Frequently Asked Questions - Corporations, Partnerships, LLCs

How long does it take to get a corporation or a limited liability company "up and running"? Generally, a corporation or a limited liability company is qualified to hold itself out as such on the date on which the articles of incorporation or the articles of organization are filed. As a practical matter, though, it is best to wait until the articles of incorporation or the articles of organization are approved and processed by the Arizona Corporation Commission. What do you need to keep a corporation "up and running"? In order to avail yourself of corporate legal benefits, you should file annual reports with the Arizona Corporation Commission. Any amendments to the articles of incorporation must be filed with the Arizona Corporation Commission. In addition, you should conduct annual or special meetings as detailed in the corporate bylaws and keep accurate minutes of such minutes. Those minutes should be made part of the corporate records. What are a few of the advantages/disadvantages of forming a limited liability company versus a general or limited partnership? Although the differences are numerous, if properly formed, a limited liability company offers protection to its individual members from liability for debts of the entity. While the limited partners of a limited partnership are often afforded protection from individual liability, general partners, both general and limited partnerships are usually jointly and severally liable for the debts of such partnerships. In addition, management in a limited liability company may be more flexible than afforded by a limited partnership, with management often being vested in members of the limited liability company or specifically named managers. Conversely, management in a limited partnership is vested in the general partner(s), with participation by limited partners generally restricted. What are a few of the differences in forming a limited liability company versus a corporation? Generally, limited liability companies offer many of the same protections as corporations with a minimization of paperwork. For example, limited liability companies do not have annual reporting requirements, nor do they require minutes to be maintained in the company records. Like corporations, however, limited liability companies provide protection to individual members with respect to debts and liabilities of the company. In addition, limited liability companies are only subjected to one level of taxation (as opposed to the "double" taxation that may exist at the corporate and shareholder levels for some corporations). Unlike corporations, limited liability companies do not issue stock. Or adopt bylaws. Rather limited liability companies rely upon operating agreements, which are similar to partnership agreements, to manage their internal affairs. Because the law addressing corporations has been in existence for many years, one can get a good approximation as to how a court will rule with respect to many corporate issues and concerns. Although it is suspected that courts will apply many of the same corporate legal principals to limited liability companies, until the case law is more complete, the potential for greater uncertainty exists. What should I expect to pay for forming a limited liability company or corporation? That depends on the level of complexity associated with formation of the entity and the time expended in addressing the investors various concerns. However, one thing is certain: you can pay for the cost of properly forming your corporate or limited liability company entity; or you can risk paying for it later if you don't take the time to form the entity right. It is often easy to get into business with someone, but can be very expensive to get out. Don't forget to consider filing fees and publication costs when preparing a budget.