How To Start a Business in Arizona
July 29, 2021
How To Start a Business in Arizona
Starting a business can be an exciting time, but there are also challenges and stresses involved in getting your business off the ground in the proper way. Many of the initial tasks involve market research about goods or services you plan to sell and creating your unique business proposition. You want to pick out a business name that’s meaningful to your clients, and a domain name that reinforces your branding.
But let’s focus on some of the legal matters that need to be addressed because failure to get those buttoned-up properly can expose you to legal liability from government authorities in the form of taxes and penalties, as well as legal exposure from your customers. Note that this is not an exhaustive list of legal steps that need to be considered, and you should consult with your business lawyer in starting your new venture.
Select Your Business Structure
The first step is to select the proper business structure, preferably after consultation with your attorney and accountant. The decision you make will impact the extent of your filing obligations with the state of Arizona, the regulatory oversight of your business and the legal liability to which you will be exposed. The four most common possibilities include:
– Sole Proprietorship: The simplest and most common business structure, in a sole proprietorship an individual engages in a business activity without the need for a formal organizational structure. This is generally not recommended, as your personal assets are not protected from liability in the event of a lawsuit.
– General Partnership: A general partnership is created when two or more persons associate to carry on a business for profit. There is no state filing requirement for this structure. As with a Sole Proprietorship, this is not generally recommended, as your personal assets are not protected from liability in the event of a lawsuit.
– Corporation: A corporation is a legal entity with a board of directors and centralization of management. While it protects private assets, this is a much more complicated legal structure for a business and, unless you plan to go public, is generally not recommended. An Arizona corporation must file Articles of Incorporation with the Arizona Corporation Commission. If you will be doing business under another name, known as a “DBA” (“Doing Business As”), you should file this DBA with the Arizona Secretary of State.
– Limited Liability Company: In most cases, this is the legal entity we propose to our clients. It protects the owner’s personal assets but isn’t too complicated structurally. An LLC must file Articles of Organization with the Arizona Corporation Commission. If you will be doing business as a “DBA,” you should file this DBA with the Arizona Secretary of State.
Considerations Regarding Your Business Name and Logos
As noted above, depending on which business structure you choose, you may have to register your business name with the Arizona Secretary of State. The state has special naming requirements which are enforced by the Arizona Corporation Commission. Special rules apply if you will be operating as a DBA.
Any new venture which will use such terms as “Loan,” “Bank,” “Credit Union,” and similar terms requires approval from the Arizona Department of Financial Institutions.
If you will be using unique slogans and logos, you may want to protect this intellectual property by filing with the U.S. Patent and Trademark Office.
Apply for Pertinent Licenses and Permits
Arizona does not require a state business license. However, depending on where you are doing business, you may also need a city or county business license.
If your business will be selling a product or service subject to the Arizona Transaction Privilege Tax (“TPT”), which is in essence a sales tax, your business must be licensed by the Arizona Department of Revenue.
A number of businesses must also have a professional license. These include businesses engaged in construction, child care, adult care, pest control and alcoholic beverage sales.
Obtain a Federal EIN
The Employer Identification Number or EIN (sometimes referred to as the Federal Employer Identification Number or FEIN) is a nine-digit tax identification number issued by the Internal Revenue Service. This number identifies your business and is used for paying payroll taxes, filing tax returns, and more. Partnerships, corporations, and most LLCs or sole proprietorships with employees must register for an EIN.
Sole proprietorships or a single-member LLC with no employees are not required to obtain an EIN. In these instances, the owner’s social security number is used to identify the business.
Contact Counxel Legal Firm
Many other legal steps are often required to protect your new business fully, such as procuring liability insurance and setting up separate bank accounts. Hiring employees involves a whole series of legal steps, including verifying that employees are eligible to work in the U.S. and setting up payroll and other taxes.
Every day we help small and large businesses with legal formation and identifying the legal hurdles that must be complied with. If you would like to talk further with a business lawyer about setting up your new business, contact Counxel Legal Firm at 480-536-6122 or at email@example.com.
This article is intended for informational purposes only and does not constitute legal advice for your specific situation. Use of and access to this article does not create an attorney-client relationship between you and Counxel Legal Firm. Please contact firstname.lastname@example.org or 480-536-6122 to request specific information for your situation.
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