by Richard Keyt, Arizona LLC, corporate and business lawyer

This article is part of a series of nine related articles I wrote about the seven types of entities used in Arizona to operate a business and to hold business assets and investment real estate. The articles are:  (1) the “Best” Arizona Entity, (2) limited liability companies, (3) sole proprietorships, (4) general partnerships, (5) limited partnerships, (6) C corporations, (7) S corporations, (8) business trusts, , and (9) 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.

CharacteristicSPGPLPC CorpS CorpLLCLT
Ease of formationeasyeasycomplexcomplexcomplexsemi-complexcomplex
Formation document-GPALPAAOIAOIAOOTA
Owners identified in formation docs--yesyes(1)yes(1)yes(1)-
Managers, officers & directors identified in formation docs--yesyesyesyes-
File formation docs with--ASSACCACCACC-
Filing fee - normal--$10 + $3/page$60$60$50-
Filing fee - expedited--$10 + $3/page$95$95$85-
Publish formation docs in papernononoyesyesyesno
Publication cost(2)---$150+$150+$45+-
Statutory agentnonoyesyesyesyesno
Number of owners12+2+1+1-751+1+
Ownership restrictednonononoyesnono
ACC annual reportnononoyesyesnono
Owners, officers, directors & managers disclosed in annual reportnononoyesyesnono
Entity existence terminates if annual report not filednononoyesyesnono
Annual ACC fee---$45$45--
Annual minutesnononoyesyesnono
Managed by-GPSGPSD&O(3)D&O(3)M/MTEE
Owners generally have limited liabilitynonoyesyesyesyes-
Management by owners loses limited liabilityn/an/ayesnonono-
Entity a federal tax paying entityn/anonoyesnono(5)-
Report profits & losses on owners' federal tax returnyesyesyesnoyesmaybe(6)maybe(7)
Profits & losses may be specially allocated to ownersn/ayesyesnonoyesn/a


ACC = Arizona Corporation Commission

AOI = articles of incorporation

AOO = articles of organization

ASS = Arizona Secretary of State

C corp = C corporation

D&O = directors & officers

GP = general partnership

GPA = general partnership agreement

GPS = general partners

LP = limited partnership

LLC = limited liability company

LPA = limited partnership agreement

LT = land trust

M = members

M/M = members or managers

S corp = S corporation

SHDR = shareholders

SP = sole proprietorship

TEE = trustee

TA = trust agreement


(1)  The formation document must disclose the name and address of all owners of twenty percent or more of the ownership interests in the entity.

(2)  Estimated cost based on KEYTLaw standard document. Actual cost depends on length of document and publishing newspaper. Note: The Yuma Daily Sun newspaper is the only paper in Yuma County approved by the ACC for publication. It recently charged me $186 to publish substantially the same articles of organization for an LLC that would have cost approximately $60 if I had published the same articles in the Mesa Tribune.

(3)  The members of the board of directors are responsible for managing an Arizona corporation. The shareholders elect the directors. The officers report to the directors and carry out the day to day business of the corporation in accordance with the policies and instructions set by the directors. The directors elect the officers.

(4)  The limited partners, as a general rule, are not liable for the debts of the limited partnership, but all general partners of an Arizona limited partnership have unlimited liability for the obligations of the limited partnership. Limited partners who become involved in management may become liable as general partners.

(5)  An LLC may or may not be a federal income tax paying entity depending on how it elects to be taxed. Sole member LLCs may be taxed for federal income tax purposes as a sole proprietorship, partnership or corporation. Multiple member LLCs may elect to be taxed for federal income tax purposes as a partnership or a corporation. LLCs that are taxed as a partnership are not federal income tax paying entities. LLCs that are taxed as corporations are federal income taxpaying entities.

(6)  If the LLC is taxed as a partnership, the profits and losses pass through to the members prorata based on their percentage ownership or as otherwise provided in a special allocation of profits and losses. If the LLC is taxed as a C corporation, the LLC reports profits and losses rather than the members.

(7)  Federal income taxation of trusts is a complex subject and is beyond the scope of this article. The profits and losses of a trust are sometimes reported by the trust and sometimes reported by the beneficiaries depending on the sources of the profits and losses and whether and to what extend income is distributed to the beneficiaries.

Related Articles

This article was first published on February 9, 2003.