An Arizona limited liability company (“LLC”) is a separate legal entity organized pursuant to Arizona’s Limited Liability Company Act, A.R.S. § 29-601, et seq. In general, an LLC is often called a hybrid entity because it is similar to a partnership in some ways, e.g. governance and pass-through taxation, while also similar to a corporation in other ways, e.g. limited liability.

Limited Liability

Although there are many potential reasons as to why a person or persons might organize an Arizona LLC, perhaps the principal reason is to provide limited liability protection to the owners, called “members,” of the LLC for some of the debts of the LLC.

For example, if an LLC owes money to a creditor, that creditor generally cannot attach the assets of a particular LLC member to satisfy that creditor’s claim if that LLC member did not cause the creditor’s claim or did not personally guarantee a debt owed to the creditor.

Organization

Arizona’s LLC Act requires a minimum of two distinct actions to organize an an Arizona LLC: 1) filing articles of organization with Arizona’s Corporation Commission and 2) publication of that filing in a qualifying publication. In addition, Arizona’s LLC Act set forth an optional third step: filing an affidavit of publication with Arizona’s Corporation Commission.

Articles of Organization

Arizona’s LLC Act requires the Articles of Organization to contain: 1)  the LLC’s name, 2) the name, street address in Arizona, and signature of the agent for service of process, 3) the address of the LLC’s known place of business in Arizona, if different from the street address of the LLC’s statutory agent, 4) whether the LLC is member-managed or manger-managed, and 5) the names of the LLC’s managers, if member-managed, or the names of the members, if member-managed.

LLC Name

A preliminary name  search can be performed at the following website to determine if a particular name is available pursuant to Arizona’s LLC Act: http://cooklaw.co/areas-of-practice/arizona-llc/arizona-llc-name-availability-search. Please note that a name may infringe upon the trademarks or rights of another person or entity even if such name is approved by Arizona’s Corporation Commission pursuant to Arizona’s LLC Act.

LLC Operating Agreement

Similar to a partnership agreement, an Arizona LLC operating agreement sets forth the rights and obligations of the LLC members one to another and to the LLC. While Arizona’s LLC Act does set forth various rights and obligations, these obligations are often a bare minimum. An operating agreement can be customized to better fit the needs of many LLCs and LLC members. For example, an operating agreement can restrict the sale of any or all of a member’s ownership interest in the LLC by triggering buy-sell provisions.

Cost

At Cook & Cook PC, we charge $575 — including fees and costs — to organize a single-member, i.e. single-owner, LLC. However, that charge increases to about $1,500 — not including fees and costs — to organize a multiple-member, i.e. multiple-owner, LLC. The increase in cost is principally attributable to substantial amount of time that is required to negotiate the terms of the LLC’s operating agreement among the LLC’s members.

The foregoing information regarding Arizona LLCs is by no means comprehensive. Always consult with a competent financial or legal profession when making important financial or legal decisions.