Arizona LLC and Advantages and Disadvantages
Organizing an Arizona LLC
An Arizona limited liability company is formed by filing Articles of Organization with the Arizona Secretary of State and paying a fee of $50.
Arizona LLC and Advantages and Disadvantages
An Arizona LLC
offers business entrepreneurs the form of corporate organization that provides perhaps the most flexibility to you. An LLC formation, like the alternative corporate forms of organization like a limited partnership
or a Subchapter S Corporation,
are generally prime candidates for a business juststarting. The state of Arizona gives public support to an Arizona LLC.
Should I form an Arizona LLC?
An Arizona LLC satisfies a necessary condition of your business planning developement in that it meets the requirement that you establish a legal form of organization in order to gain the statutory benefits and protection available in Arizona to your LLC. Your Arizona LLC establishes a legal presence within the state, which you can use either as a platform for in-state operations or by registering your Arizona LLC via your agent's physical address in order to meet the purely statutory requirement for tax and filing purposes absent an in state operation.
Arizona LLC Law Requires
- Arizona requires a LLC (limited liability company) to publish notice of the Articles of Organization. The notice of articles of organization is to occur in the county where the LLC is located. Arizona is one of two states which requires publication of LLC Articles. The notice must appear in an approved legal publication such as a newspaper of general circulation.
- You are also required to Submit an affidavit of publication to the Arizona Corporation Commission (ACC) to verify compliance.
Advantages and Disadvantages: Arizona LLC
Advantages of LLC
- Limited Liability: Owners of a LLC have the limited liability protection of a corporation.
- Flexible Profit Distribution: Limited liability companies can select varying forms of distribution of profits. Unlike a common partnership where the split is 50-50, LLC have much more flexibility.
- No Minutes: Corporations are required to keep formal minutes, have meetings, and record resolutions. The LLC business structure requires no corporate minutes or resolutions and is easier to operate.
- Flow Through Taxation: All your business losses, profits, and expenses flow through the company to the individual members. You avoid the double taxation of paying corporate tax and individual tax. Usually, this will be a tax advantage, but circumstances can favor a corporate tax structure.
Disadvantages of LLC
- Limited Life: Corporations can live forever, whereas a LLC is dissolved when a member dies or undergoes bankruptcy.
- Going Public: Business owners with plans to take their company public, or issuing employee shares in the future, may be best served by choosing a corporate business structure.
- Added Complexity: Running a sole-proprietorship or partnership will have less paperwork and complexity. A LLC may federally be classified as a sole-proprietorship, partnership, or corporation for tax purposes. Classification can be selected or a default may apply.
Arizona’s 2012 Business Tax Climate Ranks 27th
Arizona ranks 27th in the Tax State Business Tax Climate Index. The Index compares the states in five areas of taxation that impact business: corporate taxes; individual income taxes; sales taxes; unemployment insurance taxes; and taxes on property, including residential and commercial property.
Tax Freedom Day Arrives on April 2 in Arizona
Tax Freedom Day is the day when Americans finally have earned enough money to pay off their total tax bill for the year. In 2011, Arizona taxpayers work until April 2 (ranked 39th nationally) to pay their total tax bill, 10 days earlier than national Tax Freedom Day (April 12).
Arizona's State and Local Tax Burden Below National Average
Arizona's 2009 state and local tax burden of 8.7% of income is below the national average of 9.8%. Arizona's tax burden has decreased overall from 10.3% (18th nationally) in 1977 to 8.7% (38th nationally) in 2009. Arizona taxpayers pay $3,140 per capita in state and local taxes.
Arizona's Individual Income Tax System
Arizona's personal income tax system consists of five brackets and a top rate of 4.54% kicking in at an income level of $150,000. That top rate ranks 39th highest among states levying an individual income tax. In 2008, Arizona's state-level individual income tax collections were $530 per person, which ranked 39th highest nationally.
Arizona's Corporate Income Tax System
Arizona's corporate tax structure consists of a flat rate of 6.968% on all corporate income. That rate ranks 26th highest among states levying corporate income taxes. In 2008 state-level corporate tax collections (excluding local taxes) were $122 per capita, which ranked 33rd highest nationally.
Arizona Sales and Excise Taxes
Arizona levies a 5.6% general sales or use tax on consumers, which is slightly below the national median of 5.85%. 2007 combined state and local general and selective sales tax collections were $1,800 per person, which ranked 7th highest nationally. Arizona's gasoline tax stands at 19.0 cents per gallon (ranked 41rst highest nationally), while its cigarette tax stands at $2.00 per pack of twenty (10th highest nationally). The sales tax was adopted in 1933, the gasoline tax in 1921 and the cigarette tax in 1935.
Arizona Property Taxes Comparatively Modest
Arizona is one of the 37 states that collect property taxes at both the state and local levels. As in most states, local governments collect far more. Arizona's localities collected $846.45 per capita in property taxes in fiscal year 2006, the latest year for which the Census Bureau has published state-by-state data. At the state level, Arizona collected $65.27 per capita during FY 2006, making its combined state/local property tax collections $911.73 per capita, ranked 35th nationally.
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