How to start a business in Arizona [Updated 2024]

With 300 days of sunshine a year, a strong economy, and a talented workforce, Arizona offers a bright future for entrepreneurs. Startups will find low costs and taxes and a high quality of life for workers in the Grand Canyon State. There are more than 550,000 businesses with fewer than 500 workers operating in Arizona, which is roughly 45% of the state’s private workforce. Is it time for you to join them? 

It might seem daunting, but our step-by-step guide will help you through the process. Here’s how to establish a business in Arizona—the compliant and economical way.

1. Name your business

A great business deserves a great name. But you must ensure your name complies with Arizona’s regulations. Here are the key steps:

• Check if your business name is available using Arizona’s business name search tool.
• Make sure it meets Arizona’s naming standards by checking the Arizona Corporation Commission’s criteria. 
• Check the US Patent and Trademark Office to ensure your business name hasn’t been trademarked.
• Reserve your business name on the Arizona Corporation Commission's website for $45 ($10 filing fee plus $35 expedited fee). If you reserve by mail, you’ll save the $35 expedited fee.

This is also an excellent time to register a domain name for your business website and set up social media accounts using your business name. 

In some cases, you may want to use a DBA (doing business as) or trade name. For example:

• If you want to use a business name that doesn’t incorporate your or your partners’ names. 
• If the business operates under a name that is different from the original business registration. 

In Arizona, this is accepted business practice but not legally required. You can register on the AZSOS website.

2. Explore your funding options

It goes without saying that funding is critical to starting a business. You may choose to use your own capital or seek out investors or lenders that can help turn your business idea into reality. Small grants and business loans can help, too. Here’s a sampling of what’s available:

• Arizona loan programs. There are several small business loan and loan programs available in Arizona. Many are regional or tied into federal programs. Read more on the Arizona Commerce Authority website.

• Federal loan programs. The Small Business Administration (SBA) offers assistance through starter loans and disaster relief and is a good source for information about starting a business—including coaching. Arizona SBA contact information is available on this page, and program overviews can be found here.

• Local grants and loans. The SBA can also provide information on local grant and loan programs in Arizona. Find out more from your local SBA office. 

3. Decide on your business structure 

There are a number of different business structures in Arizona that you can choose from. Whether you’re launching a large manufacturing plant or an independent bookstore, you’ll have to pick the right business entity. Limited liability companies and sole proprietorships are the most popular, but others may be better suited. Here are the basics of each structure.

Arizona Loan Programs. There are several small business loan and loan programs available in Arizona. Many are regional or tied into federal programs. Read more on the Arizona Commerce Authority website.

4. Register your business in Arizona

If you’re going to run your business as a sole proprietorship or general partnership, it’s not necessary to register with the Arizona Secretary of State. General partnerships do require an operating agreement between parties, and there may be a requirement to file paperwork in some local jurisdictions. Remember that if you’re selling a product or service, you’ll need an Arizona Transaction Privilege Tax (TPT) License from the Arizona Department of Revenue (ADOR).

5. Decide on a registered agent

All corporations and LLCs registered in Arizona must assign a statutory agent—which is the same as a registered agent. A statutory agent is an individual (you or a professional) who accepts tax and legal documents for the business. The statutory agent must have an address in Arizona, and they are required to take the appointment by signing a statement of acceptance. 

You can engage the services of a professional statutory agent if you wish. Costs start at around $50 and go up from there, depending on the level of service you require. You’ll pay more for same-day document delivery and round-the-clock service. 

6. Apply for an Employer Identification Number

An Employer Identification Number (EIN) is required before you can employ or pay employees. EINs are issued by the Internal Revenue Service (IRS) and required in every state. It’s a unique nine-digit number (like a Social Security number) used to identify your new business. You’ll need it for a number of tasks, including opening bank accounts, applying for loans, filing taxes, and paying your workers. EINs are easy to apply for and there’s no cost. Just complete IRS Form SS-4. 

7. Get up to speed with Business Tax Credits

Nobody likes to pay taxes, but we all have to. Arizona’s corporate tax rate is 4.9%, which is lower than many states (ranking 38th). Still, it means you'll be dealing with a hefty tax bill unless you can find ways to reduce your tax obligation. One way is to take advantage of the tax and business credits and incentives available to Arizona businesses. Here are some examples:

• Qualified Small Business Capital Investment Program: Income tax credits are equal to 30% or 35% of the investment amount and are claimed over a three-year period. This is administered by the Arizona Commerce Authority (ACA). 
• Quality Jobs Tax Credit: This credit is available to businesses that create new quality jobs in Arizona. The credit (up to $3000 per year per position) is based on the wages paid to the new employees and can be claimed for up to three years. 
• Arizona’s Additional Depreciation Program: This incentive encourages new capital investment in Arizona by reducing the taxable value of most business personal property, resulting in substantially lower personal property tax liabilities for businesses.
• Angel Investment Tax Credit: This provides credits to investors who make capital investments in small businesses certified by the ACA.

8. Stay on top of filing requirements and taxes

It’s important to file your taxes and other business documents on time. In Arizona, corporations have to file an annual report and a Certificate of Disclosure with the Arizona Corporation Commission on the anniversary of their formation. LLCs are free from this obligation. What will your business have to file? It depends on your business structure. Here are some examples: 

• Sole proprietorships: File income on personal income tax return. You can find more information on filing here. 

• LLCs: If the LLC has made a valid federal election to be taxed as a corporation, it must file an Arizona corporate income tax return. A single member limited liability company that is disregarded as an entity is treated as a branch or division of the owner and is included in the tax return of its owner.

• Corporations: File annual income taxes to the Arizona Department of Revenue (ADOR). This must be done electronically. 

• Partnerships: File annual income taxes to ADOR. This can be done online.

Read more about state filing requirements on the ADOR portal. 

9. Find a payroll solution

There’s a lot to consider if you’re hiring employees or contractors in Arizona. It’s vital to ensure you classify your workers correctly. Failure to do so could result in fines and penalties, including back taxes and back pay. You’ll need to keep a close eye on overtime and other entitlements, too. The minimum wage in Arizona is $14.35 per hour, which is higher than the federal rate of $7.25 per hour. Arizona follows the federal Fair Labor Standards Act requirements for overtime pay. Covered employers must pay employees 1.5 times their regular pay rate if they work more than 40 hours in a work week.

Payroll software is crucial when it comes to paying your employees and contractors correctly and on time. Rippling can simplify running payroll and keep you compliant with overtime regulations. With Rippling Time & Attendance, you can monitor your employees’ hours and create alerts that notify you if they’re nearing overtime hours. Verified hours will automatically sync to payroll. Click “submit,” and Rippling will calculate net pay and taxes in a flash.

Recruiting globally? Rippling has that covered, too: 

• Pay all your workers—across international boundaries and in local currencies—in a single pay run
• Include hourly and salaried employees, as well as contractors
• Manage your entire team, systems, and data around the planet all in one place

10. Support and scale your growing business with Rippling

As your business expands, you’ll need an HRIS (Human Resource Information System): a software solution to simplify tasks like recruiting, employee onboarding, payroll processing, benefit administration, and much more. 

The earlier you use an HRIS, the easier it is to scale—especially if you’re aiming to grow your business globally. And once you reach that phase, Rippling has everything you need to manage your global team—in a single system. 

• Hire, pay, and manage your people—whether they’re based in Phoenix or on the other side of the globe.
• Avoid potential local, state, and federal compliance violations—with an action plan for each one.
• Bring all benefits—health insurance, 401(k), commuter, and more—into a single system and automate routine tasks, like enrolling new employees, updating deductions, and managing COBRA.
• Easily keep all your recruiting information current—from open headcount to new hires—and automate every stage of the hiring process. 
• Have a single source of information for HR analytics, policies, and more.

FAQs about setting up a business in Arizona

Do I need a business license in Arizona?

In most cases, yes. If you’re selling a product or service, you’ll need to acquire an Arizona Transaction Privilege Tax (TPT) License (similar to a sales tax, but a tax on the vendor for the privilege of doing business in Arizona) from the Arizona Department of Revenue (ADOR). 

There isn’t a state business license in Arizona, but many municipalities issue their own. Whether you need one depends on your business and the locale where you’re based or operating. ADOR has local contact information here.

You may need regulatory (professional or special) licensing/permits if your business activities are supervised or regulated by state, federal, or local agencies or offices. Check with the Small Business Administration (SBA) and state and local agencies to determine if you require one of these licenses or permits. The Arizona Commerce Authority website can help you figure out which licenses and permits might apply to your situation.

Do I need a business bank account when launching an Arizona business?

In most cases, you’re not legally required to have a business bank account, but having one is the smart move. A dedicated business account and credit card keep your personal finances and business finances separate and help protect your personal assets. Note that business accounts are necessary for running payroll. 

Do I need to get business insurance?

Business insurance isn’t legally required unless you have employees. Employers in Arizona with at least one employee must have workers’ compensation insurance. This provides medical coverage and wage replacement if an employee is injured at work. Commercial auto insurance is required for businesses that own vehicles in the state.

No matter the size of your business, liability protection insurance is always a good idea. A solid policy will cover you and your business in the face of personal injury claims. Coverage for circumstances like business closures or property damage is essential for larger firms. If you provide professional services or advice, professional liability insurance can protect you from negligence claims. 

What are Arizona’s state payroll taxes?

These are the state payroll taxes in Arizona:

• Arizona Withholding Taxes — withheld from employee wages
• Arizona State Unemployment Insurance (SUI) — employer contributions

To learn more about state taxes, visit the Arizona Department of Revenue website.

Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any related activities or transactions.