Incorporating your business in the state of Arizona comes with various advantages. The primary benefit is the Enterprise Zone Program.
It’s one of the most rewarding programs for startups in the state and aims to bring about improvement in some of the most distressed areas of the state.
The following guide is designed to show you how to start a corporation in Arizona.
1. Select a name for your corporation
Choosing a business name for your Arizona corporation is one of the essential steps in the process of incorporation.
General corporate name guidelines
The name you choose must adhere to the state naming guidelines below:
If you plan on using the following words, written consent must be granted by the Arizona Department of Financial Institutions:
- Banker, bank, banc, banking, Banque, deposit, credit union, association, savings, savings, and loan association, building association, building and loan association, trust, thrift, savings banks, trust company
- The Arizona business name must also be significantly different from other business names in the state
- The Arizona business name must also contain the words or abbreviations of the words: company, corporation, limited, or incorporated
Additional rules for naming an Arizona-based corporation may be found on the Arizona state legislator’s website.
Arizona does not require corporations to register their business names as trademarks; however, it is an accepted business practice if you choose to do so.
To register your business name as a trademark, simply head over to the U.S. Patent and Trademark Office’s website and complete the online registration process.
A business’s entity name is the name by which the state identifies the corporation. So it is the corporation’s legal name and must be included in all formation documents.
DBA (Doing-business-as) name
Arizona corporations can do business under another name aside from the legal entity name, provided you register a DBA or Doing Business As name with the Arizona Secretary of State. Complete the application online after specifying the nature of your corporation’s business and including the name and type of entity registering.
2. Nominate a registered agent
Arizona corporations need to nominate a statutory agent, also referred to as a service of process or registered agent.
This individual has a primary role in fulfilling, and that is accepting compliance documents, government correspondence, and service of process on your business’s behalf. Essentially, they are your corporation’s point of contact with the state.
Anyone may be appointed to be a registered agent, provided they meet the following criteria:
- The Arizona statutory agent should be at least 18 years old
- The Arizona statutory agent should have a street address in the state
- The Arizona statutory agent must keep availability during business hours
- The Arizona statutory agent must consent to the appointment
3. Appoint initial directors at the organizational meeting
You must hold an organizational meeting where a few tasks like creating and approving bylaws, determining the corporation’s share structure, and selecting initial directors must be completed.
Your corporation needs at least one director who will oversee the company’s operations until the first shareholder meeting is concluded.
This individual is known as the corporate director and is tasked with adopting, amending, and repealing the bylaws in addition to electing, supervising, and removing officers.
You’ll also need to select an incorporator who will sign and deliver the Articles of Incorporation.
4. File Articles of Incorporation
The legal creation of your corporation starts with submitting the Articles of Incorporation with the Arizona Corporation Commission.
The articles must include the following information:
- Each incorporator’s name and address
- The registered agent’s name, address, and signature
- The directors’ contact information like names and addresses
- The number and class of shares to be issued
- A statement of purpose describing the corporation’s type of business
- The business’s name and address
Additionally, the incorporator must sign a Certificate of Disclosure for Business Corporations and submit it along with the Articles of Incorporation.
This document must contain or declare information regarding civil fraud actions, criminal convictions, and any previous corporate bankruptcies related to the founders of the business. You must also include your business’s fiscal year-end.
Complete the Arizona Articles of Incorporation Form and submit it via mail to the following address:
Arizona Corporation Commission
Corporate Filings Section
1300 W. Washington St.
Phoenix, AZ 85007
Alternatively, complete and submit the application online with the ACC also known as the Arizona Corporation Commission – Corporations Division. You’ll find the website by entering the URL acc.gov.
5. Create and approve bylaws
A corporation’s bylaws are the internal legal operating rules that are applicable to all members of the corporation. So it needs to be followed by directors, shareholders, and officers who conduct business.
Additionally, the bylaws must comply with the relevant federal and state laws as well as what’s included in your corporation’s Articles of Incorporation.
While bylaws do not need to be filed in the state, you should consider creating and approving them. This is because they are still legally enforceable documents that instruct all members of the organization to conduct business in a fair manner.
For example, when conflict arises within the company, the bylaws will determine exactly how that conflict is going to be handled.
When creating and drafting Arizona corporation bylaws, keep the following in mind:
- State the name, purpose, and office location of your business
- State exactly how the board of directors will be elected, how many you are going to have, and how long each director’s term of service will last
- Address how bylaws will be adopted and approved in future
- State exactly how board meetings will be organized and how often they will be held
- Contain a dispute resolution
- State how the officers of the corporation are going to be chosen and state their relevant roles and responsibilities
6. Select a share structure
The unit of ownership of a corporation is referred to as a share of stock. Shares of stock represent percentages of ownership of the company. For example, if a business issues one share of stock, the shareholder then owns 100% of the corporation.
Shares of stock are structured into classes, and each class is termed a share class. Additionally, each share class holds different privileges and rights. Corporations may choose to have multiple classes, and each class may hold any number of shares.
In the state of Arizona, the Arizona Articles of Incorporation Form allows you to declare whether the corporation will issue one or more authorized share classes of stock.
7. Obtain an EIN
All Arizona corporations need Employer Identification Numbers. The Employer Identification Number is often referred to as a Federal Tax Identification Number.
This is a unique nine-digit code that is used by the Internal Revenue Service to identify business entities in each state. Essentially, it’s more or less a Social Security number for your corporation.
Applying for and obtaining an EIN is advised as it will be required when you open up a business bank account for your corporation, submit federal and state taxes and hire staff for your corporation.
Simply go to the IRS website and complete the online application using the EIN Assistant to apply for an EIN. Additionally, you may download the EIN Application Form and mail it to the following address:
Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999
8. File Arizona state taxes
The following taxes are payable by all Arizona corporations:
- Corporate income tax: All corporations in Arizona are subject to Arizona’s corporate income tax at a rate of tax is 4.9%.
- Arizona sales tax: Arizona corporations are only liable to pay sales tax on out-of-state sales if they have Nexus in other states. A business’s physical presence in a state is referred to by the legal term Nexus.
9. Arizona business licenses and permits
The following business permits and licenses are required by Arizona corporations:
- Arizona business license: The state of Arizona does not require nor does it issue a statewide business license. However, based on your city or town of business, you may require a license within that jurisdiction.
Some cities and counties also require that anyone conducting business in the locality obtain a license. Therefore, you should check with each city or town office in which you plan to conduct business to find out which business license is relevant to your corporation and also get further information on business license renewal in the state.
- State Transaction Privilege Tax License (TPT): Your corporation may need to register for a State Transaction Privilege Tax license from the Department of Revenue. It’s often referred to as a sales tax permit and is actually a tax on the business’s gross sales.
- Resale Certificate: An Arizona Resale Certificate is needed if you plan on purchasing merchandise to resell in the state. This is because the certificate will ensure that you do not pay sales taxes for merchandise that is being resold to customers.
- Professional Occupational License: A professional occupational license may be required if you are involved in one of the following industries, transport for hire, childcare, construction, massage services, pest control, home inspection, and more. Refer to the Arizona One-Stop website for the full list of occupations requiring a professional occupational license.
10. Annual report requirements in Arizona
Every corporation registered in the state of Arizona must file an annual report, irrespective of whether it is a domestic or foreign corporation. The annual report must be filed with the Arizona Corporation Commission or ACC each year no later than the anniversary date of incorporation. Additionally, you must file the report online through the ACC website.
11. Costs of starting a corporation in Arizona
The following filing fees are applicable to all Arizona corporations:
- DBA name: $10
- Articles of Incorporation: $60
- Annual report: $40
- Arizona Certificate of Good Standing: $10
Next steps after forming a corporation
Some essential steps are necessary even after starting your Arizona corporation. Let’s take a closer look at them below:
Open a business bank account
Opening up a business bank account for your corporation is an essential step to ensure that you keep business expenses separate from your own. Additionally, if you want to stay in good standing with the Internal Revenue Service, you need to open up a business bank account.
Some of the benefits of having a business bank account include:
- Managing your cash balance
- Deduct business expenses for taxes
- Completing and filing your income tax returns with the Department of Revenue
- Executing employee payroll
- Conducting proper accounting
Keep corporate records up to date
Arizona corporations need to keep corporate records in a safe place for reference as and when needed. The following documents and paperwork will need to be kept with your Arizona corporation’s records:
- Agreements between shareholders
- Most recent annual report
- The addresses or places of business and names of officers and directors
- All written communications to shareholders over the last three years
- A record of the actions taken by shareholders without a meeting
- Minutes of shareholder meetings
- The Articles of Incorporation
If you’re trying to look up a corporation in Arizona, you’ll find information on the Arizona Secretary of State’s website. You may also complete an entity search on the Arizona Corporation Commission’s website.
The Arizona Corporations Commission provides rules and procedures on how to go about incorporating a business in the state. Therefore, irrespective of how it is structured, every business will need to register with the Arizona Corporation Commission.
The Arizona Corporation Commission serves various roles to ensure reliable, safe, and affordable public utility services. Additionally, they are responsible for facilitating the incorporation of businesses and organizations in Arizona. They also approve or deny rate adjustments, approve security matters, and enforce safety and public service requirements.
In the state of Arizona, shareholders and their families are usually not held liable for corporate debts. Some corporation structures, such as the S corporation, ensure that shareholders are only liable for the amount of capital they invest into the business.
The main difference between an Arizona LLC or limited liability company and a corporation is a limited liability company is owned by one or more individuals. In contrast, the shareholders own a corporation in Arizona.