by Richard Keyt, Arizona corporate and business lawyer
To incorporate a for profit corporation in Arizona you merely:
- File articles of incorporation with the Arizona Corporation Commission (the “ACC”),
- Publish the articles of incorporation in a newspaper of general circulation the required number of times, and
- Submit an affidavit of publication to the ACC.
Despite this relatively easy three-step process, there are a number of tasks the must be performed to incorporate a for profit corporation in Arizona. The following is a checklist and explanation from A to Z of the tasks necessary to incorporate a business in Arizona. If you want to form an Arizona nonprofit corporation, see my article entitled “How to Form an Arizona Nonprofit Corporation.”
For a summary of the characteristics of the seven types of entities commonly used in Arizona to operate businesses and hold assets, see “Types of Entities for New Arizona Companies.” See also KEYTLaw’s Arizona Corporation Formation Services for information about our fees to form your nonprofit corporation.
1. Select the Name of the Corporation
a. Trademarks & Service Marks
Finding a good name for your new Arizona corporation can sometimes be the most difficult piece of the formation puzzle. Ideally, you want a name that: (i) will afford strong federal trademark protection, but will not infringe on anybody’s trademark or service mark, (ii) will be easy for your customers to remember, (iii) will describe your products or services, and (iv) will allow you to obtain .com, .net., .org, .biz, .info and .us domain names. For information on obtaining domain names, see How to Obtain a Domain Name that Does Not Infringe on a Trademark.
One way to check if your desired corporate name will infringe on a federally registered trademark or service mark is to search your prospective name and variations thereof on the searchable database of the United States Patent & Trademark Office.
Unfortunately, obtaining a strong trademark that describes your product or services is frequently not possible. These two goals are in conflict. Most clients of trademark lawyers want a trademark that describes their products or services. For example, if I have a bar and grill called Rick’s Bar & Grill, it describes my business, but federal trademark law grants a lower level of protection to marks that are merely descriptive of the products or services. People like descriptive trademarks because they are descriptive. Trademark lawyers prefer marks that are arbitrary such as Apple® when used to identify computer products or fanciful marks such as Xerox® because these types of marks provide the highest level of trademark protection. For more information about trademarks and service marks, see the KEYTLaw feature called “Trademarks & Service Marks.”
b. Arizona Corporation Commission Name Approval
When you have selected at least one possible name for your corporation, you should perform a Preliminary Name Search on the ACC’s website to see if you can find any Arizona entities or tradenames that are exactly the same as or too similar to the name you have chosen for your corporation. Corporate names must satisfy the requirements of Arizona Revised Statutes Section 10-401.
2. Prepare the Articles of Incorporation
You must prepare your new Arizona corporation’s articles of incorporation and have it signed by the incorporators. The articles of incorporation of an Arizona for profit corporation must contain the following information:
- A corporate name that satisfies the requirements of A.R.S. Section 10-401.
- The number of shares the corporation is authorized to issue.
- A brief statement of the character of business that the corporation initially intends to actually conduct in this state.
- The name and address of each person who is to serve as a director until a successor is elected and qualifies.
- The name, street address and signature of the corporation’s statutory agent.
- The street address of the known place of business for the corporation, if different from that of its statutory agent.
- The name and address of each incorporator.
- The signatures of all incorporators.
See the ACC’s sample form articles of incorporation for a profit corporation.
3. Select the Corporation’s Statutory Agent
Every corporation formed in Arizona or qualified to do business in Arizona must have and maintain a statutory agent located in Arizona. The purpose of a statutory agent is to give notice to the public of a person or entity authorized by the corporation that can be served with legal documents as the agent of the corporation. The statutory agent is the person or entity that can be served with a summons and complaint filed in a lawsuit.
The statutory agent must be one of the following:
- An adult individual who resides in Arizona.
- A domestic corporation formed under Arizona corporate law.
- A foreign corporation authorized to transact business in Arizona.
- A limited liability company formed under Arizona law.
- A limited liability company authorized to transact business in Arizona.
The statutory agent must have an Arizona street address rather a post office box.
4. Prepare a Cover Sheet
When you file the articles of incorporation with the ACC, you must also submit a completed cover sheet (pdf).
5. Prepare a Certificate of Disclosure
When you file the articles of incorporation with the ACC, you must also submit a completed certificate of disclosure for profit corporations (pdf). When completing this form: (i) check yes or no for question A, but if you check yes, you must attach to the certificate of disclosure all information requested in question B. Check yes or no for question C. If you check yes, you must attach to the certificate of disclosure all information requested in question C.
All incorporators must sign the initial certificate of disclosure. Signatures must be dated within 30 days of delivery to the ACC.
If, within sixty days of filing the articles of incorporation, any person becomes an officer, director, trustee or person controlling or holding over 10% of the issued and outstanding shares or 10% of any other proprietary, beneficial, or membership interest in the corporation and the person was not included in the initial certificate of disclosure, the corporation must file an amended certificate signed by at least one duly authorized officer of the corporation.
6. File the Incorporation Documents with the ACC
When you are ready to file the incorporation documents, hand deliver or mail the following to the ACC:
- Completed and signed articles of incorporation
- Completed cover sheet
- Completed and signed certificate of disclosure
- Cash or check to pay the filing fee
7. Pay the Filing Fee
When you submit your articles of incorporation, the cover sheet and the certificate of disclosure, you must also pay the appropriate filing fee, which is $60 for a profit corporation. You can pay the fee with cash or your check.
You may also pay an extra $35 for expedited review service. I recommend that you pay the extra $35, which will cause the ACC to review your articles of incorporation within the shortest time period possible. If you do not pay the extra $35 it could take up to a month for the ACC to approve or reject your articles of incorporation. When the articles are approved, the date of approval reverts back to the date the articles were filed. The problems with using regular review service rather than the expedited review are: (i) it can substantially reduce the time remaining to publish the articles of incorporation and deliver the affidavit of publication to the ACC, and (ii) you may have to wait a month to find out that your articles were rejected.
8. Where to File the Incorporation Documents
File your articles of incorporation, the certificate of disclosure and the cover sheet and pay the filing fee at either of the following ACC locations:
Phoenix office: 1300 W. Washington, 1st Floor, Phoenix, AZ 85007.
Tucson office: 400 W. Congress St., Tucson, AZ 85701
ACC offices are open Monday – Friday, 8:00 a.m. to 5:00 p.m., except holidays. You may mail all the incorporation documents with a cover letter and a check for the filing fee to either ACC office. The ACC does not accept credit cards.
9. Obtain a Copy of the Articles of Incorporation
It goes without saying that you should make a copy of all the documents you submit to the ACC and retain them in your corporate file. I recommend that when you file your articles of incorporation, you submit an extra copy and ask the ACC to stamp the extra copy to show the date the ACC received the articles of incorporation. This extra copy can be shown to other parties (such as a bank when you open a bank account) before you receive the final approved articles of incorporation from the ACC.
10. Approval or Rejection of the Articles of Incorporation
After the ACC reviews your articles of incorporation, it will mail to the corporation’s place of business a notice of approval or rejection of the articles of incorporation. If the articles of incorporation were rejected, your corporation was created as of the date the articles were filed, but it terminated as of the date and time the ACC completes its determination. The ACC will notify you in a letter why the articles were rejected. You may then correct the problem and resubmit another set of incorporation documents. However, you will not be able to recover your filing fee.
If your articles of incorporation were approved, the corporation was created (“born”) as of the date the articles of incorporation were filed with the ACC (or a later date set forth in the articles).
11. Publish the Articles of Incorporation
This Section 11 only applies to corporations with a place of business outside Maricopa County and Pima County. Within sixty days after the date the articles of incorporation were filed with the ACC, you must publish the entire articles of incorporation for three consecutive publications in a newspaper of general circulation in the county of the corporation’s known place of business in Arizona. If you file the articles of incorporation on an expedited basis, you may wait to publish the articles of incorporation until they have been approved by the ACC to prevent wasting the publication costs if the articles are rejected. However, IF YOU FILE THE ARTICLES OF INCORPORATION ON A NON-EXPEDITED BASIS, THE ACC WILL APPROVE OR REJECT THE ARTICLES MORE THAN THREE MONTHS AFTER FILING SO YOU MUST PUBLISH THE ARTICLES BEFORE APPROVAL. IF YOU WAIT FOR ACC APPROVAL, IT WILL COME AFTER THE DEADLINE TO PUBLISH AND RETURN THE AFFIDAVIT OF PUBLICATION TO THE ACC.
See the ACC’s list of Arizona newspapers of general circulation by county, which list also includes newspapers from which the ACC will not accept publications. The cost to publish the articles of incorporation depends on the newspaper and the length of the articles, but you should budget $100 – $175, unless the corporation’s place of business is in Yuma County where the publication costs are three times higher.
I publish my notices of filing articles of incorporation with the Arizona Capitol Times newspaper at P.O. Box 2260. Phoenix, Arizona 85002; email address – firstname.lastname@example.org; and phone number 602-258-7026. This newspaper can also arrange to publish in any county in Arizona. After publishing, the Arizona Capitol Times will prepare and send an Affidavit of Publication to the Arizona Corporation Commission.
Arizona law no longer requires that the corporation file an Affidavit of Publication of the articles with the ACC. Nevertheless, I recommend that you always obtain an Affidavit of Publication form the newspaper and file it with the ACC so the corporation prove years later that it satisfied the publication requirement.
If you fail to timely publish the articles of incorporation, the ACC may revoke the charter of the corporation, which causes it to cease to exist.
12. Prepare the Bylaws
Arizona Revised Statutes Section 10-206 requires that the board of directors of a corporation adopt initial bylaws for the corporation. The bylaws of a corporation may contain any provision for managing the business and regulating the affairs of the corporation that is not inconsistent with law or the articles of incorporation. Each initial director should sign the bylaws. The board of directors must adopt bylaws.
13. Conduct an Organizational Board of Directors Meeting
Arizona Revised Statutes Section 10-205 requires that the board of directors of a corporation hold an organizational meeting at the call of a majority of the directors to complete the organization of the corporation by appointing officers (such as a President), adopting bylaws and carrying on any other business brought before the meeting. This organizational meeting must be documented by corporate minutes signed by all the directors. This meeting must be documented with minutes or an action by unanimous consent signed by all of the directors.
14. Obtain a Minute Book Kit
Arizona Revised Statutes Section 10-701 requires that all Arizona for profit corporations hold an annual meeting of the shareholders. The board of directors has the responsibility to manage and direct the business and affairs of the corporation, subject to any limitation set forth in the articles of incorporation or in a shareholder agreement. See ARS § 10-732.
All corporations should follow the formalities of corporate organization, which include the following:
- Sending proper written notice to all shareholders and directors of annual and special meetings of the shareholders and directors, respectively
- Preparing minutes of all meetings that document the persons present, the matters discussed and all resolutions adopted by the shareholders and the directors
- Maintaining a corporate minute book that contains copies of the approved articles of incorporation, the affidavit of publication, the organizational minutes of the directors, the bylaws, the stock ledger and copies of all minutes of meetings of the shareholders and directors and any shareholder agreements
- Issuing stock certificates to all shareholders
- Opening and using a corporate checking account for all corporate funds
- Obtaining state and federal tax identification numbers
I recommend that all new corporations purchase a corporate kit immediately after being incorporated. These kits contain the basic corporate materials needed by new corporations such as the minute book, stock certificates with the corporate name imprinted thereon, a stock ledger and a corporate seal. You can also purchase kits that contain sample organizational minutes and bylaws. I purchase my minute book kits from Attorneys Corporate Service. The kits start at $48. The phone number is 800-462-5487.
15. Obtain a Federal Employer Identification Number
Most newly formed corporations must obtain a federal employer identification number. Banks require this ID number for bank accounts. If the corporation will have employees and pay wages, it must file payroll tax returns and pay payroll taxes using the ID number. A corporation obtains a federal ID number by completing IRS Form SS-4 (pdf), Application for Employer Identification Number, and filing it with the Internal Revenue Service. See also the Instructions for Form SS-4 (pdf) and IRS Publication 1635 (pdf), Understanding Your EIN – Employer Identification Number.
You should apply for an EIN early enough to have your number when you need to open a bank account, file a tax return or make a tax deposit. You can get an EIN over the phone by calling the Tele-TIN phone number for your state, which for Arizona entities is 1-800-829-4933. Before calling the IRS, fill in the IRS Form SS-4 as best you can because the IRS may ask you to refer to it while on the phone and may ask that you sign and mail or fax a copy of the form to the IRS within 24 hours. The person making the call must be authorized to sign the form or be an authorized designee.
You may also obtain a federal EIN online in a matter of minutes from the IRS website. After submitting the completed Form SS-4 online, the IRS’ system will immediately issue an EIN. Online EINs are available 24/7 without the need to file any paper document with the IRS. The online EIN is a provisional EIN, but it will be the permanent federal employer identification number for your business unless voided by the IRS. The IRS may void an EIN obtained online if : (i) the name and social security number of the principal officer do not match Social Security Administration records, or (ii) the business has already been assigned an EIN. Keep a record of your application for an EIN. Be sure to print your SS-4 application after the EIN is assigned and keep a paper copy for your records. You can do this by clicking the “Print Form” button after receiving your EIN.
Third parties may also request EINs via the internet on behalf of a taxpayer. A third party who obtains an EIN for another party must retain a completed copy of the IRS Form SS-4 signed by the taxpayer and the signed statement authorizing the third party to file the online application.
If you prefer, you can fax a completed Form SS-4 to the appropriate service center (215-516-3990 for Arizona), and they will respond with a return fax in about one week. If you do not include a return fax number, it will take about two weeks. If you apply by mail, send your completed Form SS-4 at least four to five weeks before you need your EIN.
16. If the Corporation Will Have Employees – Hire a Payroll Service to Do the Payroll for Your Employees
If your company will have employees, it must: (i) calculate and withhold the proper federal and state income tax and FICA amounts from employees’ wages, (ii) calculate and pay correct FICA and FUTA amounts to the federal government, (iii) calculate and pay state unemployment tax to the state government, (iv) calculate and pay before the due dates federal and state payroll tax deposits, and (v) prepare and file all federal and state payroll tax returns before the due dates, including, IRS forms W-2s and 1099s. As a person who once created and owned a small law firm that had many employees, I know that complying with payroll tax laws is a nightmare unless you have an experienced service do it for you. If you do not get payroll under control, it can be a very expensive disaster. The small cost per employee for a good payroll service is well worth it in my opinion.
17. Consider Electing S Corporation Federal Taxation
Corporations that satisfy certain stock ownership requirements may elect to be taxed as an “S corporation” for federal income tax purposes. In general, the difference between an S corporation and a “C corporation” (corporations that do not elect S corporation status) is that S corporations are not taxpaying entities and C corporations are. The profits, losses and other tax items of an S corporation are passed to the stockholders of the corporation prorata according to their stock ownership and included on the stockholders’ federal income tax returns. By electing S corporation federal income taxation, a corporation can avoid the double tax that can occur with a C corporation when the corporation has taxable income.
The stockholders of a qualified corporation may elect S corporation status for federal tax purposes by filing IRS Form 2553 (pdf), Election by a Small Business Corporation. There are several requirements that must be met before a corporation can elect S corporation status. For more information, see IRS Instruction for Form 2553 (pdf), Election by a Small Business Corporation.
To elect S corporation taxation, all the stockholders must complete and file IRS Form 2553 with the IRS:
(a) at any time before the 16th day of the 3rd month of the tax year, if filed during the tax year the election is to take effect, or
(b) at any time during the preceding tax year.
An election made no later than 2 months and 15 days after the beginning of a tax year that is less than 2 and 1/2 months long is treated as timely made for that tax year. An election made after the 15th day of the 3rd month, but before the end of the tax year is effective for the next year. For example, if a calendar tax year corporation makes the election in April 2001, it is effective for the corporation’s 2002 calendar tax year.
Before forming a new corporation or as soon as possible after forming it, you should consult with your accountant for advice on whether the corporation should be taxed as an S corporation or a C corporation. The choice will have significant economic consequences to the corporation and its stockholders. Facts and circumstances applicable to each new corporation will influence whether or not to elect S corporation taxation. An erroneous tax election can be very expensive.
18. Obtain Arizona Department of Revenue Identification Numbers & Transaction Privilege Tax Licenses
If your corporation will engage in an activity that is taxable under the Arizona transaction privilege tax statutes, it must apply for a transaction privilege tax license for each business location before engaging in business. If the corporation will pay wages to employees, it must an Arizona withholding number and an Arizona unemployment number. To obtain a transaction privilege tax license, an Arizona withholding number or an Arizona unemployment number, the corporation must complete and file an Arizona Joint Tax Application with the Arizona Department of Revenue. For licensing questions on transaction privilege or withholding call (602) 542-4576 or 1-800-634-6494 (from area codes 520 and 928). For questions on unemployment tax call (602) 248-9396 or email the Arizona Department of Economic Security.
19. Sign a Stockholders Agreement / Buy-Sell Agreement
When a corporation is owned by more than one stockholder, corporate lawyers recommend that the stockholders enter into an agreement called a “Stockholders Agreement” or sometimes called a “Buy-Sell Agreement.” This is an agreement that governs how the stockholders will deal with their stock ownership and important corporate matters. The Stockholders Agreement adds to the basic governance provisions contained in the corporate bylaws.
Stockholders Agreements typically deal with the following types of corporate issues:
- Requiring super majority approval or unanimous approval of stockholders for major corporate decisions such as borrowing large amounts of money, entering into major contracts, amending the articles of incorporation or bylaws, changing the capital structure of the corporation, hiring or firing people related to stockholders and directors, setting compensation of key employees, and entering into contracts with related parties or companies affiliated with stockholders or directors.
- Restrictions prohibiting stockholders from selling, encumbering or transferring their stock without first giving the corporation and other stockholders a right of first refusal to acquire the stock.
- Rules governing rights of the corporation and stockholders following a stockholder’s death, disability, divorce or incapacity. The agreement can obligate the corporation to purchase the stock of a deceased shareholder or give the corporation and other stockholders options to purchase the stock of a deceased stockholder.
- The acquisition of life insurance to fund the purchase of stock of a deceased stockholder.
- Fixing the value of stock in certain situations such as the purchase by the corporation of the stock of a deceased stockholder.
- Requiring minority stockholders to sell their stock when the majority of the stockholders want to sell the corporation
- Requiring stockholders to cooperate if the corporation makes a public offering of securities.
- “Shot-gun” buy-out procedures that can be used to terminate the stock ownership of stockholders when they cannot get along or work together.
The best and easiest time to adopt a stockholders agreement is when the corporation is formed. I have seen too many sad stockholder disputes that could have been avoided with a good stockholders agreement. A stockholders agreement is like insurance, i.e., if you never need it, you don’t miss it, but if you need it and don’t have it, you may suffer greatly.
Richard Keyt charges $750 ($595 if prepared when forming a corporation) for a comprehensive stockholders agreement. To obtain your stockholders agreement, call Rick at 480-66474-78. An office appointment is not necessary.
20. Annual Meetings of Shareholders & Directors
Arizona law requires all Arizona for profit corporations to hold a meeting of shareholders annually at a time stated in or fixed in accordance with the bylaws. A.R.S. § 10-701.A. Arizona corporations must notify all shareholders entitled to vote of the date, time and place of each annual and special shareholders’ meeting at least ten, but not more than sixty days before the annual meeting date. A.R.S. § 10-705.A. Directors shall be elected at the first annual shareholders’ meeting and at each annual meeting thereafter. A.R.S. § 10-803.C.
Every Arizona corporation should prepare minutes of all meetings of the shareholders and directors. The minutes should be approved by the appropriate parties, signed and added to the corporate minute book along with copies of the notices of the meetings sent to the shareholders and directors. Actions of shareholders and directors taken without a meeting should be evidenced by resolutions signed by all the shareholders and directors, respectively, and added to the corporate minute book.
Arizona corporations that fail to hold annual meetings of shareholders and directors increase the risk that a creditor may “pierce the corporate veil” and hold the shareholders liable for the obligations of the corporation. The approved and signed minutes and resolutions are the evidence that meetings of shareholders and directors were held in accordance with Arizona law. A corporation that fails to hold annual meetings or to properly adopt resolutions of the shareholders and directors may also experience problems if a shareholder dispute arises. Corporate action taken without proper approval can create liability for the persons who authorized the action.
21. Additional Incorporation Considerations
Although it is relatively easy and inexpensive to incorporate a business in Arizona and the information in this article tells you how to do it, I recommend that you consult an Arizona corporate attorney when incorporating because there are many issues that may require legal advice and action. For example, when offering to issue and issuing stock and securities, all corporations must comply with federal and applicable state securities laws. It may be advisable to file trademark applications with the U.S. Patent & Trademark office to protect your trademarks and/or service marks. Forming the new corporation is just the “tip of the iceberg” with respect to operating a business in the corporate form.
KEYTLaw’s Arizona Incorporation Services
If you follow the instructions above, you can form an Arizona corporation yourself. It is relatively simple. If on the other hand, you value your time and prefer to hire somebody with years of experience to form an Arizona corporation for you, KEYTLaw has a special corporate formation offer that is available only to new clients who contact KEYTLaw via the internet.
KEYTLaw’s incorporation services include the following:
- unlimited telephone consultations with Arizona attorney Richard Keyt concerning choice of entity, questions about forming and operating the corporation, and other incorporation related issues,
- name selection advice,
- prepare the Articles of Incorporation,
- prepare a Certificate of Disclosure for each initial stockholder, officer and director,
- prepare the Arizona corporation Commission (“ACC”) cover sheet,
- file the Articles of Incorporation with the ACC on an expedited basis,
- give you a copy of the Articles stamped with the ACC’s “received” stamp,
- give you a 35 page Arizona corporation Operations Manual explaining how to comply with applicable Arizona corporate law, how to obtain a federal employer ID number (over the phone or the internet), how to open the corporation’s bank account, how to document changes in owners, how to hold and document meetings of the stockholders and directors, and how to operate your new corporation,
- arrange to publish the Articles of Incorporation in a newspaper in the appropriate county before the statutory deadline,
- obtain an Affidavit of Publication and file it with the ACC before the statutory deadline,
- prepare By-Laws,
- prepare the organizational minutes or resolutions of the directors of the corporation,
- give you the ACC’s letter approving the Articles of Incorporation,
- give you the Articles of Incorporation stamped with the ACC “approved” stamp,
- give you access to IRS Form SS-4 (Application for Employer Identification Number), IRS Instructions for Form SS-4, and the Arizona Joint Tax Application (used to obtain an Arizona tax identification number and sales tax license, if needed),
- give you an up-to-date corporate minute book with stock certificates, a corporate seal, the corporation’s Articles of Incorporation, By-Laws, and organizational resolutions of the directors,
- prepare stock certificates for the initial stockholders,
- give you access to the S corporation election form (IRS Form 2553) and the IRS Instructions for Form 2553 so that you may file the S election form with the IRS if you want the corporation to be taxed as an S corporation for federal income tax purposes, and
- act as the corporation’s statutory agent for its first year.
Many law firms charge legal fees of $1,500 or more to form a corporation, but KEYTLaw provides all the above incorporation services for $995, which includes guaranteed legal fees of $720 plus costs of approximately $275. The costs are $95 for the ACC expedited filing fee, $90 for the publication fee (estimated), $75 for a minute book and $15 for a filing service.
To hire KEYTLaw to form your Arizona corporation, complete the Incorporation Agreement online, sign it and send it to us with your check. If you have questions about incorporating or the Incorporation Questionnaire, call Richard Keyt at 480-664-7478.