Benefits of a corporation
Forming a corporation can shield you from liability for your company’s financial obligations. A corporation’s liability is generally limited to the assets in the corporation, and creditors cannot collect from the corporation’s shareholders personally. Forming a corporation can also help shield you from liability if one of your employees is accused of doing something illegal.
Requirements for incorporating in Arizona
Preparing your articles of incorporation
Your corporation’s existence begins as soon as you file articles of incorporation with the Arizona Corporation Commission, unless the articles specify a later date. To form a corporation, file the articles of incorporation, together with a cover sheet, statutory (registered) agent acceptance form, Certificate of Disclosure form, and filing fee.
The articles of incorporation may contain many provisions, but at a minimum, they must contain the following:
- Name of the corporation
- Corporate purpose
- Stock structure
- Registered agent
- Known street address of the corporation, if different from the registered agent address
- Names and addresses of incorporators
- Names and addresses of directors
In the section of the articles regarding stock structure, you must include the following information:
- The articles of incorporation must identify each class of stock the corporation is authorized to issue and state the number of shares in each. You must have at least one class of shares.
- If your corporation’s classes of shares are divided into series, you must also list the series designation for each class. Before a class of shares is issued, the articles must describe the rights, limitations, and preferences for that class.
After you receive an approval letter from the Arizona Corporation Commission, you must publish a notice of incorporation. The approval letter will contain instructions for doing this.
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Naming your corporation
It is a good idea to find out if your proposed corporation name is available before filing your articles of incorporation. You can conduct a search on the Arizona Corporation Commission website and then reserve a corporate name for 120 days by submitting a form to the Commission.
Your corporation’s name must meet the following criteria:
- It must contain the words “association,” “company,” “corporation,” “incorporated” or “limited,” or the abbreviation of one of those words.
- It cannot contain the words “limited company” or “limited liability company,” or the abbreviations “L.L.C.,” “L.C.,” “LLC” or “LC.”
- It must be distinguishable from other entity names and trade names on file with the Arizona Corporation Commission and the Secretary of State.
An incorporator is responsible for signing and filing the articles of incorporation. Incorporators’ names and addresses must be listed in the articles of incorporation. Keep in mind the following when specifying your incorporators:
- There may be one or more incorporators.
- An incorporator may be an individual, a corporation, a limited liability company or an association.
- Once the articles of incorporation are filed, the incorporators have no further duties.
A corporation’s directors have responsibility for establishing corporate policies and procedures and managing the affairs of the business. Directors have a duty to act in good faith and be diligent and prudent in managing the corporation’s affairs.
Every corporation must have at least one director. There is no upper limit on the number of directors. The articles of incorporation or bylaws should set the number of directors.
Arizona law does not place limitations on who can serve as a director, but you can include eligibility requirements in your articles of incorporation or bylaws.
Specifying a registered agent
A registered agent, also called a statutory agent, is a person who receives official correspondence and legal papers on behalf of the corporation. A registered agent can be an individual who resides in Arizona and has an Arizona street address or a corporation or LLC that is authorized to conduct business in Arizona.
The registered agent must agree in writing to serve as an agent. A form for this purpose is available from the state.
Stating a corporate purpose
You are required to describe the general character of the business your corporation will initially conduct. This is not a limitation on the kind of business you can conduct, as you can change your business purpose in the future.
Determining incorporation bylaws
A corporation’s bylaws set the corporation’s rules and procedures and serve as a guideline for operating the corporation. Arizona law does not specify what the bylaws must contain. Bylaws typically include such provisions as the number of directors and how they are chosen and the number of votes required for a particular action.
While your corporation must have bylaws, you do not need to file them with the state. Bylaws cannot include any provisions that are inconsistent with the law or the articles of incorporation.
Costs of incorporating in Arizona
The Arizona Corporation Commission requires a fee when filing articles of incorporation or reserving a corporation name. Corporations are also required to pay state and federal income taxes.
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