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Arizona 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 Limited Liability Company
- 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.
By Arizona and other state law in order to proceed with forming a llc, you need to prepare a written abstract detailing your llc purpose, the names of your initial Arizona LLC members, the name and address of your Arizona registered agent, the details of which will be introduced into the body of your LLC operating agreement and related Arizona LLC formation documents assembled for application to the state of Arizona.
Arizona’s Business Tax Climate Ranks 19th
Arizona ranks 19th in the State Business Tax Climate Index, which measures the impact on business of five major elements of the tax system: the percentage of income taken by all taxes, the individual income tax rates, the corporate income taxes, the sales tax rate, and the complexity of the tax system. The ranks of neighboring states were as follows: California (38th), Nevada (6th), Utah (26th), Colorado (8th) and New Mexico (40th).Arizona’s State/Local Tax Burden at National Average
In 1991, Arizona had one of the nation’s highest tax burdens with taxes as a percentage of state income registering at 11.5%. Since then however, the tax burden has significantly fallen due to tax cuts and the fact that individual incomes have risen faster than state/local tax collections. Recently the decline has evened off. Estimated now at 10.0% of income, Arizona’s state/local tax burden percentage equals the national average.Arizona Individual Income Tax System
Arizona’s personal income tax system consists of five brackets and a top rate of 5.04% kicking in at an income level of $150,000. In 2003 Arizona's individual income tax collections were $377 per person, ranked 39th highest nationally.Since most small businesses are either S Corporations or partnerships or sole proprietorships, they pay their business taxes at the rates for individuals. This makes the tax environment for small businesses in Arizona competitive compared to other states.
Arizona’s Corporate Income Tax System
Arizona’s corporate tax structure consists of a flat tax of 6.97% on all corporate income. That rate ranks 32nd highest among states levying corporate income taxes. In 2003 corporate tax collections were $69.80 per capita, ranked 23th highest nationally.