How to Start a Professional LLC in Arizona
If you’re thinking about how to start a PLLC in Arizona, you’ve come to the right place. Further down, we will walk you through all the critical steps required to form a professional limited liability company in Arizona as well as explain all the costs.
In addition, you’ll get answers to questions, such as what is a PLLC in Arizona, how it differs from an LLC, how to create PLLC in AZ, and what other tasks need to be taken care of after the Certification of Formation is already in your hands. Keep reading to explore.
Table of Content
What Is a PLLC in Arizona?
A professional limited liability company in Arizona is just what it says on the tin: it’s an LLC created by professionals. However, not every LLC can be PLLC.
Only licensed professionals rendering services in industries, such as law, medicine, and architecture can work under the PLLC, whereas LLCs can be used by all other businesses without the need to acquire an occupational license.
How to Start a PLLC in Arizona: Step by Step
As mentioned, before anything else, a professional looking to open a PLLC in Arizona is supposed to obtain a business license.
The tricky thing is, in Arizona, they only give a general definition of the term “professional service”, making it a bit confusing for businesses to figure out whether their service belongs to it or not. If you have similar concerns, the easiest way to find out is to consult an attorney.
Other than that, professionals in Arizona do not need to obtain a statewide license, unlike some other states. Getting a license in their city or town is enough to legally operate a PLLC, which saves you money and time.
Step 1: Name Your PLLC
Once you’ve got your license, you can move on to one of the most enjoyable steps in forming a PLLC - selecting your company name. Your business name is what people and other companies will associate you with, so it should be chosen carefully.
Choose the name that best describes your company’s services and resonates with you, because, at the end of the day, this is your business, and it should be named according to how you feel about it.
Other business name requirements to consider are listed below:
- Legalities. The name of a PLLC in Arizona must include either the short abbreviation “PLLC” or the full form to make it clear what type of legal entity you have registered;
- Name restrictions. Also, you should not use words that may mislead the public, such as “law firm” and “corporation”, unless it’s what your business is about;
- Explanatory names. A company name may include the name of its members, but it’s best to use explanatory words that describe the product or service;
- Name availability. Make sure that the name you like is still available. You can put it on hold by obtaining an online name reservation;
- Get a domain name. If you’re planning to launch a website, it will be a good idea to get a domain name as well, so it has the same name and a distinct URL.
Sometimes, you can come up with a good company name, but since you still have some paperwork to fill out and you can’t create a PLLC just yet, the name you like may be passed on to someone else.
To prevent this from happening, a PLLC in Arizona can reserve any particular name for up to 120 days. The online name reservation cost is $45 (this price includes the $10 filing fee and the $35 expedited fee). As soon as you pay for it, you’ll immediately get a name reservation.
Step 2: Hire a Registered Agent to Get a PLLC in Arizona
Whether you register an LLC or PLLC, Arizona law requires every business to have a designated registered agent (RA). Basically, it’s a person or a company that is appointed to act as the point of contact between your legal entity and the government.
A registered agent can be:
- Any resident of Arizona aged 18 or older with a physical address;
- Attorney or the law firm of your choice;
- Professional agent company;
- You yourself can be a registered agent, too.
As just mentioned, you can also be your own RA, which will help keep the PLLC cost down. On the other hand, it isn’t always the best option, especially for those who operate their business from home. For this reason, most PLLCs prefer to use professional RA services.
The advantages of hiring an RA are numerous, including:
- Keeping your company in good standing;
- Protecting your personal data from being exposed to the public;
- Enjoying more freedom, as you won’t be bound to the office at all times;
- Establishing your presence in multiple states;
- Maintaining a good business image.
Step 3. File Your PLLC Articles of Organization
As you’ve come to this state, it’s time to officially establish your PLLC in Arizona. To do it, you will need to fill out the Articles of Organization form, including details about the kind of service your business provides, and submit it to the Corporations Division.
The Articles of Organization is an official document that proves the fact of PLLC creation and outlines the following information:
- Your business name;
- The purpose of business, including details about the types of service you provide;
- Contact information and names of all PLLC members;
- Name and address of your registered agent;
- Information about how your business will be managed;
- Signatures of all organizers.
This form can be submitted online or by mail, and the largest you’ll pay is $85 if you choose expedited processing. The standard fee, however, is only $50, making Arizona one of the cheapest states to open a PLLC.
Step 4. Draft an Operating Agreement
Unlike the Articles of Organization, which set out the essential details about the PLLC, the operating agreement clarifies the internal rules, or, in other words, who is responsible for what, thus, making it easier to resolve any type of operational or legal issues.
Furthermore, it can be used to set the rules for the following:
- How the company will be managed;
- How it will let go of and accept members;
- The distribution of profits from the PLLC.
In general, having an operating agreement isn’t a state requirement. However, it’s highly advisable to draft it in order to prevent any uncomfortable situations with your employees later on. More to that, you’ll likely need it when opening a bank account.
Drafting an operating agreement is quite easy using online templates, but if you feel like you could do with some help, consider having a lawyer assist you in creating this document.
Step 5: File an EIN for Your Arizona PLLC Registration
Finally, if you’re planning to hire employees, you will need to look into filing an Employer Identification Number (EIN) from the IRS. This number is needed by any company, regardless of its type, to pay taxes, file tax returns, open bank accounts, and so on.
Please, note that technically, all PLLC members are considered employees, so if your company has five or more people, you’ll need to get this number, too.
An EIN can be received by completing a request form online, and there’s no fee to pay.
Cost to Start an LLC in Arizona: How Much Is PLLC in AZ
Except for the additional cost you’d pay for obtaining a business license, getting an LLC and PLLC entails about the same expenses. That said, there’s no fixed price, and you can expect to pay more or less depending on how much work you delegate.
In general, all fees can be divided into two groups:
- Compulsory, which include the main fees necessary to get your business up and running;
- Optional, which may arise later on with introducing changes to your PLLC, e.g. accepting new members, adding a new trade name, expanding to other states, etc.
Here’s what’s included in the cost of a PLLC in Arizona:
| Service | Cost |
|---|---|
| Business License | Varies depending on the industry, etc. |
| Articles of Organization fee | $50 or $85 for expedited processing |
| Registered agent fee | $0-$125 |
| Name reservation fee (optional) | $45 |
| Certified copies of documents | $15 for order + $0.50 per page |
| Annual report fee (optional) | $45 |
| DBA (optional) | $10 |
| Certificate of Compliance fee (optional) | $10 |
| Articles of Amendment fee (optional) | $25 |
| Articles of Dissolution fee (optional) | $35 |
Although not necessary, you may also want to acquire a Certificate of Compliance (also known as a Certificate of Good Standing). Banks and lending institutions require a copy of this document to make sure that no action is taken to remove the PLLC from the register.
In addition, some professionals are required to renew their licenses from time to time, which will add to the cost. In case your license needs to be renewed, it will have an expiration date.
First Tasks After Registering a PLLC in Arizona
Once you’ve filed all the paperwork and received your signed Articles of Organization document, you’ve officially become an owner of a professional limited liability company. However, it’s not time to relax.
To keep your business running as smoothly as possible, there are a few more things to consider. Read on to find out what they are.
Open a Bank Account
The most important benefit of starting a PLLC in AZ is that you get peace of mind knowing that your personal assets will be protected in the worst-case scenario. However, the catch is that this is only true if you keep your personal assets separate.
With this in mind, the first task after completing the PLLC registration in Arizona should be to open a business bank account that you will use solely for the purposes of your company. The reasons why it’s beneficial:
- It will help secure your personal savings;
- It will make filing taxes easier;
- Having a business account will add to the credibility of your PLLC.
The last one means that most companies feel more comfortable sending emails and checks to businesses rather than personal names.
To open a business account, you will need to fill out an application form at the Arizona bank of your choice and provide your EIN number.
Get Insurance
No company is guaranteed from common risks, such as workplace accidents, injuries, property damage, and so on, so it’s highly recommended that you take up general business insurance to avoid any complications should anything like that happen.
Also, all PLLCs with 1 and more employees in Arizona are required to obtain workers’ compensation insurance. This insurance covers all medical expenses to heal job-related injuries and can also cover missed wages.
Find an Accountant
While you may be a highly skilled professional, you will not necessarily be a brilliant accountant, but the truth is - you don’t need to be. Finding an accountant who will work on your behalf often proves to be the most effective way to manage your PLLC finances.
With an accountant, you will always know what and when to pay, and your books of accounts will be in order, which will spare you the headache and the risk of penalties.
More to that, you’ll get help on important things, such as:
- Tax returns;
- Income tax payments;
- Filling forms and allowances.
As a result, you’ll have more time to work rather than go to great lengths to study all the bureaucracy.
Understanding Reports
Keeping your reports in good standing is essential to run a successful business. In Arizona, however, you will have less of a chore, as you will only need to take care of your tax reports. As long as they meet the requirements, your PLLC won’t need to file annual reports.
In general, PLLCs can choose the taxation structure that fits their business goals best. If you register your PLLC in the corporation status, you’ll have to pay a flat rate of 4.9%.
However, most PLLCs adhere to pass-through taxation, giving each member of the company the right to pay taxes as individuals, which reduces tax rates to 2.59%-4.5%.