In this blog post, we’re breaking down the legal compliance essentials and fees needed to register your Limited Liability Company (LLC) in Arizona and ensure your small business e-commerce startup maintains its LLC status smoothly.
It’s important to note that, in the United States, LLC registration operates at the state level. This means you have the flexibility to register your LLC in any of the 50 states, including Washington DC.
You can check out the best states in the US to register your LLC as a small business e-commerce start-up, if you want to pay less State fees, less State imposed taxes and do less periodic paperwork in order to maintain your LLC.
In this Article, our focus is on Arizona LLC. What cost should you expect to pay when you register an Arizona LLC? What periodic filings requirements are imposed on Alabama LLCs? What State taxes are levied on e-commerce small business start ups in Alabama and what are the tax rates? What business permits are required to be obtained by e-commerce businesses in Arizona, what’s the cost of these permits and are there any renewal requirements?
This article offers a quick snapshot, providing insights into the fees and legal compliance requirements associated with registering an LLC for your e-commerce small business startup in Arizona. Learn what’s needed to operate with the necessary licences and ensure the continued status of your Arizona LLC.
Business registration and compliance on Arizona
- LLC Registration cost; the state fee for registering an LLC in Alabama is $85. You can register your Arizona LLC with Bizee for a service charge of $0 + the State fee.
- LLC registration Publishing requirement; LLCs in Arizona are required to publish their registration in a local newspaper, However If you form your LLC with an initial Designated Office in Maricopa or Pima county in Arizona, you’ll be exempt from the requirement to publish your LLC in a local newspaper, instead the Arizona Corporation Commission will publish your LLC on their website at no cost.
Otherwise, if you have registerd your LLC in other Counties in Arizona, you will have to publish your Arizona LLC with a newspaper that is located in the same city or same county as your LLC (based on your LLC’s Initial Designated Office)
The Arizona Corporation Commission (A.C.C) maintains a neutral stance by not endorsing any specific newspaper. However, as a courtesy, they furnish a list of newspapers that have affirmed to the A.C.C that they meet the statutory criteria for publishing documents.
- Has the Option to register as an Anonymous LLC; No, LLCs in Arizona do not have the option to register as an anonymous LLC. Meaning that the business details of the LLC Owners are published on the Arizona public records. The LLC still can maintain some privacy by using a virtual office address and not the Owners real addresses.
- DBA requirement; In Arizona, DBA is optional if your LLC is operating under a different name than your LLC and referred to as “Trade name”. Cost of registering a Trade name in Arizona is $10, the Trade name length of approval is 5 years. You can register a trade name in Arizona online or outsource the registration of your Alabama DBA (if needed) to Bizee
- Annual returns filing requirement; No, Arizona LLCs do not have annual report filing requirements.
Annual Franchise tax filing and compliance in Arizona
- State Franchise tax requirement; No, LLCs are not required to pay Franchise tax in Arizona.
Annual State income tax filing and compliance in Arizona
- State income tax requirement; Arizona implements a flat 2.50 percent individual income tax rate and a 4.90 percent corporate income tax rate.
- Who files State income tax; LLCs by default are passed through entities meaning that tax obligation passes through to the individuals who own the LLC. Therefore an LLC with a default tax status pays the individual state income tax. Interestingly, if the individuals behind the LLC are not resident in the state and do not have state source income (a dependent agent in the state), then they are not required to pay “individual State income tax”.
If the LLC owners are resident in the State or have State source income (a dependent agent in the state), then the LLC Owners are required to pay “individual State income tax”.
If the LLC has elected to be taxed as a corporation (C-corp), then the LLC is required to pay “Corporate State income tax”.
- How to file state income tax; You can file your Arizona State income tax by yourself. You will need to visit the State website. Alternatively, we recommend using the Service of a Certified Public Accountant (CPA), through H&R Block to file your state income tax.
Periodic Sales tax filing and compliance in Arizona
- Sales tax requirement; In Arizona, there’s a state sales tax rate of 5.60 percent, with a maximum local sales tax rate of 5.30 percent. When combined, the state and local sales tax rate reaches 8.37 percent.
- Sales tax nexus; sales tax nexus serves as the defined threshold between a seller and a state. Once this threshold is reached, it becomes mandatory for the seller to register for a seller permit in the state, charge sales tax to customers within that state, and subsequently remit the collected sales tax to the state government.
The concept of sales tax nexus typically involves both “physical sales tax nexus” and “economic sales tax nexus.”
Physical sales tax nexus occurs when a seller has a tangible presence in the state, such as an office address or a warehouse. This physical presence establishes a nexus that triggers the obligation to collect and remit sales tax in that particular state.
In most States, “economic sales tax nexus” is reached when a Seller makes up to 200 transactions or $100,000 in sales in a State.
It’s important to note that, when you register your LLC in the State of Arizona (which generally requires that you have a registered business address in Arizona), you automatically meet the physical sales tax nexus and will be required to obtain a Sales tax permit in Arizona, charge applicable sales tax rates to customers in Arizona and remit sales tax to the Arizona State Government.
- Sales tax permit; It costs $12 to register for an Arizona transaction privilege tax (TPT) licence per business location.
The Arizona sales permit must be renewed annually by January 1.
- Reseller/Resale Certificate; Businesses who purchase products from their suppliers for the purpose of reselling those products to their customers can make sales tax free purchases from their suppliers if they have a resale certificate.
This means that Resale businesses can get cheaper product prices from their suppliers (that is product prices without sales tax included) which can help these Businesses have a higher profit margin and/or maintain competitive selling prices to their Customers.
Generally, suppliers will charge the sales tax rate applicable in the State where the product is to be delivered unless the business presents to the supplier a Resale Certificate (also called a Reseller Certificate).
The Resale certificate must be valid and acceptable in the state where the product is to be delivered.
Businesses can present any of the below listed Resale certificates to suppliers if they want to make sales tax free purchases for product delivery to an Arizona address.
- Resellers | Form 5000A
- MTC Uniform Sales & Use Tax Resale Certificate. (The MTC form serves as a uniform resale certificate for various states, streamlining the process by replacing the need for multiple state-specific resale forms when dealing with your supplier.)
Note; Arizona accepts the use of out-of-State Seller ID.
This means that Out-of-State Resale Businesses seeking sales-tax-free purchases in Alaska can use an out-of-state seller ID (i.e a seller ID issued by another US state or their home state) to fill-out the MTC uniform resale certificate. They can indicate an out-of-state seller ID as their Arizona Seller ID on the MTC form.
In Arizona, A blanket Resale certificate (This means that the resale certificate is kept on file by the Supplier to cover multiple purchase transactions between a specific Supplier and Reseller) should be renewed at least every twelve months.
Conclusion
This Article shows you a snapshot of the legal fillings and compliance requirements for LLCs that are registered in Alabama, specifically for LLCs that want to carry on the business of selling and especially for small e-commerce start up LLCs that are registered in Arizona.
If you are wondering what might be the best State in the United States to register your small business (especially if you are a reseller or an e-commerce business), we have written this Article, where we go over our most recommended states for registering a business in the United States, if you want to pay less LLC filling and legal compliance fees, if you want less state imposed taxes and if you want to do less periodic legal paperwork required to maintain your LLC status.
