LLC FORMATION (All States)
1. Liability Protection
One of the biggest advantages of forming an LLC in Arizona is liability protection. The members of an LLC are typically not held personally liable for business debts. This means that business creditors cannot come after your personal assets (car, house, bank account, etc.) to cover any business losses or unpaid debts. Liability protection is one of many reasons why we suggest forming an LLC over forming a Sole Proprietorship. If you choose to form a Sole Proprietorship, then business creditors are generally free to pursue your personal assets to recover any debts owed.
2. Tax Benefits
An LLC enjoys several taxation benefits that are not available to other entities. The primary benefit is that profits are only taxed when owners file their returns. This is known as pass-through taxation. With some entities, such as C-Corporations, business profits are subject to double taxation. The business profits are taxed at the corporate level, before they are distributed to owners, and taxed a second time when owners file their individual tax returns.
Additionally, the owners of an LLC have the unique opportunity to decide how to pay payroll taxes. If done correctly, this may allow the business and the owners to reduce the overall tax liability. This level of flexibility is advantageous for business owners looking for the most efficient and flexible way to pay their taxes.
3. Easy to Form and Operate
It is important to understand everything that goes into forming an LLC in Arizona. Forming an LLC is often much easier to set up than other business structures. Once the proper paperwork is filed, your additional paperwork requirements are minimal.
Further, running an LLC is also an easier task compared to running a corporation. Unlike a corporation, there is no requirement for an annual meeting and corporate minutes. There is also no requirement to file an Annual Report with the Corporation Commission. A corporation that does not file the required reports is subject to dissolution. This does not occur with LLCs.
4. Multiple Ownership Options
Arizona LLCs give business owners multiple ways to set up their ownership and management structures. For example, you have the option of creating a single-member or multi-member LLC. You also have the option to determine whether your multi-member LLC is managed by one individual (manager-managed) or managed by everyone together (member-managed).
5. Increased Credibility
An LLC is generally viewed as a more formal business structure than a Sole Proprietorship or Partnership. This can work to your benefit when attempting to raise capital and attract clients or customers to your business.
Additionally, when you form an LLC, you must register a unique business name that only your business can use. No other businesses in Arizona can use that name while your business is active. Creating a unique business name is a great way to stand out from the crowd and improve your brand awareness and marketing efforts.
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