Using an Arizona Limited Liability Company (LLC) for simple business formation and Asset Protection
When starting a new business or seeking to reduce liability in Arizona, many people choose to form a Limited Liability Company (LLC). LLCs are a very popular entity because they are a “pass-through” entity meaning they don’t face corporate income tax like corporations do. Instead, Income generated by a LLC is generally passed through to its members without being taxed first. After income is given to its’ members, each member pays income tax according to their particular tax bracket.
Like its’ name suggests, members of an Arizona Limited Liability Company enjoy protection against potential creditors. Even when there are several owners of a single LLC, creditors of any particular member are unable to liquidate assets of the LLC and are not entitled to income from the LLC. This makes an LLC an extremely appealing method of business formation, especially for new businesses or real estate investments. It is important to understand that in some cases, creditors have been successful in “piercing” this protection if a company improperly uses an LLC or if the company acts fraudulently. For this reason, it is imperative that your LLC is established and utilized correctly.
Another reason why a Limited Liability Company is an attractive choice for business formation and asset protection planning is the simplicity in creating the entity. Compared to other methods of entity formation, Limited Liability Companies are very simple to create and manage. In Arizona, a Statutory Agent must be designated and is responsible for receiving important company information. Articles of Organization must also be prepared and filed with Arizona Corporation Commission (AZCC). Once the Articles of Organization are filed, they must be published according to AZ law. After all this is complete a publication notice is sent to AZCC and a federal EIN number is obtained. Though not required, it is important to also prepare an Operating Agreement which regulates the management of the entity and controls important company events that may be specific to each LLC. If an Operating Agreement is not prepared, the company will be managed according to law set by the state which may be contrary to the desires of those involved with the company.
To form a limited liability company today or to clarify questions, Call Dana Law Firm for more information.