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How To Start A Business In Arizona

How To Start A Business In Arizona

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How To Start A Business In Arizona

How To Start A Business In Arizona

Are you ready to start your business in Arizona but overwhelmed by the thought of what it takes? Relax, we’ve laid out a simple plan for you. Our easy-to-follow checklist covers everything from writing a business plan, deciding on a business structure, obtaining business licenses, and more, so you’ll be set up for a smooth start.

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Steps for Starting a Business in Arizona

Step 1: Choose a Business Idea

The first step in launching your business in Arizona is to decide what kind of business you want to run. If you’ve already got a great idea, you’re on the right track. If you’re still thinking it over, don’t worry. Arizona offers a fertile ground for various types of small businesses, thanks to its thriving industries, diverse economy, and supportive business environment. Based on online search data, some popular options for small businesses in Arizona include:

If you are looking for more ideas, we have a collection with hundreds of different business ideas where you can learn about the industry, how much it might cost to start, and get useful tips to help you along the way.

Step 2: Write a Business Plan

Once you’ve decided on the perfect business idea, the next step is to draft a business plan. Think of this plan as more than just a document a lender or investor needs before they consider funding; it’s your guidebook for navigating the journey from concept to reality.

It may seem like a huge pain, but it forces you to think through the different aspects of your business, from marketing and sales to operations, running numbers, and more. This prep work increases your chances of success by making mistakes on paper instead of finding problems after you open the doors.

Related: How to write a business plan

Step 3: Find the Money

As we continue moving through the steps of setting up a business, we now take a look at getting the money needed to launch. This is an area where business owners can get stuck, but there are a number of options, each with its pros and cons. Here are the most common funding sources to consider:

  • Personal funds: If the startup costs are low enough, many entrepreneurs choose to self-fund by using their personal savings, retirement funds, or tapping into their home equity.
  • Bank loans: Traditional banks and credit unions provide small business loans. These loans usually have competitive interest rates and terms, but they can be challenging to qualify for, especially for borrowers without a positive credit history, sufficient collateral, or a large enough down payment.
  • SBA loan guarantees: The U.S. Small Business Administration (SBA) offers loan guarantee programs to help small businesses secure funding from participating lenders. The most popular program is the 7(a) loan program, which guarantees up to 85% of loans up to $150,000 and 75% of loans over $150,000. These loans can be used for working capital, equipment purchases, real estate, and more.
  • Microloan programs: Microloans are smaller loans, usually up to $50,000, though some go higher, and are designed to help businesses with limited credit history or collateral. These loans can be obtained through local nonprofit organizations and community development financial institutions (CDFIs), such as the Local First Arizona, Arizona Microcredit Initiative, and Prestamos.
  • Investors: Raising capital from investors is another option for some startups. This can be done through equity financing, where you sell shares of your company to investors. Some common types of investors include angel investors, venture capitalists, and crowdfunding platforms. Seeking investments can be time-consuming, and you’ll likely need to give up some ownership and control of your business. Some investor groups operating in Arizona include the Desert Angels and Canyon Angels.

Related: Understanding the different types of business funding

Step 4: Select a Business Structure

The next step in starting a business in Arizona is selecting a business structure (also called a business entity) which refers to how a business is legally organized to operate. There are four primary business entities: sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). A brief description of each is below.

Sole proprietorships are the most simple and common type of business structure where an individual owns, manages, and operates the business without forming a separate legal entity, such as a corporation or Limited Liability Company (LLC). In a sole proprietorship, the business owner is personally responsible for all aspects of the business, including liabilities, debts, and taxes.

There is no registration to set up a sole proprietorship, however, some will want to register for a Trade Name with the Arizona Secretary of State.

Related: How to start a sole proprietorship in Arizona

general partnership is a type of business structure where two or more individuals agree to carry on a business together, sharing profits, losses, and management responsibilities. Unlike corporations or Limited Liability Companies, general partnerships do not require registration with the state and are not considered separate legal entities.

Related: What is a partnership?

corporation is a type of business structure that is considered a separate legal entity from its owners (shareholders). Corporations provide limited liability protection to shareholders and have specific requirements for formation, taxation, and management. This liability protection separates the owner’s personal assets and the assets of the business, so if the business is sued, their personal assets are generally safe.

Related: How to form a corporation in Arizona

The Limited Liability Company (LLC) is a popular type of legal business structure that combines the limited liability protection of a corporation with the flexibility and pass-through taxation of a partnership or sole proprietorship. An LLC is a separate legal entity from its owners, known as members, and is governed by Arizona state law.

Both the Arizona corporation and LLC are a little more complicated to form as a filing is required through the Arizona Corporation Commission. It is required that the business name is unique as there can’t be another corporation or LLC in Arizona with the same name, and each must appoint a Statutory Agent, which is a central point of contact for receiving important state and legal correspondence.

Related: How to form an Arizona LLC

Step 5: Register the Business

Once you have the business structure in place, it’s time to start working on registering the business. The specific business licenses required in Arizona depend on the location and the nature of the products or services the business offers, but here are some common registrations to look out for:

  • Business licenses: There is no general state of Arizona business license; however, many cities require a business license to operate.
  • Transaction Privilege Tax License – Businesses selling products and certain services must register for an Arizona Transaction Privilege Tax Permit (TPT) with the Arizona Department of Revenue (ADOR). The TPT is similar to sales tax in other states.
  • Professional licensing: Some services, such as construction, transporting for hire, massage, child care, home inspection, and pest control, require licensing in the state. The Arizona Commerce Authority’s Small Business Services website has more information regarding regulations for professional licenses.
  • Employer Identification Number: The EIN is not a state-specific registration but rather a number assigned by the Internal Revenue Service (IRS). An EIN is used to identify a business for tax purposes, similar to what a social security number is for an individual. Businesses typically require one if they have employees, operate as a corporation or partnership, or need to file certain tax returns, such as excise or employment tax returns. Additionally, an EIN may be required by a bank when opening a business bank account or applying for loans and credit.

Related: What business licenses and permits are needed in Arizona

Step 6: Open a Business Bank Account

With the business set up and registered, you can set up a business bank account to start paying for all of those new business expenses 🙂 Every bank is different, but in general, they will request the following to open a new account:

  • Sole proprietorship & partnership: Trade Name Certificate, EIN or SSN, and owner(s) state ID
  • Corporation: Filed Articles of Incorporation, bylaws, Certificate of Good Standing, EIN, and owner(s) state ID
  • LLC: Filed Articles of Organization, Operating Agreement, Certificate of Good Standing, EIN, and owner(s) state ID

Step 7: Hire Employees

The next step for many businesses will be to prepare to hire employees. Becoming a new employer is fairly complex as there are multiple agencies to register with and labor laws to understand.

To get registered as a new employer, you’ll need the EIN, in addition to a Withholding Account Number from the Arizona Department of Revenue, and an Unemployment Insurance Tax Account Number from the Arizona Department of Employment Security.

Employers are also responsible for reporting new hires, verifying employees are eligible to work in the U.S., income tax withholding, unemployment taxes, and taking care of payroll withholding taxes, which include Social Security and Medicare.

Related: Steps to hiring your first employee in Arizona

Step 8: Obtain Business Insurance

Business insurance is never at the top of anyone’s list of things they want to do when starting their business, but it is a step to not overlook. Most types of business insurance are optional, except for workers’ compensation insurance for any business with employees working in Arizona. Other types of insurance may be required too, depending on what the business does, but it is generally tied to businesses that require professional licensing with the state.

Even if insurance isn’t required and there is a fire, theft, or personal injury lawsuit, the business owner may have to pay out-of-pocket for damages and legal fees. Home-based businesses may want to consider business insurance, too, as personal home and vehicle policies may not cover a business loss.

Related: 7 types of insurance your business may need

Step 9: Set Up a Bookkeeping System

Another important step in the startup process is having a system for tracking income and expenses. Getting your bookkeeping in place not only keeps you in compliance with the government but also provides better financial oversight and improved organization. Whether you choose to use pen & paper, accounting software, or work with an accountant, having some sort of system in place helps ensure the long-term success of your business.

Related: Setting up accounting for a business

This material is property of StartingYourBusiness.com

Common Questions When Starting A Business In Arizona

Is Arizona a good state to start a business?

Arizona is a great place to start a business for several reasons, including its business-friendly environment, skilled workforce, relatively low cost of living, and strategic location. A few reasons include the following:

Pro-business environment: Arizona has been consistently ranked as one of the top states for businesses due to its favorable tax policies, incentives, and regulatory environment.1 Additionally, the Arizona Commerce Authority offers various incentives to attract and support businesses, such as the Arizona Innovation Challenge and the Angel Investment Tax Credit.

Skilled workforce: Arizona has a diverse and well-educated workforce, thanks in part to its strong education system and universities. The state is home to Arizona State University (ASU), which has been consistently ranked as the nation’s most innovative school.2 ASU and other institutions in the state help create a pipeline of talent for businesses in various industries.

Low cost of living and favorable real estate market: Arizona offers a relatively low cost of living compared to other states, making it an attractive place to start a business.

Growing industries and innovation: Arizona is home to several growing industries, including technology, aerospace, renewable energy, and healthcare. The state has become a hub for tech companies, with major players like Intel, Apple, and Amazon operating facilities.

Overall, Arizona’s favorable business climate, skilled workforce, low cost of living, strategic location, and growing industries make it an attractive place to start a business.

How much does it cost to start an LLC in Arizona?

The cost to start an LLC in Arizona includes a state filing fee of $50. In addition, a Notice of Publication must be run in a local newspaper, which typically costs between $60 – $130.

Related: How to start an LLC in Arizona

What are the steps to starting an LLC in Arizona?

There are three main steps to starting an LLC in Arizona. These include:

1. Making sure the LLC name is available
2. Appointing an Arizona Statutory Agent
3. Filing the Articles of Organization

To learn how to set up an LLC, check out our guide to starting an LLC in Arizona.

Does a sole proprietor need a business license in Arizona?

In Arizona, whether a sole proprietor needs a business license depends on the type of business they are running and where it’s located. The state itself does not require a general business license for sole proprietors (or any business structure), but local cities or counties might.

For example, if you’re offering certain services like food service, childcare, or professional services (like real estate, legal, or accounting services), you might need specific permits or licenses to operate legally.

Arizona Small Business Resources

There are 650,151 small businesses in Arizona, which is 99.5% of all businesses in the state,3 and 1.1 million people are employed by these small businesses.4 Because of the economic impact of small businesses, there are a number of small business resources to help Arizona businesses start and grow. Some of these include:


  1. Tax Foundation’s State Business Tax Climate Index ↩︎
  2. U.S. News & World Report ↩︎
  3. Small Business Administration ↩︎
  4. Census Bureau ↩︎


  • Greg Bouhl

    With over two decades as an entrepreneur, educator, and business advisor, Greg Bouhl has worked with over 2,000 entrepreneurs to help them start and grow their businesses. Fed up with clients finding and acting on inaccurate and outdated information online, Greg launched StartUp101.com to be a trusted resource for people starting a business.

How To Start A Business In Arizona

How To Start A Business In Arizona

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