In Arizona, you may incorporate a S corporation (S corp) by founding a limited liability company (LLC) or a corporation and then choosing S corp status from the IRS when applying for an EIN.
An S corporation is a tax categorization, not a company structure, according to the IRS. The S corp classification is used to lower a company’s tax burden.
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In our How to Start a S Corp in Arizona tutorial, we’ll walk you through the steps.
Considerations Before Forming a S Corp
You must examine the following things before founding a S corporation:
Is a S corporation the best option for your company?
S corporation limitations
Why is an LLC the ideal structure for the S corporation tax status?
Are the tax benefits of a S corporation good for you?
Is a S Corporation the Best Business Structure for You?
For assistance in determining the best structure for your company, please contact us.
Restrictions on S Corporations
S corporations are restricted to one class of stock and 100 stockholders, among other things.
Why is an LLC the best structure for S Corporation tax status?
As entrepreneurs, we feel that incorporating a S corporation via an LLC is the best option since the benefits of founding a corporation are offset by S corp limitations. LLCs are also less difficult to manage than corporations.
Are S Corporation Tax Benefits Right for You?
You must determine if the S corp tax status is preferable to the default LLC tax status for your company. Read our LLC vs. S corp tutorial to fully grasp the tax benefits of a S corp.
How to Form a S Corporation
There are two major methods to form a S corporation:
When requesting your employee identification number, organize an LLC and obtain S corp tax status from the IRS (EIN)
By creating a company and applying to the IRS for S corp status
We do not advocate forming a company with the S corp tax status since it undermines all of the advantages of forming a corporation.
Forming an LLC and Choosing S Corp Status in Arizona
To form an LLC and elect S corp status, follow these six simple steps:
Step 1: Give Your LLC a Name
Step 2: Select a Registered Agent.
Step 3: Submit the Articles of Incorporation.
Step 4: Fulfill the publication requirement.
Create an Operating Agreement in Step 5
Step 6: Obtain an EIN and complete Form 2553 to elect S Corporation Tax Status.
Step 1: Give Your LLC a Name
The first and most significant step in forming an LLC in Arizona is deciding on a name.
Make certain that the name you chose conforms with Arizona naming rules and is readily searched by prospective customers.
1. Follow the Arizona LLC naming guidelines:
The following terms or abbreviations must appear in your name: limited liability company, limited company, L.L.C., L.C., LLC, or LC.
Your name may not include the terms “association,” “corporation,” or “incorporated,” or any abbreviation of those words.
Your LLC’s name cannot include terms that may be confused with a government organization (FBI, Treasury, State Department, etc.).
Your name must be distinct from any other businesses in your state. More information regarding what makes a company name distinctive may be found on the website of Arizona’s state senate.
information.
2. Does the name exist in Arizona? To determine whether your selected LLC name is available, visit the Arizona Corporation Commission’s eCorp business entity search.
3. Is the URL accessible?
We suggest that you check to see whether your company’s name is accessible as a web domain. Even if you do not intend to construct a company website right away, you may wish to purchase the URL to prevent others from gaining it.
Step 2: Select an Arizona Registered Agent
For your Arizona LLC, you must choose a statutory agent, also known as a registered agent.
A registered agent for your LLC will accept legal papers and tax notifications on your behalf. When you submit your LLC’s Articles of Organization, you will name your registered agent.
Many company owners opt to use the services of a registered agent. Many of these firms will incorporate your LLC for a modest price and provide free registered agent services for the first year.
Consent to Appointment of Arizona Registered Agent
Statutory agents in Arizona must provide written or electronic agreement to their appointment.
The following information should be included in the consent statement:
Your company’s name
The name of the person named as the statutory agent.
An explicit declaration that the person chosen agrees to act as the LLC’s registered agent.
The statutory agent’s signature
The execution date
Statutory Agent Acceptance Form M002 contains detailed information on this requirement as well as a printable consent form.
Step 3: Fill out and submit the Arizona LLC Articles of Organization.
To properly register an LLC, the Arizona LLC Articles of Organization are utilized.
Step 4: Fulfill the publication requirement.
In Arizona, newly established LLCs must post a Notice of LLC Formation in an authorized newspaper for three weeks in a row. The authorized newspaper must be published in the same county as the LLC’s primary office and within 60 days of establishment.
Your LLC Formation Notice should contain the following information:
The name of your LLC
Your statutory agent’s name and street address
The primary location of business of the LLC (if different from the statutory agent address)
Whether your LLC is administered by members or by managers
The name(s) and address(es) of your LLC manager or each LLC member
Step 5: Draft an Operating Agreement for your LLC.
An LLC operating agreement is a legal document that defines your LLC’s ownership and member responsibilities.
Step 6: Apply for an EIN and fill out Form 2553 on the IRS website.
An EIN is a number assigned by the US Internal Revenue Service (IRS) to companies in order to identify and tax them. It is basically a business’s Social Security number.
When you apply directly with the IRS, EINs are free.
Select S Corporation Tax Status
The IRS will give a link to Form 2553, the Election by a Small Business form, during the online EIN application process.
For full assistance with completing the form, please see our Form 2553 Instructions page.
This is the form to use if you want to elect S corp tax status for your LLC: