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Starting a Business in Arizona

View of businesses in downtown Phoenix, AZ

So you’ve decided to start your own business. That’s outstanding; everyone dreams of the day they can put something into the world that’s truly their own, to be their own boss and not have someone else looking over their shoulder. For those who succeed, it’s the ticket to the American Dream. Unfortunately, the majority of startup businesses don’t make it, and it’s not because they didn’t have a marketable idea.

Starting your own business requires doing it right, taking the right steps and making sure you’re in line with all federal, state and local regulations. Starting a business can be as easy as simply selling whatever product you’re offering and paying taxes. However, getting your business right, taking the right steps towards success, can be a lot more complex.

Like every state, Arizona has specific laws and rules you have to follow to get up and running. If you’re looking at starting a business in Arizona, here are the things you’ll need to consider, the steps you’ll need to take and the early secrets to success you should follow.

Starting a Business in Arizona: Business 101

At its most basic level, starting a business in Arizona involves three steps. First, you need to decide what kind of business you’re going to file: a sole proprietorship, an LLC, a corporation or a partnership. Each type of business has its own steps toward getting registered and up and running.

Second, you’ll need to register a trade name. While it’s not a legal requirement to file a trade name for your business, it is standard practice, and it can provide an extra layer of protection, separating you from your business. If you’re filing a corporation or LLC your company name will be part of this process and you won’t have to do it separately.

Finally, you’ll need to create an employee identification number (EIN). This is the tax number for your business. It’s the official number that the government uses to identify your business for tax purposes. All the taxes you pay to the IRS will be done using your EIN.

That’s the basics. However, as you might expect, there’s actually a lot more that goes into starting your Arizona business than this. Let’s break it down further.

Every Business Is Unique

The first thing to remember is that everything you read here is a broad overview of what it takes to get a business up and running. Your business will almost certainly have specific issues it needs to address, and you’ll have to handle those as they come up. For this reason, it’s never advisable to simply “dive in head first.”

You should always consider speaking with professionals who have the knowledge and experience to guide you through this process individually. This means a business attorney, a financial advisor and potentially even a consulting service.

Consider consulting with these people as security and insurance. Talking with the right professionals may carry an up-front cost, but the savings you’ll get from avoiding critical errors later on will more than make up for it. It’s one of the best investments you can make in the future success of your business.

Start With an Idea

We can go through the steps of getting your business up and running all day, but the most important aspect of your business — the hinge upon which it will succeed or fail — is the idea. Without a good idea, you can’t pursue a business. And your idea goes far beyond the basic concept. You might know that you want to sell chocolate chip cookies based on your grandma’s recipe, but there are thousands of cookie makers out there.

You’ll need a plan of action to make it work. What exactly is it that sets your product apart from the competition? What makes your cookies (for example) better than those at the bakery down the street? Once you’ve established that clearly for yourself, you’ll have a hook to use for your marketing.

Next, you need to form a business plan. How are you going to fund the business? Do you need a storefront? How will you profit from the cookies? What are your expenses? From ingredients costs to overhead, rent and more. It can be helpful to take a brief entrepreneurship course at your local community college to get a feel for how a business plan is structured. Having a good business plan will provide you the opportunity to foresee potential complications and avoid them, and it can be an invaluable tool to get funding for your company.

Top Business Ideas in Arizona

You might be surprised at the top, most potentially successful business ideas in Arizona. These include:

  • Arts and crafts
  • Bookshops
  • Small publishing companies
  • Private tutoring businesses
  • Consulting firms
  • Outsourcing services including:
    • Secretarial and educational
    • Interior design
    • Stock photography
    • Courier services
    • Public speaking
    • Computer training classes
    • Contracting
    • Landscaping
    • Property maintenance businesses

A few things many of these have in common: they focus on your passion and love, many can be done either online or right out of your home and they require little overhead and investment to get started. Many of the best small businesses start off very small as something you can do right out of your basement and then build later on.

Choose Your Name

Choosing a name for a business may seem simple, but you’ll need to be sure that nobody else is using it. Even if you’re just using your family name, take the time to Google it and be sure it’s not already in use. If it is, you could end up with legal troubles.

You’ll also want to check with the Arizona Corporation Commission to be sure it hasn’t been registered by another entity. If the name isn’t already in use, you’ll need to register and secure the name. Your business attorney can also help you make sure you’re in the clear.

Choose Your Business Type

Again, you’ll need to decide what kind of business you want to create. The simplest kind of business is a sole proprietorship or a “DBA.” In this kind of business, you open the doors and start selling. The problem with this kind of business, though it’s easy to start, is that everything that happens falls on you personally. That means if you end up deeply in debt or in legal trouble, your creditors can come after your house, your car and your other personal assets.

A partnership is similar to the proprietorship, except that multiple people each assume responsibility for the business. This means that if your partner gets the business into trouble, you could bear liability as well. Partnerships can be a solid arrangement, but only if they’re clearly spelled out and everyone’s responsibilities delineated without question.

The most protection separating you from your business is in the form of a corporation, an S-Corp or C-Corp. These entities are treated like individual people under the law, and all liabilities they rack up are specific to the corporation. They pay their own taxes at their own tax rate, they have their own assets and you are largely separate from those assets. If your business folds, that doesn’t necessarily mean you will. However, these can be very difficult to set up and expensive to maintain, and for most small businesses it’s a lot more than you need.

An LLC, or Limited Liability Company, is the most popular form of small business in the nation. It allows the simplicity of paying taxes for your business on your personal income tax, but still provides you with a large degree of protection by sheltering your personal assets should the business run into difficulty. It’s easy and inexpensive to set up and is an ideal balance between sole proprietorship and corporation.

Talk with your attorney about which is the best option for your new business.

Your Statutory Agent

If you form an LLC in Arizona, you’ll need to designate a statutory agent for the company. This is the person or entity who agrees to act as the “voice” of your company — they send and receive legal documents for the company. This person must be a resident of Arizona or a company that is licensed to operate in Arizona. It can be you, and in fact, many entrepreneurs do serve as the statutory agent for their company. For others, their attorney serves this purpose.

Securing a Tax Number

If you file an LLC, your tax number or EIN (Employer Identification Number) will be a part of your business registration. Otherwise, you’ll need to file for one of these in order to be able to pay taxes on your business. Your EIN and all business paperwork will be filed with both the ACC (Arizona Corporation Commission) and the Arizona Department of Revenue as well as the IRS — after all, the EIN is a federal tax number.

In addition, you’ll need to file with the city and county where you do business, so you can pay taxes to that entity as well.

Business Licenses and Permits

Starting a business in Arizona may or may not require state licensing, though there can be exceptions for things such as contracting and construction companies. You may have to register for transaction tax licensing, special regulatory or professional licensing, occupancy permits, local business licenses and a range of others.

You’ll need to carefully check to be sure that your company doesn’t need to be licensed or certified to practice in the state, county or local municipality where you set up. Again, your business attorney can point you in the right direction to make sure you’re in compliance with all the regulations and laws in your area.

Get a Business Bank Account

You’ll need a place to store the money you own. Even though your business structure may provide protection for your personal assets, you’ll still need to keep those assets separate so you have a clear line regarding what is yours and what belongs to your business. Setting up a business bank account isn’t difficult — many banks even offer free business checking accounts for small businesses. Talk to your local bank or credit union and see what options are open to you.

You’ll want to do this early in the process, however, as any payments you make to the A.C.C. must be on permanent checks with a pre-printed contact (name and address); temporary checks cannot be used.

Get a Location

Even if you’re going to run a home-based business, it can help to have a professional location where you can receive communications and physical mail, and where you can meet clients if necessary. Otherwise, you will be letting everyone know your home address, which can open you up to all sorts of dangers.

Consider a shared office space if you don’t want to pay for a full suite yourself. Many cities and towns have these and they not only offer a professional location at a discount, but they can provide a wonderfully creative and collaborative environment that can inspire you to new heights.

Get Business Cards

Business cards are a small detail that many entrepreneurs overlook. When you’re starting a business in Arizona, you’ll need a means by which people can contact you, and it doesn’t look very professional to scribble your email on a piece of scrap paper. If you’re creative, you can print business cards yourself on your printer using templates. Otherwise, business cards can be very inexpensive from your local office supply store or any of a range of online vendors.

Getting Funding and Advice

Starting a business in Arizona requires capital, and securing funding for a startup is one of the biggest hurdles most aspiring entrepreneurs face. The best way to get started and get your business funded is to ensure that you’ve taken all the right steps, including applying for a small business loan.

Securing a small business loan is the most important step in starting your business, and can increase your chances of success. Make sure to do your research, and you should be able to find the loan that fits the exact needs of your small business.

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