|FORMING A LIMITED LIABILITY COMPANY
Attorneys and Counselors at Law
This article addresses the nuts and bolts of forming a limited liability company (typically called an “LLC”). This article does not
address the questions that should be asked before making the decision to form a company, such as: “Do I have what it takes
to be an entrepreneur?”; “Should I form an LLC or a corporation?”; and “What business should I conduct?” These topics are
the subjects in other some of my other articles. If you are looking for information on how to navigate the process of legally
creating an LLC, please read on.
Forming an LLC in Arizona is a fairly straightforward process. The process can be broken down into the following steps.
You will first need to decide who will own your new LLC and what you will name it. You will also need to decide how the
LLC will be run, whether by all the owners (member managed), by fewer than all the owners, or a third party (manager
managed). Once you have made these basic, preliminary decisions, you need to complete your articles of organization and
file them with the Arizona Corporation Commission (called the “ACC” throughout the remainder of the article), with the
appropriate fee of course. Once the ACC has accepted your articles of organization (this can take several months!), you
must publish your articles in one of the newspapers authorized by the ACC for three consecutive publications in the county
of your known place of business (address on your Articles of Organization). The last step is filing an affidavit of publication
with the ACC. At this point the formation of your LLC is complete.
While the paragraph above describes the basic steps to form an LLC in Arizona, as with most things in life, “the devil is in the
details.” By this I mean that there are many intermediate steps, decisions you will not have known about that need to be
made and pitfalls you must watch out for. For example, choosing a name seems like a simple task, but it catches many
people off guard. The next section provides more details related to choosing a name for your LLC.
In Arizona, your name must be distinguishable from other business names used in the state of Arizona. Your LLC name must
be not only distinguishable from other LLCs, but also from corporations and other businesses registered with the ACC and
the Arizona Secretary of State. Arizona Revised Statutes section 29-602(B) has a complete list of the type of entities that
must have distinct names. Unfortunately, because of the boom in LLC formations over the last few years, many common
names are already taken by existing companies. If you have a name that you would like to use, but you are not ready to form
an LLC or corporation, you can reserve the name with the ACC for $10 ($45 for expedited) by filing an Application for
Reservation of a Corporate Name using the following form. Please note that you can only reserve a name that is “available.”
Name availability is discussed below.
As of August 12, 2005, the guidelines for how the ACC determines whether or not a name is “distinguishable” have
changed. These changes have made it much easier to find an acceptable name. To see the ACC’s new and improved
naming standards click on this link.
What things do you need to do to see if a name is available? At a minimum, you must perform a corporate name search on
the ACC’s web site. You can call the ACC to get their opinion on whether a name is acceptable, but the advice is not binding
and your name could still be rejected regardless of what you are told on the phone. If the name you want is close to one
already registered and violates the naming standards, you may not be able to get your first choice. Consequently, it is a
good idea to have a first, second and third choice of names.
The above steps are the minimum you need to take to get your business name in Arizona. Just because Arizona allows you
to use a name as your business name does not mean you have a right to the name. If someone has used the name in
another state, particularly if they have used the name in interstate business, they may have federal rights to the name. To
protect yourself, I also suggest you search the Patent and Trademark Office for registered trademarks and service marks to
ensure the name you would like to use is not already registered. If you use a name that infringes on someone else’s
registered mark, you could be subject to penalties. If you are thinking about expanding into other states, you should consider
searching for similar business names in those states as well.
Another technical requirement in naming your LLC is what is known as the “extension.” You must use the words “limited
liability company” or “limited company” or the abbreviations “L.L.C.”, “L.C.”, “LLC” or “LC” in the name of your business to
identify the company as a limited liability company. For professional LLCs, such as accounting firms and law firms, you can
use “professional limited liability company”, “P.L.L.C.”, “P.L.C.”, “PLLC” or “PLC” instead of the above identifiers. If you forget
the identifying language, the ACC will reject your articles. You are also prohibited from using the words “association,”
“corporation,” or “incorporated” or abbreviations of these words. These identifiers are used only for corporations. Also,
there are other state laws that limit the words you can use in your business name. For example, you cannot use words that
would indicate you are a banking institution.
Adhering to all the technical statutory requirements (not the least of which is finding a name that is not too similar to someone
else’s name) while trying to choose a name that meets your business objectives can be difficult. When picking your
proposed names, be both creative and flexible. Finding a name you are happy with and is acceptable to the state may take
some time, and linguistic gymnastics!
MANAGEMENT OF COMPANY
Before you can form your Arizona LLC, you will need to decide whether your LLC will be “member managed” or “manager
managed.” I have seen several commentators state that there is really no distinction between member managed and
manager managed LLCs. In many cases this is probably true, however, I believe you should consider the type of
management authority you want each member to have before dismissing this distinction. If you have a husband and wife as
members of the LLC and each is to have full management authority, the distinction between member managed and manager
managed is likely academic. On the other hand, if you have some members that are passive investors or family members that
are members in the LLC only to achieve wealth transfer goals and are not involved in the operation of the LLC, the distinction
is very important.
When you indicate to the world through your articles of organization that you are member managed, you are representing
that the all members have authority to bind the company. In situations where you have passive investors or family members
who are not actively involved in the business, you likely do not want to give those individuals this apparent authority. You
open yourself and your LLC up to the unnecessary risk that some action by a passive member will legally bind the company.
Exposing the company to this risk is silly because you can easily avoid the risk by taking the time to consider how your LLC
will be managed and filing your articles of organization accordingly. Consequently, you should consider who will manage the
LLC, and who will be excluded from making management decisions, before you file your articles of organization. The
management authority in running the LLC, whether member managed or manager managed, should be clearly spelled out in a
written operating agreement. Operating agreements are discussed below.
Arizona law requires every LLC to have a “statutory agent” (sometimes referred to as a registered agent). The statutory
agent is the person or company designated in the public record as having the authority to receive legal documents on behalf
of the company. The statutory agent can be an individual who is a resident of Arizona, a corporation authorized to transact
business in Arizona, or a limited liability company authorized to transact business in Arizona. Because the statutory agent
must be able to accept service of process, the statutory agent must have a physical address listed. If the statutory agent
uses a post office box for mail, you must also provide a physical address.
DATE OF DISSOLUTION
In your articles you must give a date for dissolution if your LLC is to dissolve at a fixed date in the future. For example, if you
and another investor buy some land for development and you plan to sell the developed land by a certain date, you may want
to specify the latest date you will dissolve the company. Declaring a dissolution date puts others on notice that the company
is organized for a limited time.
In reality, very few people specify a latest date to dissolve anymore. Even with short-term ventures, few people want to be
bound to dissolve the LLC by a certain date because circumstances often change. If you do not have a definite latest date to
dissolve, you need not state in your articles that the life of the LLC is perpetual, it will be assumed.
ARTICLES OF ORGANIZATION
To formally create an LLC, you must file a document called the “articles of organization” with the ACC. The following items
are the statutory minimum requirements for what you must include in your articles of organization:
1. The name of your limited liability company.
2. The name, Arizona street address and signature of the agent for service of process (statutory agent).
3. The address of the company's known place of business in Arizona.
4. The latest date, if any, on which the limited liability company must dissolve.
5. Either of the following statements:
(a) Management of the limited liability company is vested in a manager or managers.
(b) Management of the limited liability company is reserved to the members.
6. The name and address of either of the following:
(a) If management of the limited liability company is vested in a manager or managers, each person who is a manager of
the limited liability company and each member who owns a twenty per cent or greater interest in the capital or profits of the
limited liability company.
(b) If management of the limited liability company is reserved to the members, each person who is a member of the limited
In addition to providing the minimum information required by statute, the articles of organization may include other provisions
as long as they are consistent with the law. The ACC publishes a form that contains the statutory minimum requirements.
You can find the ACC’s form articles of organization here.
FILING WITH THE ACC
Once you have completed your articles of organization, you must file them with the ACC. All documents filed with the ACC
must have the ACC’s standard cover sheet. The ACC cover sheet can be found here.
The filing fee for articles of organization is $50. However, we suggest also paying the additional $35 fee for expedited
processing. Processing times for documents not filed on an expedited basis have taken months to be processed.
You must file your original articles of organization, at least one copy of your articles of organization, the cover sheet, and
your check for $85 ($50 processing and $35 expedited fee) with the ACC. You can either mail or personally deliver all of the
above items to the ACC at:
1300 West Washington
Phoenix, AZ 85007-2929
400 West Congress
Tucson, AZ 85701-1347
PUBLISHING ARTICLES OF ORGANIZATION
When the ACC has reviewed and approved your articles of organization, they will send a letter to you stating that your
articles have been approved. At this point you must publish your articles of organization in an approved newspaper of
general circulation for three consecutive publications. The newspaper must publish the notice in the same county as your
known place of business. A list of approved newspapers can be obtained through the ACC. After your articles of
organization have been published you must make sure that an affidavit of publication is filed with the ACC. Once the affidavit
of publication is filed, you are finished!
We strongly encourage you to have a written operating agreement for your LLC. While not required by statute, an operating
agreement is essential for spelling out the rights and duties of the members.
LLC FORMATION SERVICES
While forming an LLC is well within the abilities of a diligent person, there are many potential traps and pitfalls. This article is
NOT a substitute for competent legal advice. If you would like to ensure your LLC is formed correctly and that you have
considered all the appropriate issues in the formation, please feel free to contact us at (602) 344-0034 or by e-mail.
About the Author: Kenneth J. Willmott is an attorney and CPA who practices in the areas of business law, real estate,
commercial transactions, commercial contracts and agreements and wills, trusts and estate planning. Mr. Willmott can be
reached by email or by telephone at (480) 831-6900.
845 North 6th Avenue
Phoenix, AZ 85003
Willmott & Associates, PLC serves clients in all Maricopa County cities, including Phoenix, Scottsdale, Tempe, Mesa, Chandler, Gilbert, Glendale, Peoria,
Copyright © 2012 Willmott & Associates, PLC. All rights reserved.
By Kenneth J. Willmott, CPA, JD