|Characteristic||SP||GP||LP||C Corp||S Corp||LLC||LT
|Ease of formation||easy||easy||complex||complex||complex||semi-complex||complex
|Owners identified in formation docs||-||-||yes||yes(1)||yes(1)||yes(1)||-
|Managers, officers & directors identified in formation docs||-||-||yes||yes||yes||yes||-
|File formation docs with||-||-||ASS||ACC||ACC||ACC||-
|Filing fee - normal||-||-||$10 + $3/page||$60||$60||$50||-
|Filing fee - expedited||-||-||$10 + $3/page||$95||$95||$85||-
|Publish formation docs in paper||no||no||no||yes||yes||yes||no
|Number of owners||1||2+||2+||1+||1-75||1+||1+
|ACC annual report||no||no||no||yes||yes||no||no
|Owners, officers, directors & managers disclosed in annual report||no||no||no||yes||yes||no||no
|Entity existence terminates if annual report not filed||no||no||no||yes||yes||no||no
|Annual ACC fee||-||-||-||$45||$45||-||-
|Owners generally have limited liability||no||no||yes||yes||yes||yes||-
|Management by owners loses limited liability||n/a||n/a||yes||no||no||no||-
|Entity a federal tax paying entity||n/a||no||no||yes||no||no(5)||-
|Report profits & losses on owners' federal tax return||yes||yes||yes||no||yes||maybe(6)||maybe(7)
|Profits & losses may be specially allocated to owners||n/a||yes||yes||no||no||yes||n/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.
This article was first published on February 9, 2003.