FAQs Archives

How Do I Get Money into My LLC?

Question: My limited liability company needs money. How do I get my money into the LLC?

Answer: There are two ways a member of a limited liability company funds the LLC:

a Loan: The member loans money to the LLC. The loan should be evidenced by a Promissory Note signed by the LLC. The Promissory Note should state the the terms of the loan such as the interest rate (if interest will be charged), repayment terms and the maturity date. The member(s) of the LLC should sign a resolution or action by unanimous consent that authorizes the loan. The loan should also be reflected as a loan in the LLC’s books.

Capital Contribution: A capital contribution is the equivalent of a gift from the member to the LLC without any obligation to repay the contribution until the LLC liquidates. Capital contributions are additions to the LLCs’ assets without a corresponding debt that arises when money is loaned to the company. Capital contributions are added to the contributing member’s capital account. The LLC’s books must correctly reflect that the funds were made by the member as a capital contribution. Capital contributions should also be approved by members by signing a resolution or action by unanimous consent that authorizes the capital contribution.

Purchase an Editable Promissory Note & Member Resolution

The KEYTForms store sells a form Promissory Note and a form Resolution of Members authorizing the member loan. Each form is $47, is a downloadable & editable Word file, and comes with instructions on how to edit the form.

Richard Keyt2016-11-16T08:23:43-07:00March 8th, 2014|FAQs, How Do I|0 Comments

Do Arizona LLCs File Annual Reports with the State?

Question: Does Arizona LLC law require that an Arizona limited liability company file an annual report with the Arizona Corporation Commission?

Answer: No. One of the benefits of an Arizona LLC is that it does not have to file an annual report with the Arizona Corporation Commission or pay an annual fee to exist. Most if not all other states require LLCs to file and annual report and pay a fee. California is the worst. It requires LLC’s to not only file an annual report, but pay an annual gross receipts tax of a minimum of $800.

Unfortunately Arizona corporate law requires Arizona corporations to file an annual report and pay a $45 fee (for profit corporations) or a $10 fee (nonprofit corporations). Every year approximately ten percent of Arizona’s existing for corporations fail to file their annual report and are terminated by the Arizona Corporation Commission. This is one of the reasons the Arizona LLC is a better choice of entity than an Arizona corporation.

Corporate Annual Report Reminders: Although the ACC no longer mails annual report forms to corporations it does provide an annual email reminder, but you must subscribe on the ACC’s website to get the reminder. If you have an Arizona corporation and you want to get a reminder every year from the ACC that the corporation’s annual report is due go to your entity’s record and then click on the “Subscribe to Annual Report Email Reminder” button and follow instructions.

Richard Keyt2018-05-31T16:54:14-07:00March 2nd, 2014|AZ Corporation Commission, FAQs|0 Comments

When Will the Arizona Corporation Commission Review My LLC’s Articles?

Question: When will the Arizona Corporation Commission review the Articles of Organization of my new Arizona limited liability company?

Answer: The amount of time the ACC takes to review Articles of Organization filed to create a new Arizona LLC depends on the whether the filing fee paid to the ACC was the $50 standard fee or the $85 epedited filing fee. In general the ACC will review new Articles of Organization as follows:

If the filing fee is $50: ACC review is normally 4-6 business days after filing.

If the filing fee is $85: ACC review is normally 25- 30 business days after filing.

Go to the ACC’s document processing time web page to see exactly the filing date of documents that the ACC is currently reviewing. Compare the Expedited ($85 filing fee) or the Nonexpedited Filing ($50 filing fee) processing times in business days for new LLCs with the received date stamped on the first page of the Articles of Organization that we emailed to you.

One of the advantages of purchasing our Silver or Gold LLC formation packages is that both of these packages include our payment of the $85 expedited filing fee. Our Bronze LLC formation package Articles of Organization are filed using the standard $50 filing fee, which results in the much longer ACC review and approval.

Richard Keyt2019-07-04T07:58:36-07:00February 27th, 2014|Articles of Organization, FAQs|0 Comments

When Do I Change the Address of My LLC with the Arizona Corporation Commission?

Question: After I filed the Articles of Organization for my Arizona LLC my LLC moved its place of business. Should I notify the Arizona Corporation Commission about the address change?

Answer: Yes. Arizona LLC law requires that whenever an Arizona LLC changes it address the LLC must notify the ACC of its new address within thirty days of the change.

To change the address of your LLC with the ACC complete the Arizona Corporation Commission’s Statement of Change of Known Place of Business Address or Statutory Agent. Print the change of address form and send to the Arizona Corporation Commission at Arizona Corporation Commission – Corporate Filings Section, 1300 W. Washington St., Phoenix, Arizona 85007, with a check for $5 or $40 if you want expedited review by the ACC.

Richard Keyt2019-07-04T10:41:46-07:00February 24th, 2014|AZ Corporation Commission, FAQs, How Do I|0 Comments

What is the Difference Between a Warranty Deed & a Special Warranty Deed?

Question: What is the difference between a Warranty Deed and a Special Warranty Deed to Arizona real property?

Answer: In a Warranty Deed the grantor warrants title from the beginning of time to the moment of the transfer of title under the deed. In a Special Warranty Deed the grantor warrants the title only for the period of time the grantor owned the real estate. When I represent the seller of real estate I try to have the seller give a SWD. Sometimes a buyer will insist on a GWD, which is ok if the buyer can’t be talked out of it and there are no title problems that would cause a breach of the warranties made in the deed.

Richard Keyt2016-11-16T08:23:43-07:00February 23rd, 2014|FAQs|0 Comments

What is the Difference between the Silver & Gold LLC Formation Packages?

Question: Why would I purchase your $1,297 Gold LLC formation package instead of your $797 Silver LLC formation package?

Answer: The primary reason people purchase our Gold LLC formation package is confidentiality by keeping your name and address off the publice records of the Arizona Corporation Commission. Arizona LLC law requires that the Articles of Organization filed with the Arizona Corporation Commission (ACC) to create the LLC state the following information:

If the LLC is member managed, the names and addresses of all members, or
If the LLC is manager managed, the names and addresses of all members who own 20% or more of the LLC and all managers.

If you do not want your name as the owner of your LLC and your address to appear on the ACC’s public searchable internet database then you need to purchase my Gold LLC formation package. The Gold package includes a Confidential Trust that will be the legal owner of the LLC. A Confidential Trust is a revocable living trust in which the ultimate owner of the LLC is the trustmaker, trustee, and beneficiary.

For example, if the name of your Confidential Trust is the Laguna Beach Trust then the owner/member shown in the Articles of Organization filed with the ACC is the Laguana Beach Trust, c/o KEYTLaw, LLC, 7373 E. Doubletree Ranch Road, Suite 135, Scottsdale, AZ 85258.

Note: The Gold LLC formation package includes our address service for one year.

Second Reason to Buy Our Gold LLC Package

The second reason people buy our Gold LLC package is to avoid probate on the death of the ultimate owner or owners. All assets owned by the trust, including the LLC, will pass automatically to the heir(s) named in the trust agreement without the need for a probate when the initial beneficiary or beneficiaries die. Probate avoidance can save the heir(s) $3,500+ in attorneys fees that can be generated by a superior court probate.

Learn about the contents of our three LLC formation packages.

Richard Keyt2023-11-03T07:41:15-07:00February 15th, 2014|Articles of Organization, FAQs, Forming LLCs|0 Comments

How Do I Complete an IRS Form W-9 for My LLC?

Question: I operate my business through a limited liability company that is taxed as a sole proprietorship. I received an IRS Form W-9 from a vendor who wants my LLC’s employer ID number or my social security number. How do I complete the W-9?

Answer: Here is how you complete the beginning of IRS Form W-9:

Enter your name in the “Name (as shown on your income tax return)” box.
Enter the name of your LLC in the “Business name/disregarded entity name, if different from above” box.
Check the box in the “Check appropriate box for federal tax classification:” box that is to the left of “Individual/sole proprietor.”
In Part I enter your social security account number.
Complete the remainder of the form then date and sign it.

The above assumes you did not file either an IRS Form 9932 or 2553 with the IRS to cause the LLC to be taxed as a C corporation or an S corporation, respectively.

Richard Keyt2014-02-23T10:20:11-07:00February 13th, 2014|FAQs, How Do I, Tax Issues|0 Comments

Can I Have LLC in My Arizona Trade Name / DBA?

Question: I have not formed a limited liability company for my Arizona business, but can I register the trade name World Wide Widgets, LLC, from the Arizona Secretary of State for my business?

Answer: No. An Arizona trade name, aka a “dba,” cannot contain any words or abbreviations that indicate an entity type such as LLC or Inc. See the Arizona Secretary of State’s Trademark Handbook. If your dba included the letters LLC that would be misleading because it falsely represents to the public that the business is a limited liability company.

If you are going to operate a business you should form an LLC to protect yourself from things that might go wrong. Without an LLC, a corporation or a limited partnership the owners of a business risk losing their life savings if business activity results in a lawsuit. Read my article called “How LLCs Protect Your Life Savings.”

Say you form a business called World Wide Widgets, LLC. That business could get a dba such as Best Widgets and use that on its store front or letterhead. In Arizona the dba is obtained from the Arizona Secretary of State for $10 by completing and filing a Trade Name Registration Application. This is explained in detail in my book called the Arizona LLC Operations Manual that is included with my Silver and Gold LLC packages.

Richard Keyt2023-10-24T10:14:36-07:00February 12th, 2014|FAQs, How Do I|0 Comments

Who Signs the IRS Form 2553 If My Confidential Trust Owns My LLC that Wants to be Taxed as an S Corporation?

Question: I purchased your Gold LLC formation package that included a Confidential Trust. My Confidential Trust is the sole owner of my LLC. My CPA advised me that my LLC should be taxed as an S corporation. I am completing the IRS Form 2553, Election by a Small Business Corporation, but I am not sure how to show the ownership and who should sign the form. What should I do?

Answer: Dealing with the IRS with respect to your LLC is different from everybody else. The following only applies to the IRS and tax treatment of your LLC that is owned solely by your Confidential Trust:

Because the LLC is a single owner LLC the IRS pretends like it does not exist. The IRS calls a single member LLC a “disregarded entity” for federal income tax purposes. This is the default tax treatment for single member LLCs.
Because the Confidential Trust is revocable the IRS treats it as a “grantor trust,” which means the IRS pretends like the Confidential Trust does not exist.
The end result of the application of items 1 & 2 above is the IRS considers you to be the owner.
Sign the IRS Form 2553 on page 2 Part 1 and after your signature put a comma and print the following text: “individually and as Trustee of the [name of your trust] Trust under Agreement dated [date of your trust agreement], a grantor trust.”
If you are a resident of a community property state like Arizona and own the beneficial interest in the Confidential Trust as community property then both spouses must sign the Form 2553 per the instructions in item 4 above.

Send the completed and signed IRS Form 2553 to the IRS via Certified Mail, Return Receipt Requested. Make a transmittal letter that accompanies the Form 2553. Keep a copy of the letter, the Form 2553, the Certified Mail certificate and the green Return Receipt in a save place in case the IRS claims it never got your Form 2553.

Richard Keyt2017-02-25T10:36:53-07:00February 8th, 2014|FAQs, How Do I, Tax Issues|0 Comments

How Do I Change the Purpose of My Arizona LLC?

Question: I’ve used my Arizona LLC to sell widgets. I now want to use it to provide marketing services. How do I make the change?

Answer: An Arizona LLC can engage in any lawful activity unless its activities are limited by language in the Articles of Organization. Unless your AOO prohibits the LLC from engaging in marketing services the LLC is free to begin providing those services at any time, subject to any state, county or city licensing requirements.

When I form an Arizona LLC is do not normally include any language in the Articles of Organization that limits the LLC’s activities unless the LLC is a professional LLC (PLLC). PLLCs by definition must limit their activity to practicing the applicable profession.

Richard Keyt2014-02-23T11:56:38-07:00February 2nd, 2014|Articles of Organization, FAQs, How Do I|0 Comments

What Does the Signature Block on a Contract Look Like When My Trust is the Manager of My LLC?

Question: My Arizona LLC is owned and managed by the Confidential Trust you created. When the LLC signs a contract, what should the signature block on the contract look like?

Answer: If your LLC is World Wide Widgets, LLC, and its manager is the Laguna Beach Trust dated 1/1/14 and Homer Simpson is the trustee, the signature block at the end of a contract should be as follows:

World Wide Widgets, LLC, an Arizona limited liability company

By: ____________________________
Homer Simpson, as Trustee of the Laguna Beach Trust
under Agreement dated 1/1/14, Manager

Richard Keyt2014-02-24T21:47:06-07:00January 24th, 2014|FAQs, How Do I|0 Comments

Watch Out for Ignorant Bank People

Question: I went to the bank to open my LLC bank account and they need to know what kind of LLC I have. The bank wanted to know if I have an S LLC, C LLC or partnership LLC.

Answer: You need to go to another bank that knows how to deal with LLCs. The State of Arizona only has two types of LLCs, i.e., an LLC and a professional LLC (PLLC). You have an LLC.

There are no such terms as S LLC, C LLC or partnership LLC. The person you are talking to is ignorant, which is troubling. He or she may be asking for the LLC’s tax method under the internal revenue code, which could be:

Sole proprietorship
C corporation
S corporation or
Partnership

Those terms refer to the four possible federal income tax methods availabe to LLCs under the Internal Revenue Code. The terms do not describe a type of LLC.

The bank does not need to know how the LLC is taxed. The default tax method for your two member LLC is partnership. The LLC will be taxed as a partnership unless it files a timely IRS form 8832 (election to be taxed as a C corporation) or an IRS form 2553 (election to be taxed as an S corporation). The subject of the four possible LLC tax methods is discussed in great detail in your Operations Manual in your LLC portfolio.

Richard Keyt2023-04-06T12:20:36-07:00October 30th, 2013|Bank Problems, FAQs, Operating LLCs, Questions People Ask|0 Comments

Failure to Plan Causes Problem for Spouse of LLC Owner

Question: My spouse owns an Arizona limited liability company as separate property and is the sole manager of the company. He recently became mentally incompetent and can no longer run the company. The LLC’s bank will not allow me to sign checks to pay employees and vendors. How can I take over the management of the company?

Answer: Because your husband failed to take action needed to protect you in the event of his incapacity you must now file a petition with an Arizona Superior Court and ask the Court to appoint you as the conservator of your husband’s financial affairs. With that court order you will be able to elect yourself as a manager of the LLC, amend the Articles of Organization on file with the Arizona Corporation Commission to show that you are the new manager and give a copy of the filed amendment and Court order to the bank to take control of the LLC’s bank account.

Your husband’s failure to plan will cost you $3,000 – $5,0000 in legal fees that could have been avoided if he had signed a Financial Power of Attorney that named you as his agent with the power to manage his financial affairs in the even of his incapacity. Contact us to prepare and file the petition to get you appointed as the conservator.

Warning: This situation illustrates why people should take action to protect their most valuable asset – their family – before it is too late. Don’t let this happen to your loved ones. Adopt a comprehensive estate plan with a Trust, Will, Financial Power of Attorney, Healthcare Power of Attorney and Living Will now to prevent the stress, problems and high economic cost that results when people die or become incapacitated and have not taken the steps needed to protect their family.

To learn more about this topic and how to protect your family read my article called “Why You Need an Estate Plan to Protect Your Family and the High Cost of Procrastination and Neglect” and visit my Arizona Wills and Trusts website.

Richard Keyt2013-10-17T07:10:24-07:00October 17th, 2013|FAQs, How Do I|0 Comments

Must I Sign the Operating Agreement

Question: I am the sole member of my Arizona limited liability company. Must I sign the LLC’s Operating Agreement?

Answer: Although Arizona LLC does not require that the members of an Arizona LLC sign an Operating Agreement, as an Arizona LLC attorney I highly recommend that all members of an Arizona LLC, including single member LLCs, sign a “good” Operating Agreement. A good Operating Agreement is a document that is drafted specifically to comply with Arizona’s LLC law and that contains provisions and language needed by most LLCs and their members. The fact the members of an LLC sign an Operating Agreement could actually be detrimental to the members if the Operating Agreement is poorly written or not written specifically to comply with Arizona LLC law.

There are two reasons a the sole member of an LLC should sign an Operating Agreement:

When courts are asked to pierce the company veil and hold the sole member liable for the debts of the LLC one of the factors that counts against the member is the lack of an Operating Agreement. If you treat your business like a hobby you don’t have a signed Operating Agreement. If you treat your business like a business you must have a signed Operating Agreement.

To set the rules that govern the operation of the company if the sole owner were to die and his or her interest is inherited by loved one.

A good Operating Agreement is a complex document that should cover a lot of important ground. It should be drafted by an experienced LLC attorney licensed to practice in the LLC’s state of formation. As a business lawyer who has practiced law in Arizona since 1980 I’ve prepared [contentblock id=1 img=gcb.png] Operating Agreements and spent hundreds of hours researching and revising my Operating Agreement.

Richard Keyt2017-05-29T11:05:02-07:00October 14th, 2013|FAQs, Operating Agreements|0 Comments

How Do I Get an Arizona Trade Name aka DBA?

Question: How does my limited liability company get an trade name, aka a “dba” or “doing business as?”

Answer: In Arizona the term “dba” or “doing business as” is what Arizona law calls a “trade name.” Trade names are issued by the Arizona Secretary of State. To get a trade name the applicant must complete a Trade Name Registration Application form and file it with the Arizona Secretary of State at the address at the top of the form. The filing fee is $10.

Richard Keyt2023-10-24T10:14:58-07:00September 27th, 2013|FAQs, How Do I|0 Comments

Why is My Spouse Named as a Member in the Articles of Organization?

Question: Why did you list my spouse as a member of my Arizona LLC in its Articles of Organization?

Answer: Arizona is a community property state. Arizona law provides that all property acquired while married by either spouse who is an Arizona resident is community property unless it is acquired by gift or inheritance. This means that if one spouse of a married couple who reside in Arizona acquires a membership interest in an Arizona by then both spouses automatically own the interest as community property unless the non-owner spouse signs a disclaimer in which the non-owner spouse disclaims all ownership of the membership interest.

Because you told me that you wanted to own your membership interest in the LLC as community property I named both spouses as members of the LLC in its Articles of Organization. Arizona law provides that it is a felony to file Articles of Organization with the Arizona Corporation Commission if contains known factual misrepresentations. If one spouse owns his or her membership interest as separate property then the non-owner spouse should not be named as a member in the Articles of Organization.

Richard Keyt2013-09-20T07:17:39-07:00September 20th, 2013|Articles of Organization, FAQs, Forming LLCs|0 Comments

Consequences of S Corporation Tax Method Termination

Question: My multimember LLC filed an election to be taxed under Subchapter S of the Internal Revenue Code, aka S corp method of federal income tax. Recently one of the members transferred 10% of the LLC to his corporation, which caused the IRS to terminate the S corp tax method. Our LLC is now taxed as a partnership. Do the other members of the LLC have a claim for damages against the member who caused the termination of the S corp tax method?

Answer: It depends. If the loss of the S corp election causes economic harm to the other members they could sue for damages, but it would be a roll of the dice as to who would win. The defendant member’s defense would be “I was free to transfer my membership interest and never promised to refrain from doing anything that would cause the loss of the S corp tax method.”

If your LLC was formed by me then the Company and the other members would have a claim against the transferring member for breach of contract because every Operating Agreement I prepare contains a clause that says no member will take any action that would cause the LLC to lose its S corporation tax method, but it a member did cause the loss that member would be liable to the other members for damages.

My Operating Agreements also contain language that prohibits a member from transferring all or a portion of the member’s membership interest without the consent of a majority of the members.

Caution about S Corp Method of Tax

To be eligible to be taxed as an S corporation none of the LLC’s owners can be a corporation, LLC (unless it is a disregarded entity), limited partnership, limited liability limited partnership, limited liability partnership or a nonresident alien. If a qualified party ever becomes a member of the LLC it causes an automatic termination of the S corporation tax method as of the date the disqualified party acquires the membership interest. This is the reason all multimember LLCs taxed as S corporations must have language in their Operating Agreements that prohibit transfers of membership interests without the approval of the other members.

Moral of the story: Every multimember LLC needs a good Operating Agreement prepared by an LLC attorney who knows the LLC law of the state in which the LLC is formed.

Richard Keyt2013-09-13T08:45:17-07:00September 13th, 2013|FAQs, Operating LLCs, Tax Issues|0 Comments

Why Does My Spouse’s Name Appear in My Arizona LLC’s Articles of Organization?

Question: You formed my Arizona limited liability company and the Articles of Organization list me and my spouse as members. Why is my spouse named as a member in the AOO?

Answer: You told us that you and your spouse are Arizona residents and you want to own your membership interest in the LLC as community property. That means each spouse owns an undivided ½ of the 100% of membership interests in your LLC. Arizona law requires that the names and addresses of all members who own 20% or more of an Arizona LLC be disclosed in the Articles of Organization.

A married person can also own his or her interest in the LLC as separate property, which means the owner spouse owns 100% of the membership interests in the LLC and the other spouse owns none of the LLC. When a married Arizona resident owns his or her interest in the Arizona LLC as separate property then only the owner spouse is listed in the Articles of Organization.

For more on this topic see “How Do I Acquire an Ownership Interest in an Arizona LLC as Separate Property?“

Richard Keyt2016-11-16T08:23:44-07:00September 9th, 2013|FAQs, Members|0 Comments

How an LLC Owned by a NonUS Citizen / NonUS Resident Opens a US Bank Account

Question: I am not a resident or citizen of the United States. I want to form a limited liability company in the U.S. to own and operate a business or to own investment real estate. How do I open a bank account in the name of the LLC?

Answer: I form a lot of Arizona LLCs for people who are not residents or citizens of the United States, aka nonresident aliens. Opening a US bank account for the US LLC can be a very big problem. The US Patriot Act imposes substantial limits and restrictions on the ability of a US bank with respect to creating a US bank account for a people and entities.

The number one new account requirement is that the bank must positively identify the person who seeks to open the bank account. Positive ID means two things:

Sufficient documentation such as a passport to prove the identity of the person who seeks to open the bank account, and

The presence of the person who seeks to open the bank account personally in front of the bank employee who is opening the account.

The banks seem to be getting tougher with respect to the personal ID requirement. This week I met with a nonresident alien client from Australia who opened two LLC bank accounts with Wells Fargo for his two Arizona LLCs two years ago. He did come to Phoenix to present himself to the bank personnel in order to open the accounts.

The client told me that he came to Phoenix this week because Wells Fargo notified him that it was closing ALL LLC BANK ACCOUNTS IN THE US IF THE LLC IS OWNED BY A NONRESIDENT ALIEN OR ALIENS. Wells Fargo closed his LLC bank accounts, but did allow him to open a personal bank account while he was present at the bank.

If somebody tells you that they know of a bank that will open an LLC bank account for a nonresident alien without the need for the nonresident alien satisfying the two requirements described above, don’t buy it. I personally know that MidFirst Bank and Commerica Bank had opened LLC bank accounts without requiring the nonresident alien owner of the LLC to satisfy the two requirements listed above. When supervisors found out about the accounts, they closed the accounts and fired the bank officer.

One potential solution to the problem is for the LLC to have a member or manager that is a US citizen or legal resident. That person could open a bank account in the US for the LLC. However, this solution creates its own set of problems. The person who opens the bank account is taking a risk that if the LLC is involved with anything that is illegal he or she could be in big trouble, perhaps criminal trouble.

Richard Keyt2023-04-06T12:23:31-07:00September 5th, 2013|Bank Problems, FAQs, Forming LLCs, How Do I, Questions People Ask|3 Comments

Can an Arizona Real Estate Broker Operate through an LLC vs. a PLLC?

Question: I am a licensed Arizona real estate broker. I know that Arizona licensed sales agents must operate through a professional corporation (PC) or professional limited liability company (PLLC). Must I operate my brokerage business in a PLLC or can I do it through a vanilla LLC? Also, if I can use an LLC can I use the LLC I formed that owns two investment rental properties?

Answer: Arizona does allow a licensed real estate broker to operate the brokerage business through an LLC or a PLLC. See Section 3 of the Entity / Employing Broker License Application LI-212. You could use your existing LLC. Keep one asset protection concept in mind: If you put all your eggs in one basket and you drop your basket you lose all of your eggs. If you have an operating brokerage LLC that owns other assets like stocks, bonds or investment real estate and a lawsuit arises out of the conduct of the business that turns into a large judgment for money, you lose the brokerage business and all the assets owned by the LLC. If you had put the investment assets in one LLC and operated the brokerage in a different LLC a financial disaster with the brokerage LLC would not cause a loss of the assets in the other LLC.

Richard Keyt2013-09-04T08:20:20-07:00September 4th, 2013|FAQs|0 Comments