If you have a great idea for a product or service and want to be your own boss, life as an entrepreneur and business owner could be calling. The past couple of years set record-breaking numbers for new business applications filed, with the U.S. Census Bureau reporting an all-time high of 5.38 million new business applications in 2021 and 5.04 million new business applications in 2022.
As one of the fastest-growing states in the country, Arizona is an ideal place to start a business for various reasons. There’s a booming technology industry. As people migrate to Arizona from California, Washington, Illinois and other states, there’s more innovation. Plus, the sunshine-filled state supports a work-life balance with an abundance of nature, arts and culture, sports and entertainment, and other fun things to do.
If you’re interested in starting a business in Arizona, learn about the steps you can take to set yourself up for success.
10 Steps To Starting A Business In Arizona
Creating your own business can be an exciting venture that fulfills you both income-wise and in life satisfaction. The following steps for starting a small business in Arizona can help transform your idea into a revenue-generating business.
1. Write a business plan
Before you launch your business, you’ll want to outline your strategy in the form of a business plan. A business plan helps you stay focused and on track. If you decide to pursue funding, potential investors may also be interested in seeing your business plan before they offer funding.
The U.S. Small Business Administration has a thorough guide on how to write a business plan. Your business plan should include:
- An executive summary that includes a mission statement, your product or service, financial information and information about employees and location
- A company description, which includes detailed information about your company’s consumers and competitive advantages
- Market analysis, which highlights the industry outlook and details the target market
- Organization and management, which explains how your business will be structured
- Marketing and sales strategy, which details how you’ll attract and win customers
Your business plan can also explain the legal structure of your business, which brings us to the next step.
2. Determine your legal structure
Your business structure will impact business aspects like taxes, funding, liability and your ability to operate your business legally in Arizona. It will also determine how to register a business in Arizona.
Some of the most common business structures are:
- Sole proprietorship: A sole proprietorship gives one person complete control of the business. You won’t create a separate business entity in a sole proprietorship. Instead, your business assets and liabilities blend with your personal assets and liabilities, which means you’re held liable for business debts. You can still get a trade name with a sole proprietorship, but you’ll operate without forming a separate business entity.
- Partnership: A partnership is a business structure where two or more people own the business together. Limited partnerships include a single general partner with unlimited liability and another partner or partners with limited liability. Limited liability partnerships give limited liability to each owner.
- Limited liability company (LLC): An LLC protects a business owner from personal liability with the business. If your LLC faces lawsuits or goes bankrupt, your personal assets will be protected.
- Corporation: A corporation is a legal entity that’s separate from its owners. Corporations pay income tax on profits and are entirely independent entities from shareholders. They’re generally an ideal choice for businesses with more risk, businesses that need to raise capital, and businesses that plan to go public or sell.
If you’re completely new to business ownership and need assistance in determining the proper business structure, Arizona has several groups and resources for small business owners. Check out the Arizona Small Business Association, the Arizona Commerce Authority and the Arizona Small Business Development Center Network to connect with local business advisors in Arizona.
3. Choose your business name
You want a business name that’s unique for your target market and that enables you to create a branded presence in Arizona or wherever you’re selling your product or service. Your business name could also help you grow your business if it’s a word or term people frequently search for online.
The Arizona Corporation Commission (A.C.C.) recommends:
- Search the name online to see if it’s already used.
- Check the entity name on the A.C.C. website to see if it’s available.
- If the name is available on the A.C.C. website, secure it by making a name reservation. You can reserve the name for 120 days while you submit paperwork to form the entity.
Once you’ve determined a name, you can purchase a website domain through a site like GoDaddy to create a website featuring the name. If you’re interested in additional legal protection for your business name, you can register a trademark through the U.S. Patent and Trademark Office for your business name and file for trade names and trademarks through the Arizona Secretary of State office.
4. Select a statutory agent
A statutory agent is someone who has a physical address in Arizona and receives business-related tax and legal documents on behalf of an LLC or corporation. If your business entity falls into these categories, you’re required to appoint and maintain a statutory agent at all times. Otherwise, your business will be administratively dissolved.
You can hire a professional statutory agent or appoint yourself or a business partner to be the statutory agent for your business. Whoever is appointed must be at least 18 years old and reside in Arizona.
5. File your business paperwork
To operate legally in Arizona, you’ll need to file documentation for your business with the A.C.C. You can do this on the same website where you secure your name, at Ecorp.azcc.gov.
You’ll need to submit different paperwork depending on what type of entity you’re filing. The A.C.C. will review and approve your paperwork. Then you’ll receive additional instructions on how to proceed or instructions for how to resubmit your paperwork if it’s rejected.
6. Register with the Arizona Department of Revenue
Your business may be subject to the transaction privilege tax (TPT) in Arizona. The TPT is a “tax on a vendor for the privilege of doing business in the state.” Depending on your business activities, you may need to pay the TPT and be licensed by the Arizona Department of Revenue (ADOR).
If your business is subject to the TPT, you’ll need to apply for a TPT license through the ADOR. You can do that online through the ADOR website.
7. Coordinate city/county taxes, business licensing and insurance
You’ll also want to register your business with the city where you’ll be located or with the county if you’re in an unincorporated area. Various cities in Arizona may require a business, occupational or regulatory license to legally conduct business there.
Visit your city or county’s website to navigate to its business and regulatory licenses page. You can also search “register a business in [city]” to find information on business licensing and registration.
Insurance also protects your business and enables you to operate legally. You may be required to obtain workers’ compensation, unemployment insurance, professional liability insurance, commercial property insurance and disability insurance, depending on your business model.
8. Get a federal identification number
You’ll also need to register for a federal tax ID number so your business can pay federal taxes. You can apply for an Employer Identification Number (EIN) through the Internal Revenue Service (IRS). The EIN serves as your federal tax ID, which you’ll need to:
- Pay federal taxes
- Hire workers
- Open a business bank account
- Apply for federal business licenses and permits
Your federal tax ID will differ from your Arizona state tax ID. If you’re a sole proprietor without employees, you may not need an EIN and may be able to use your social security number to pay federal taxes instead.
9. Open a business bank account
In many cases, it makes sense to separate your personal and business assets. This helps you stay organized, protects your personal assets and streamlines your taxes.
Arizona Central Credit Union’s Business Member Share Accounts require a $5 minimum opening deposit and a $5 minimum balance to remain eligible for benefits and services. Any type of business entity is eligible to open a business account for no-fee business banking benefits.
10. Get funding
If you’re wondering how to start a business in Arizona with no money, don’t worry: you have options. There are several types of funding models available. You might be interested in:
- Bootstrapping: Bootstrapping means you fund your business yourself. You can use your own savings to start your business, ask friends and family for capital, or access funds from a retirement account. The benefit of bootstrapping is that you retain complete control over your business. However, that means your assets are also vulnerable if your business fails.
- Venture capital: Venture capital is funding that comes from investors who expect equity in your company in exchange for their investment. Most venture capitalists will also require a presence on the business board of directors. A benefit of venture capital funding is that you may be able to get a higher amount of funding to grow your business more quickly. The potential disadvantage is that the investor will gain some control and ownership of your company when they provide funding.
- Business loan: You can also apply for a business loan that you’ll be expected to pay back, likely with interest. The good news is that the lender will have no control over the direction of your company. However, you’ll be liable to pay back the loan, including interest.
- Crowdfunding: Another small business funding option is crowdfunding. The way crowdfunding works is that a business owner presents the business plan to the public, who then contribute to the business launch. In exchange, donors will get some sort of gift in return. For example, a board game developer that’s seeking crowdfunding may send out a copy of the game once funding’s collected and the game debuts. Sites like Kickstarter provide crowdfunding options.
You may want to consult a financial advisor to see which type of funding makes sense for your company. Your product or service model will greatly influence the funding that works best for your business.
How To Secure Funding For Your Arizona-Based Business
If you’re interested in financing through a lender for your Arizona-based company, there are different types of business financing available. These include:
- A business term loan, which is a lump sum amount paid back on a fixed schedule
- A business line of credit, which works like personal credit and can be accessed when needed
- A U.S. Small Business Administration 7(a) loan or microloan, which have various repayment terms, loan limits and rates
Visit our guide on How to Get a Startup Business Loan to learn more about your options.
Achieve Your Small Business Dreams In Arizona
Your business idea has the potential to change the world. While the initial process does involve completing some steps to legally operate your business, the outcome could be financially and personally rewarding.
Connect with local Arizona small business resources to network with other business owners and advisors. If you’d like to learn more about your funding options, visit Arizona Central Credit Union’s Business Loans page. Contact us online or at (866) 264-6421 for more information.
