Can an LLC be a Tax-Exempt 501(c)(3) Charity?

Question:  My group is considering forming a tax-exempt charitable organization.  Can the organization be a limited liability company or must it be a nonprofit corporation?

Answer:  It can be an LLC if the LLC is wholly owned by a single exempt organization and the LLC satisfies the 12 conditions described in an IRS paper called “Limited Liability Companies as Exempt Organization Update.” The LLC cannot have individuals or nonexempt organizations as members, and its organizing documents must state a purpose to further the charitable purpose. To learn more about nonprofit corporations see my website called “Nonprofit Corporations & Charitable Organizations.”

The 12 conditions are:

1. The organizational documents must include a specific statement limiting the LLC’s activities to one or more exempt purposes.

2. The organizational language must specify that the LLC is operated exclusively to further the charitable purposes of its members.

3. The organizational language must require that the LLC’s members be section 501(c)(3) organizations or governmental units or wholly owned instrumentalities of a state or political subdivision thereof (“governmental units or instrumentalities”).

4. The organizational language must prohibit any direct or indirect transfer of any membership interest in the LLC to a transferee other than a section 501(c)(3) organization or governmental unit or instrumentality.

5. The organizational language must state that the LLC, interests in the LLC (other than a membership interest), or its assets may only be availed of or transferred to (whether directly or indirectly) any nonmember other than a section 501(c)(3) organization or governmental unit or instrumentality in exchange for fair market value.

6. The organizational language must guarantee that upon dissolution of the LLC, the assets devoted to the LLC’s charitable purposes will continue to be devoted to charitable purposes.

7. The organizational language must require that any amendments to the LLC’s articles of organization and operating agreement be consistent with section 501(c)(3).

8. The organizational language must prohibit the LLC from merging with, or converting into, a for -profit entity.

9. The organizational language must require that the LLC not distribute any assets to members who cease to be organizations described in section 501(c)(3) or governmental units or instrumentalities.

10. The organizational language must contain an acceptable contingency plan in the event one or more members ceases at any time to be an organization described in section 501(c)(3) or a governmental unit or instrumentality.

11. The organizational language must state that the LLC’s exempt members will expeditiously and vigorously enforce all of their rights in the LLC and will pursue all legal and equitable remedies to protect their interests in the LLC.

12. The LLC must represent that all its organizing document provisions are consistent with state LLC laws, and are enforceable at law and in equity.

2016-11-16T08:23:42-07:00August 4th, 2014|FAQs|0 Comments

New IRS Procedure to Get EIN for an LLC Owned by a Nonresident Alien

Question:  I am a not a U.S. citizen and I live outside the U.S., aka a “nonresident alien.”  I formed a limited liability company in the U.S.  How do I get a federal employer id number (EIN) for my LLC?

Answer:  You can get the EIN one of two ways:  the easy way or the not so easy way. Before January of 2014 we could get an EIN for an LLC we formed for a nonresident alien if the nonresident alien completed and signed an IRS form SS-4 that designated my legal assistant as a third party designee authorized to contact the IRS and get the EIN.  My legal assistant would call the IRS international EIN number, fax the SS-4 to the IRS agent and spend about 45 minutes on the phone, but at the end of the call the IRS would give my legal assistant the EIN.

Beginning in January of 2014, the IRS canned that procedure.  Now a company of any type owned by a nonresident alien gets an EIN for the company by one of the following two methods:

You should be able to get the EIN for the new LLC by using the IRS’ online wizard here:

Easy Way: If the nonresident alien has an IRS issued International Taxpayer Identification Number (ITIN), the nonresident alien can obtain the EIN in a 5 – 10 minute data entry session using the IRS’ online EIN wizard.  After submitting all of the information the website will display the EIN.  Be sure to print the page with the EIN and keep it in a safe place.

Hard Way:  If the nonresident alien does not have an ITIN then he or she must complete and sign an IRS form SS-4 and fax or mail it to the IRS.  Faxing the SS-4 to the IRS is the better method because the IRS will fax the EIN to the applicant in approximately four business days vs. three to four weeks if the SS-4 is mailed to the IRS.  Prepare, sign and fax the IRS form SS-4 to the IRS at 859-669-5760.

To get a partially completed IRS form SS-4 for an LLC and my detailed instructions on how to fill out the form read my article called “How to Complete IRS Form SS-4.”  Be sure to delete all the text at the bottom of the form in the Third Party Designee Fields and insert your name, phone number and fax number at the bottom of the form.

2017-10-06T21:36:19-07:00June 5th, 2014|FAQs, Forming LLCs, Tax Issues|0 Comments

Warning: Improper Contract Signature May Create Personal Liability

Question:  My LLC is to be the tenant on a real property lease.  The landlord’s lease has a signature block that indicates I will sign the lease as the manager and as a member of the LLC.  The signature block looks like this:

World Wide Widgets, LLC, an Arizona limited liability company

Homer Simpson, Manager and Member

If I sign the contract will I be personally liable under the lease in addition to the LLC?

Answer:  Probably.  If you sign the contract with the signature block as indicated above the landlord will claim you signed the contract in your capacity as the manager of the LLC AND in your individual capacity as a member.  A court might agree because that is the strict reading of the text under your signature.  Arizona LLC law says that a member does have have the legal power to sign a contract and bind the Arizona LLC on legal obligations.  Therefore the text “and Member” can only mean the signer is signing in his or her individual capacity.

Bottom Line:  If you do not want to be liable for obligations under a contract, make sure the signature line/block shows that you are signing only on behalf of the LLC.  The signature block should be one of the following:

If the LLC is member managed:

World Wide Widgets, LLC, an Arizona limited liability company

Homer Simpson, Member

If the LLC is manager managed:

World Wide Widgets, LLC, an Arizona limited liability company

Homer Simpson, Manager

2016-11-16T08:23:42-07:00April 21st, 2014|FAQs, How Do I, Operating LLCs|0 Comments

How Do I Complete IRS Form SS-4

Question:  I just formed a limited liability company.  I want a third party to obtain a federal employer id number (EIN) from the IRS.  The form is confusing.  Can you help me complete IRS Form SS-4?

Answer:  Yes.  We get this question so often LLC attorney Richard Keyt wrote a detailed article that explains how to complete the IRS Form SS-4.  Read “How to Complete IRS Form SS-4.”

Note:  If you are not asking a third party to get your LLC’s EIN don’t use IRS Form SS-4.  Instead, go to the IRS’ EIN wizard and take five minutes to answer questions online.  The IRS will issue your LLC an EIN at the end of the simple data entry process.

Watch this video to learn how to use the IRS’ online wizard to get an EIN for your LLC or PLLC.

2020-05-30T07:19:01-07:00April 20th, 2014|FAQs, Forming LLCs, How Do I, Operating LLCs|0 Comments

Do I Need a Certificate of Good Standing for My LLC?

Question:  Do I need to purchase a Certificate of Good Standing for my Arizona limited liability company from the Arizona Corporation Commission?

Answer:  Not unless a third party requires it.  The purpose of the Certificate of Good Standing is to prove to people or companies that your Arizona LLC was formed and is in good standing with the Arizona Corporation Commission.  You do not need the Certificate of Good Standing unless a third party requests it.  If you do get a request for a Certificate of Good Standing the requester will want a current Certificate of Good Standing, not one created months or years before the date of the request.

The most common reason you might need a Certificate of Good Standing is your LLC wants to borrows money from a financial institution.  Lenders frequently ask for a Certificate of Good Standing because they want to confirm that the LLC exists and is in good standing with the Arizona Corporation Commission when the lender loans the money.

Don’t waste your money on getting a Certificate of Good Standing unless somebody asks for it and complying with the request is important to your LLC.

If you need a Certificate of Good Standing for an Arizona LLC or corporation for your company or somebody else’s company watch my demonstration video and I will show you how to purchase the Certificate of Good Standing for $45 and download it immediately.

Do Members of an Arizona LLC Owe Fiduciary Duties to Other Members?

Question:  “Does a member of an Arizona limited liability company owe other members of the company any fiduciary duties?

Answer:   A March 27, 2014, Arizona Court of Appeals opinion in the case of TM2008 Investments, Inc., vs. ProCon Capital Corp. says that the members of an Arizona limited liability company do not owe any fiduciary duties to the other members unless the members signed an Operating Agreement that creates and imposes contractual fiduciary duties on the members.

Since the TM2008 Investments case involves fiduciary duties we should first explain what the term means.  The Cornell University Law School Legal Information Institute says the following about fiduciary duties:

“A fiduciary duty is a legal duty to act solely in another party’s interests. Parties owing this duty are called fiduciaries. The individuals to whom they owe a duty are called principals. Fiduciaries may not profit from their relationship with their principals unless they have the principals’ express informed consent. They also have a duty to avoid any conflicts of interest between themselves and their principals or between their principals and the fiduciaries’ other clients. A fiduciary duty is the strictest duty of care recognized by the US legal system.”

If a person owes a fiduciary duty to another person it also means it is much easier for the principal to sue the fiduciary for breach of a fiduciary duty and win a judgment because there is a higher standard of care associated with the fiduciary duty than would otherwise apply.

The TM2008 Investments, Inc., vs. ProCon Capital Corp. case arises from a dispute among the two members of Doveland Developments, LLC, a company formed to buy land and develop it into homes.  Unfortunately the project was not successful.  The lender threatened to foreclose and sell the land and go after the owners of the two members (Steve Tackett and Bonnie Vanzant) of Doveland Developments, LLC, because they had personally guaranteed the payment of the loan.  The members of Doveland Developments, LLC, are TM2008 Investments, Inc., and ProCon Capital Corp.

When the lender notified the parties that the loan was in default Bonnie Vanzant paid the loan in full.  She then sued Steve Tackett under an indemnification agreement they had signed to collect from Steve one half of the money Bonnie paid to the lender under her personal guaranty of the loan.  TM2008 Investments filed a petition to dissolve and liquidate Doveland Developments due to the inability to conduct business in light of the members’ substantial disagreements. ProCon Capital filed counterclaims against TM2008 Investments for breach of the implied covenant of good faith and fair dealing (count 1) and breach of contract (count 3), and against TM2008 Investments and the Bonnie and James Vanzant personally for breach of fiduciary duty (count 2).

The lawsuits were consolidated.  The trial court granted Bonnie Vanzant’s motion for summary judgment on the indemnification claim, but denied TM2008 Investments’ motion for summary judgment on the counterclaims.  Just before trial, ProCon Capital voluntarily dismissed with prejudice counts 1 and 3.  After jury trial on the claim for breach of fiduciary duty, the jury returned a verdict in favor of ProCon Capital and against TM2008 Investments and the Vanzants personally for $1,039,754.  The losers appealed.

The primary issue before the Arizona Court of Appeals was whether or not Arizona’s limited liability company law provides that a member of an Arizona LLC owes a fiduciary duty to the other members of the LLC.  ProCon Capital argued that because Arizona corporate and partnership law create fiduciary duties on shareholders and partners, respectively, Arizona law must therefor create fiduciary duties on members of an Arizona LLC.  The appellate court disagreed.  The court said:

We decline in this case to mechanically apply fiduciary duty principles from the law of closely-held corporations or partnerships to a limited liability company created under Arizona law. The legislature did not explicitly outline any such duties for members of an LLC; instead, the LLC Act allows the members of an LLC to not only create an operating agreement, but also delineate in that agreement the duties members owe one another.”

Translation:  The court said Arizona’s LLC statutes do not subject members of Arizona LLCs to any fiduciary duties and neither do any Arizona appellate court opinions.

However, the court said that an Operating Agreement can contain language that creates one or more fiduciary duties on members.  The Operating Agreement of Doveland Developments, LLC, contained this clause that ProCon Capital aruged created a fiduciary duty on TM2008 Investments, Inc, and Bonnie and James Vanzant:

It is agreed any Member shall not be liable to the Company or any other Member for any damages or the like relating to any vote, decision, action, inaction or the like taken on behalf of the Company in accordance with these provisions and other provisions of this Agreement if such is done in good faith and with reasonable business judgment including the duty to make management decisions with the care of an ordinarily prudent person in a like position and similar circumstances and in a manner believed to be in the best interests of the Company.

The appellate court found that the above quoted language did not create a fiduciary duty on the members.

The court reversed the trial court and sent the case back to the trial court.

Lessons to Be Learned

The TM2008 Investments, Inc., vs. ProCon Capital Corp. case stands for the following:

  • Arizona’s statutes that govern Arizona limited liability companies do not create fiduciary duties on members.
  • Members of an Arizona LLC can create one or more fiduciary duties by inserting appropriate language in the LLC’s Operating Agreement.

The issue of whether the Operating Agreement of a multimember Arizona LLC should or should not contain fiduciary duty provisions is a topic for another article.  Hint:  A member in control of an Arizona LLC would not want any fiduciary duties in the Operating Agreement, but the minority member would want the opposite.

What is Piercing the Veil of an LLC & Why is Do You Need to Understand It?

Question:  I have heard the term “piercing the veil” of a corporation or a limited liability company.  What does the term mean and why do owners of LLCs need to understand it?

Answer:  “Piercing the veil” means that a court disregards the shield or veil created by state law that says the owners of a corporation or an LLC are not liable for the debts of the entity.

Example 1: Homer Simpson’s LLC called World Wide Widgets, LLC, borrowed $25,000 from Ned Flanders.  The LLC signed the promissory note, but Homer didn’t.  The LLC does not pay.  World Wide Widgets, LLC, doesn’t have any assets so Ned knows if he gets a judgment against the LLC he can’t collect it.  Ned never gets his money.

Example 2:  Same facts as Example 1, but in operating the LLC Homer did not follow Arizona LLC law and did not follow proper procedures.  Ned sues the LLC and Homer and asks the court to pierce the veil and hold Homer liable for the LLC’s debt.  The court finds there are grounds to pierce the company veil and holds Homer personally liable for the LLC’s $25,000 debt.  This is the bad result for the LLC member and frustrates the reason people form an LLC, i.e., to protect themselves from liability for the debts of the LLC.

Jay Adkisson, a nationally known asset protection lawyer, said the following in response to a recent court ruling in a case called Shermane Hector v. Mo–Dad Environmental Serv., LLC:

The veil-piercing/alter ego challenges to LLCs are going to be interesting because they start out with the intended lack of formality of corporations, and then their owners often get loosey-goosey about how the company is operated, how it is capitalized (and continues to be capitalized), etc.  IMHO, the real challenge for planners is not so much in the meticulous drafting of LLC management agreements and the like, but in the education of owners as to how the entity needs to be run after all the ink dries.

How true.  The vast majority of people think that if they file the Arizona Corporation Commission’s fill in the blanks form Articles of Organization they are home free and their life savings are protected from the LLC’s debts.  Ignorance may be bliss, but ignorance of the legal concept called “piercing the company veil” can cost LLC members big bucks.

Most people who form an LLC don’t know that they must comply with Arizona’s LLC law or risk a court piercing the veil and holding them liable for the LLCs debts.  For example, Arizona LLC law requires that every Arizona LLC maintain certain records.  If you own an Arizona LLC don’t you think it would be a good idea to comply not only with that statute, but other Arizona LLC laws too?

The Shermane Hector v. Mo–Dad Environmental Serv., LLC court said this about veil piercing:

Some of the relevant factors considered in determining whether to apply the alter ego doctrine include: commingling of corporate and shareholder funds; failing to follow statutory formalities for incorporating and transacting corporate affairs; undercapitalization; failing to maintain separate bank accounts and bookkeeping records; and failing to hold regular shareholder and director meetings”

In forming 8,400+ Arizona LLCs I learned a long time ago that I must educate my LLC clients about Arizona LLC law.  I accomplish this two ways:

  • The LLC Operations Manual:  This is a 170 page book I wrote that explains Arizona’s LLC law in great detail.  For example, chapter 3 of the Operations Manual contains a list of 34 tasks that every LLC should complete in its first 75 days.  Learn more about the LLC Operations Manual.
  • Informative Email Messages:  Everybody who hires me to form an Arizona LLC will be sent 50 email messages during the first year informing them about Arizona LLC law and reminding them to do things like sign the Operating Agreement, open a bank account, set up the LLC’s bookkeeping system, consult with a CPA and document loans by members to the LLC.

To learn more about this very important topic read my article called “Two Phases in the Life of an LLC.”

Can One Member of an Arizona LLC Expel Another Member?

Question:  I am named in the original Articles of Organization of an Arizona limited liability company as a member.  Another member of the LLC signed an amendment to the Articles of Organization that removed me as a member.  Is that legal and does it terminate my membership in the LLC?

Answer:  No and no unless the member who signed the amendment had a contractual right to sign and file the amendment that removes you as a member of the LLC.  Arizona LLC law does not give a member of an Arizona LLC the right or power to unilaterally terminate the membership interest of another member.

As an Arizona limited liability company attorney who formed my first AZ LLC in October of 1992 and who has formed 8,400+ LLCs since then I must say that this is a very common scenario.  People think that the mere fact they file an amendment to the Articles of Organization that removes a member that the filed document has legal significance, i.e., that the person or entity that was a member yesterday is suddenly no longer a member today merely because the Articles were amended.

When a person or an entity acquires a membership interest in an Arizona LLC that person or owner has a property right recognized by Arizona law.  The owner of a property right cannot be divested of the property merely because somebody files a false document.  Example:  Homer Simpson owns a parcel of Arizona land.  Ned Flanders signs a deed that says Homer Simpson conveys the land to Ned and then records the deed.  This false deed does not transfer title to the property to Ned.  Ned’s deed is a legal nullity because it was not signed by the owner of the property.

The same concept applies to the property right that attaches to the member of an Arizona LLC.  If Ned Flanders signs and files an amendment to the Articles of Organization that removes Homer Simpson as a member that document does not cause Homer to cease to be a member.  There are four ways that Homer can cease to be a member of the company:

  • Homer dies.
  • Homer signs a document by which he assigns his membership interest to the LLC or one or more other people or entities.
  • Somebody has a legal or contractual right to terminate Homer’s membership interest.
  • A court terminates the membership.

Warning:  Arizona Revised Statutes Section 29-613.A states: “A person who . . . signs any articles, statement, report, application or other document filed with the commission that is known to the person as false in any material respect is guilty of a class 4 felony.”

Should I Pay the $50 or $85 Arizona LLC Filing Fee?

Question:  I know the fee to file Articles of Organization to create a new Arizona limited liability company is $50 or $85.  Why would I pay the $85 filing fee?

Answer:  The main reason to pay the $85 expedited filing fee is because the Arizona Corporation Commission will review the new LLCs Articles of Organization and approve it (hopefully approve rather than reject) within 5 – 8 business days rather than the 30 – 35 business days that applies to the standard $50 filing fee.  You should pay the $85 fee if any of the following apply to your LLC:

  • You need to open a bank account and your bank requires a copy of the LLC’s approved Articles of Organization and you can’t wait 30 – 35 business days.
  • You want the LLC to be able to take title to real estate and you can’t wait 30 – 35 business days.  Escrow companies will not close a real estate purchase escrow if title insurance is to be issued to the new LLC until the ACC approves the Articles of Organization.
  • The LLC is to sign an important contract and the other party won’t sign the contract until the ACC approves the Articles of Organization.

To see the exact number of days for the ACC to review regular filings and expedited filings go to its document processing times webpage.

Question about the Arizona Joint Tax Application Form

Question:  I am completing the Arizona Joint Tax Application (the sales tax license application) for my Arizona limited liability company that is owned by my Confidential Trust.  How do I answer question 18 that asks for the social security number of the owner?

Answer: Because your Confidential Trust owns your LLC so that your name does not appear on the public records of the Arizona Corporation Commission for confidentiality purposes, the answers to question 18 may not be obvious.  The trust owns the LLC so put the trust’s name in question 18.A. The trust is a revocable living trust, which means the IRS treats the trust as if it does not exist so for federal income tax purposes the trust uses the social security number of the trustmaker. Put the SSAN of the trustmaker in question 18.B. In question 18.C put the word “member.”

To learn more about the LLC owned by a Confidential Trust read my article called “How to Form an Arizona LLC without Disclosing Its Ultimate Owner(s).”

2018-05-20T14:01:27-07:00March 11th, 2014|FAQs, How Do I, Operating LLCs|0 Comments

What is the Arizona LLC Operations Manual?

Question:  I read on your Arizona LLC law website’s LLC formation package comparison page that your Silver and Gold packages include your book called the “Arizona LLC Operations Manual.”  What is the Operations Manual and why do I need it?

Answer:  In forming 8,400+ Arizona LLCs I learned long ago that people who form Arizona limited liability companies have the same questions.  I wrote the Operations Manual to educate the owners of Arizona LLCs about what they need to know during phase 2 of their LLC’s life. See the Operations Manual’s Table of Contents to learn the 75+ LLC topics it explains.

The primary reason people form an LLC is to protect the owners of the company from liabilities that might arise form the business and operations of the LLC.  However, before a court will uphold the protection given by Arizona LLC to the owners of an Arizona LLC the LLC must show that it complied with Arizona’s LLC law.  The purpose of the Operations Manual is to explain Arizona’s LLC law so people can know the law and make sure their LLC complies with it.

For example, Arizona LLC law requires that the LLC maintain certain records.  Don’t you think that if you form an Arizona LLC you should know what records your LLC must keep so you can make sure your LLC complies with the law?  This is just one example of the many legal issues that arise during phase 2 in the life of an LLC, aka the operational phase.

Read my article called “Two Phases in the Life of an LLC.”

2019-06-15T07:35:54-07:00March 9th, 2014|FAQs|0 Comments

How Do I Get Money into My LLC?

Question:  My limited liability company needs money.  How do I get my money into the LLC?

Answer:  There are two ways a member of a limited liability company funds the LLC:

  • a Loan:  The member loans money to the LLC.  The loan should be evidenced by a Promissory Note signed by the LLC.  The Promissory Note should state the the terms of the loan such as the interest rate (if interest will be charged), repayment terms and the maturity date.  The member(s) of the LLC should sign a resolution or action by unanimous consent that authorizes the loan.  The loan should also be reflected as a loan in the LLC’s books.
  • Capital Contribution:  A capital contribution is the equivalent of a gift from the member to the LLC without any obligation to repay the contribution until the LLC liquidates.  Capital contributions are additions to the LLCs’ assets without a corresponding debt that arises when money is loaned to the company.   Capital contributions are added to the contributing member’s capital account.  The LLC’s books must correctly reflect that the funds were made by the member as a capital contribution.  Capital contributions should also be approved by members by signing a resolution or action by unanimous consent that authorizes the capital contribution.

Purchase an Editable Promissory Note & Member Resolution

The KEYTForms store sells a form Promissory Note and a form Resolution of Members authorizing the member loan.  Each form is $47, is a downloadable & editable Word file, and comes with instructions on how to edit the form.

2016-11-16T08:23:43-07:00March 8th, 2014|FAQs, How Do I|0 Comments

Do Arizona LLCs File Annual Reports with the State?

Question:  Does Arizona LLC law require that an Arizona limited liability company file an annual report with the Arizona Corporation Commission?

Answer:  No.  One of the benefits of an Arizona LLC is that it does not have to file an annual report with the Arizona Corporation Commission or pay an annual fee to exist.  Most if not all other states require LLCs to file and annual report and pay a fee.  California is the worst.  It requires LLC’s to not only file an annual report, but pay an annual gross receipts tax of a minimum of $800.

Unfortunately Arizona corporate law requires Arizona corporations to file an annual report and pay a $45 fee (for profit corporations) or a $10 fee (nonprofit corporations).  Every year approximately ten percent of Arizona’s existing for corporations fail to file their annual report and are terminated by the Arizona Corporation Commission.  This is one of the reasons the Arizona LLC is a better choice of entity than an Arizona corporation.

Corporate Annual Report Reminders:  Although the ACC no longer mails annual report forms to corporations it does provide an annual email reminder, but you must subscribe on the ACC’s website to get the reminder.  If you have an Arizona corporation and you want to get a reminder every year from the ACC that the corporation’s annual report is due go to your entity’s record and then click on the “Subscribe to Annual Report Email Reminder” button and follow instructions.

2018-05-31T16:54:14-07:00March 2nd, 2014|AZ Corporation Commission, FAQs|0 Comments

When Will the Arizona Corporation Commission Review My LLC’s Articles?

Question:  When will the Arizona Corporation Commission review the Articles of Organization of my new Arizona limited liability company?

Answer: The amount of time the ACC takes to review Articles of Organization filed to create a new Arizona LLC depends on the whether the filing fee paid to the ACC was the $50 standard fee or the $85 epedited filing fee.  In general the ACC will review new Articles of Organization as follows:

  • If the filing fee is $50: ACC review is normally 4-6 business days after filing.
  • If the filing fee is $85: ACC review is normally 25- 30 business days after filing.

Go to the ACC’s document processing time web page to see exactly the filing date of documents that the ACC is currently reviewing.  Compare the Expedited ($85 filing fee) or the Nonexpedited Filing ($50 filing fee) processing times in business days for new LLCs with the received date stamped on the first page of the Articles of Organization that we emailed to you.

One of the advantages of purchasing our Silver or Gold LLC formation packages is that both of these packages include our payment of the $85 expedited filing fee.  Our Bronze LLC formation package Articles of Organization are filed using the standard $50 filing fee, which results in the much longer ACC review and approval.

2019-07-04T07:58:36-07:00February 27th, 2014|Articles of Organization, FAQs|0 Comments

When Do I Change the Address of My LLC with the Arizona Corporation Commission?

Question:  After I filed the Articles of Organization for my Arizona LLC my LLC moved its place of business.  Should I notify the Arizona Corporation Commission about the address change?

Answer:  Yes.  Arizona LLC law requires that whenever an Arizona LLC changes it address the LLC must notify the ACC of its new address within thirty days of the change.

To change the address of your LLC with the ACC complete the Arizona Corporation Commission’s Statement of Change of Known Place of Business Address or Statutory Agent.  Print the change of address form and send to the Arizona Corporation Commission at Arizona Corporation Commission – Corporate Filings Section, 1300 W. Washington St., Phoenix, Arizona 85007, with a check for $5 or $40 if you want expedited review by the ACC.

2019-07-04T10:41:46-07:00February 24th, 2014|AZ Corporation Commission, FAQs, How Do I|0 Comments

What is the Difference Between a Warranty Deed & a Special Warranty Deed?

Question:  What is the difference between a Warranty Deed and a Special Warranty Deed to Arizona real property?

Answer:  In a Warranty Deed the grantor warrants title from the beginning of time to the moment of the transfer of title under the deed.  In a Special Warranty Deed the grantor warrants the title only for the period of time the grantor owned the real estate.  When I represent the seller of real estate I try to have the seller give a SWD.  Sometimes a buyer will insist on a GWD, which is ok if the buyer can’t be talked out of it and there are no title problems that would cause a breach of the warranties made in the deed.

2016-11-16T08:23:43-07:00February 23rd, 2014|FAQs|0 Comments

What is the Difference between the Silver & Gold LLC Formation Packages?

Question:  Why would I purchase your $997 Gold LLC formation package instead of your $597 Silver LLC formation package?

Answer:  The primary reason people purchase our Gold LLC formation package is confidentiality. Arizona LLC law requires that the Articles of Organization filed with the Arizona Corporation Commission (ACC) to create the LLC state the following information:

  • If the LLC is member managed, the names and addresses of all members, or
  • If the LLC is member managed, the names and addresses of all members who own 20% or more of the LLC and all managers.

If you do not want your name as the owner of your LLC and your address to appear on the ACC’s public searchable internet database then you need to purchase my Gold LLC formation package.  The Gold package includes a Confidential Trust that will be the legal owner of the LLC.  A Confidential Trust is a revocable living trust in which the ultimate owner of the LLC is the trustmaker, trustee and beneficiary.

For example, if the name of your Confidential Trust is the Laguna Beach Trust then then owner/member shown in the Articles of Organization filed with the ACC is the Laguana Beach Trust, c/o KEYTLaw, LLC, 7373 E. Doubletree Ranch Road, Suite 135, Scottsdale, AZ 85258.

Note: The Gold LLC formation package includes our address service for one year.

Second Reason to Buy Our Gold LLC Package

The second reason people buy our Gold LLC package is to avoid probate on the death of the ultimate owner or owners.  All assets owned by the trust, including the LLC, will pass automatically to the heir(s) named in the trust agreement without the need for a probate when the initial beneficiary or beneficiaries die.  Probate avoidance can save the heir(s) $3,500+ in attorneys fees that can be generated by a superior court probate.

Learn about the contents of our three LLC formation packages.

2020-12-22T08:10:19-07:00February 15th, 2014|Articles of Organization, FAQs, Forming LLCs|0 Comments

How Do I Complete an IRS Form W-9 for My LLC?

Question: I operate my business through a limited liability company that is taxed as a sole proprietorship.  I received an IRS Form W-9 from a vendor who wants my LLC’s employer ID number or my social security number.  How do I complete the W-9?

Answer:  Here is how you complete the beginning of IRS Form W-9:

  1. Enter your name in the “Name (as shown on your income tax return)” box.
  2. Enter the name of your LLC in the “Business name/disregarded entity name, if different from above” box.
  3. Check the box in the “Check appropriate box for federal tax classification:” box that is to the left of “Individual/sole proprietor.”
  4. In Part I enter your social security account number.
  5. Complete the remainder of the form then date and sign it.

 The above assumes you did not file either an IRS Form 9932 or 2553 with the IRS to cause the LLC to be taxed as a C corporation or an S corporation, respectively.

2014-02-23T10:20:11-07:00February 13th, 2014|FAQs, How Do I, Tax Issues|0 Comments

Can I Have LLC in My Arizona Trade Name / DBA?

Question: I have not formed a limited liability company for my Arizona business, but can I register the trade name World Wide Widgets, LLC, from the Arizona Secretary of State for my business?

Answer:  No.  An Arizona trade name, aka a “dba,” cannot contain any words or abbreviations that indicate an entity type such as LLC or Inc.  See the Arizona Secretary of State’s Trademark Handbook.  If your dba included the letters LLC that would be misleading because it falsely represents to the public that the business is a limited liability company.

If you are going to operate a business you should form an LLC to protect yourself from things that might go wrong.  Without an LLC, a corporation or a limited partnership the owners of a business risk losing their life savings if business activity results in a lawsuit.  Read my article called “How LLCs Protect Your Life Savings.”

Say you form a business called World Wide Widgets, LLC.  That business could get a dba such as Best Widgets and use that on its store front or letterhead.  In Arizona the dba is obtained from the Arizona Secretary of State for $10 by completing and filing a Trade Name Registration Application.  This is explained in detail in my book called the Arizona LLC Operations Manual that is included with my Silver and Gold LLC packages.

2018-05-09T14:22:27-07:00February 12th, 2014|FAQs, How Do I|0 Comments

Who Signs the IRS Form 2553 If My Confidential Trust Owns My LLC that Wants to be Taxed as an S Corporation?

Question:  I purchased your Gold LLC formation package that included a Confidential Trust.  My Confidential Trust is the sole owner of my LLC.  My CPA advised me that my LLC should be taxed as an S corporation.  I am completing the IRS Form 2553, Election by a Small Business Corporation, but I am not sure how to show the ownership and who should sign the form.  What should I do?

Answer: Dealing with the IRS with respect to your LLC is different from everybody else.  The following only applies to the IRS and tax treatment of your LLC that is owned solely by your Confidential Trust:

  1. Because the LLC is a single owner LLC the IRS pretends like it does not exist.  The IRS calls a single member LLC a “disregarded entity” for federal income tax purposes.  This is the default tax treatment for single member LLCs.
  2. Because the Confidential Trust is revocable the IRS treats it as a “grantor trust,” which means the IRS pretends like the Confidential Trust does not exist.
  3. The end result of the application of items 1 & 2 above is the IRS considers you to be the owner.
  4. Sign the IRS Form 2553 on page 2 Part 1 and after your signature put a comma and print the following text: “individually and as Trustee of the [name of your trust] Trust under Agreement dated [date of your trust agreement], a grantor trust.”
  5. If you are a resident of a community property state like Arizona and own the beneficial interest in the Confidential Trust as community property then both spouses must sign the Form 2553 per the instructions in item 4 above.

Send the completed and signed IRS Form 2553 to the IRS via Certified Mail, Return Receipt Requested.  Make a transmittal letter that accompanies the Form 2553.  Keep a copy of the letter, the Form 2553, the Certified Mail certificate and the green Return Receipt in a save place in case the IRS claims it never got your Form 2553.

2017-02-25T10:36:53-07:00February 8th, 2014|FAQs, How Do I, Tax Issues|0 Comments
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