Looking to setup a limited liability company in Arizona? This type of legal entity is similar to a partnership or corporation, but there are distinct differences between the two.
LLC’s don’t have such stringent rules and requirements like a Corporation. LLC’s are also different from partnerships in that they do not have unlimited liability placed on them. As such, an LLC limits the liability assumed by the members. In addition, an LLC must have the word “limited” in the name of the legal entity; it also must be treated like a distinct and separate legal entity apart from the members of the LLC. Members of a limited liability company in Arizona have control over who can be admitted as a new member of the LLC.
The LLC’s benefits
There are numerous benefits for incorporating your business as an LLC. Not the least of which is the members of an LLC are, by and large, protected from personal liability that would come as result of actions coming from the LLC since the LLC is in and of itself a legal entity. Think of it this way, let’s say there were two empty seats and you were the only one in the room. Naturally, you would go sit in one seat and the other seat remains empty. But you decide to form an LLC. That LLC sits in the other seat as a distinct business entity. If it would ever come to the point where you would have the LLC dissolves, the LLC would no longer exist.
Arizona law states that “no member, manager, employee, officer or agent of a limited liability company is liable solely by reason of being a member, manager, employee, officer or agent, for the debts, obligations and liabilities of the limited liability company whether arising out of contract or tort, under a judgment, decree or order of a court otherwise. ” A.R.S. 29-651
the simple facts a person is part of a Corporation doesn’t completely free them from future liability when these two exceptions are relevant: piercing the corporate veil; or the alter ego theory of liability. The LLC will be disregarded – if necessary – when these exceptions apply to encourage fraud prevention or in preventing a member of the LLC from abandoning their obligation to the LLC. Additionally, members of the LLC can be personally liable according to the under the veil theory should they do not give adequate capitalization when the LLC is formed.
Another benefit to forming an LLC is flexibility in management. LLC members have the opportunity of participating directly in managing the business, or have the ability to designate one or more members to take care of the administrative duties for the LLC. As a business entity, the LLC can hire and retain employees who do not have a membership stake in the LLC. The employees’ compensation can be deducted as business expenses. If an LLC member, who is also an employee the LLC that has two or more members, receives compensation from the LLC, that expense is also deductible as long as the compensation is determined by the income generated by the LLC.
Forming an LLC or a Corporation with the help of an attorney at a reasonable cost can save you from certain legal headaches and the money spent trying to remedy those headaches down the road. And LLC run properly can protect the assets you own personally if your LLC happens to go into debt or if you are taken to court and the court does not rule in your favor. Finally, if your LLC goes bankrupt, creditors can’t force you to put up your personal assets as collateral to settle the debt. That’s because the LLC, a completely separate legal entity from you, is liable for the debt.
Entrepreneurs forming a small business have come to realize the benefits of forming an LLC. However, there are those who don’t understand the bytes responsibilities associated with forming an LLC. Since Arizona law is subject to change, it’s important to be up to date with what the law says about forming corporations or LLC’s so that you form an LLC in compliance with the law.
How do you form or setup a Limited Liability Company in Arizona?
Obviously, you’ll want to set up your LLC properly. In order to do that, you must file Articles of Organization for the LLC with the Arizona Corporation Commission. Generally speaking, you should be able to have your Articles of Organization for your LLC formed in about a month depending upon the number of other corporations filing papers at the time. However, for an extra fee, you can have your Articles of Organization for forming your LLC expedited. Once the Articles of Organization are approved, you must file a notice of publication according to the guidelines set forth by that Corporation Commission. Even though it seems relatively easy, there are numerous things that can happen that can bring your business formation to a grinding halt. That happens when the proper procedures are not followed.
It is true that you can file papers for an LLC by yourself, but it would be to your advantage to hire an experienced business formation attorney to make sure your LLC is formed properly. An experienced business formation attorney understands the proper procedure and can ensure your LLC formation is done in compliance with the law from the beginning. A business formation attorney can check for conflicts for naming your LLC and advise you about the pros and cons of an LLC filing. Furthermore, a business formation attorney can act as a statutory agent when it comes to service of process.
In today’s unpredictable marketplace, it’s vital now more than ever to establish your business on firm footing. Starting your own company can turn into a great opportunity for you since a number of today’s larger corporations got there beginning in a basement, backyard, or garage. The possibilities for where your LLC will go are limitless. Let an experienced business formation professional help you and your LLC get started in the direction you want to go.