BUSINESS ENTITIES, FORMATION,
AND TAXES, OH MY!
May Lu, Esq.
Tiffany & Bosco, P.A.*
Camelback Esplanade II, Third Floor
2525 E. Camelback Road
Phoenix, AZ 85016
(602) 255-6032
mlu@tblaw.com
*Offices in: Phoenix, Arizona and Las Vegas, Nevada
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Disclaimer
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Information presented here is general
information.
Choice of the right legal strategies for your
specific situation depends on your fact situation
and how the law and market conditions apply to
that situation.
Consult professional advisors such as your
accountant, insurance professional, and business
attorney.
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Choice of Business Entity:
Legal Forms (Pros and Cons)
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Legal Forms a Business May Take
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Sole Proprietorship
Partnerships
 General Partnership
 Limited Partnership
 Limited Liability Partnership
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Legal Forms a Business May Take
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Corporations
 ‘S’ Corporation
 ‘C’ Corporation
Limited Liability Company
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Sole Proprietorship
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Sole Proprietorship
 Default for one person “owning” their own
business
Unlimited Personal Liability!
Business not a “going concern,” nothing to
sell at death or retirement
Fictitious name filing
No reason to use, considering allowance of
one-member LLC in Arizona
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General Partnership
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An association of two or more persons to carry
on as co-owners a business for profit.
All parties are equally “involved”
All partnerships have the benefit of flowthrough taxation (i.e. entity does not pay tax
itself, with some exceptions)
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General Partnership
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In a general partnership, all partners subject to
personal liability!
Should create a written partnership agreement,
otherwise at-will and subject to default rules of state
of formation
 Revised Uniform Partnership Act (RUPA) in
Arizona
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Limited Partnership
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Still need at least one general partner
(unlimited liability)
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Can be a corporation, another limited partnership,
etc.
Control issues (use of name)
Usually a “money” person and a “manager”
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Limited Partnership
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Some liability protection – still minimal
Gives limited liability to the “passive
investor”
 Only liable to extent of capital contribution
Additional filing = additional cost
Should create separate partnership agreement
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Limited Liability Partnership
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If general partnership or limited partnership,
easy and wise to switch to LLP
Limited liability for all partners
Generally, Limited Liability Company is the
better entity form if you can afford to plan
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Cannot be partner of yourself
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C Corporation
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Default whenever a corporation is created
 Taxed at corporate level – income, including
dividend income, of shareholders is also taxed
(Double Taxation!)
Corporate Formalities
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C Corporation
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Management structure fixed
 Shareholders, Board of Directors, and
Officers
Deductible Benefits to Employees
 Can cut tax liability
Losses incurred by C Corporation do not
flow through to owners
Should form if plan to go public soon
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S Corporation
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Tax Election of a C Corporation or Limited
Liability Company
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Protection still the same
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S Corporation
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Four relatively confining requirements
 Must be corporation of state or U.S. territory;
 Partnerships and corporations cannot be
shareholders;
 No more than 100 shareholders;
 Only citizens or residents of U.S. may be
shareholders; and
 Only one class of stock (can have voting/nonvoting)
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Limited Liability Company
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Management – Members and managers
Limited Liability – Even for one member
Ability to Elect Federal Taxation as Corporation or
Partnership
Very Flexible Organization
Some Risk Because Newer Entity Form
No Annual Reports
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Formation: Documents, Cost & Timeline
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In General
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Takes approximately 1 week for the Arizona
Corporation Commission to file Articles of
Incorporation or Articles of Organization on an
expedited basis. $35.00 to expedite filings.
Other states will vary
Should seek advice of local professionals
Check/Reserve Name ($10.00)
Name appropriately
Do not forget the Internal Revenue Service (EIN,
S Election)
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Arizona Corporation Commission
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www.cc.state.az.us
Search Corporations, LLCs, Trade
Names, & Trademarks
Check Name Availability
Forms, Instructions, and Fees
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Arizona Secretary of State
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http://www.azsos.gov/business_services/filings.htm
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Search Partnerships, Trade Names &
Trademarks
Checklist for Limited Partnership Filings
Applications for Trade Names & Trademarks
Forms, Instructions, and Fees
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C Corporation
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Articles of Incorporation ($60)
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Statutory Agent
Certificate of Disclosure
Organizational Meeting Minutes (Attorney)
Bylaws (Attorney)
Certificate of Good Standing ($10.00)
Shareholders’ Agreement (Attorney)
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C Corporation
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Keep Originals – Corporate Book (approx. $80 for
leather, with certificates, etc.)
Employer Identification Number
Publication of Articles – local newspaper; 3
consecutive weeks (Cost Varies)
 Get affidavits from each newspaper – at least two
originals from each
Annual Report ($45)
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S Corporation
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Very Similar to C Corporation
Tax Election – Flow-through Taxation
Make Sure to Meet All Requirements
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Limited Liability Company
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Articles of Organization ($50)
Operating Agreement (Attorney/CPA)
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Member-Managed
Manager-Managed
Publish Articles – same requirements as
corporation (Cost Varies)
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Partnership
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Default entity for two or more persons
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“An association of two or more persons to carry
on as co-owners a business for profit forms a
partnership, whether or not the persons intended
to form a partnership.” A.R.S. § 29-1012(A)
Partnership Agreement!
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Limited Partnership
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Certificate of Limited Partnership ($10 fee;
$3.00 per page)
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File Certificate with Secretary of State (Two
signed copies)
Partnership Agreement (Attorney/CPA)
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Limited Liability Partnership
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Partners Must Agree
 By Vote or Partnership Agreement
If agree, file a statement of qualification
 $ 3.00/page
 A.R.S. § 29-1101(C)
Annual Report – Simple ($3.00)
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QUESTIONS?
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