Entrepreneurship is exciting—the thrill of developing a winning product or service, bringing that idea to life, and making life better for your clients—it’s fun. But unfortunately, it’s not free. Long story short: starting a business has a price tag. LLCs are no exception.
If you’re hoping to start an LLC in Arizona, you’ll quickly learn that you’ll have a pretty long list of fees for forms, licenses, and applications that you’ll need to get started. Some of those are optional fees, and some are unavoidable. In this guide, we’ll walk you through all the costs you can expect when starting an Arizona LLC. By the end, you’ll have a clear picture of how your new business will impact your wallet.
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What’s the least amount I have to pay to form an LLC in Arizona?
If you’re crunching the numbers before diving right in, good on you! Planning ahead is a surefire way to start your business off on the right foot. But let’s make one thing clear: the phrase “cost to start an LLC” is a bit deceptive. That’s because you don’t want to get stuck focusing on the “day one” expenses of business.
That’s right—when budgeting for start-up costs, you need to account for the costs you’ll pay today and the costs you’ll pay a year or two down the road.
So let’s talk start-up costs and ongoing costs for your Arizona LLC. But to keep things simple, here we’ll cover the non-negotiable costs. Later on, we’ll talk about services that are nice to have (but you can live without if you have to).
AZ LLC Start-up costs
There are two primary start-up costs in Arizona. The most important one is the Articles of Organization. Unlike many states, Arizona charges a pretty affordable filing fee of just $50 ($85 for online filings, which are regarded as expedited). You can’t avoid this cost, though. After all, the Articles of Organization is what officially forms your business in the state. Without it, you’re not a recognized business.
The other main start-up cost is for business licensing. Unfortunately, we can’t really list the total price tag for them. That’s because what license you need will vary based on your location and your industry. For starters, there’s the general business licenses: Arizona doesn’t require them on the state levels, but some cities and counties do. You’ll need to get in contact with your local government to learn what the requirements are (plus what the fee is, if applicable). The only state license type is the Transaction Privilege Tax License, which you’ll get from the Department of Revenue. The good news is, this license helps you apply for other ones at the same time.
Then there are professional licenses to consider: Arizona requires licenses for a wide variety of industries, including massage therapists, home care therapists, and more. To learn more about professional licenses, check out Arizona Commerce Authority.
Ongoing costs for an LLC in AZ
If your business lasts (and we’re confident it will), then you’ll have several ongoing costs. These include license renewals and annual taxes. Let’s dig into those prices and fees.
License renewals
Just as it’s hard for us to list the costs to apply for your initial licenses, it’s hard for us to list out the cost to renew them. Every licensing board has their own requirements for renewal, and so do the individual cities and counties that require general licenses. When you obtain your licenses to begin with, we recommend taking note of the renewal requirements for your industry so none of the fees surprise you.
Annual taxes
In Arizona, one of the biggest annual costs you’ll have will be taxes. How big that cost is mostly depends on your taxation structure. If you’re taxed as an individual, your rates will fall between 2.59% and 4.5% depending on your income. The corporate income rate, however, is a flat 4.9% rate. Next, there’s the Transaction Privilege Tax, which acts like the state sales tax. It’s a 5.6% rate, and you need to obtain a license in order to compliantly collect it.
There’s also a wide variety of miscellaneous business taxes that might apply to your LLC: liquor, tobacco, and waste tires, just to name a few. There are plenty of others, though. To learn more about these business taxes, check out Arizona’s helpful resource, Business Basics: A Guide to Taxes for Arizona Businesses.
What are the discretionary costs to form an Arizona LLC?
When you’re starting your business, your budget is usually pretty tight. Prioritizing costs can get tricky. The costs we listed above are unavoidable. Well, technically, you can avoid them, but you’ll be heavily penalized if you do. And there’s not much point to spending all that money on starting a business only to knowingly let it be dissolved because you didn’t pay your ongoing costs.
But if you can help it, doing the “bare minimum” is probably not the best way to start your business. There are plenty of discretionary costs you can pay for certain services that make life easier. Here, we’ll dig into those costs—and why you might consider paying them.
1. Name reservation application
Naming things can be a bit tricky; after all, sometimes inspiration is a little lacking! And since Arizona doesn’t allow you to use a name that someone else has already claimed, you have to work even harder to pick one that’s unique, memorable, and just right for your business.
It’s a multi-step process, really: you have to brainstorm name ideas, choose just the right words, meet state name requirements, and of course, ensure that the name isn’t already in use (you can check using a Business Entity Search).
If you’re like a lot of people, you probably want to ensure that your hard work doesn’t go to waste once you’ve created the perfect name. So you have to lay claim to your new business name. You can do so either by filing your Articles of Organization, or by filing an Entity Name Reservation Application. You should only file this form if you’re not yet ready to file your Articles. Otherwise, you’d be wasting your hard-earned cash. Arizona requires a $45 fee (it’s only $10 if you file by mail; online filings are “expedited”). This process will protect your desired name for 120 days. Arizona does not allow you to renew a reservation.
2. Obtaining a Trade Name
Wait—didn’t we just cover business names? Yes. But there’s a distinction: your business name, which you’ll write in on your Articles of Organization, is the legal name of your business. A Trade Name, sometimes called a DBA or assumed name, is like a nickname for your business. For example, your legal name might Joseph Smith, but your friends call you Joe for short. Joe is a perfectly valid name, but you can’t put it on legal paperwork. You’d have to legally change your name to do so.
A Trade Name acts kind of like a nickname for your business; some LLCs and corporations also use Trade Names to establish new product lines or new “businesses” under the LLC “parent company.” But regardless of why you use a Trade Name, if it differs from your legal name, you need to register it before you can use it.
Quick note: registering a Trade Name in Arizona doesn’t give you an exclusive legal right to your name. That said, every business that registers with the state must ensure that their name differs from the names of other registered businesses. So even though it doesn’t give exclusive ownership, registering effectively prevents others from trying to use your name.
To register your Trade Name, you’ll need to file the state’s Trade Name Application. There’s a $10 fee for this filing. Your registration is valid for 10 years. After that, you’ll need to file a renewal; like the initial registration, the cost is $10. For more information on this registration process, check out our guide to Arizona Trade Names.
3. LLC formation services
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Paperwork is a massive hassle. And unless you’re starting an LLC to help other Arizonans with their paperwork, odds are you don’t want to deal with much paperwork yourself.
The bad news? Paperwork is an unavoidable part of starting an Arizona LLC: the Articles of Organization, general business license applications, professional licenses, transaction privilege taxes—the list goes on and on. The good news? You can hire an LLC formation service to do the pesky paperwork for you.
Of course, there’s some cost involved. And while there are a lot of great LLC formation services, they aren’t all created equal. And they all have different price points.
Many LLC formation services offer a wide variety of options, with ZenBusiness offering packages starting at $0 + state fee. You can also take a look at other well known services like LegalZoom, Northwest, and Incfile that have other types of pros.
These services are completely optional; you can DIY your Arizona LLC formation. But many entrepreneurs find the time saved is worth the money. If you do opt to hire a service, please make sure you take the time to understand what you’re buying.
4. AZ Registered agent services
Arizona law clearly states that every LLC must designate a registered agent to act as a middleman between your business and the state. Long story short, the registered agent accepts service of process (and any other official communication from the state) on your behalf. One quick note: Arizona refers to them as statutory agents, though. There’s no difference between a statutory agent and a registered agent; it’s just a different word choice.
Technically, this is another thing you can DIY; Arizona allows you to serve as your own registered agent. However, in our opinion, it’s worth the expense to hire a registered agent.
Why? For starters, a registered agent’s address becomes part of the public record; anyone in the state can find that address. That leads to spam mail (sometimes worse). Plus, a registered agent must be present at the registered address during all standard business hours. If you serve as your own, you’d be tied down to your location constantly. A registered agent service prevents those annoyances. A service will also help you keep track of annual filing requirements, license renewals, and more.
These services typically charge an annual fee. For example, annual fees for our top 4 Arizona registered agent services range from $99 to $299 per year depending on the service you choose. That said, some offer the first year free if you use them as an LLC formation service.
Quick Note: If you need to later down the line, you can always change your registered agent.
5. Expedited filing fees
In Arizona, it usually takes up to 4 weeks for the Secretary of State to process your Articles of Organization. Granted, that time can vary based on order volume, time of year, and so on. But they’ll usually approve or reject your Articles within a month.
If that sounds like too long to wait, Arizona allows you to expedite your filings. Technically speaking, if you file online, you’ll automatically expedite it. You can expedite mail-in filings, too. Expediting cuts down processing speeds to approximately 12 business days. There’s a $35 upcharge for faster processing. Since the fee isn’t unreasonable, it may be worth the extra expense to expedite, but patience works, too. You can let your budget and your timetable be the deciding factors.
6. Business attorneys
Starting a business is a complicated process. And it’s a legal one. We do our best to make the process seem less daunting with guides like this one. But at the end of the day, we can’t write a guide that would cover every single question every business will ever face. That’s because your business is unique.
Business attorneys, however, can talk you through all the nuances of forming and running your business. In many cases, the advice of an attorney can save you thousands by helping you avoid expensive legal mistakes.
However, the upfront costs of hiring a business attorney can be pretty pricey. For example, many attorneys charge per hour, with rates ranging between $150-$350. Others offer “LLC formation packages” for flat rates that fall between $500-$2000. And of course, those fees vary based on the attorney’s experience, location, and so on.
If you’d like to hire one, we recommend checking out sites like Avvo.com. Their database is nearly comprehensive, so it’s a great way to search Arizona business lawyers. You can also narrow results by location, cost, overall satisfaction rating, and more. It’s the best place to look to find the right legal consultation for your business.
Conclusion
Long story short: starting an Arizona LLC can be a pretty pricey endeavor. If you look at each cost separately, it doesn’t seem too bad (even the $50-$85 Articles of Organization fee is pretty manageable). But when you add them all up or tack on some additional services, the total price tag grows pretty quickly.
Thankfully, since you’ve read this guide, you know what you’re up against. And sometimes, knowing is half the battle—and now you’re armed with all the information you need to budget the start-up costs so you can start your Arizona LLC off on the right foot. We wish you and your new business the best!