An Arizona LLC Operating Agreement is an internal regulatory document used by LLCs based in Arizona to outline how the LLC is organized and how it will be managed.
The document also protects the LLC owner(s) by limiting their liability for the LLC’s financial and legal liabilities by separating the owner(s) from the company. Additional information provided in the document is the members’ and managers’ obligations, company rules and regulations, and percentage ownership of each member listed.
Even though it is not mandatory in Arizona, the execution of an LLC operating agreement is subjected to the following state laws:
Operating Agreement Laws: § 29-3105
Arizona Limited Liability Company Act: Title 29, Chapter 7
State Definition: § 29-601(14)
Types of Operating Agreement
There are two (2) types of LLC operating agreements in Arizona. The differences between the types of Arizona LLC operating agreements are as discussed below:
Single-member LLC operating agreement
A single-member operating agreement is meant for single-member LLC companies. A single-member LLC has one owner and can have employees or not. The document declares the roles and responsibilities of the owner and management and operation policies and regulations.
Download: Microsoft Word (.docx)
Multi-member LLC operating agreement
A multi-member operating agreement is meant for multi-member LLCs owned by more than one member. This type of operating agreement highlights members’ percentage ownership, member and management obligations, governing rules, and regulations, etc.
Download: Microsoft Word (.docx)
How to Form Operating Agreement?
For an Arizona LLC operating agreement to be prepared, an LLC must be existent. Therefore, the process of creating an Arizona LLC operating agreement begins with the formation of an LLC in Arizona. Note that each operating agreement is unique to its LLC, even though most operating agreements must cover certain aspects of the LLC.
This article has highlighted the steps every Arizona LLC can take to craft its operating agreement:
Name of LLC
The first step is naming the LLC. Select a distinguishable that will be used as the identity of the company. Next, conduct a name search to determine if the name is available for use. The name must have “LLC” or “Limited Liability Company” attached to it. Also, it must comply with business names state requirements meaning it cannot have words like Treasury, City Hall, etc., used by government agencies.
Other restricted names such as Bank, University, attorney, or hospital can be available if certain requirements are met, such as filing additional paperwork and involving an individual licensed in the particular field such as a lawyer, doctor, etc., in the LLC membership. Also, verify if the name is being used on the internet as a web domain; if not, it can be registered with the Arizona Corporations Commission.
If the name is found to be available for use in Arizona, it can be reserved for 120 days by completing an application to Reserve Limited Liability Company Name with the state’s Corporation Commission. This process can be done online through the Corporation Commission website at $45 (a filing fee of $10 plus an expedite fee of $35) or by mail at the cost of $10.
Once the name has been registered and reserved, appoint a statutory agent with an operating address or residence in Arizona. The agent is meant to receive legal and tax documentation on behalf of the LLC.
A registered agent or statutory agent can be an individual or organization within the state of Arizona, and they must accept the role in writing by completing the Statutory Agent Acceptance Form, which is submitted together with the LLCs Articles of Organization.
Type of LLC
Next, declare the type of LLC being formed. An LLC can either be a domestic LLC (founded within Arizona) or a foreign LLC (founded outside Arizona). The type of LLC being formed and management structure influences the paperwork required to form the company.
For example, applications made using Adobe PDF are required to submit the Cover Sheet, Member or Manager Structure attachment, and the Statutory Agent Acceptance form. Foreign LLCs must submit a Certificate of Good standing from their original jurisdiction as an additional document.
Forms used to register Arizona LLCs are:
- Form L010 – Articles of Organization
- Form M002 – Statutory Agent Acceptance
- Form L041 or Form L040 – Member Structure Attachment
- Cover Sheet
Also, the agreement indicates if the LLC is a single-member or a multi-member LLC and legally binds all the members of a multi-member LLC.
Once all the relevant documents have been obtained, they can be filed with the Arizona Corporations Commission either by mail or online. Domestic LLCs pay a $50 filing fee while foreign LLCs pay $150. Payments can be carried out by check or money order, or credit card.
Mail applications should be forwarded to Arizona Corporation Commission, Corporate Filings Section, 1300 W. Washington St., Phoenix, AZ 85007.
Arizona LLCs are obliged to publish a notice of LLC formation within 60 days after the approval of the LLC’s Articles of Organization. The publications must be with an accredited newspaper within the LLC’s County and run for three consecutive weeks, and failure to which the LLC may result in the dissolution of the LLC.
LLCs formed with Maricopa and Pima counties do not have to publicize the formation. Note that filing an affidavit of publication is, however, not required.
Next, the LLC is recommended, not instructed, to craft their Arizona LLC operating agreement or else be subjected to default LLC state laws. The operating agreement should outline the operating structure adopted by the LLC and define business policies and decision-making processes to run the company.
In addition, the agreement should contain the legal LLC name, ownership, management structure, obligations of members and managers, voting rights, contributions, distributions, meeting procedures, and other relevant details such as buyout and buy-sell regulations. The Arizona LL operating agreement must be signed by all LLC members and copies distributed among the members, and one is kept in company files.
The LLC must obtain an Employment Identification Number, a nine-digit unique number assigned by the IRS to companies to make legal, financial transactions, to finalize the formation process. The EIN is also used to open a business bank account, file federal and state taxes, acquire credit cards and hire employees (disburse payments).
The EIN is basically like a Social Security Number for businesses and can be acquired from the IRS at no charge. The Employer Identification Number is sometimes also known as a Federal Tax Identification Number (FTIN) or Federal Employer Identification Number (FEIN). Applications for the EIN can be made online or via mail using Form SS-4.
Operating Agreement Template
The state of Arizona highly recommends its LLCs have an operating agreement. While the document can be prepared from scratch, an Arizona LLC operating agreement template can be used instead. Templates streamline the writing process of operating agreements by outlining all the fundamental sections that should appear on a standard Arizona operating agreement.
Our readers can readily access the templates given here, fill out the documents, print out, and sign to have valid operating agreements for their LLCs. In addition, the templates are FREE to download.
What’s Next After Forming an LLC?
After the LLC has been formed, what should the LLC member(s) do next? There are different things they can do to ensure they are operational, and their limited liability status is protected. They include:
Differentiate the assets
The LLC owners should separate their assets from the company’s. This includes real estate, vehicles, bank accounts, etc. This includes opening a separate business account, applying for a business credit card, and hiring an accountant to oversee funding and tax aspects of the LLC. Once the LLC is independent of the member(s), any claims against the company cannot be transferred to the owners.
Business insurance is a good way of managing potential risks of operating any business. There are different types of insurance Arizona LLCs can obtain. General liability insurance can be obtained for protection against litigation.
Professional liability insurance can cover the business from claims of business errors and malpractices by professional service providers such as consultants. LLCs with employees can get worker’s compensation insurance to cover job-related injuries, illnesses, or death.
Obtaining a website is a positive step towards the growth of a business. The LLC should get a website that gives them an online presence and authenticate their company. This can result in increased sales and ease of accessibility once the company becomes operational.
Lastly, the LLC members should make a press release to communicate to potential customers about the company’s existence. This helps with promoting the company to establish an online presence, increases traffic to the LLC website by improving the LLC’s Search engine optimization.
Frequently Asked Questions
It takes approximately thirty business days for the Arizona Corporation Commission to approve an LLC Articles of Organization. Once the document is approved, the LLC formation process is completed. Therefore, the process can be fast-paced for an additional fee.
The formation of domestic LLCs in Arizona costs $50 while foreign LLCs cost $150. The formation process can be expedited for an additional $35 fee. Extra costs are applicable for name reservation; mail applications cost $10, while online applications cost $45.
No. An Arizona LLC operating agreement is not filed with any state or government agency. LLCs are also not required to have one by the state, but they are recommended to prepare one have it signed by all the LLC members.
An LLC should be dissolved according to the procedure outlined in the operating agreement or Articles of Organization. This will generally require the appointed person to raise the proposal, seek the consent of dissolution from members, settlement of debts, liquidation, and distribution of assets, tax clearance, and file the termination form’s articles.