 29-682 specifically states an LLC agreement may also provide a method for creating additional classes of membership interests in the future. These provisions facilitate everything from complex, high-dollar-volume transactions to succession planning in family businesses and estate planning by gifts of non-Voting interests.

The Arizona Act gives members contractual freedom to customize their capital contributions and their shares of profits and losses. Section 29-709 states “[t]he profits and losses of a limited liability company shall be allocated among the members and among classes of members in the manner provided in an operating agreement.” This gives members contractual flexibility to have preferred members who get paid first or paid more than common members.

Privacy for Members

A “person” may form an LLC by filing its articles of organization, and the definition of “person” includes almost any kind of business or legal entity. An LLC’s members may therefore have an entity or person who is not a member file the LLC’s Articles of Organization with the Arizona Corporation Commission.

Protection from Unwanted Parties

The Act allows members to protect their control of an LLC. An LLC agreement may prohibit members from assigning their membership interests. But if an LLC agreement does not prohibit it, an assignment does not dissolve the LLC or entitle the assignee to become a member. Instead, the assignee may only receive the allocations of profit and loss and distributions to which the assignor would have been entitled, and all the other members must consent to the assignee becoming a member. Therefore, the default provisions of the LLC Act in Arizona are reasonable and sophisticated to suit many people’s needs.

Protection From Creditors

If a judgment creditor of a member obtains a charging order against the member’s membership interest, “the judgment creditor has only the rights of an assignee.” Furthermore, a charging order is a judgment creditor’s exclusive remedy.

In addition, the Act states that unless an LLC agreement provides otherwise or all members give written consent, a person ceases to be a member of an LLC when the person makes an assignment for the benefit of creditors, files a voluntary petition in bankruptcy, is adjudicated insolvent or bankrupt, or fails to contest a petition seeking his or her reorganization, liquidation, dissolution, or similar relief. These events are considered “events of withdrawal.”  If this is not what you want, you should modify your Arizona LLC agreement accordingly.

Here are the steps you will need to follow to set up an LLC in Arizona.

Step1. Choose a Name

Arizona LLC names must satisfy a few statutory requirements. First, the name must include one of the following designators: “limited liability company,” “limited company,” “L.L.C.,” “L.C.,” “LLC,” or “LC.” It cannot include the words “association,” “corporation,” “incorporated,” “bank,” “deposit,” “credit union,” “trust,” or “trust company.” In addition, the name must be differentiable from every other business entity that is formed in Arizona and every foreign entity that has qualified to do business in Arizona.

Step 2. Appoint a Statutory Agent in Arizona

Statutory Agents are also commonly known as “Registered Agents”. An Arizona LLC must continuously maintain a registered agent for Service of Process in the state. A Commercial Registered Agent service may act as an Arizona Registered Agent. A Commercial Registered Agent can be a valuable partner in keeping your LLC in Good Standing, especially if you have a small business or operate out of your residence.

Step 3. File Articles Of Organization

To form an Arizona LLC, a person must file Articles of Organization with the Arizona Corporation Commission. The Articles of Organization must include the LLC name, the address of the LLC’s place of business in Arizona, the name and address of the Registered Agent, the latest date that the LLC must dissolve, and whether managers or members will manage the LLC. 

If managers will manage the LLC, you must include the names and addresses of managers, along with members who have greater than a 20% interest in the LLC. If there are no managers, you must submit the names and addresses of all members. Then these Articles of Organization, which can include any other provisions you would like, are sent to the Corporation Commission with a $50 filing fee.

Step 4. Draft an Operating Agreement

While not mandated, many Arizona LLCs will have Operating Agreements that govern their internal affairs. This agreement can be verbal, although we recommend that it is written to avoid any future conflict.

There are some additional steps you will need to take after you form your Arizona LLC to finish setting up and maintaining your business. 

Get an EIN Number

If an Arizona LLC is going to have employees or multiple members, it will need to obtain an EIN directly from the IRS or through an incorporation service like Incnow®.

Do Arizona LLCs need to file Annual Reports?

Unlike most states, Arizona does not require LLCs to file annual reports or pay annual fees.