Business Organization Types

Choose the Best Form for Your Arizona Business

The following issues are likely to be of concern when choosing the best form of organization for your Arizona business: (1) formation and formalities (2) liabilities of owners to third parties (3) management and control (4) liquidity (5) dissolution and (6) taxation.

Corporations: (1) formation and formalities: must file articles of incorporation and observe ongoing formalities (2) liabilities of owners to 3rd parties: no liability (3) management and control: no direct control – delegate to Board of Directors (4) liquidity: shares easy to transfer (5) dissolution: unlimited life (6) taxation: double taxation except for S-Corp. (up to 75 owners, 1 class of stock, only U.S. citizens)

Partnerships: (1) formation and formalities: none for general partnership, modest for limited partnership (2) liabilities of owners to 3rd parties: general partners personally liable unless a registered Limited Liability Partnership (LLP) (3) management and control: general partners have control rights (4) liquidity: limit on transferability, general interest is illiquid (5) dissolution: limited life (6) taxation: pass-through taxation

Limited liability companies (LLC): (1) formation and formalities: must file articles of organization and operating agreement (2) liabilities of owners to 3rd parties: members have same limited liability as shareholders (3) management and control: members can manage or may delegate management power to team of managers (4) liquidity: members may transfer their interest only through the unanimous consent of all members or through consent described in the articles of organization (5) dissolution: must be some event of dissolution specified in articles or membership agreement (6) taxation: pass-through

For many small businesses, LLC is best choice because although they have limited liquidity and limited life, they have limited formalities, limited liability, some control and pass-through taxation.