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LLC Law Blog

Elimination of the New LLC Newspaper Publication Requirement

Because the newspaper publication requirement for new Arizona limited liability companies will be eliminated on January 1, 2017, the Corporations Division of the Arizona Corporation Commission issued the following press release:

2/19/2016 – HB2447 – PUBLICATION OR POSTING ON ACC WEBSITE — HB2447, passed last legislative session, provides the public with options of publication in a newspaper or posting by the ACC if the known place of business is located in Maricopa County or Pima County. The ACC approval correspondence for documents subject to the bill will inform the submitter about the options. The database mandated by the revision to A.R.S. Section 10-130 is actually a new page on our website, and as of January 1, 2017 there will be a prominent link to it on the eCorp home page. Approved documents subject to the bill will automatically be posted after January 1, 2017, and the customer will not need to interact further with the ACC. There is no fee associated with the posting at this time.

Note:  The elimination of the newspaper publication requirement only applies with respect to new Arizona LLCs that have a place of business located in Maricopa County or Pima County, Arizona.  See my article called “Arizona Legislature’s HB 2447 Eliminates Newspaper Publication.”

2016-12-27T20:20:02-07:00December 27th, 2016|Forming LLCs|0 Comments
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S Corporation Ignorance

For the umpteen time today a client told me about the client’s discussion with a person who does not understand the difference between the type of entity formed under the law of one of the fifty states vs. the method of income tax applied to the entity by the Internal Revenue Code of 1986, as amended.   The ignoramus said, “My company insists that it enter into a contract with your company, but only if your company is an S corp.”  My client’s company is an LLC, but the ignorant person thinks his company cannot enter into a contract with the LLC because the LLC is not an “S corporation.”

Too many people, including CPAs and lawyers, do not understand that when they say the entity must be an S corporation they are mixing two concepts: (i) the type of entity formed under state law, and (ii) the income tax method applicable to the entity under the Internal Revenue Code.  Just today I downloaded the materials to a webinar I will watch later today.  The lawyer who is teaching the webinar created reference materials that constantly use the phrase “limited liability companies vs. ‘S’ corporation.”  The lawyer knows better, but falls into the trap of loose talk about S corporations.

Not one single state in the United States allows people to create an S corporation.  The states allow people to create, sole proprietorships, general partnerships, limited partnerships, limited liability partnerships, limited liability limited partnerships, for profit corporations, nonprofit corporations, benefit corporations, and limited liability companies.  The term “S corporation” refers to a method of federal income tax applicable to an entity under the Internal Revenue Code.  After forming your entity under state law you must then decide the federal income tax method you want to apply to your entity.  If Homer Simpson forms a for profit corporation in Arizona and an Arizona LLC, he can cause both entities to be taxed under Subchapter S of the Internal Revenue Code by timely filing an IRS form 2553.  The federal income tax law applies exactly the same to the corporation and the LLC taxed as S corporations.

P.S.  Timely filing the IRS Form 2553 means filing the form with the IRS within the first two and one half months of the entity’s existence or within the first two and one half months after the beginning of a calendar year.

For more on this topic see my article called “LLCs vs. Corporations: Which Type of Arizona Entity Should You Form?“

2017-05-29T09:32:16-07:00December 19th, 2016|FAQs, Forming LLCs, LLCs & Corporations, Operating Agreements, Tax Issues|0 Comments
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Arizona Benefit Corporations Update

On January 1, 2015, Arizona’s benefit corporation law became effective.  This new law allowed people to form a new type of Arizona corporation called the “benefit corporation.”  An Arizona benefit corporation is a corporation whose Articles of Incorporation states that the corporation is a benefit corporation.  The benefit corporation may have a general public benefit goal, i.e., to have a material positive impact on society and the environment, taken as a whole, assessed against a third-party standard, from the business and operations of a benefit corporation.

Yesterday I asked the Arizona Corporation Commission how many benefit corporations have been formed under Arizona’s relatively new benefit corporation law.  The answer is twelve!  Yes.  Twelve benefit corporations formed in Arizona in two years.  Of the twelve Arizona benefit corporations ten of them became b corps in 2015 and two became b corps in 2016.  Here are the only corporations in Arizona that are benefit corporations:

  • Goodmans, Inc.
  • Sechler, CPA, P.C.
  • Desert Sky – Music, Art & Sustainability Festival, Inc.
  • Elevate by Will Claye Inc.
  • Spirit of Esther Incorporated
  • Individualized Pool Care, Inc.
  • Spex: Sedona Philosophy Experience Corporation
  • Nail Art Club, Inc.
  • Good Market Inc.
  • Upcycle Tucson Inc.
  • The Bull Market, Inc.
  • Envusion, Inc.

You might ask “why would anybody form an Arizona benefit corporation?”  My answer is I don’t know.  If you can think of a good reason to form a benefit corporation rather than a form a for profit corporation, a nonprofit corporation or a limited liability company, leave a comment and tell me.

2018-05-20T14:07:25-07:00December 15th, 2016|AZ Corporation Commission, LLCs & Corporations, Miscellaneous|0 Comments
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Why Your Arizona LLC Needs Richard Keyt’s Custom Operating Agreement

I formed my first Arizona LLC the day the Arizona LLC law became effective in October of 1992.  Since then I have formed 9,200+ Arizona LLCs.  In practicing LLC law for 28 years I have seen the same LLC operational problems over and over.  When I learn about an operational problem I add new language to my LLC Operating Agreement to “fix” or prevent the problem.

For example, one of the most common LLC operational problems occurs when members cannot agree and need a company divorce.  When members have major disagreements over running the LLC it is very common for a member without any authority or basis to file an amendment to the LLC’s Articles of Organization that removes one or more members as members of the LLC.  The culprit may also open a new bank account and misrepresent to the bank who the members of the LLC are.

People who file false documents with the ACC are usually unaware that they could be committing a felony.  Arizona Revised Statutes Section 29-3205.C states:

“An individual who signs a record authorized or required to be filed under this Chapter affirms under penalty of perjury that, to that individual’s knowledge, the information stated in the record is accurate.”

Arizona Revised Statutes Section 13-2702 states:

A. A person commits perjury by making either:

1. A false sworn statement in regard to a material issue, believing it to be false.

2. A false unsworn declaration, certificate, verification or statement in regard to a material issue that the person subscribes as true under penalty of perjury, believing it to be false.

B. Perjury is a class 4 felony.

I am not aware of that the Arizona Attorney General has prosecuted anybody who filed a false document with the Arizona Corporation Commission.

The purpose of Arizona Revised Statutes Section 29-3205.D is to reduce false filings with the Arizona Corporation Commission and give aggrieved members a remedy.  This statute states:

“A person that signs a record, or causes another to sign it on the person’s behalf, knowing that the record contains inaccurate information at the time it is signed, is liable to the limited liability company and to each member of the company for damages resulting from the inaccurate information.”

The problems with this statute are: (i) proving damages for a false filing is very difficult, and (ii) the cost to sue coupled with the risk of winning and collecting a judgment makes this remedy very risky.  Few members will actually use this statute to sue another member.

After seeing the false amendment to the Articles of Organization too many times I added a clause to my Operating Agreements that provides that a member who files a false document with the Arizona Corporation Commission is liable to all other members for liquidated damages of $10,000 and if the damages are not paid in full within sixty days the member who filed the false document ceases to be a member.

Why Your Existing or New Arizona LLC Needs Richard Keyt’s State of the Art Operating Agreement

I have prepared 9,200+ Arizona LLC Operating Agreements.  My Operating Agreement is unlike any Operating Agreement prepared by anybody else including attorneys because it contains provisions I created to prevent or solve common LLC operational problems I have seen representing thousands of LLCs.  For a partial list of common LLC operational problems see my article called “Common LLC Disasters a Good Operating Agreement Prevents.”

To hire me to prepare an Operating Agreement for an LLC that does not have one or to amend an Operating Agreement for an LLC whose members signed an Operating Agreement complete my comprehensive Operating Agreement Questionnaire.

2021-01-02T15:05:52-07:00December 4th, 2016|Operating Agreements, Operating LLCs|0 Comments
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Proposition 206, Minimum Wage and Paid Sick Time Off Initiative Passed by Arizona Voters

On November 8, 2016, Arizona voters approved Proposition 206, the Minimum Wage and Paid Sick Time Off Initiative, by a 59% to 41% margin.  Effective January 1, 2017, the Arizona minimum wage increases to $10.00 per hour.  The minimum hourly wage increases to $10.50 on January 1, 2018, $11 on January 1, 2019, and $12 on January 1, 2020.  Beginning January 1, 2021, and every January 1 thereafter the minimum hourly wage will increase by the increase in the cost of living increase per the U.S. consumer price index.

The paid sick time component is effective July 1, 2017. The new law includes the following sick time provisions:

  • For every 30 hours worked the employee accrues one hour of sick time.

  • If an employer employs 15 or more employees the employer may cap maximum annual accrual of paid sick time at 40 hours.

  • If an employer employs less than 15 employees the employer may cap maximum annual accrual of paid sick time at 24 hours.  Note:  This means that an employer that has ONE employee is subject to this sick leave accrual law.

  • An employee that is exempt under the Fair Labor Standards Act of 1938 is deemed to work 40 hours per week when calculating paid sick time accrual unless the employee’s normal work week is less than 40 hours.  When an exempt employee works a less than 40 hours the employee’s accrued sick time is based on the actual hours worked.

  • If an employee does not use sick time accrued during a year the unused amount will be carried forward to the next year unless the employer adopts a procedure that eliminates the carry forward.

  • New employees are subject to a 90-day probationary period that provides the employee is not entitled to any compensation for accrued and unused sick time during the probationary period if the employee is fired before the expiration of the 90 day period.

2016-12-03T17:15:39-07:00December 3rd, 2016|Miscellaneous|0 Comments
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Tax Free Merger of a Corporation into an LLC

Question:  How do I convert my corporation into a limited liability company?

Answer: Two ways – the easy way and the hard, but not too hard way.

Easy Way:  If your corporation does not have assets that have substantial value or contracts that cannot be assigned or transferred to the LLC without the consent of the other party to the contract then simply form a new LLC, dissolve the corporation and start doing business under the new LLC.  If your corporation is an Arizona corporation and you dissolve it before or concurrently with forming your Arizona LLC the new LLC’s name can be identical to the corporation’s name.

Harder Way:  Form an Arizona LLC and merge the corporation into the LLC.  The advantage of this method is that a merger causes the assets and liabilities of the corporation to become assets and liabilities of the LLC automatically as of the effective date of the merger.  If the dissolution of the corporation would cause its shareholders to pay unwanted income taxes the merger method may avoid the tax.

Example 1:  World Wide Widgets, Inc. owns property that has a value of $101,000.  The sole shareholder’s basis in his stock of the corporation is $1,000.  If the corporation assigned the property to its shareholder before dissolving the shareholder would have taxable gain of $100,000 ($101,000 value of property – $1,000 adjusted basis of the stock).

If the stock is a capital asset (held for more than one year) the shareholder in this case could be paying as much as 23.8% of the gain as federal income tax plus state income tax if the shareholder resides in a state that has a state income tax.  Arizona’s tax rate for capital gains in 2016 is 4.5%.  Therefore, if the shareholder is an Arizona resident and the stock is a capital asset the total federal and Arizona income tax on the $100,00 gain is $24,500 if the shareholder is not subject to the 3.8% federal surtax on net investment income or $28,300 if the shareholder is subject to the surtax.  Yikes!  Who wants to pay federal and state income tax if it can be avoided.

The good news is that if the corporation is taxed as an S corporation or a C corporation and the LLC is taxed as an S corporation or a C corporation the merger can be a tax free reorganization under Section 368(a)(1)(F) of the Internal Revenue Code.  By carrying out the “F” merger the shareholder can eliminate the income tax.

Example 2:  Same facts as example 1 except the corporation taxed as a C or an S corporation merges into an LLC taxed as a C or an S corporation.  Result:  $0 income tax instead of $24,500 or $28,300.

Conclusion:  Ask your CPA to tell you in writing what would be the income tax consequences to you if you were to dissolve your corporation.  If dissolution will cause you to pay federal and/or state income tax you do not want to pay then do an F reorganization, i.e. merge your corporation into an LLC that is taxed as a C or S corporation.

P.S.  If your surviving LLC will be an Arizona LLC hire me, Richard Keyt to prepare the merger documents and to consummate the tax-free merger.  Call me at 480-664-7478 if you have questions or to get started.

2016-11-24T11:13:40-07:00November 25th, 2016|FAQs, How Do I, LLCs & Corporations, Tax Issues|0 Comments
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How a Married Couple Owns an Arizona LLC as Community Property

Married Arizona residents can own property as separate property, community property and community property with right of survivorship.  Arizona law provides that if a married Arizona resident acquires property, the property is automatically community property (not community property with right of survivorship) unless the property was a gift or inherited property.  When property is owned as community property or community property with right of survivorship then each spouse owns an undivided one half of the property and if they divorce, each spouse is entitled to one half the value of the combined value of the couple’s community property asset.

Separate property is property acquired from a gift or inherited property or property acquired before marriage.  The non-owner spouse has no interest in or claim to his or her spouse’s separate property.

The only difference between community property and community property with right of survivorship is what happens to the interest of the first spouse to die.  When an Arizona married couple owns property as community property and one of them dies, the interest of the deceased spouse does not transfer automatically to the other spouse.  The interest of the deceased spouse is inherited as provided in the deceased spouse’s will or trust, but if there is no will or trust then the interest of the deceased spouse passes according to the law of intestate succession.  A probate may be required to complete the transfer to the property heir(s) unless the value of the interest is less than $75,000.

When an Arizona couple owns property as community property with right of survivorship then if one spouse dies, the interest of the deceased spouse transfers automatically to the surviving spouse without the need for a probate.  If a married Arizona couple wants the community property interest of a deceased spouse to pass automatically to the surviving spouse on the death of the first spouse they must own the property as community property with right of survivoship.

How to Own an Interest in an Arizona LLC as Community Property with Right of Survivorship

If a married couple who are Arizona residents form an Arizona LLC they automatically own their interest in the LLC as community property, not community property with right of survivorship.  If they want to own their interest in the LLC as community property with right of survivorship they must sign an Operating Agreement that expressly declares that the married couple holds their interest in the limited liability company as community property with right of survivorship. Arizona Revised Statutes Section 29-732.01.C.

When people hire me to form their Arizona LLC and tell me they want to own their interest in the LLC as community property with right of survivorship then we insert language in the LLC’s Operating Agreement hat expressly declares that the married couple holds their interest in the limited liability company as community property with right of survivorship.

2017-05-29T10:38:51-07:00November 24th, 2016|How Do I, Operating Agreements|0 Comments
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Caution: LLC Membership Interests Held as Community Property

Question:  My husband and I acquired a 50% membership interest in an Arizona LLC as community property with right of survivorship.  Homer & Marge Simpson own the other 50% of the LLC.  My husband died and my husband’s interest in the LLC passed to me automatically per Arizona Revised Statutes Section 29-732.01.

Homer Simpson says that he and Marge now have control of the LLC because the 25% interest I acquired from my husband is a mere assignment of his interest and is not a membership interest with voting rights.  The Simpsons say that I own a 25% membership interest in the LLC and the 25 votes associated with that membership interest and an economic right to 25% of the profits of the LLC without any voting rights.  Homer says that since my husband’s death members have 75 total votes instead of 100, the Simpsons have 50 votes and I have 25 votes  How many votes do I have?

Answer:  The interest in the LLC that you inherited from your husband is a membership interest with voting rights rather than an assignment of an economic interest without voting rights if the members of your LLC signed an Operating Agreement that provides that when a married couple own their interest in the LLC as community property with right of survivorship and one of them dies, the interest of the deceased inherited by the survivor is a membership interest.  Section 29-731.B.2.  If the members of your LLC did not sign such an Operating Agreement then what you inherited from your husband was a 25% economic interest in the LLC without any voting rights.

Lesson to Be Learned:  If your Arizona LLC has members who own their membership interests as community property with right of survivorship, joint tenancy with right of survivorship or tenants in common and the members want the heirs who inherit an interest to inherit membership interests with voting rights vs. economic interests without voting rights then the members of the LLC must sign an Operating Agreement that provides that inherited interests are membership interests with voting rights.

Note:  My standard Operating Agreement contains this automatic membership interest with respect to inherited interests clause.  Hire Arizona LLC attorney Richard Keyt to amend your existing Operating Agreement or prepare a new Operating Agreement by completing our online Questionnaire.

2017-05-29T10:46:48-07:00November 22nd, 2016|FAQs, Members, Operating Agreements|0 Comments
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How to Resign as Statutory Agent of an Arizona LLC (2018)

This video demonstrates how to prepare and file the Statutory Agent Resignation Limited Liability form by which the statutory agent of an Arizona limited liability company resigns.

Links mentioned in the video are:

  • ACC cover sheet that must be submitted with the Statutory Agent Resignation form

For more videos on forming and operating Arizona limited liability companies and how to use the Arizona Corporation Commission’s forms and online services  see the KEYTLaw Youtube channel.  Please click on the subscribe icon and the bell symbol to the right of the subscribe icon to get a notice when we upload a new video.

2019-07-25T11:14:55-07:00September 8th, 2016|ACC How to Videos, Our Videos|0 Comments
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Arizona LLC Alert System Includes 50 Email Messages

A lot of lawyers and document preparers form Arizona limited liability companies including yours truly.  My LLC formation services, however, include many features nobody else offers.  One of my unique services is the Arizona LLC Alert System, which is a series of email messages I send to people who purchase my Silver and Gold LLC packages.

In forming 9,200+ Arizona LLCs I learned a long time ago that people need help learning about and accomplishing the many post LLC formation tasks that arise when people form a new LLC.  Here is a short list of common LLC post formation tasks:

  • Get federal employer ID number.
  • Open bank account in name of the LLC.
  • Arrange for all members to sign the Operating Agreement.
  • Set up a bookkeeping system.
  • Consult with tax accountant about which of the four ways an LLC can be taxed is best for the owner(s) of the LLC.
  • File IRS Form 8832 or 2553 if recommended by the LLC’s tax advisor.
  • Transfer land to the LLC by recording a deed (for LLCs that are to own real estate).
  • Purchase insurance.
  • Get a dba or trade name from the Arizona Secretary of State.
  • Register a federal trademark.

Another unique service I give purchasers of Silver and Gold LLCs is access to my 170 page ebook called the “Arizona LLC Operations Manual.”  Chapter 3 of the Operations Manual is a checklist of 34 tasks the LLC should accomplish in its first 75 days after being formed.  To help members of new LLCs I form accomplish these 34 tasks I created the Arizona LLC Alert System.  It is a series of email messages I send to the members of Silver and Gold LLCs I form.  These messages remind people to accomplish important LLC post formation tasks.

The Arizona LLC Alert System consists of 50 email message alerts.  See the entire list of the 50 Alert emails now included in the Alert System.  The Alert System sends members a mobile friendly email message that links to a mobile friendly web page where the actual content of the alert is displayed.  Our LLC members love getting these informative alerts.

The following is a list of other unique LLC formation services I provide for all purchasers of my Silver and Gold LLC formation packages.

  • Two different Operating Agreements – a 30 page Operating Agreement for single member LLCs and husband and wife owned LLCs and a 55 page Operating Agreement for multi-member LLCs.
  • Provisions in the Operating Agreement needed as a result of the Bipartisan Budget Act of 2015, that modified the partnership audit rules applicable to LLCs.
  • Addition of Partnership Representative provisions in our multi-member LLC Operating Agreement.  These provisions replace the tax matters partner provisions required under prior law called TEFRA.
  • Corporate Transparency Act filing information that explains what your LLC must do to avoid being fined $500/day by the Financial Crimes Enforcement Network for not filing its required FinCEN report about the beneficial owners of your LLC.
  • Optional Service:  Members digitally sign the Operating Agreement and are sent pdf copies of the digitally signed documents.

Hire Me to Form Your Arizona LLC

See the contents of our Bronze, Silver and Gold LLC packages.  To hire us to form an Arizona LLC follow one of the two options on our LLC formation page.

2023-03-15T08:30:42-07:00August 29th, 2016|Forming LLCs, Operating LLCs|0 Comments
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LegalZoom & Arizona LLC Newspaper Publication

Recently I received an email message from a person who is not my client that stated the following:

“I hired LegalZoom to form the LLC that I started here in Arizona . . . towards the end of 2014. Earlier this year I found out that . . . [the LLC] was never published in the newspapers ( I thought that this service what part of the package that I purchased from LegalZoom) I’m not quite sure what to do”

This is an example of why people should not use this document preparer to form an Arizona LLC.  We always publish for every LLC we form.  Publication is a requirement of Arizona LLC law.

Arizona Revised Statutes Section 29-635.C states:

“Within sixty days after the commission approves the filing, there shall be published in a newspaper of general circulation in the county of the known place of business, for three consecutive publications, a notice of the filing of such articles of organization”

Notice the language that says the notice SHALL be published.  Arizona LLC law, however, does not state the consequence of failing to publish the notice timely.  A third party could argue to a court that the failure to satisfy the publication requirement of Section 29-635.C means the LLC was not legally formed and therefore does not exist.

Because Arizona law is silent on the consequences of failing to publish, I recommend that LLCs that do not publish timely publish when they become aware of the fact the LLC did publish.  Better late than never.

Author’s Note:  As of January 1, 2017, Arizona Revised Statutes Section 29-635.C  was amended to eliminate the newspaper publication requirement for LLCs that have a place of business in Maricopa County or Pima County.

2017-02-26T09:13:05-07:00August 8th, 2016|Forming LLCs|0 Comments
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ACC Procedure Change

On July 15, 2016, Patricia Barfield, Director, Corporations Division, of the Arizona Corporation Commission, announced the following change in procedures of the Arizona Corporation Commission:

“This is notice that we are changing the procedure for requesting copies and certificates of good standing.  The change is being made as part of our ongoing effort to improve the document processing times.  We will be channeling all copy or certificate requests to our Records Section.

Beginning Monday, July 18, 2016, you will no longer be able to request plain or certified copies of documents or certificates of good standing on the Cover Sheet.  We are removing these options on the Cover Sheet.  Instead, we suggest using our Records Request Form to request copies or certificates, and that will be sent directly to the Records Section.

IMPORTANT — FEES:  If you submit your own cover sheet or letter and you request copies or certificates at the time you submit the document for filing, you must pay the correct fees.  If the correct fees are not paid or the correct amount is not authorized to be deducted from the MOD account, the document will be rejected.

The fees for copies are as follows:

Certified copy – corporations (per document): $5.00 + $.50/page

Certified copy – LLCs (per document): $15.00 + $.50/page

Certificate (any type that is not for copies): $10.00

Uncertified or plain copy – corporations (per document): $.50/page

Uncertified or plain copy – LLCs (per document): $5.00 + $.50/page

*Expedited processing is available by adding $35.00 to the fee for any request or service.

Plain or certified copies of documents that have been filed can be obtained directly from our Records Section, by submitting a Records Request Form.

Certificates of Good Standing for active entities can be obtained online after the entity is formed, or by submitting Records Request Form.

We greatly appreciate your cooperation with our efforts at improving our customer service by improving our processing times!

Patricia L. Barfield

2016-07-23T16:29:38-07:00July 18th, 2016|AZ Corporation Commission|0 Comments
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How Do I Form an Arizona LLC in 2023?

by Arizona LLC attorney Richard Keyt who has formed 9,200+ LLCs

Question:  How do I form an Arizona limited liability company?

Answer:  Two ways: (1) hire me (see the “Contents of the $497 Bronze, $797 Silver & $1,297 Gold LLC Packages), or (2) do it yourself.  There are two ways to form a do it yourself Arizona LLC:

Compare Forming an LLC Yourself with My LLC Formation Services

I have formed 9,200+ Arizona LLCs because I give my clients everything they need to know to operate the LLC during phase 2 and comply with Arizona LLC law.  When I form an Arizona LLC for $797 (I pay the $85 ACC expedited filing fee), I provide many LLC formation services, including preparing the following custom drafted LLC documents:

  • Same Day Filing and Approval of the LLC’s Articles of Organization – I form LLCs and PLLCs the same day you approve the LLC formation questionnaire we send you and you pay our fee.  We will email the Articles of Organization approved by the Arizona Corporation Commission to you the same day.
  • Members Digitally Sign the Operating Agreement – We send all members of multi-member LLCs an email from DocuSign so they can digitally sign the Operating Agreement.  When all members have signed the Operating Agreement DocuSign will send every member a fully signed pdf version of the Operating Agreement.
  • Spousal Disclaimer – If a married member who is a resident of Arizona is to own his or her interest in the LLC as separate property, the non-owner spouse must sign a Disclaimer in which he/she disclaims any ownership of the LLC interest.  If the non-owner spouse does not sign and deliver a Disclaimer to the owner spouse, Arizona law presumes that the spouses own the LLC as community property even if the non-owner spouse is not named in any of Articles of Organization or the Operating Agreement.
  • Arizona LLC Operations Manual – When we form a $797 Silver or a $1,297 Gold Arizona LLC we give all members of the LLC access to my 170 page ebook called the Arizona LLC Operations Manual. This book covers 75+ topics the members and managers of AZ LLCs must know.  It has the answers to questions people commonly ask us after we form their LLC.
  • Organizational Resolutions – When we form a $797 Silver or a $1,297 Gold Arizona LLC we prepare resolutions to be signed by all of the members in which approve the issuance of membership interests, adoption of the Operating Agreement, opening a bank account, reimbursement of LLC formation expenses paid by any member, election of one or more managers and other formation related actions.
  • Membership Certificates – When we form a $797 Silver or a $1,297 Gold Arizona LLC we prepare a numbered membership certificate issued to each member. This is equivalent to a corporate stock certificate.

When we form a $797 Silver or a $1,297 Gold Arizona LLC we put all of your LLC documents in a nice portfolio with everything organized behind tabs.

For People Who Want to Form an LLC Themselves

If you think you might want to create a do-it-yourself Arizona LLC you must read Arizona LLC attorney Richard Keyt’s article called “Step by Step Guide: How to Form Arizona LLC 2023 in (6 Easy Steps).”

Free Answers to Your LLC or PLLC Questions

If you have questions about forming or operating Arizona LLCs or PLLCs call Arizona LLC attorneys Richard Keyt (the father) at 480-664-7478 and [email protected] or his son Richard C. Keyt at 480-664-7472 and [email protected].  To hire us to form an Arizona LLC or PLLC submit our online LLC formation questionnaire or call one of us and give us your information over the phone.

2023-02-19T08:33:06-07:00July 14th, 2016|FAQs, Forming LLCs, How Do I|0 Comments
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How to Dissolve an Arizona LLC (2018)

This video demonstrates how to prepare and file the Articles of Termination to dissolve an Arizona limited liability company.

Links mentioned in the video are:

For more videos on forming and operating Arizona limited liability companies and how to use the Arizona Corporation Commission’s forms and online services  see the KEYTLaw Youtube channel.  Please click on the subscribe icon and the bell symbol to the right of the subscribe icon to get a notice when we upload a new video.

2019-07-25T11:14:47-07:00July 8th, 2016|ACC How to Videos, Our Videos|0 Comments
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Member Fraudulently Amends Articles of Organization to Remove Other Member

From time to time a member of an Arizona LLC calls and tells me that another member of the LLC filed an amendment to the Articles of Organization with the Arizona Corporation Commission that removed the caller as a member of the LLC without the caller’s knowledge or consent.  There was no legal basis to file the amendment.

The caller always asks “what can I do?”  The simple answer is the caller should prepare and file another amendment to the Articles of Organization to correct the removal of the caller as a member.  This solution, however, is only a temporary band aid.  It does not solve the fundamental problem which is the members cannot get along.

Unfortunately this scenario is an all too common problem.  The Arizona Corporation Commission is, in actuality, a mere filing service.  If a person submits a document for filing and it satisfies the ACC’s filing requirements, the ACC will file the document.  The ACC does not confirm or verify that the information set forth in a document is correct.  Many times when members of an Arizona LLC can not agree on the management of the LLC one of the members will file an amendment to the Articles of Organization that removes another member without any legal basis for the removal.

People who file false documents with the ACC are usually unaware that they could be committing a felony.  Arizona Revised Statutes Section 29-613.A states:

“A person who . . . signs any articles, statement, report, application or other document filed with the [Arizona Corporation] commission that is known to the person as false in any material respect is guilty of a class 4 felony.”

The bottom line is that when this happens the members need to consummate a “company divorce,” i.e., a legal termination of their relationship as members of the same LLC.  The best solution occurs if the members agree on the terms and conditions of their company divorce and they sign documents that evidence their agreement.  If the members cannot agree, they have two options:

  • Continue their relationship as members of the LLC, which means ongoing disputes, problems and stress.
  • File a lawsuit in an Arizona Superior Court and ask the court to dissolve the LLC.  This option takes time and causes both members to pay large amounts of money to their lawyers.

As a result of this latest call, I revised my multi-member Operating Agreement (yes I have a single member and husband and wife owned Operating Agreement that is about 20 pages shorter) to include a section that obligates a member who causes a fraudulent amendment to the Articles of Organization to be filed with the ACC to pay each other member liquidated damages in the amount of $10,000.  If the liquidated damages are not paid within 30 days of the filing date the unpaid amount accrues interest at the rate of 10% per annum.  If the entire amount is not paid within one year of the filing date, the offending member’s membership interest in the LLC will be forfeited on the first anniversary of the date the false amendment to the Articles of Organization was filed with the ACC and the unpaid portion of the liquidated damages will be forgiven.

For more on this topic read my blog post called “Can One Member of an Arizona LLC Expel Another Member?“

2017-01-15T11:00:19-07:00June 23rd, 2016|Articles of Organization, AZ Corporation Commission, Lawsuits, Member Disputes|0 Comments
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How to Get a Certificate of Good Standing for an AZ LLC

Question:  How can I get a Certificate of Good standing for my Arizona LLC from the Arizona Corporation Commission?

Answer:  It is very easy.  First go to the link below and search for the LLC.

http://ecorp.azcc.gov/Search

Do the following:

  • Enter the name of the limited liability company in the name field.
  • Click on “Search.”
  • Click on the link that says “Check Corporate Status.”
  • Click on the link that says “Print Certificate.”
  • Click on the link that says “Payment Screen.”
  • Follow the instructions to pay $45 with your major credit card to buy the Certificate of Good Standing.
  • As soon as you pay print the Certificate of Good Standing.
2018-09-27T13:03:13-07:00June 4th, 2016|FAQs, How Do I|0 Comments
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Arizona Legislature’s HB 2447 Eliminates Newspaper Publication

On May 17, 2016, Arizona Governor Doug Ducey signed Arizona Legislature House Bill 2447.  This new law is a tremendous victory for the people and a huge defeat for Arizona newspapers.  HB 2447 eliminates the long standing rip off known as the publication of legal notices when corporations or limited liability companies are formed in Arizona.  Unfortunately, publication was eliminated only for entities with known places of business in Maricopa or Pima counties.

Beginning December 31, 2016, new Arizona LLCs and corporations with a known place of business in Maricopa and Pima Counties will not have to publish Articles of Incorporation (corporations) or Notices of Publication (LLCs) in a newspaper.  Instead, the Arizona Corporation Commission will enter information about the newly formed entities into a database it is obligated to create.

HB 2447 states that publication is eliminated only for entities that have a known place of business in a county that has a population greater than 800,000.  Currently only Maricopa County and Pima County have populations that exceed 800,000.

Entities that have known places of business in counties other than Maricopa and Pima must continue to donate money to the few Arizona Corporation Commission approved newspapers in the eleven counties with less than 800,000 people.  Publication is a total rip off.  For example, a few years ago we published Articles of Incorporation for a nonprofit corporation in a newspaper in a less populated county and it cost my client $600 after a 10% discount for the nonprofit corporation.  Outrageous!

 

2016-11-16T08:23:41-07:00May 24th, 2016|AZ Corporation Commission, Forming LLCs|0 Comments
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8,600+ Arizona LLCs Formed by Richard Keyt

I formed my first Arizona LLC the day Arizona’s LLC law became effective in October of 1992.  I’ve been forming Arizona LLCs ever since.  I didn’t start counting my LLC formations until 2002.  Since I started counting in 2002 I have formed 9,200+ Arizona LLCs.  I created number 5,000 sometime during April of 2016.

There are a lot of reasons why I’ve formed so many LLCs, but here are the main reasons:

  • Silver & Gold LLC purchasers get online access to my 170 page ebook called the “Arizona LLC Operations Manual.”  Chapter 3 is checklist of 34 important tasks that must be performed within 75 days after the LLC is formed.
  • 50 post formation email messages reminding you to perform important post formation tasks and giving you helpful LLC information.
  • We will form your LLC and get it approved by the Arizona Corporation Commission the same day you pay the fee and approve your formation questionnaire so you can start using your new LLC immediately.
  • People love my LLC formation services.  Watch and read some of our 349 five star reviews.
  • To hire me to form your Arizona LLC complete my online LLC formation questionnaire or call me.  If you have questions about forming an Arizona LLC call me, Richard Keyt, at 480-664-7478 or go to www.keytlaw.com/rk to book a free phone, in office or Zoom video meeting.  I don’t charge to answer questions about LLCs.
2023-02-19T09:27:16-07:00May 7th, 2016|Why People Need an LLC|0 Comments
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How a Non-U.S. Citizen or Non-U.S. Resident Can Get an Employer ID Number (EIN)

Question:  I am not a citizen or resident of the United States who wants to form a U.S. limited liability company.  Can I get a federal employer identification number (EIN) for my LLC and if so, how?

Answer:  The instructions to IRS Form SS-4, explain how a non-U.S. citizen who is a non-resident of the U.S. can get an EIN for his or her LLC.  The instructions say the following:

If you have NO legal residence, principal place of business, or principal office or agency in the U.S. or U.S. possessions, you can’t use the online application to obtain an EIN. Please use one of the other methods to apply.

Apply by telephone—option available to international applicants only. If you have NO legal residence, principal place of business, or principal office or agency in the U.S. or U.S. possessions, you may call 267-941-1099 (not a toll-free number), 6:00 a.m. to 11:00 p.m. (Eastern time), Monday through Friday, to obtain an EIN.

The person making the call must be authorized to receive the EIN and answer questions concerning Form SS-4. Complete the Third Party Designee section only if you want to authorize the named individual to receive the entity’s EIN and answer questions about the completion of Form SS-4. The designee’s authority terminates at the time the EIN is assigned and released to the designee. You must complete the signature area for the authorization to be valid.

Note. It will be helpful to complete Form SS-4 before contacting the IRS. An IRS representative will use the information from Form SS-4 to establish your account and assign you an EIN. Write the number you’re given on the upper right corner of the form and sign and date it. Keep this copy for your records. If requested by an IRS representative, mail or fax the signed Form SS-4 (including any third-party designee authorization) within 24 hours to the IRS address provided by the IRS representative.

Apply by fax. Apply by fax. Under the Fax-TIN program, you can receive your EIN by fax generally within 4 business days. Complete and fax Form SS-4 to the IRS using the appropriate fax number listed in Where To File or Fax, later. A long-distance charge to callers outside of the local calling area will apply. Fax-TIN numbers can only be used to apply for an EIN. The numbers may change without notice. Fax-TIN is available 24 hours a day, 7 days a week.  Be sure to provide your fax number so the IRS can fax the EIN back to you.

Apply by mail. Complete Form SS-4 at least 4 to 5 weeks before you will need an EIN. Sign and date the application and mail it to the appropriate address listed in Where To File or Fax, later. You will receive your EIN in the mail in approximately 4 weeks. Also, see Third-Party Designee, later.  Call 800-829-4933 to verify a number or to ask about the status of an application by mail.

Where To File or Fax

If you have no legal residence, principal office, or principal agency in any state or the District of Columbia (international/U.S. possessions) fax to:

Internal Revenue Service
Attn: EIN International Operation
Cincinnati, OH 45999
Fax: 855-215-1627 (within the U.S.)
Fax: 304-707-9471 (outside the U.S.)

2021-10-02T09:34:40-07:00May 7th, 2016|FAQs, How Do I, Tax Issues|0 Comments
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New Arizona Law Exempts LLC Organizers from Arizona Securities Laws

Arizona House Bill 2303 signed into law by Governor Doug Ducey contains a significant change to Arizona’s securities laws.  The new law allows the issuance of LLC membership interests to as many as ten LLC “organizers” to be exempt from Arizona securities laws.

Arizona Revised Statutes Section 44-1844.A was amended to read (new language is in bold red text):

“sections 44‑1841 and 44‑1842, section 44‑1843.02, subsections B and C and sections 44‑3321 and 44‑3325 do not apply to any of the following classes of transactions: . . .

10.  The issuance and delivery of securities of a corporation, limited liability company or limited partnership to the original incorporators, organizers or general partners, not exceeding ten in number, where the securities are not acquired by the incorporators, organizers or general partners for the purpose of sale to others and are not directly or indirectly sold to a third party within twenty-four months unless an incorporator, organizer or general partner experiences a bona fide change of financial circumstances within such time period, providing original incorporators, organizers or general partners are notified of their right pursuant to title 10 or 29 to review the financial books and records of the corporation, limited liability company or limited partnership at reasonable times.”

The term “organizer” is not defined in any Arizona statutes.  The Arizona Corporation Commission’s hard copy form Articles of Organization contains the following statements in Section 9 of the document:

“ORGANIZERS and SIGNATURE – the individual or pre-existing entity submitting this document is the Organizer – list the name of the Organizer below. If the Organizer is an individual, that individual must sign below. If the Organizer is a pre-existing entity, provide the signature of the individual acting for that entity, then print the individual’s name.”

Without any statutory reference that supports the statements, the first paragraph of the ACC’s instructions for its hard copy Articles of Organization states:

“One or more persons can form an Arizona LLC by signing and filing Articles of Organization with the Arizona Corporation Commission. . . . These persons are called “organizers.” “Person” includes individuals and entities.”

Significance of the New Law

This change in Arizona law is very important for every Arizona LLC that will issue membership interests that the securities regulators would designate as a security.  If you think an LLC must issue stock to investors before it is considered issuing a security you are wrong.

If the promoters of the LLC say to an investor give me your money for an X% membership interest in our LLC and the LLC will make a profit for you the LLC is issuing a security to the investor.  This is an example of an “investment contract,” which is a type of security under federal and state securities laws.

When securities laws apply to the issuance of membership interests in an LLC the LLC must comply with federal and applicable state securities laws or the promoters and the LLC become guarantors of the investors’ investments.  Promoters who cause an LLC to issue membership interests that are securities the issuance of which does not comply with applicable securities laws will have substantial liability to the investors and to the securities regulators.

To learn more about securities laws and how they can affect LLCs read the article my son and I wrote called “California LLCs & Securities Laws.”  Although the article is about California LLCs, many of the concepts apply to Arizona LLCs.

Bottom Line

If your to be formed Arizona LLC will be issuing membership interests to people or entities that are investing substantial amounts of money to purchase their membership interests, you must have EVERY INVESTOR (without exception, but no more than ten) sign the Articles of Organization as an organizer so the LLC can claim the exemptions provided from Arizona securities laws by Section 44-1844.A.10.

If you need your LLC to be able to use the ten exemptions provided in Arizona Revised Statutes Section 44-1844.A.10 hire us to form your LLC.  Our Articles of Organization for LLCs that want to take advantage of Section Section 44-1844.A.10 contain special Section 44-1844.A.10 language.

2019-07-04T10:40:31-07:00April 8th, 2016|Articles of Organization, Forming LLCs, LLCs & Securities Laws|0 Comments
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