Limited Liability Company

One of the many advantages of a limited liability company over other business forms is the flexibility to choose how the limited liability company is taxed by using default rules or by making elections. The owner of an limited liability company is called a member. Ownership is not restricted unless the limited liability company elects to be taxed as an S corporation. Like a partnership, there is no tax to the limited liability company unless it elects to be taxed as a C corporation. A limited liability company (LLC or a professional LLC “PLLC”) is formed by filing articles of organization with the Arizona corporation commission (this is similar to the requirements for the formation of a corporation, which begin with the filing of Articles of Incorporation, also with the Arizona corporation commission). The articles of organization sets forth general information about the company, including its name, address, statutory agent for the purpose of accepting service of process (lawsuit papers or legal documents), term, and whether it will be run by members, or managers. Even though not required by statute, an Arizona limited liability company should have an operating agreement. This document, similar to a partnership agreement, provides a blueprint for how the LLC will be run, the financial obligations of the members, and how profits and losses will be divided. If there is no operating agreement, then the limited liability company statutes (ULLCA) will govern how the limited liability company conducts its affairs. It is therefore recommended that every limited liability company have a well-drafted operating agreement.

Depending on elections made and the number of members, the Internal Revenue Service will treat an limited liability company as either a sole proprietorship, a partnership, or a corporation (C corporation or S corporation).

The filing fee to form an LLC with the Arizona corporation commission “ACC” is $50. For expedited processing, add $35 to the filing fee. All fees are nonrefundable.