Formation of an LLC is governed by Arizona Revised Statute § 29-631. A Limited Liability Company, or LLC, combines some of the best features of other business entities, such as corporations and partnerships. One of the main benefits is that LLC’s allows their members limited personal liability or exposure while at the same time allowing members to maintain full control and participation. Another benefit is the potential to avoid double taxation when dealing with the acquisition and development of real estate due to increased or appreciated value.
As discussed in the previous paragraph, LLC’s allow for management directly by the members, however, members can also opt out and allow a more centralized style management, similar to a corporation if they choose. Before forming an LLC the members must establish how many members there will be and what the initial contribution of each member will be. While the initial contribution is usually money, contribution can also include other things as well, for example it could be labor or a space to operate. Although contribution is governed by statute, members can choose from the options what each member’s contribution will be. There are no restrictions or requirements for types of members.
The first step in forming an LLC is choosing a name. A good idea to avoid any hassles would be to run a search for other businesses that may have the same or similar names. In addition to a normal internet search, a search of the Arizona Corporation Commission “ACC” website should be run to make sure a chosen name is available. If the name is available you can hold it with the ACC for up to 120 days.
Once a name has been selected, and it is available, the next step is to file the Articles of Organization with the ACC. The articles must include certain information such as the name, address and statutory agent among other things. The articles must then be reviewed by the ACC and either accepted or returned for additional work. If the articles are rejected they will be accompanied by a letter from the ACC explaining what steps must be taken to correct them. Finally, the members will want to register the LLC with the city they are doing business in and apply for any additional business licenses or other licenses that may be required by Federal law for tax purposes. The LLC may also open a bank account in the name of the LLC for conducting business transactions. Once an LLC is formed it generally can continue as long the members want to. Members can vote to dissolve the LLC, or sometimes they can vote to keep an LLC going in the event of a death or bankruptcy of one of the members.
While an LLC is a great business entity for many needs, it is certainly not the only business entity available and may not fit every need. If you are interested in forming an LLC, or to find out if an LLC is right for your needs, contact our offices to schedule a free consultation with an experienced lawyer.