On behalf of Zachary Price at Cook & Price, PLC
Arizona law allows several different kinds of business entities.
Economists at a September 2015 Greater Phoenix Chamber of Commerce presentation were cautiously optimistic about Arizona’s economic recovery based on “slow but steady” improvement in housing and employment measures, according to Curtis Spicer of Cronkite News. This may be just enough optimism for some Arizona entrepreneurs to finally start new businesses in the Grand Canyon State.
One of the first decisions the owner of a new commercial endeavor should make is choosing legal counsel. Getting an experienced business attorney on board early on can help prevent problems later because a lawyer can dispense legal advice and guidance in the earliest stages of business development, including the choice of business entity.
The business owner can share with counsel the short- and long-term goals of the business so that the attorney can help the entrepreneur weigh the pros and cons of each kind of business-entity allowed under Arizona law.
Some of the major considerations in choosing a new business entity are:
- Personal liability of owners for business debt
- Control and management of the business
- Tax concerns
- And more
The main entities within which to do business in Arizona are:
- A sole proprietorship begins which one person goes into business alone; does not require a formal structure; leaves management decisions to the owner; assigns personal responsibility for business liabilities to the owner, including the duty to handle business taxes on his or her personal return.
- A general partnership is formed when two or more people go into business together; may commence by implication just by carrying on the business or formally by entering into a partnership agreement; profits and losses are shared equally unless the partnership agreement provides otherwise; partners share management powers and each can bind the partnership, unless the partnership agreement changes this arrangement; normally partners are individually liable for debts and obligations of the partnership; and taxes are paid by partners on their personal returns.
- A corporation is an artificial legal entity that exists separately from its shareholders, directors and officers; the corporation pays its own business taxes and individual shareholders pay taxes on dividends received; shareholders are normally shielded from personal liability of the business, with narrow exception; management is done through an elected board of directors and its chosen officers; and a corporation may be privately held or publicly by selling shares of stock.
- A limited liability company is a relatively recent creation that combines the limited personal liability of owners, called members, with pass-through taxation to members individually; management is either by members or appointed managers.
- And more, including limited liability partnerships or LLPs, limited partnerships, choices for professional entities and others.
Legal counsel should be consulted for assistance in setting up the chosen entity. For example, important or required documents must be drafted and sometimes filed with state authorities. Filings also may be necessary concerning state or federal taxation, licensing, assumed names and more.
From their office in Tempe, the attorneys of Cook & Price, PLC, represent business owners in entity selection and other commercial matters throughout the Tempe and Phoenix metropolitan area.
Call us today at 480-407-4440 or email us through this website.