If you want to start and run an Arizona limited liability company (LLC), you'll need to prepare and file various documents with the state. This article covers the most important ongoing reporting and state tax filing requirements for Arizona LLCs.
Unlike most other states, Arizona does not require LLCs to file annual reports.
When it comes to income taxes, most LLCs are so-called pass-through tax entities. In other words, the responsibility for paying federal income taxes passes through the LLC itself and falls on the individual LLC members. By default, LLCs themselves do not pay income taxes, only their members do. Some states impose a separate tax or fee on LLCs for the privilege of doing business in the state. Arizona, though, is not one of those states.
However, in some cases, the owners of an LLC choose to have their business treated like a corporation for tax purposes. This choice is made by filing IRS Form 2553 with the IRS. (See the IRS website for the form.) Unlike the default pass-through tax situation, when an LLC elects to be taxed as a corporation, the company itself must file a separate tax return. The State of Arizona, like almost every other state, taxes corporation income. Arizona's corporation income tax generally is calculated at a flat percentage rate. That rate, however, currently is different for different years (6.5% for 2014, 6% for 2015, 5.5% for 2016, 4.9% after 2016). The tax is payable to the state's Department of Revenue (DOR). Use the state's corporation income tax return (typically some version of Form 120) to pay the tax. For more details, check the DOR website.
Does your LLC have employees? If so, you'll need to pay employer taxes. Some of these taxes are paid to the federal government (the IRS) and are not covered here. (But note that federal employer tax obligations start with obtaining a federal employer identification number (EIN).) However, Arizona employers also must pay taxes to the state.
First, you'll need to withhold and pay employee income taxes to the DOR. Begin by registering your business with the DOR either online or on paper (Form JT-1/UC-001, Arizona Joint Tax Application). Once you've registered, you'll need to file withholding taxes on a periodic basis—for example quarterly using Form A1-QRT. You'll also need to use some version of Form A1-R each year to reconcile your LLC's tax withholding. For more information, including regarding online filings, check the DOR website.
In addition, you'll probably need to register to pay state unemployment insurance (UI) taxes. These taxes are handled through Arizona's Department of Economic Security (DES). However, registration is combined with other registrations through the DOR. You can register online or by using Form JT-1/UC-001. Then, each quarter, use Forms UC-018FF and UC-020FF to report on wages and pay the UI taxes. For more information, including regarding online filings, check the DES website.
If your LLC will sell goods to customers in Arizona, you will need to collect and pay the state's sales tax (which Arizona technically refers to as the Transaction Privilege Tax or TPT). This means you'll have to register for this purpose with Department of Revenue and then make periodic sales tax payments for goods sold. You can registeronline or mail in Form JT-1. After you've registered, you'll be sent a sales tax license. Then, on a periodic basis, you must submit sales tax returns to the DOR. You can do this on paper (Form TPT-1) or online. For more information, check the DOR website.
If you will be doing business in states other than Arizona, you may need to register your LLC in some or all of those states. Whether you're required to register will depend on the specific states involved: each state has its own rules for what constitutes doing business and whether registration is necessary. Often activities such as having a physical presence (a business location) in a state, hiring employees in a state, or soliciting business in a state (such as by telephone, print ads, mail, or the Internet) will be considered doing business for registration purposes. Registration usually involves obtaining a certificate of authority or similar document.
For more information on the requirements for forming and operating an LLC in Arizona, see Nolo’s article, 50-State Guide to Forming an LLC, and other articles on LLCs in the LLC section of the Nolo website.