By The Wyoming LLC Attorney TeamMay 04, 2023
This article discusses limited liability companies (LLCs) as a business structure for entrepreneurs. LLCs provide owners with protection from personal liability for any legal or financial issues, making them popular among new entrepreneurs. The article explains the requirements for forming an LLC in Arizona, including business name, registered agent, operating agreement, articles of organization, business licenses, permits, and tax forms. LLCs are also compared to corporations, with LLCs being more flexible and better suited for small businesses, and corporations being better for larger scale businesses.
When starting a new business, it’s important to understand the different business structures available to ensure you select the right one. These all vary in terms of their tax, income, and liability implications. A very common business structure that’s favored by new entrepreneurs forming their first company is an LLC, which stands for limited liability company. Limited liability companies are a very popular business structure and offer lots of benefits. They also come with different requirements depending on the state they are formed in.
An LLC is a business structure in the US that protects the owners of a company from personal responsibility for any liabilities. This includes financial problems such as debts or bankruptcy as well as any legal issues such as lawsuits. Essentially, the owner's personal finances can’t be used to resolve any of these issues. This is one of the many reasons a limited liability company is particularly favored by new entrepreneurs starting their businesses. This added sense of legal and financial protection offers reassurance and allows them to focus on building their companies.
While most states have their requirements when it comes to forming an LLC, some rules generally apply to all of them. These are:
When it comes to forming an LLC in Arizona, all of the above apply, but there are a few additional publication requirements too. These requirements tend to be outlined on the notice of formation and include:
Although all business structures have their benefits, there is a common argument that limited liability companies offer more flexibility than corporations. Several factors support this. Some of these are:
Limited liability companies work for any type of business and would have benefits for all of them. However, arguably an LLC is better suited to some business owners than others and would operate more smoothly and advantageously with certain types of businesses and circumstances. Some of the scenarios and people who should seriously consider starting an LLC are highlighted below:
Although limited liability companies offer many benefits and are a very useful business structure for some, corporations do offer certain things that a limited liability company cannot. In some scenarios, a corporation would be better for a business owner. In particular when an owner wants their business to go on a much larger scale. Small businesses are great and for many entrepreneurs, they are desired. In that scenario, an LLC is most applicable.
However, not everyone wants to run a small business. Some business-savvy minds want to take their business to a much larger scale perhaps nationally, internationally, or even globally. In this scenario, a corporation would be better suited. This is also likely to be the case if the business owner has a history of building big, successful businesses. This would make it likelier for their new business to grow and succeed as they have done it before and have a solid understanding of the industry. They have the connections and networking skills necessary to develop their company as well as the funds and success to gain investors or take it larger on their own. It would also be beneficial to use a corporate structure if the owner wants to seek outside investment as this will also grow their company and take more funding.
These bigger companies that will have a board of directors should use a corporate structure as this is what's necessary for a corporation in Arizona. If this hierarchical structure is what your company would better suit, a corporation may be the better choice.
Many benefits come with owning a limited liability company that acts as a reason to form one. Below we have explored some of these:
We highly recommend working with a lawyer to form your LLC. They can offer you solid, expert advice that could prevent any legal and financial troubles your LLC may face. There are many benefits to working with an attorney when creating your limited liability company and some of these are:
An operating agreement is a legal document that outlines how an LLC will conduct its business. This includes outlining the management structure, powers and duties of managers, buyout rules, how to amend the operating agreement, what to do in unforeseen circumstances and how to resolve disagreements between members. It’s not a requirement in Arizona, but it can be beneficial.
This is a unique nine-digit number assigned by the IRS, Internal Revenue System. They are used for IRS federal tax purposes. This is needed for an LLC if your employees or yourself wish to open a business bank account.
You may need to apply for additional licenses or permits depending on what type of business your LLC is conducting. You can find this out by visiting the State of Arizona Department of Revenue website.
There are 3 basic types of licensing in Arizona:
Speaking to a team of professionals may be beneficial in ensuring that all of the legal elements of the formation of your LLC in Arizona are up to standard and have been completed and filed appropriately. This should help for a more seamless formation and operation of your LLC.