Starting a Professional Corporation in Arizona 2024: Ultimate Guide

How to Start a Professional Corporation in Arizona

Licensed professional? Level up your business with Arizona professional corporation! Enjoy unique benefits like Arizona LLC, such as limited liability, tax perks, and a polished image. Our step-by-step guide unravels the essentials for smooth compliance and the right fit. LLCBase has your back with expert guidance, so make an informed decision and triumph in Arizona with your professional corporation today!

This guide will review the requirements for starting a professional corporation in Arizona, explore the advantages and disadvantages of this business structure, and help you determine if it is the right fit for your business goals.

What is a Professional Corporation

A Professional Corporation (P.C.) is a unique type of corporation designed for licensed professionals, such as doctors, dentists, lawyers, architects, and accountants. Forming a P.C. allows licensed professionals to offer their services through a corporate structure, providing them with the benefits of a traditional corporation, such as limited liability protection and tax advantages. Forming a professional corporation in Arizona is a popular choice due to the thriving professional landscape and business-friendly environment. When starting a professional corporation, choose a reliable formation service in Arizona.

The primary purpose of Arizona Professional Corporation is to protect its owners from personal liability for the corporation’s actions. The shareholders’ personal assets are protected if the professional corporation faces legal issues. Moreover, Arizona professional corporations can offer certain tax benefits, such as deducting employee benefits and operating expenses. These advantages make forming a professional corporation an attractive option for many professionals in Arizona.

Recommended: Hire a formation service to make your dream a reality! Choose the best for a seamless professional corporation setup in Arizona. We recommend –

Our #1 Pick: LegalZoom – ($0 + State Fees) Online LLC Setup

Who Can File Under Professional Corporation Laws

Under Arizona Professional Corporation laws, only certain licensed professionals are eligible to form a professional corporation. The specific professions allowed to form a P.C. may vary slightly by state, but in Arizona, the following professionals can typically form a professional corporation:

  • Physicians and Surgeons
  • Dentists
  • Chiropractors
  • Optometrists
  • Podiatrists
  • Certified Public Accountants
  • Architects
  • Engineers and Land Surveyors
  • Psychologists
  • Marriage and Family Therapists
  • Clinical Social Workers
  • Professional Clinical Counselors
  • Veterinarians
  • Attorneys
  • Speech-Language Pathologists
  • Pharmacists
  • Registered Nurses
  • Physical Therapists
  • Occupational Therapists
  • Acupuncturists

Each profession has its governing licensing board, which sets specific rules and regulations for forming and operating a professional corporation. It is essential to check with the relevant board and state laws to ensure that your profession is eligible to form a professional corporation and to understand the specific requirements associated with your profession.

Launching a professional corporation in Arizona? Get in touch with the best LLC formation services in Arizona for expert guidance and support tailored to your unique venture. Let their skilled assistance pave the way for seamlessly setting up your professional corporation, so you can focus on growing your business!

LLC Services

Rating & Pricing

Top Features

Learn More

#1 Editor's Choice

$0 + State Filing Fee

  • Free LLC Formation

  • Various Legal Services

  • Attorney Advice

$299 + State Filing Fee

  • Single Package

  • Flat Pricing

  • Legal Services

Structure of a Professional Corporation

  • Shareholders: Arizona Professional Corporation’s shareholders must be licensed professionals in the same field as the corporation’s purpose. For example, if a professional corporation is formed to offer legal services, all shareholders must be licensed attorneys. This requirement ensures that the professional corporation’s management comprises qualified individuals with relevant expertise.
  • Directors: The directors of a professional corporation in Arizona are responsible for overseeing the corporation’s operations and making high-level decisions. The directors must also be licensed professionals in the same field as the corporation’s purpose. The number of directors required depends on the specific licensing board’s regulations, but typically a minimum of one director is needed.
  • Officers: The officers of Arizona Professional Corporation manage the professional corporation. Officers typically include a President, Secretary, and Treasurer. However, additional officers can be appointed as needed. While not all officers must be licensed professionals, the President must hold a valid license in the same field as the corporation’s purpose.

Starting a Professional Corporation in Arizona: A Guide

Here is a detailed guide to starting a professional corporation in Arizona that you should follow.

Step 1: Appointment of Statutory Agent

The first step in forming a Professional Corporation is appointing Statutory Agent in Arizona. This individual or company will act on behalf of the corporation, receiving official notices and legal documents. The agent must have a physical address in Arizona and be available during regular business hours.

We compiled the list of the best registered agent services in Arizona to help you choose the one you can rely on.

Step 2: Choosing the Name of the Corporation

Selecting a name for your Arizona Professional Corporation is crucial. The name must be unique and appropriate, including the words “professional corporation” or the abbreviation “P.C.” It must also comply with the rules and regulations of the governing licensing board and should not be confusingly similar to an existing corporation’s name.

Recommended: Lock down your ultimate business name confidently with the name reservation by a reliable business formation service. Effortlessly scope out name options with just a few clicks! We recommend –

Our #1 Pick: LegalZoom – ($0 + State Fees) Online LLC Setup

Step 3: Drafting of By-laws

By-laws are the internal rules and regulations governing the management and operations of the professional corporation. These should include provisions related to the appointment of directors, issuance of shares, and any restrictions imposed by the licensing board.

Step 4: Appointment of Board of Directors

The board of directors oversees the management and operations of the Arizona Professional Corporation. Directors must be licensed professionals in the same field as the corporation’s purpose.

Step 5: Conduction of Board Meetings

Regular board meetings are essential for maintaining the proper functioning and compliance of the professional corporation. The by-laws should specify the frequency, notice requirements, and procedures for conducting these meetings.

Step 6: Issuance of Corporate Shares

Shares represent ownership in the corporation. The professional corporation must issue shares to its shareholders, who must be licensed professionals in the same field. Share issuance should comply with the by-laws and any restrictions imposed by the licensing board.

Step 7: Comply with State Requirements

Forming Arizona Professional Corporation requires compliance with specific state requirements, such as obtaining necessary permits and licenses, paying fees, and adhering to rules and regulations the governing licensing board sets forth.

Need trustworthy guidance on business licenses, permits, and compliance? Look no further than the best business attorneys in Arizona who are adept at navigating your specific industry’s legal ins and outs. With their friendly support, you can confidently and seamlessly manage your business requirements!

Step 8: Filing of Statement of Information

Arizona professional corporations must file an annual report with the Arizona Secretary of State. This document includes essential information about the corporation, including its name, address, Statutory Agent, and directors.

Step 9: Getting Tax Permits from the State

The professional corporation must obtain the necessary tax permits from the Arizona Department of Revenue, such as an Employer Identification Number (EIN) from the Internal Revenue Service (IRS).

Step 10: Opening of a Bank Account

Finally, open a separate bank account for the Arizona Professional Corporation to maintain proper accounting and financial records.

Fees Associated with Professional Corporation in Arizona

Here are some of the most common fees when starting a professional corporation in Arizona.

  • State Laws and Regulations: To form a professional corporation in Arizona, it is crucial to comply with the state laws and regulations governing professional corporations. The Arizona Revised Statutes Title 10 and the specific licensing board’s regulations for each profession outline the requirements and restrictions for professional corporation formation. Before starting the process, professionals should consult with their licensing board to ensure they meet the necessary qualifications.
  • Incorporation Process: Once the licensing requirements are met, the next step to form a professional corporation in Arizona is to draft and file the Articles of Incorporation with the Arizona Secretary of State. This document includes essential information about the corporation, such as its name, address, purpose, and number of authorized shares. Filing the Articles of Incorporation requires a filing fee currently $60 for most professions. However, it is essential to check with the Arizona Secretary of State for the specific fee associated with your profession.
  • Naming Requirements: You must follow specific rules when choosing a name for a Professional Corporation in Arizona. The name must include the words “Professional Corporation,” “P.C.,” or “Prof. Corp.” Additionally, the name cannot be misleading or too similar to an existing corporation’s name. Conducting a name search with the Arizona Secretary of State is recommended to ensure the chosen name is available. This search is free, but reserving a name before filing the Articles of Incorporation requires a reservation fee of $45 online and $45 mail.
  • Articles of Incorporation: The Articles of Incorporation is a critical document for forming a professional corporation in Arizona. It outlines the corporation’s essential information, such as the name, address, purpose, and number of authorized shares. The Articles must also include a statement that the corporation is a professional corporation and the specific profession it practices. Once completed, the Articles of Incorporation must be filed with the Arizona Secretary of State, accompanied by the appropriate filing fee.
  • Additional Fees and Costs: In addition to the filing fees mentioned above, forming Professional Corporation in Arizona may involve other costs, such as:
    • Annual Report: professional corporations must file an initial Statement of Information with the Arizona Secretary of State every Anniversary month of the corporation of filing the Articles of Incorporation. The filing fee for this form is $0.
    • Licensing and Permit Fees: Depending on the specific profession, the governing licensing board may require additional licensing and permit fees.
    • Statutory Agent Fee: Hiring of Statutory Agent service will likely involve an annual fee of $50 – $150, which can vary depending on the service provider.
    • Legal and Accounting Fees: Forming a professional corporation may involve consulting with attorneys and accountants, which can result in additional professional fees.

Advantages of a Professional Corporation

  • Limited Liability Protection: One of the main benefits of a professional corporation is its limited liability protection to its shareholders. This means the shareholders’ assets are protected from the corporation’s debts and liabilities.
  • Tax Benefits: Professional Corporations enjoy specific tax benefits, such as deductions for business expenses and the ability to retain earnings within the corporation.
  • Business Credibility: Operating as a professional corporation can enhance the credibility and reputation of the professional services, demonstrating a commitment to compliance and professionalism.
  • Continuity of Operations: A professional corporation has a perpetual existence, ensuring the continuity of operations even if the shareholders or directors change.

Disadvantages of a Professional Corporation

  • Complexity and Cost of Formation: Forming a professional corporation can be more complex and costly than other business structures, such as sole proprietorships or partnerships.
  • Ongoing Compliance Requirements: professional corporations must adhere to ongoing compliance requirements, including regular board meetings, filing annual reports, and maintaining proper records.
  • Limited Flexibility in Management: professional corporations may need more flexibility in management, as the board of directors must consist of licensed professionals in the same field.

Taxation of Professional Corporations

Here are the taxes that your professional corporation must pay in Arizona:

Federal income tax

A professional corporation in Arizona is subject to federal income tax on its net earnings. However, a P.C. can elect to be taxed as an S corporation, which allows the corporation’s income, deductions, and credits to pass through to the shareholders. This can result in significant tax savings by avoiding double taxation.

State taxes

Arizona Professional Corporation is also subject to state taxes, such as the Arizona franchise tax, which is based on the corporation’s annual net income. Additionally, depending on the nature of its operations, the professional corporation may be subject to other state and local taxes, such as payroll and sales taxes permit in Arizona.

Tax deductions and exemptions

A professional corporation in Arizona can take advantage of various tax deductions and exemptions, such as deductions for employee benefits, operating expenses, and depreciation. These deductions can help reduce the corporation’s taxable income, ultimately leading to tax savings for the P.C. and its shareholders.

Alternatives to Professional Corporations in Arizona

If you decide that a professional corporation is not for you, then you might consider the following alternatives.

  • Sole Proprietorships: A simpler business structure is where an individual operates the business under their name without limited liability protection.
  • Partnerships: Two or more individuals join to operate a business, sharing profits, losses, and responsibilities.
  • Limited Liability Companies (LLCs): A hybrid business structure that combines the limited liability protection of a corporation with the tax benefits and flexibility of a partnership.
  • S-corporations: Starting an S Corp in Arizona avoids double taxation by allowing income, losses, and deductions to pass through to the shareholders’ personal tax returns.

FAQs

What are the requirements to start a professional corporation in Arizona?
The requirements to start a professional corporation in Arizona include filing articles of incorporation with the Arizona Corporation Commission and paying a fee.
Can a professional corporation registered in another state operate in Arizona?
Yes, a professional corporation registered in another state can operate in Arizona if it meets Arizona’s licensing and business requirements.
What types of businesses can form a professional corporation in Arizona?
Certain licensed professionals, such as accountants, architects, engineers, and lawyers can form a professional corporation in Arizona.
Is it required for all shareholders in a professional corporation to be licensed professionals in Arizona?
No, not all shareholders in a professional corporation need to be licensed professionals in Arizona.
Can non-residents of Arizona form a professional corporation in the state?
Yes, non-residents of Arizona can form a professional corporation in the state.
Do all professional corporations in Arizona have to have the same business structure?
No, professional corporations can choose to exist as a limited liability company or as a for-profit corporation.
Do professional corporations in Arizona require a registered agent?
Yes, professional corporations in Arizona are required to have a registered agent.
How long does it take to process and file articles of incorporation for a professional corporation in Arizona?
The processing time to file articles of incorporation for a professional corporation in Arizona may vary from a few days to several weeks.
Can an attorney represent a professional corporation during Arizona Corporation Commission proceedings if the attorney is a shareholder or officer of the corporation?
Yes, an attorney can represent a professional corporation during Arizona Corporation Commission proceedings even if the attorney is a shareholder or officer of the corporation.
Does Arizona require professional corporations to obtain a business license?
Yes, professional corporations in Arizona are required to obtain a business license.
Can professional corporations obtain a license for more than one profession in Arizona?
No, professional corporations in Arizona can only obtain a license for one specific profession.
Which professions require mandatory malpractice insurance before establishing a professional corporation in Arizona?
Architects and engineers are required to obtain mandatory malpractice insurance before establishing a professional corporation in Arizona.
Can an individual who is both a shareholder and employee of a professional corporation in Arizona participate in the company’s 401(k) or group health insurance plans?
Yes, an individual who is both a shareholder and employee of a professional corporation in Arizona can participate in the company’s 401(k) or group health insurance plans.
Can professional corporations in Arizona have more than one board of directors?
Yes, professional corporations in Arizona can have more than one board of directors.
Are professional corporations in Arizona required to have annual shareholder meetings?
No, professional corporations in Arizona are not required to have annual shareholder meetings.
Can non-professionals hold any ownership stake in a professional corporation in Arizona?
No, only licensed professionals can hold any ownership stake in a professional corporation in Arizona.
Are professional corporations in Arizona required to have a written company agreement?
No, professional corporations in Arizona are not required to have a written company agreement.
Must all of the shareholders in a professional corporation reside in Arizona?
No, not all of the shareholders in a professional corporation need to reside in Arizona.
Can professional corporations in Arizona choose to dissolve the corporation at any time?
Yes, professional corporations in Arizona can choose to dissolve the corporation at any time.
What is the cost to file articles of incorporation for a professional corporation in Arizona?
The cost to file articles of incorporation for a professional corporation in Arizona can vary but is typically several hundred dollars.
Can professional corporations in Arizona issue stock?
No, professional corporations in Arizona cannot issue stock.
Is there a minimum number of shareholders or officers required to start a professional corporation in Arizona?
No, there is no minimum number of shareholders or officers required to start a professional corporation in Arizona.
Can a professional corporation in Arizona operate as a sole proprietorship?
No, a professional corporation in Arizona cannot operate as a sole proprietorship.
Are professional corporations in Arizona required to pay state income tax?
Yes, professional corporations in Arizona are required to pay state income tax.
Can professional corporations in Arizona qualify for tax exemptions?
No, professional corporations in Arizona cannot qualify for tax exemptions.
Do professional corporations in Arizona have to file annual reports?
Yes, professional corporations in Arizona are required to file annual reports.
Can professional corporations in Arizona merge with other corporations?
Yes, professional corporations in Arizona can merge with other corporations.
What are the consequences of failing to renew a professional corporation’s license in Arizona?
Failing to renew a professional corporation’s license in Arizona can result in the corporation’s dissolution or revocation of its right to conduct business.
What is a professional corporation in Arizona?
A professional corporation is a type of corporation formed by individuals that provide professional services to their clients.
Who can form a professional corporation in Arizona?
Individuals engaged in the practice of law, medicine, engineering, and other professions that require a license can form a professional corporation in Arizona.
What are the key benefits of forming a professional corporation in Arizona?
The key benefits of forming a professional corporation in Arizona include protecting personal assets, limiting liability, and potentially reducing taxes.
What steps do I need to take to create a professional corporation in Arizona?
To create a professional corporation in Arizona, you need to file the necessary paperwork with the Arizona Corporation Commission and meet all state licensing requirements for your profession.
How do I choose a name for my professional corporation in Arizona?
Your corporation’s name must be unique and not already registered or reserved with the Arizona Corporation Commission.
Do Arizona’s professional corporations require a separate permit or license?
Yes, the professions that require a professional corporation also require a separate permit or license from their respective licensing boards.
Can a foreign corporation register as a professional corporation in Arizona?
A foreign corporation authorized to conduct business in Arizona can register as a professional corporation if it meets all licensing and registration requirements under Arizona law.
Can I file articles of incorporation for a professional corporation in Arizona online?
Yes, Arizona Corporation Commission provides online services to file articles of incorporation for a professional corporation in Arizona.
Do I need a registered agent for my professional corporation in Arizona?
Yes, you must have a registered agent that maintains a physical address in Arizona.
Can I act as a registered agent for my professional corporation in Arizona?
If you have a physical address in Arizona and meet all the requirements, then you can act as the registered agent for your professional corporation in Arizona.
Does Arizona require professional corporations to file an annual report?
Yes, professional corporations in Arizona must file an annual report with the Arizona Corporation Commission.
What types of information do I need to include in my professional corporation’s annual report in Arizona?
Arizona requires professional corporations to include significant identifying information when filing the annual report.
How much is the filing fee for a professional corporation in Arizona?
The filing fee for professional corporation articles of incorporation in Arizona is $95.
Are there any ongoing requirements after a professional corporation is filed in Arizona?
Yes, annual reports, registered agent services, and meeting state licensing requirements are ongoing requirements for a professional corporation in Arizona.
How long does it take to form a professional corporation in Arizona?
It can take anywhere from several business days to several weeks for the Arizona Corporation Commission to process the paperwork necessary to form your professional corporation.
What types of professional services require a professional corporation in Arizona?
Attorneys, doctors, engineers, and other professions that require licensure need to form professional corporations in Arizona.
What are the tax implications of forming a professional corporation in Arizona?
Professional corporations in Arizona have the potential to pay less in taxes either as an S Corporation or being considered a pass-through entity.
Is forming a professional corporation in Arizona expensive?
Forming a professional corporation is not expensive, and in many cases, the costs associated are tax-deductible.
Can I convert an existing corporation to a professional corporation in Arizona?
Yes, you can convert your existing corporation to a professional corporation if you follow all the requirements to form a professional corporation.
Can professionals who aren’t licensed in Arizona form professional corporations?
No, only those authorized to conduct business in Arizona can form a professional corporation.
What protection does forming a professional corporation provide in Arizona?
By forming a professional corporation, you can limit personal liability over corporate debts or claims against error or malpractice by the corporation.
Do professional corporations have a different legal structure compared to other corporations in Arizona?
No, other than meeting licensing requirements, professional corporations have the same legal structure as other corporations in Arizona.
How many directors and officers are required for a professional corporation in Arizona?
Arizona statute regarding the number of directors includes two separate board groups – the board of directors and the shareholders board. While the number of directors can vary, the practicing owners should always control fifty-one percent.
How do I find out if the name I want for my professional corporation is already in use in Arizona?
You can search the Arizona Secretary of State’s corporate name database to determine potential rame overlap issues.
Can I change the name of my professional corporation in Arizona after it has already been filed?
Yes, you can file an amendment to change the name of your professional corporation in Arizona.
How can I check for state approval on my professional corporation in Arizona?
The Arizona Corporation Commission can confirm state approval status regarding supplied paperwork and filed documentation.
Does Arizona require minutes to be kept for professional corporations?
Yes, Arizona law requires meeting minutes to be properly recorded, usually with shares held joining in the Directors or Shareholders meeting minutes.

Also Read

How to Save Money While Forming Arizona Professional Corporation

One way to save money when forming an Arizona professional corporation is to take advantage of resources that are readily available to you. There are numerous online guides and resources that can help you understand the legal requirements and procedures for setting up a professional corporation in Arizona. By educating yourself on the process, you can avoid costly mistakes and streamline the formation process.

Another way to save money is to consider doing some of the work yourself. While it may be tempting to hire professionals to handle every aspect of setting up your professional corporation, there are many tasks that you can take on yourself with a little research and effort. For example, you may be able to draft your own articles of incorporation or handle your own business filings, saving you the cost of hiring outside help.

When it comes to hiring professionals, it’s important to shop around and compare prices. Just because a particular lawyer or accountant has a strong reputation doesn’t mean they are the most cost-effective option for your business. Take the time to get quotes from multiple professionals and consider working with a smaller firm or independent practitioner who may offer more competitive rates.

Additionally, consider utilizing technology to save money during the formation process. There are many software and online tools available that can help streamline the paperwork and administrative tasks associated with setting up a professional corporation. By leveraging these tools, you can save time and money while ensuring that your business is compliant with all legal requirements.

It’s also important to consider the long-term financial implications of your decisions when forming a professional corporation. For example, choosing the right business structure from the outset can have a significant impact on your taxes and liability exposure down the line. By consulting with a knowledgeable professional or financial advisor early in the process, you can make informed decisions that will benefit your business in the long run.

Ultimately, saving money when forming an Arizona professional corporation requires a proactive and resourceful approach. By educating yourself, taking on tasks where you can, comparing prices, leveraging technology, and making informed decisions, you can set your business up for success without overspending. With careful planning and smart financial management, you can create a solid foundation for your professional corporation to thrive in the competitive Arizona business landscape.

Conclusion

Arizona Professional Corporation can offer several benefits for licensed professionals. However, it is essential to carefully consider the proper structure and compliance requirements before proceeding. Seeking professional guidance in forming a professional corporation can help ensure a smooth process and enable professionals to focus on providing their services. Visit LLCBase for more information about starting a professional corporation in Arizona.

Leave a Comment