Forming LLCs

People Love Our 170 Page LLC Operations Manual eBook

When people purchase my Silver or Gold LLC package one of the features they get is access to the 170+ page ebook I wrote called the “Arizona LLC Operations Manual.”  In forming 6,200+ Arizona LLCs I learned a long time ago that people have the same post formation questions.  I realized I could save myself a lot of time on the phone and answering emails if I wrote a book that answers all of people’s post LLC formation questions.  See the Table of Contents to see the many LLC topics that are explained in the Operations Manual.

Here are four recent emails I got from happy LLC clients who wrote about the Operations Manual:

“The operations manual well written and easy to follow. A great tool to have as a guide and reference. I would recommend an LLC keep this guide for its existence.  On a separate note thanks for the regular communication … wish all law firms were as easy to work with.”

“The LLC Operations Manual has been a great resource.  Its is well organized and provides clear instructions on what tod (and what not to do).”

“The online book is very helpful, as well as the email alerts.  I appreciate having the information that, for most the part, is easy to understand.”

“So, far I have not ended up with questions not covered by the book.”

2018-11-12T13:59:31+00:00November 13th, 2018|Forming LLCs, Operating LLCs|0 Comments

How to Open a Bank Account for an Arizona LLC Before the ACC Approves Its Articles of Organization

Because the Arizona Corporation Commission’s new database is broken and apparently can’t be fixed the time the ACC takes to review and approve the Articles of Organization filed to create a new Arizona LLC or PLLC has sky-rocketed through the roof.  To see how long it will take for the Arizona Corporation Commission to review and approve your company’s Articles of Organization go to the ACC’s processing times web page.  See also my article called “Arizona Corporation Commission’s New Database System Sucks.”

This delay is preventing people from opening a bank account in the name of the newly formed company.  Most of the large national banks and some smaller banks in Arizona will not open a bank account for a newly formed LLC or PLLC until after the Arizona Corporation Commission approves the company’s Articles of Organization.  If you cannot wait until the ACC approves the Articles of Organization of your newly formed Arizona LLC or PLLC you can open a bank account before the Articles are approved if you go to one of the banks listed below.

1. First Western Trust. Call Anna Popova, Assistant Vice President, at 602-224-7616 or email her at Anna.Popova@myfw.com. Her office is at 2425 E Camelback Road, Suite 100, Phoenix, AZ 85016. To open an account this bank needs the company’s EIN, Articles of Organization with the ACC stamp on it and the company’s Operating agreement. LLC owners can open a new business account as early as the day they file the Articles of Organization with Arizona Corporation Commission. They bank also has an office at 7025 North Scottsdale Road, Suite 100, Scottsdale, AZ 8525.

2. Trust Bank. Call Angela M. Chavira, Arizona Banking Manager, at 480-883-6819 or email her at Angela.Chavira@tbaz.com. Her office is at 2375 E. Camelback Road, Suite 155, Phoenix, AZ 85016. Trust Bank has four offices in Arizona. See its list of locations.

2018-10-03T14:59:03+00:00October 3rd, 2018|AZ Corporation Commission, Forming LLCs|0 Comments

Arizona Corporation Commission’s New Database System Sucks

This article explains a very serious problem that affects most Arizona LLCs and PLLCs that have filed paper (not online filed) Articles of Organization or amendments to Articles of Organization after May 19, 2018.  If you have a company that filed paper articles or amended articles with the Arizona Corporation Commission after that date you need to read this article so you will understand the problems the ACC probably created for you and your company.

ACC Adopts New Software System that Is Crap

On May 20, 2018, the Arizona Corporation Commission stopped using the database and related software that served the public well for many years and switched to a new database system that is broken and may not be fixable.  Before the new software went live the ACC was reviewing expedited filings in 3 – 5 business days and non-expedited filings in 20 – 25 business days.  According to the ACC’s processing time report dated July 30, 2018, the new and improved software system enables the ACC to review expedited filings in 15 -20 business days and non-expedited filings in 54 – 59 business days.

Here’s an example of the broken software system.  I did a search for an Arizona LLC.  Note the date and time of the search, which was 1/1/0001.  My search did not occur in the year after Jesus was born.  How is it possible the software programmers were unable to program the software to display the date and time of a search?  Very troubling.

The Biggest Problem is the ACC Cannot Put Correct Information on Approved Filings

The new software system prevents the Arizona Corporation Commission from compiling and disseminating accurate and correct information.  Between May 24, 2018, and July 13, 2018, we filed Articles of Organization for SIXTY-FIVE LLCs that the ACC has approved, but whose approval documents contain ACC created errors that the ACC is unable to fix.  Despite our many requests to fix incorrect dates and text the ACC put on approved documents the ACC has been unable to correct a single item  of bad information it stamped on the companies’ approval documents.  Update 8/14/18:  On this date we got the first entirely correct approved Articles of Organization, ACC approval letter and ACC website information of the 110 Articles we filed after May 20, 2018.

When the ACC approves new Articles of Organization there are three ACC created sources of information about the new company.  Information about the new company is found in the following locations:

  1. the top of the first page of the filed Articles of Organization returned to the company
  2. the ACC’s approval letter given to the company
  3. the ACC’s website

Not one of the 65 companies we formed between May 20, 2018, and July 13, 2018, that have been approved by the ACC has the correct filing date and correct information on all three of the above sources.  Despite repeated requests given to ACC personnel asking them to correct the ACC errors it has not corrected a single company’s incorrect data.

Illustrations of ACC Created Problems

The images below contain numbers in circles that refer to areas of Articles and approval letters and the website that have un-fixable errors.  The numbers in circles will be explained below.

Top of the Filed Articles of Organization

 

Articles of Organization Problems

The information next to numbers in a circle above is imprinted on the Articles of Organization by the ACC and then given to the company after it approves the filing of the Articles of Organization or amendment to the Articles of Organization.  The significance of each type of information shown above that has a number in a circle:

Circle 1:  The “received” date.  This is supposed to be the date the ACC received the Articles of Organization or the amendment.  This line may or may not be the actual date the ACC received the document.

Circle 2:  The “pending” or “filed” date.  Some times this line says “pending” followed by a date.  Some times it says “filed” followed by a date.  The filed date should always be the date the ACC received the Articles of Organization or the amendment.  Note:  If the ACC approved the document this line should say “filed” (not “pending”) followed by the date the ACC received the Articles of Organization or the amendment.    This line may or may not be the actual date the ACC received the document, which date is the actual date the document was filed.

Circle 3: I don’t have a clue what this long number is, but the ACC stamps it on the top right of each page of the approved document.

Circle 4: The approved document may or may not have this stamp under the first two lines the ACC puts on the top left of the first page.  In the good old days when the ACC was doing its job it always stamped its “Filed” stamp on the top of the first page of the document.  The stamp include the ACC’s file number given to the company.  Now the ACC never stamps its “Filed” stamp or the company’s file number on the approved document.  Sometimes the document may display the “Received” stamp, which is a good thing because the Received stamp always displays the correct date the document was received and filed.

ACC Approval Letter Problem

 

Circle 5:  This image is the top of the ACC’s letter given to companies when it approves the filed Articles or Organization or amendment to the Articles of Organization.  The document received date should be the date the ACC received the document.  This date may not be the actual date the ACC received the document.

ACC’s Company Web Page

 

Circle 6:  The formation date should be the date the ACC received the Articles of Organization or the amendment to the Articles of Organization.  This date is frequently wrong.

Circle 7: The Original Incorporation Date is the Formation Date.  These two dates should be the same and should be the date the ACC received the Articles of Organization or the amendment to the Articles of Organization.  This date is frequently wrong.

Circle 8: The Entity Status should say “Active,” which means the company exists.

Circle 9: The Reason for Status should say “In Good Standing.”

Important Note: If a third party asks for proof that your company exists show the ACC’s web page for the company and point out that the Entity Status is “Active” and the company is “In Good Standing.”

Bottom Line

When your company’s paper filed (not filed online) Articles of Organization have been approved by the ACC the date the ACC received the document should be the same as the filed date.  The received/filed date should be the same on each of the following locations:

  • Circle 1
  • Circle 2: This should say filed, not pending.
  • Circle 4: If this stamp is on your document it should show the date the document was received by the ACC
  • Circle 5
  • Circle 6
  • Circle 7

If your approved Articles of Organization, ACC approval letter or ACC website listing contain errors and you want to fix the errors call the Arizona Corporation Commission at 602-542-3026.

Richard Keyt Formed Arizona LLC Number 6,000

I formed my first Arizona LLC the day Arizona’s LLC law became effective in October of 1992.  I did not start counting the number of LLCs I formed until 2002 so I don’t know how many LLCs I formed the ten years after Arizona adopted LLCs.  On June 1, 2018, I formed Arizona LLC number 6,000.

The reason I’ve formed so many Arizona LLCs is because my LLC services are second to none.  Nobody offers as many LLC services as I provide for the low prices of $597 (Silver LLC) and $997 (Gold LLC that includes a revocable living trust).  Read some of the 138 five star Google & Facebook reviews our clients have given me.

2018-06-03T08:32:29+00:00June 3rd, 2018|Forming LLCs, Miscellaneous|0 Comments

Buying a Home With an LLC: A Primer

Wall St. Journal:  “In the age of the internet, privacy is an especially valuable commodity.  To that end, many home buyers and real-estate investors form limited-liability companies with cryptic names when purchasing property. This appeals to the publicity shy, but LLCs also help homeowners avoid scams, identity theft and frivolous lawsuits.”

Arizona LLC law requires that the Articles of Organization of an Arizona LLC contain the name(s) and address(es) of all members of member managed LLCs and the name(s) and address(es) of all managers and members who own 20% or more of the capital or profits of the LLC.

The Confidential Arizona LLC

If you want to form an Arizona LLC without having your name and address stated in the Articles of Organization then you need to purchase my Gold LLC package for $997.  Our Gold LLC package provides confidentiality for the ultimate owner because we prepare a confidential trust to be the member of the LLC.

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

2018-03-11T08:55:41+00:00March 11th, 2018|Forming LLCs, Miscellaneous|0 Comments

How to Do an Arizona Business Name Search to Find a Name for a New LLC

If you want to form a new Arizona limited liability company the first thing you need to do is determine if your desired name is available.  The good news is that the Arizona Corporation Commission has an online name check database that will tell you if a desired name is available or taken.

In this video we will demonstrate and show you how to how to do an Arizona business name search to find a name for a new LLC. If the name is available we will also show you how to reserve the name for 120 days.

Here is the link to the Arizona Corporation Commission’s entity name database:

http://ecorp.azcc.gov/

Warning:  People sometimes mistakenly search for arizona secretary of state business entity search when they want to know if a name is available for an Arizona LLC or corporation.  Do not search the Arizona Secretary of State’s website for LLC or corporation names because it is the Arizona Corporation Commission that determines is a name is available for an Arizona LLC or corporation.

For more videos on forming and operating Arizona limited liability companies and how to use the Arizona Corporation Commission’s forms and online services  see the KEYTLaw Youtube channel.  Please click on the subscribe icon and the bell symbol to the right of the subscribe icon to get a notice when we upload a new video.

Another Nice Review of My LLC Formation Services

Today I got my 93rd 5 star review on Google and Facebook.  I appreciate all of the five star reviews for my Arizona LLC creation services, but I especially like the review Jim J left today.  He said:

“Setting up the LLC was extremely easy. The information they provide in daily emails of things to do and Arizona law to be aware of sets Keyt apart from others I’ve used that provide similar services. The comprehensive LLC manual they have on-line has everything you need to know about starting and operating your LLC. The automation they have is truly impressive. And the price is right. The value for the money is definitely there! If you are shopping around and are skeptical about what you see on-line, ask Mr Keyt for my phone number. I would be happy to discuss the great experience I had with KEYTLaw.”

See the contents of my Bronze ($397), Silver ($597) and Gold ($997) LLC formation packages.  To buy your LLC complete my online LLC formation questionnaire or call me.

If you have questions about forming an Arizona LLC call me, Richard Keyt, at 480-664-7478.  I don’t charge to answer questions about LLCs.

2017-10-15T14:47:52+00:00October 15th, 2017|Forming LLCs|0 Comments

Should a Corporation Own Real Estate?

Question:  I intend to buy a commercial real estate property.  Should I form a corporation to own the real estate?

Answer:  No. Nope. Absolutely not.  No way. Negative. Are you kidding? Ix nay.  Uh-uh.  Nah. Not on your life.  No way.  No way José.  Ixnay.  I hope you don’t misunderstand my position.

An article in Forbes called “Why You Should Never Hold Real Estate In A Corporation” states:

“Take, for example, the client who contemplates the type of entity that should be used to hold a piece of real estate. For most tax practitioners, this would elicit the following Pavolovian reaction:  ‘You should NEVER put real estate inside a corporation.’  And while there are very few NEVERS in the tax world, this one is pretty darn accurate.”

See also “The Perils of Holding Real Estate in a Corporation,” which discusses the federal income tax reasons it is a bad idea for a corporation to own real estate.

 

 

Keyts Formed 448 Arizona LLCs in 2016

My son Richard C. Keyt and I formed 448 Arizona limited liability companies in 2016, which exceeds the 414 LLCs we formed in 2015.  Sixteen LLCs were IRA LLCs in which IRA owners used IRA funds to make self-directed investments in real estate or other assets.  Our best year was 2012 when we formed 530 Arizona LLCs.  I formed my first LLC in October of 1992 the day Arizona’s LLC law became effective.  Since I started counting in 2002 I have formed 5,321 Arizona LLCs.

2016-12-31T11:59:58+00:00December 31st, 2016|Forming LLCs|0 Comments

Elimination of the New LLC Newspaper Publication Requirement

Because the newspaper publication requirement for new Arizona limited liability companies will be eliminated on January 1, 2017, the Corporations Division of the Arizona Corporation Commission issued the following press release:

2/19/2016 – HB2447 – PUBLICATION OR POSTING ON ACC WEBSITE — HB2447, passed last legislative session, provides the public with options of publication in a newspaper or posting by the ACC if the known place of business is located in Maricopa County or Pima County. The ACC approval correspondence for documents subject to the bill will inform the submitter about the options. The database mandated by the revision to A.R.S. Section 10-130 is actually a new page on our website, and as of January 1, 2017 there will be a prominent link to it on the eCorp home page. Approved documents subject to the bill will automatically be posted after January 1, 2017, and the customer will not need to interact further with the ACC. There is no fee associated with the posting at this time.

Note:  The elimination of the newspaper publication requirement only applies with respect to new Arizona LLCs that have a place of business located in Maricopa County or Pima County, Arizona.  See my article called “Arizona Legislature’s HB 2447 Eliminates Newspaper Publication.”

2016-12-27T20:20:02+00:00December 27th, 2016|Forming LLCs|0 Comments

S Corporation Ignorance

For the umpteen time today a client told me about the client’s discussion with a person who does not understand the difference between the type of entity formed under the law of one of the fifty states vs. the method of income tax applied to the entity by the Internal Revenue Code of 1986, as amended.   The ignoramus said, “My company insists that it enter into a contract with your company, but only if your company is an S corp.”  My client’s company is an LLC, but the ignorant person thinks his company cannot enter into a contract with the LLC because the LLC is not an “S corporation.”

Too many people, including CPAs and lawyers, do not understand that when they say the entity must be an S corporation they are mixing two concepts: (i) the type of entity formed under state law, and (ii) the income tax method applicable to the entity under the Internal Revenue Code.  Just today I downloaded the materials to a webinar I will watch later today.  The lawyer who is teaching the webinar created reference materials that constantly use the phrase “limited liability companies vs. ‘S’ corporation.”  The lawyer knows better, but falls into the trap of loose talk about S corporations.

Not one single state in the United States allows people to create an S corporation.  The states allow people to create, sole proprietorships, general partnerships, limited partnerships, limited liability partnerships, limited liability limited partnerships, for profit corporations, nonprofit corporations, benefit corporations, and limited liability companies.  The term “S corporation” refers to a method of federal income tax applicable to an entity under the Internal Revenue Code.  After forming your entity under state law you must then decide the federal income tax method you want to apply to your entity.  If Homer Simpson forms a for profit corporation in Arizona and an Arizona LLC, he can cause both entities to be taxed under Subchapter S of the Internal Revenue Code by timely filing an IRS form 2553.  The federal income tax law applies exactly the same to the corporation and the LLC taxed as S corporations.

P.S.  Timely filing the IRS Form 2553 means filing the form with the IRS within the first two and one half months of the entity’s existence or within the first two and one half months after the beginning of a calendar year.

For more on this topic see my article called “LLCs vs. Corporations: Which Type of Arizona Entity Should You Form?

Arizona LLC Alert System Includes 48 Email Messages

A lot of lawyers and document preparers form Arizona limited liability companies including yours truly.  My LLC formation services, however, include many features nobody else offers.  One of my unique services is the Arizona LLC Alert System, which is a series of email messages I send to people who purchase my Silver and Gold LLC packages.

In forming 6,200+ Arizona LLCs I learned a long time ago that people need help learning about and accomplishing the many post LLC formation tasks that arise when people form a new LLC.  Here is a short list of common LLC post formation tasks:

  • Get federal employer ID number.
  • Open bank account in name of the LLC.
  • Arrange for all members to sign the Operating Agreement.
  • Set up a bookkeeping system.
  • Consult with tax accountant about which of the four ways an LLC can be taxed is best for the owner(s) of the LLC.
  • File IRS Form 8832 or 2553 if recommended by the LLC’s tax advisor.
  • Transfer land to the LLC by recording a deed (for LLCs that are to own real estate).
  • Purchase insurance.
  • Get a dba or trade name from the Arizona Secretary of State.
  • Register a federal trademark.

Another unique service I give purchasers of Silver and Gold LLCs is access to my 170 page ebook called the “Arizona LLC Operations Manual.”  Chapter 3 of the Operations Manual is a checklist of 34 tasks the LLC should accomplish in its first 75 days after being formed.  To help members of new LLCs I form accomplish these 34 tasks I created the Arizona LLC Alert System.  It is a series of email messages I send to the members of Silver and Gold LLCs I form.  These messages remind people to accomplish important LLC post formation tasks.

The Arizona LLC Alert System consists of 47 email message alerts.  See the entire list of the 47 Alert emails now included in the Alert System.  The Alert System sends members a mobile friendly email message that links to a mobile friendly web page where the actual content of the alert is displayed.  Our LLC members love getting these informative alerts.

The following is a list of other unique LLC formation services I provide for all purchasers of my Silver and Gold LLC formation packages.

  • Two different Operating Agreements – a 30 page Operating Agreement for single member LLCs and husband and wife owned LLCs and a 55 page Operating Agreement for multi-member LLCs.
  • Provisions in the Operating Agreement needed as a result of the Bipartisan Budget Act of 2015, that modified the partnership audit rules applicable to LLCs.
  • Addition of Partnership Representative provisions in our multi-member LLC Operating Agreement.  These provisions replace the tax matters partner provisions required under prior law called TEFRA.
  • Optional Service:  Members digitally sign the Operating Agreement and are sent pdf copies of the digitally signed documents.

Hire Me to Form Your Arizona LLC for $397, $597 or $997

See the contents of our Bronze, Silver and Gold LLC packages.  To hire us to form an Arizona LLC follow one of the two options on our LLC formation page.

2018-11-01T18:55:31+00:00August 29th, 2016|Forming LLCs, Operating LLCs|0 Comments

LegalZoom & Arizona LLC Newspaper Publication

Recently I received an email message from a person who is not my client that stated the following:

“I hired LegalZoom to form the LLC that I started here in Arizona . . . towards the end of 2014. Earlier this year I found out that . . . [the LLC] was never published in the newspapers ( I thought that this service what part of the package that I purchased from LegalZoom) I’m not quite sure what to do”

This is an example of why people should not use this document preparer to form an Arizona LLC.  We always publish for every LLC we form.  Publication is a requirement of Arizona LLC law.

Arizona Revised Statutes Section 29-635.C states:

“Within sixty days after the commission approves the filing, there shall be published in a newspaper of general circulation in the county of the known place of business, for three consecutive publications, a notice of the filing of such articles of organization”

Notice the language that says the notice SHALL be published.  Arizona LLC law, however, does not state the consequence of failing to publish the notice timely.  A third party could argue to a court that the failure to satisfy the publication requirement of Section 29-635.C means the LLC was not legally formed and therefore does not exist.

Because Arizona law is silent on the consequences of failing to publish, I recommend that LLCs that do not publish timely publish when they become aware of the fact the LLC did publish.  Better late than never.

Author’s Note:  As of January 1, 2017, Arizona Revised Statutes Section 29-635.C  was amended to eliminate the newspaper publication requirement for LLCs that have a place of business in Maricopa County or Pima County.

2017-02-26T09:13:05+00:00August 8th, 2016|Forming LLCs|0 Comments

How Do I Form an Arizona LLC?

by Arizona LLC attorney Richard Keyt who has formed 6,200+ LLCs

Question:  How do I form an Arizona limited liability company?

Answer:  Two ways: (1) hire me (see the “Contents of the Bronze ($397), Silver ($597) & Gold ($997) LLC Packages), or (2) do it yourself.  There are two ways to form a do it yourself Arizona LLC:

Compare Forming an LLC Yourself with My LLC Formation Services

I have formed 6,200+ Arizona LLCs because I give my clients everything they need to know to operate the LLC during phase 2 and comply with Arizona LLC law.  When I form an Arizona LLC for $597 (I pay the $85 ACC expedited filing fee), I provide many LLC formation services, including preparing the following custom drafted LLC documents:

  • Articles of Organization – I do not use the minimally functional ACC fill in the blanks form AOO.  My Articles of Organization is a four page document that contains many provisions not found in the state’s form AOO.
  • Spousal Disclaimer – If a married member who is a resident of Arizona is to own his or her interest in the LLC as separate property, the non-owner spouse must sign a Disclaimer in which he/she disclaims any ownership of the LLC interest.  If the non-owner spouse does not sign and deliver a Disclaimer to the owner spouse, Arizona law presumes that the spouses own the LLC as community property even if the non-owner spouse is not named in any of Articles of Organization or the Operating Agreement.
  • Arizona LLC Operations ManualWhen we form an Arizona LLC we give our clients access to my 170 page ebook called the Arizona LLC Operations Manual. This book covers 75+ topics the members and managers of AZ LLCs must know.  We sell this must have book for $99 in our store, but the book is included in our Silver ($597) and Gold ($997) LLC formation packages.  Even if you do not hire Richard Keyt to form your Arizona LLC, you owe it to yourself to buy and read this book from cover to cover.  It explains what your LLC must do to comply with Arizona’s LLC laws.
  • Organizational Resolutions – Resolutions signed by all of the members that approve the issuance of membership interests, adoption of the Operating Agreement, opening a bank account, reimbursement of LLC formation expenses paid by any member, election of one or more managers and other formation related actions.  Silver ($597) and Gold ($997) LLC formation packages only.
  • Membership Certificates – The LLC equivalent of a numbered stock certificate issued to each member.  Silver ($597) and Gold ($997) LLC formation packages only.

We put all of your LLC documents in a nice portfolio with everything organized behind tabs  Silver ($597) and Gold ($997) LLC formation packages only.  To see exactly what I give to every Silver and Gold LLC package purchaser, watch the KEYTLaw Girl’s demo video.

2017-11-07T15:53:31+00:00July 14th, 2016|FAQs, Forming LLCs, How Do I|0 Comments

Arizona Legislature’s HB 2447 Eliminates Newspaper Publication

On May 17, 2016, Arizona Governor Doug Ducey signed Arizona Legislature House Bill 2447.  This new law is a tremendous victory for the people and a huge defeat for Arizona newspapers.  HB 2447 eliminates the long standing rip off known as the publication of legal notices when corporations or limited liability companies are formed in Arizona.  Unfortunately, publication was eliminated only for entities with known places of business in Maricopa or Pima counties.

Beginning December 31, 2016, new Arizona LLCs and corporations with a known place of business in Maricopa and Pima Counties will not have to publish Articles of Incorporation (corporations) or Notices of Publication (LLCs) in a newspaper.  Instead, the Arizona Corporation Commission will enter information about the newly formed entities into a database it is obligated to create.

HB 2447 states that publication is eliminated only for entities that have a known place of business in a county that has a population greater than 800,000.  Currently only Maricopa County and Pima County have populations that exceed 800,000.

Entities that have known places of business in counties other than Maricopa and Pima must continue to donate money to the few Arizona Corporation Commission approved newspapers in the eleven counties with less than 800,000 people.  Publication is a total rip off.  For example, a few years ago we published Articles of Incorporation for a nonprofit corporation in a newspaper in a less populated county and it cost my client $600 after a 10% discount for the nonprofit corporation.  Outrageous!

 

New Arizona Law Exempts LLC Organizers from Arizona Securities Laws

Arizona House Bill 2303 signed into law by Governor Doug Ducey contains a significant change to Arizona’s securities laws.  The new law allows the issuance of LLC membership interests to as many as ten LLC “organizers” to be exempt from Arizona securities laws.

Arizona Revised Statutes Section 44-1844.A was amended to read (new language is in bold red text):

“sections 44‑1841 and 44‑1842, section 44‑1843.02, subsections B and C and sections 44‑3321 and 44‑3325 do not apply to any of the following classes of transactions: . . .

10.  The issuance and delivery of securities of a corporation, limited liability company or limited partnership to the original incorporators, organizers or general partners, not exceeding ten in number, where the securities are not acquired by the incorporators, organizers or general partners for the purpose of sale to others and are not directly or indirectly sold to a third party within twenty-four months unless an incorporator, organizer or general partner experiences a bona fide change of financial circumstances within such time period, providing original incorporators, organizers or general partners are notified of their right pursuant to title 10 or 29 to review the financial books and records of the corporation, limited liability company or limited partnership at reasonable times.”

The term “organizer” is not defined in any Arizona statutes.  The Arizona Corporation Commission’s hard copy form Articles of Organization contains the following statements in Section 9 of the document:

“ORGANIZERS and SIGNATURE – the individual or pre-existing entity submitting this document is the Organizer – list the name of the Organizer below. If the Organizer is an individual, that individual must sign below. If the Organizer is a pre-existing entity, provide the signature of the individual acting for that entity, then print the individual’s name.”

Without any statutory reference that supports the statements, the first paragraph of the ACC’s instructions for its hard copy Articles of Organization states:

“One or more persons can form an Arizona LLC by signing and filing Articles of Organization with the Arizona Corporation Commission. . . . These persons are called “organizers.” “Person” includes individuals and entities.”

Significance of the New Law

This change in Arizona law is very important for every Arizona LLC that will issue membership interests that the securities regulators would designate as a security.  If you think an LLC must issue stock to investors before it is considered issuing a security you are wrong.

If the promoters of the LLC say to an investor give me your money for an X% membership interest in our LLC and the LLC will make a profit for you the LLC is issuing a security to the investor.  This is an example of an “investment contract,” which is a type of security under federal and state securities laws.

When securities laws apply to the issuance of membership interests in an LLC the LLC must comply with federal and applicable state securities laws or the promoters and the LLC become guarantors of the investors’ investments.  Promoters who cause an LLC to issue membership interests that are securities the issuance of which does not comply with applicable securities laws will have substantial liability to the investors and to the securities regulators.

To learn more about securities laws and how they can affect LLCs read the article my son and I wrote called “California LLCs & Securities Laws.”  Although the article is about California LLCs, many of the concepts apply to Arizona LLCs.

Bottom Line

If your to be formed Arizona LLC will be issuing membership interests to people or entities that are investing substantial amounts of money to purchase their membership interests, you must have EVERY INVESTOR (without exception, but no more than ten) sign the Articles of Organization as an organizer so the LLC can claim the exemptions provided from Arizona securities laws by Section 44-1844.A.10.

If you need your LLC to be able to use the ten exemptions provided in Arizona Revised Statutes Section 44-1844.A.10 hire us to form your LLC.  Our Articles of Organization for LLCs that want to take advantage of Section Section 44-1844.A.10 contain special Section 44-1844.A.10 language.

Should Richard Keyt or LegalZoom Form My LLC?

Question: People frequently ask me “why should I hire Richard Keyt to form my Arizona limited liability company rather than LegalZoom?

Answer: You should hire me, Arizona LLC attorney Richard Keyt, to form your AZ LLC instead of LegalZoom for the following major reasons:

  • 138 Five Star Reviews: See our happy client reviews
  • Cheaper:  I’m $195 less for similar services as of 4/8/18 (see the comparison table below).  See also the price summary that omits the $159 resident agent fee.
  • Attorney Formed: I’m an Arizona attorney who has formed 6,200+ Arizona LLCs since I formed my first LLC in 1992.

(more…)

2018-05-02T20:27:16+00:00February 1st, 2016|FAQs, Forming LLCs|0 Comments

How Can I See If My Desired LLC Name is Available?

Question:  I intend to form a new Arizona limited liability company.  I know that the Arizona Corporation Commission will reject my Articles of Organization if my desired LLC name conflicts with the name of an existing Arizona entity or an Arizona trade name issued by the Arizona Secretary of State. How can I insure that my desired LLC name will not be rejected by the ACC?

Answer:  Actually, the latest version of the ACC’s online database has an easy to use name checker that will tell you if your desired name will be accepted or rejected.  Here’s how to check a prospective LLC name.

  • Go the the Arizona Corporation’s name checker website.
  • Click on the text that says “Name – Forms for entity name reservations.”
  • Click on the text that says “Check Entity Name Availability.”
  • Enter your desired LLC name in the Name field.
  • Click on the down icon to the right of the text that says “Select an Entity Type.”
  • Click on the letters “LLC.”
  • Click on Check Name.

The ACC’s database will then tell you the desired name is bad or it is available.

Name Reservation Warning:  Although the ACC’s database will ask if you want to reserve the name, I don’t recommend that you waste the $45 unless there is a lot of money riding on the name.  Before purchasing a name reservation ask yourself this question:  Given that the desired name has been available from the beginning of time up to the moment you checked the name, what are the chances somebody will use your desired name before you file your Articles of Organization?

KEYTLaw Formed LLC’s Documents Stored in the Cloud

We are proud to announce that when Richard Keyt forms a Silver or Gold LLC KEYTLaw will upload and save all of the LLC’s documents to a secure folder in the cloud hosted by the Citrix ShareFile service.  We are very excited to offer this new service that has the following features:

  • We send an email message to all LLC members notifying them that their LLC’s documents have been saved in the LLC’s ShareFile folder.
  • When the member clicks on the link in the Welcome email the member is taken to a ShareFile page that tells the member ShareFile sent the member an email message that contains an access code.  The member is asked to check his or her inbox, copy the access code in the follow up email and paste the access code on the ShareFile web page.
  • When the member inserts the access code and clicks on the login button the member is taken to a secure web page on which the member enters a password, a confirmation of the password, first name and last name.
  • When the member saves the information the member is taken to a ShareFile folder in which all of the LLC’s documents are saved in Adobe .pdf format.
  • When logged in to the LLC’s ShareFile folder the member can: (1) download a document, (2) copy a document, (3) upload documents, and (4) share a file with another person.

ShareFile Security

ShareFile is a state of the art secure online document storage service.  ShareFile’s security features include the following:

Data Protection During File Transfer

  • File transfer: ShareFile employs SSL/TLS protocols to protect client authentication, authorization and file transfers.
  • High-grade encryption: ShareFile secures files in transit with no less than 128-bit encryption using industry-standard encryption protocols.
  • File integrity: ShareFile employs a keyed hashed message authentication code (HMAC) to authenticate and ensure the integrity of intra-system communications. ShareFile verifies file size and file hash to ensure integrity.
  • Link generation: ShareFile download links are uniquely and randomly generated using strong hash-based message authentication codes. ShareFile provides technical countermeasures to protect links from guessing attacks.

Data Protection During Storage

  • Datacenters: ShareFile uses SSAE 16 Type II accredited or ISO 27001 certified datacenters to host the SaaS application and metadata. All files are stored in SSAE 16 Type II (SOC1), SOC2 and ISO 27001 accredited datacenters with high availability and durability ratings.
  • Encryption: ShareFile stores client files at rest using AES 256-bit encryption, a Federal Information Processing Standards (FIPS) encryption algorithm.
  • Firewalls: Files are processed using systems protected by securely configured firewalls that effectively limit and control access to network segments.
  • Redundant storage: Files are stored in replicate with leading Infrastructure-as-a-Service (IaaS) providers that ensure high file durability and availability.
  • Backup: Files are backed up according to configurable file-retention and versioning settings

We look forward to providing members of LLCs we form and clients with state of the art online document storage.

2017-08-25T14:54:40+00:00October 18th, 2015|Forming LLCs, Members, Miscellaneous|0 Comments

Arizona LLCs Can Now Be Formed Online

The following is the text of a September 30, 2015, press release issued by the Arizona Corporation Commission:

Creating an LLC in Arizona just got a lot easier. The Arizona Corporation Commission is accepting online filings for the first time. Before the online efiling became available earlier this month, someone wishing to create a limited liability company had to either come to a Commission office or mail in the paperwork.

LLC formation is one of the commission’s most important missions, Commission Chairman Susan Bitter Smith said. Shortening the amount of time it takes to file the paperwork and making sure all necessary information is submitted up front allows a business to start functioning sooner.

‘I’m proud the commission now allows for a secure and easy way to create an LLC,’ Bitter Smith said. ‘This innovation makes it faster for people to start the businesses of their dreams.’

Last year, more than 52,000 Arizona businesses were formed as LLCs, many of those coming from people who drove to a commission office to submit paperwork. Filing for an LLC online can be done here http://ecorp.azcc.gov/Entity or by going to the commission’s home page www.azcc.gov

The ability to create an LLC through online filings won praise from the business community.

‘Electronic filing of LLC documents has been long awaited by the business community and I applaud the Commission for taking this bold step. Innovation such as this will make starting businesses in Arizona easier, more efficient, and timely,’ Greater Phoenix Chamber of Commerce President and CEO Todd Sanders said. ‘We look forward to the Commission expanding electronic services even further in the future.’

Commissioner Doug Little said the Commission is sending an important message to the business community.

‘I believe this innovation by the Commission will dramatically improve and streamline the process of establishing an LLC in Arizona,’ Little said. ‘This is exactly what we need to be doing to support Governor Ducey’s initiative to let people know that Arizona is ‘open for business.’”