Forming a Arizona S Corporation

There are two main steps in forming an Arizona S Corporation: (1) Filing Articles of Incorporation with the Secretary of State’s Business Division, and (2) submitting your S Corporation Election form, Form 2553, with the IRS. The first step causes your business to exist as a legal person, separate and distinct from the individual owners; the second step allows you to take advantage of certain tax benefits at the Federal level.

Articles of Incorporation for Your Arizona S Corporation

Your Arizona Articles of Incorporation should contain the following information:

  • Name: The name you choose for your S corporation must (1) be available for use in the state and (2) include the appropriate corporate ending or an abbreviation thereof.
  • Initial Business: List the type of business your corporation will initially conduct.
  • Registered Agent: Known as a Statutory Agent in Arizona, this person is the contact person for your S corporation. Their name and address, which must be a physical address in the state, is a matter of public record.
  • Known Place of Business: The address of the corporation should be provided; the Registered Agent’s address may alternatively be provided.
  • Board of Directors: There must be at least one initial director, and the name(s) and address(es) of all directors should be provided.
  • Incorporator: The filer will insert his or her name and address and sign the Articles.
  • The amount of share of stock to be authorized should be listed.

After the Articles of Incorporation have been filed, and assuming the S corporation and its owners follow all of the corporate formalities, there is a legal separation, called the corporate veil, between the owners and the corporation.

Along with the Articles, a Certificate of Disclosure must accompany the filing. This must be signed by the incorporator and dated within 30 days of submission for filing.

Further Responsibilities of a Arizona S Corporation

Any Arizona S Corporation—or any type of incorporated entity, for that matter—is to file an Annual Report. There will be no reminder; the corporation must remember to file each year. This can be done on Arizona’s Public Access website or through the mail.

Once your corporation has been recorded, you must file your S Corp Election Form (form 2553) with the IRS within 75 days. This form will give you S Corporation status and allow you to be taxed accordingly. You will also need to obtain an EIN from the IRS. This will be your tax ID number.

You must amend your Articles if any of the information included in your original Articles of Incorporation changes.

More Information About a Arizona S Corporation

Your S corporation:

  • Can have up to 100 owners/shareholders, but no more
  • May deduct the cost of benefits provided to employers (such as parking permits, health insurance, and so on)
  • Has a board of directors, which oversees the policies of the corporation
  • Cannot have more than one class of shares
  • Issues limited liability for owners
  • Must be owned by US citizens or resident aliens
  • Is taxed as owners’ income, not as a separate entity
  • Allows business losses to be deducted on the owners’ individual tax returns
  • Must pay payroll tax

For S corporations, only the salary paid to the owner-employee is subject to employment tax. The remaining income that is paid as a distribution is not subject to employment tax under IRS rules. Therefore, an owner of an S corporation stands to realize substantial employment tax savings. However, the salary you give yourself must not be artificially low; if the IRS finds your salary unreasonable, they may reclassify some of the distribution funds as salary and require you to pay taxes on it.

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Other Types of Businesses in Arizona

For information on other types of businesses in Arizona, please explore the links below.