Question: What is the best type of entity to form to own and operate an Arizona business or to own investment real estate?
Answer: The Arizona limited liability company, except in limited circumstances.
Two business law attorneys wrote a paper published in The Practical Tax Lawyer periodical that describes many of the reasons that an LLC is the right choice of entity for most new businesses, and advises that a new business choosing a legal form should first consider an LLC. The authors present a series of simple examples to illustrate the advantages that LLCs often have over both C corporations and S corporations. The article begins:
“An LLC is the right choice, however, in a majority of cases. Accordingly, an LLC should be the first form to consider for a new business. . . . An LLC has nearly unlimited flexibility in the types of equity and debt interests that it may issue to its members. An LLC may issue all manner of common interests, preferred interests, vested or unvested interests, debt, and options to acquire any of the above.”
As an Arizona lawyer who has been practicing business law in Arizona since 1980 and who has formed 7,600+ Arizona LLCs, I agree with the authors that the limited liability company is almost always the best type of entity to form to operate a business or own real estate in Arizona. People form Arizona LLCs 12 times more often that they form Arizona corporations. See “ACC Entity Formation Statistics.”