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Home  Arizona Law  Types of Entities  The "Best" Entity

The "Best" Entity

by Richard Keyt

This article is part of a series of nine related articles about the seven types of entities most commonly used in Arizona to operate a business and to hold business assets.  The articles are:  sole proprietorships, general partnerships, limited partnerships, C corporations, S corporations, trusts, limited liability companies, the "best" entity and the entity comparison table.  The type of entity can have significant income tax and asset protection consequences.  The articles discuss the entities in terms of ease and cost of formation, number of owners & restrictions on ownership, privacy, control and management, owners protection from liabilities of the entity, and federal income taxation issues.

1. In general, which entity offers the best potential federal tax advantages?

2. In general, which entity offers the best potential non-tax advantages?

3. In general, which entity would your recommend to a client to own real estate?

Eleven lawyers and three CPAs responded to my poll. The results of my unscientific and informal poll are:

LLC -12 votes, including all three CPAs

Limited partnership - 2 attorney votes

C corporation - 1 attorney vote

S corporation - 1 attorney vote

LLC -11 votes, including all three CPAs

C corporation - 1 attorney vote

S corporation - 1 attorney vote

Limited partnership - 1 attorney vote

LLC -14 votes, including all three CPAs

Limited partnership - 3 attorney votes

C corporation - 2 attorney votes

S corporation - 1 attorney vote

During 2002 I formed approximately forty entities for my clients.  Only four of the entities were corporations and two of them were nonprofit corporations.  The balance of the entities were Arizona limited liability companies.  I have not formed a partnership in many years other than a family limited partnership for estate planning purposes.  In my experience in the last ten years, the vast majority of the entities I have formed for clients in Arizona have been limited liability companies.

Arizona Entity Types

According to the March 17, 2003, edition of the Arizona Republic newspaper, as of February 28, 2003, the various types of entities on file with the Arizona Corporation Commission were:

Limited liability companies now make up approximately 33 percent of all Arizona entities on file with the Arizona Corporation Commission even though LLCs were first allowed in Arizona in 1992.

Another story in the Arizona Republic on April 14, 2003, showed the dramatic increase in the number of LLCs in Arizona from 1997 to date in 2003.  The number of LLCs existing in Arizona as of March 31 of the years indicated were as follows:

Before choosing your new entity, you should consult with your accountant and business attorney and discuss your options and choose the type of entity that is best for you in light of your particular facts and circumstances. 

Related Articles

This article was first published on February 9, 2003.

About the Author

Richard Keyt, J.D., LL.M. (income taxation New York University Law School) is a business, real estate, transactions, contracts and estate planning attorney licensed to practice law in Arizona.  He has formed over 1,500+ Arizona limited liability companies in the last few years because his low cost high quality LLC package is second to none and it only costs $599 for everything.  Rick has practiced law in Arizona since 1980.  Rick can be reached by telephone at 602-906-4953, ext. 101.  Email at  rickkeyt@keytlaw.com and fax at 602-297-6890.  Rick's web site located at www.keytlaw.com had over 1,000,000 visitors in 2006 and 2007.  Rick does not accept matters involving landlord / tenant disputes or litigation of any kind (other than tax lien foreclosures).  Communicating with Richard Keyt via email or otherwise does not cause you to become a client or cause your communications to be confidential or subject to the attorney client privilege.

This page was last modified on October 18, 2007.

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