How To Start A Business In Arizona (2024 Guide)

Before starting your new business, you need to give your idea some thought and make it a viable business operationally. This is best done by writing a business plan that outlines what the business is, who it serves, how you will market to your target customers and how you will organize your finances.

The business plan serves as the blueprint for what you will do in your business and should be updated and reviewed several times a year once the business begins. This way, you’ll always be on track with your business objectives and will have a plan to show to prospective investors.

Before you formalize anything, you’ll want to choose a business entity. There are several business entities to choose from:

• Sole proprietorship
• Partnership
• Limited liability limited partnership (LLLP)
• Limited liability partnership (LLP)
• Limited partnership (LP)
• Limited liability company (LLC)
• Corporation

A sole proprietorship or partnership is the easiest to establish but doesn’t offer any liability protection or separate taxes from your personal taxes.

An LLC limits liability while still passing profits onto the owner to address on their individual tax return. A corporation limits liability and can establish its own tax account where profits and expenses are accounted for.

Before you register your company, you will want to check to make sure the name you plan to use is not being used by another company. Search the Corporation Commission database.

Once you have chosen the type of entity you want to establish, you’ll register that with the Arizona Secretary of State. Sole proprietors using a name other than their own legal name will need to file a trade name with the Arizona Secretary of State for $10.

Other entities will file a certificate of limited partnership, qualification to be a limited liability partnership, articles of organization or articles of incorporation with the Secretary of State. It costs $10 plus $3 per page for LPs, LLPs and LLLPs; $50 for LLCs and $60 for corporations.

LP, LLP and LLLP forms can be mailed to:

Secretary of State Katie Hobbs
Attn: Limited Partnerships
1700 W. Washington St., FL. 7
Phoenix, AZ 85007-2808

LLC and corporation forms can be mailed to:

Arizona Corporation Commission
1300 W. Washington St.
Phoenix, Arizona 85007

Setting up your finances for your new business is an essential next step. Most business entities will need to get an employer identification number (EIN) from the IRS website. This nine-digit number is used to identify your business for tax purposes, when opening a bank account or when establishing an unemployment account with the state.

You’ll want to keep your business finances separate from your personal finances so that there is no confusion regarding income and liabilities. Commingling funds can become confusing and lead to costly mistakes.

Every business needs some level of funding to start, even if that is bootstrapping costs with your own savings. If your business plan calls for a significant amount of funding, you could consider getting a small business loan with the SBA or finding an investor for the company. A well-crafted business plan can play a significant role in acquiring the funding you need.

There isn’t a set way to establish a business location. Many small business owners start as home-based businesses. But if your business model requires a more professional business space, you’ll need to find a location. A business that relies heavily on foot traffic will likely look to retail locations or busy office buildings.

Read through the lease agreement thoroughly. In fact, you may want to have an attorney review the document to make sure that you fully understand the terms and conditions of the lease. It isn’t uncommon for landlords to transfer maintenance responsibilities to tenants; be sure you are aware of potential costs.

The state of Arizona doesn’t require a general business license but check with your county or municipality to see if there are local licenses and permits required for your business. You’ll need these in order prior to engaging in business activities.

If you sell goods or products and certain taxable services, you will need to get a transaction privilege tax (TPT) license, also known as a sales tax license. This is done with the Department of Revenue and can be completed online. It takes three to five business days to process the application and costs $12 to obtain.

Before opening to the public, you should consider the insurance policies you may need. Insurance is a low-cost way to protect against common liability claims such as slip and fall accidents or professional errors. If you lease a property, your landlord will likely require a general liability policy.

For businesses that have at least one employee—it doesn’t matter if they are full or part time—you must get workers’ compensation insurance. Talk to an insurance agent to see what policies make sense for your business and which are required.

Bottom Line

Starting your Arizona business is an exciting time. Be sure to properly file your business entity formation papers and acquire an EIN (if needed) for your company. Be diligent with your books to keep business costs separate from personal expenses so that your accounting is accurate. Remember to use your business plan as a blueprint once you start marketing your business to stay on track and give yourself the best chance for success.