Start an Arizona Corporation

Step 1: Name your Arizona corporation

This first step requires you to name your corporation. This might seem simple on the surface, but there are many factors to consider during the process, such as making sure your business name is unique, suits your business well, aligns with all business naming regulations, and includes a corporation designator.

You also don’t want to overlook the importance of choosing a name for which you can reserve a matching website domain name that has not already been taken. Additionally, you should consider any Arizona DBA names or trademarks you may want.

Arizona Corporation Naming Process Guidelines

Here are some guidelines to help you through the naming process.

Make a list of potential names

Make a list of potential names first. Names on this list should match your business’s purpose, and the more names you have, the better. The next several steps will begin to narrow down your options.

Corporate Designator

The final version of any name you choose must include the word “association,” “bank,” “company,” “corporation,” “limited,” “incorporated,” or an abbreviation of one of those words. (Note that if it includes the word “bank,” it must be a banking corporation and receive written approval to use that word in the title.) 

Professional corporations have a few additional naming requirements. For starters, they have to include a slightly different designator, such as “professional corporation,” “service corporation,” “professional association,” “limited,” “chartered,” or one of those words’ abbreviations.

Additional Rules and Requirements

Search your prospective business names on the ACC eCorp website to eliminate any names that are too similar to existing businesses. (Note that words or abbreviations in a name that indicate the type of company — “Corporation,” “Inc.,” etc. — are not considered when determining if a name is unique. Differences in spaces, punctuation, capitalization, etc., are also not enough to make a name unique.)

Unless your business is banking-related, the name cannot include anything suggesting that it is. Additionally, if you’re forming a professional corporation, you’ll need to include any industry-related words that your licensing board requires for your business name. This might include terms like “engineering,” “attorney,” or similar words or phrases. 

Generally speaking, standard corporations can’t include these professional designations unless all the principals are licensed for those services. 

If your name doesn’t meet the standards covered here, you’ll need to make some changes.

Domain Name Availability

Once you’ve narrowed down your list based on the above, the next task is to search for available domain names to ensure you will be able to secure a website domain that matches your business name.

Trademarks

Check to make sure your desired name isn’t trademarked at either the federal or state level. If not, you could consider getting a trademark on the name or any accompanying logo or slogan. To do so on the state level, you will need to complete a Trademark Registration Application on the Secretary of State’s website and pay a filing fee. But while it’s easier and quicker to file at the state level, you could also consider filing at the federal level for broader protection, especially if you plan on doing business outside of Arizona.

DBAs

If you would like to do business under a name different from your official business name (often called a “doing business as,” or DBA, name), you will need to file a Trade Name Registration Application on the Secretary of State’s website and pay a filing fee. (A DBA name is referred to as a trade name in Arizona).

Reserving Your Business Name

Once you have settled on a business name, you can reserve the name if you’re not ready to register your business. This is optional. Reserving your business name can be done through the ACC for a fee. The reservation will be good for 120 days.

When you reserve your name or register your business, you can also register the domain name you plan on using with it at the same time.

Step 2: Appoint directors

A corporation’s board of directors is responsible for overseeing the operations of the business. As such, your business needs one to get started. 

Director Requirements and Considerations

The initial incorporators — those filing the Articles of Incorporation for the business — often appoint the initial board of directors. Afterward, the board is elected annually by shareholders (those who hold stock in the company; this can include the original incorporators). 

In Arizona, only a single incorporator is required, and only one director on the board is needed, although having more is generally advisable. Incorporators may be directors and shareholders. In fact, a single person can start a corporation and hold all associated titles. But the three titles are associated with different roles within the company.

If you’re operating as a professional corporation, then keep in mind that at least half of your chosen directors (and your president) need to be licensed in your corporation’s profession. You can have some unlicensed directors, but they can’t exceed half of your directors.

Examples of Roles within Corporations

To clarify, here are some of the different roles that exist in a corporation:

• Incorporators are responsible for starting the business and filing the initial paperwork.
• The board of directors oversees the operation of the business.
• Shareholders finance the business by owning shares in the company; they also often have voting power when selecting the board of directors.
• Officers execute the duties associated with running the business.

Board of Director Meetings

If your business has more than one incorporator, the initial board of directors should be appointed during an incorporators meeting before filing the Articles of Incorporation. The appointed directors should then meet to approve corporate bylaws, determine the share structure, and solidify other matters before filing. That way, your business starts on the right foot with plans clearly in place. 

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Step 3: Choose an Arizona statutory agent

A statutory agent (often referred to as a registered agent in other states) is a person or entity that agrees to receive legal documents and court summons on behalf of the corporation.

Statutory Agent Requirements

When filing your Articles of Incorporation, you must list an Arizona statutory agent who meets the following criteria:

• The statutory agent must be an individual or corporation with a street address (not a P.O. box) in the state of Arizona on record with the ACC.
• A corporation cannot serve as its own statutory agent.
• The statutory agent must accept the appointment in writing, which can be done by submitting the Statutory Agent Acceptance (form M002) through the ACC’s website.
• If an individual, the statutory agent person must be at least 18 years of age and reside in Arizona. If the agent is a business, that business must have an address in Arizona and must be authorized to transact business in this state.

Registered Agent Service

While a shareholder or director of a corporation (but not the corporation itself) can serve as the corporation’s statutory agent, this is generally not advisable. If you’re thinking about this route, remember that you’ll need to be available during regular business hours at a physical address in Arizona to receive any legal documents or notices. Many business owners need more freedom to go out and about during the business day. 

We highly recommend going with a registered agent service for simplicity and protection. 

Step 4: File the Arizona Articles of Incorporation

If you’ve made it this far, you are ready to file your Articles of Incorporation. This document officially registers and establishes your business with the state.

Articles of Incorporation Inclusions

In this document, you will need to include:

• The name of your business
• The type of business services provided
• Whether you are for-profit or nonprofit (C corporation and S corporation designations are for tax purposes only and not included on this form)
• Number of authorized shares of stock (this is often determined by the board of directors or the incorporators and set at a high number so that more shares can be issued without the need for amendment)
• Any professional services offered if applicable
• Name and business address of each and every director of the corporation
• Name, physical address, and mailing address of the statutory agent
• The official address of the place of business
• Information (names and addresses) for every incorporator
• A Certificate of Disclosure (basically stating whether any incorporators, directors, etc. have been convicted of felonies or other violations or bankruptcy)
• Signatures of incorporators (every incorporator must sign)
• Filing fee

This filing is completed online on the ACC website by creating an eCorp account. The filing fee is $95 for for-profit corporations and $40 for nonprofits. You can also expedite processing for an additional fee. Accepted payment forms include cash (in-person only), check or money order, or credit card.

The formation paperwork must be examined and approved by ACC staff. If approved, you will get an approval letter with additional instructions. If rejected, your letter will instruct you on how to resubmit the paperwork.

This form works for both regular corporations and professional corporations, so don’t worry about finding a separate document if you’re forming a PC. 

Step 5: Create corporate bylaws

Are corporate bylaws required In Arizona?

Something that should be tackled during the first board of directors meeting is the creation of corporate bylaws. The bylaws establish all of the rules and functions of the corporation and the day-to-day activities of your business. Arizona requires all corporations to adopt bylaws.

What to Include In Arizona Corporate Bylaws

Your corporate bylaws may include:  

• A clear statement of your business purpose
• A list of the board of directors and the rights, responsibilities, and qualifications of each
• Details of your management structure and the duties of each officer
• Annual meeting scheduling and goals for directors and shareholders
• How ownership and shares are distributed and how the stock is sold or transferred
• How changes are made or voted on
• Details of any committees and their responsibilities
• How conflicts of interest are to be handled

Bylaws are legally binding, so it’s a good idea to seek the assistance of an expert or a lawyer when creating them. You can also find templates online that might help.

Your corporation’s bylaws do not need to be filed anywhere but should be kept safe with other corporate documents. (It’s often a good idea to set up a corporate records book where you can keep all of your corporation’s important papers, including bylaws, minutes from meetings, and stock certificates.)

Step 6: Draft a shareholder agreement

The shareholder or stockholder agreement is a document that outlines the rights and responsibilities of all shareholders in the company.

What should a shareholder agreement include?

Your shareholder agreement may include the following:

• Shareholders and their contact information (address, phone number, etc.)
• Shareholder responsibilities, including rules about officer appointments and any actions that shareholders are allowed to take on behalf of the business
• Shareholder voting rights, including whether a simple majority or higher percentage may be required for certain decisions
• How changes to the original shareholder agreement may be made
• How stock can be sold or transferred
• The financial obligation and time commitment for each shareholder
• A clear outline of how dividends are distributed
• A plan for the distribution of assets should the business close

Again, this agreement can be drafted from a template, but you may want to utilize professional assistance. Your shareholder agreement should be kept with your other important corporate records.

Step 7: Issue shares of stock

Once your business is registered and rules are in place, it’s time to issue stock. When you filed the Articles of Incorporation, you stated the number of stock shares authorized. The number of shares you issue should always be less than or equal to this number.

Stock may be issued publicly or privately. Privately issued stock is usually issued to the founders, officers, managers, employees, or a private group of investors. A public corporation makes a portion of its stock shares available for public purchase.

Shares of stock are how your company gets funded. The funds you use to get started are called capital. Before issuing stock, you should determine how much capital is needed. You can then divide this value among the stock shares you will issue to shareholders. 

Note that when initially issuing shares, some may be issued as compensation for helping start the business. As a result, the shareholder they are issued to does not contribute monetary capital for them, and this should be accounted for when determining share price.

Each share is only issued once, but after issuance, shares can be traded and sold. All issued shares must be documented in the company’s annual report. Companies issuing public stock need to file quarterly statements with the Securities and Exchange Commission (SEC). They must also track how many shares are issued and to whom. You should also check with the Arizona Securities Division to see what might be required at the state level.

Issuing Shares as a Professional Corporation

Professional corporations have to be a bit more selective about who owns their shares. Generally, you can issue shares to any individual, partnership, professional corporation, or professional limited liability company (PLLC) that’s licensed in your professional service. 

You can also issue stocks to unlicensed individuals, but they can’t hold more than 49% of your voting shares. The state also lets you issue shares as part of an employee stock program; you can consult the Arizona State Legislature for a full rundown of those rules. 

Step 8: Apply for necessary business permits or licenses

To keep your business on the right legal footing, make sure you take the time to research any required permits or licenses. What permits and licenses are needed depend on the business services you provide, the county or city where your business is located, and whether you have employees. Be sure to search for the following:

• State and city transaction privilege tax license(if you are selling goods)
• Regulatory or professional licenses or permits (associated with the services you provide)
• General business license (there is no statewide general business license, but some cities and counties require one)
• Any local business licenses or permits, including alarm permits, building permits, health permits, occupational permits, signage, or zoning permits

The Arizona Department of Revenue and the Small Business Administration (SBA) are good starting points. 

Step 9: File for an EIN and review tax requirements

Corporations are generally regarded as entities separate from the people involved. As such, you will need to acquire an Employer Identification Number (EIN). This number acts like the corporation’s Social Security number for tax purposes. 

To apply for an EIN, you need to visit the IRS website and fill out the online form. It only takes a few minutes and is free. Afterward, you will receive your EIN. You should keep track of this number, as you will need it for future documentation and filing your business’s tax returns.

Remember that corporations must pay taxes separate from any taxes paid on shareholder earnings. This must be done at the federal and state levels by submitting the appropriate returns each year.

Step 10: Meet Arizona’s publication requirement and submit your corporation’s first report

The final step to starting your business in Arizona is to publish an announcement of your business in a local newspaper. When your corporation is approved, the ACC will send you a letter with instructions for meeting this publication requirement, so don’t publish until you receive this. After the notice has been published, the newspaper will send you an Affidavit of Publication, which you can send to the ACC to record or keep with your other business documents. You’ll need to publish the notification of formation for three consecutive weeks.

Every year, corporations in Arizona are required to submit annual reports. This can be done electronically through your eCorp account with the ACC. As of this writing, there is a filing fee of $45 for for-profit corporations and $10 for nonprofits. The annual report consists primarily of updated information from your Articles of Incorporation and a list of stock shares issued.

How much does it cost to start a corporation in Arizona?

The exact cost of starting a corporation in Arizona will vary depending on the size and type of business and where it is located. You will need to pay the $95 fee for filing the Articles of Incorporation at a minimum. Additional fees may include:

• $35 for expedited processing
• Statutory agent service fees
• Fees for copies of documents from the ACC or Secretary of State
• Fees assessed for amendments or other business filings
• Fees associated with licenses or permits
• $45 annual report fee

Bear in mind that these fees are subject to change, so see the ACC website for the latest fee schedule.

What are the benefits of a corporation in Arizona?

Many benefits come with starting a corporation in Arizona. As a business type, the benefits of a corporation include:

• Protection of personal assets
• Legal recognition as a separate entity in and outside the U.S.
• The ability to issue stock (which can help with funding and capital)

However, there are disadvantages you should also be aware of to make an informed decision. The disadvantages are the tax structure (profits are taxed at both the corporation and personal income tax levels), and there is a lot more red tape and paperwork involved than there is with other structures, such as limited liability companies (LLCs).

How is an Arizona corporation taxed?

How your corporation is taxed in Arizona depends on whether it is a C corporation, an S corporation, or a nonprofit (501c3) corporation.

C corporations are treated as separate entities and must file their own tax returns. In addition to this, all owners and shareholders file tax returns for earnings and dividends. This results in double taxation; however, there are some benefits to this tax structure, including more flexibility in what can be deducted.

S corporations are pass-through entities. All profits are passed through to the owners, who must pay on their individual income taxes.

Nonprofit corporations are exempt from paying federal and state taxes, provided they stay within the rules for nonprofit activity. However, anyone drawing a salary from a nonprofit corporation will pay income tax on that salary.

Visit the Arizona Department of Revenue webpage for more information.

While we don’t offer professional corporation formation services in Arizona, we can help you start a standard corporation.