Now Available – B Corporations in Arizona

Welcome to Arizona! by Fred Miller from Flickr (Creative Commons License)

Welcome to Arizona! by Fred Miller from Flickr (Creative Commons License)

One of the awesome developments in the Arizona business community for 2015 is that businesses are allowed to form benefit corporations (B corporations) in this state. These are for-profit corporations that have other motives for being in business besides maximizing profits, and their shareholders are aware and accept that the company has dual motives. This motive must be to at least provide a “general public benefit,” meaning the business has a “material positive impact on society and the environment, taken as a whole, as assessed against a third-party standard, from the business and operations of a benefit corporation.” This option became available in Arizona at the beginning of the year.

Given that this is a new type of business entity in this state, I looked to the Arizona Corporation Commission (ACC) to get answers to my questions about B corporations.

What information does a company have to provide to the ACC in the Articles of Incorporation?
To create a B corporation, the incorporators must fill out the same Articles of Incorporation as other corporations in Arizona and pay a $60 filing fee ($95 for expedited processing). Every corporation is required to file an annual report with the ACC. B corporations must file an annual report and an annual benefit report where the company describes what general public benefit it provided. Each report has a separate filing fee.

Can an existing Arizona corporation be converted to a B Corporation? If so, how? Please include information about the associated fee(s).
Yes. An existing Arizona corporation can be converted to a B corporation by filing an Articles of Amendment with the ACC and paying a $25 filing fee ($60 for expedited processing). An Arizona LLC can also be converted into a B corporation under the Arizona Entity Restructuring Act.

Is a B corporation taxed like a C corporation? If so, can a company be a B corporation and file as an S corporation with the IRS?
Traditional corporations are C corporations, and they have double taxation where the corporation pays taxes on its income and the shareholders pay taxes. If the company qualifies, it may elect to be taxed as an S corporation where there is pass-through taxation so only the shareholders pay taxes on the income. Based on my research, a B corporation is taxed as a C corporation, but it has the option, if it qualifies, to be taxed as an S corporation.

I tell all clients to talk to their accountant before starting their business to determine which type of business entity is right for them and to make sure they understand the tax implications. And yes, every business needs an accountant.

Where can people go for more information about B corporations in Arizona?
The ACC created a legislative update that is filled with information and links about B corporations in Arizona. This is a great resource if you’re interested in starting a B corporation or converting your business to a B corporation. If you still have questions after reading this, contact the ACC or a business attorney in your community.

If you’re interested in B corporations but are unsure you want to create or convert your business to one at this time, you can look into being “B Corp. Certified” by B Lab.

If you want to chat with me about this topic, feel free to connect with me on TwitterFacebookYouTubeLinkedIn, or you can email me.

Please visit my homepage for more information about Carter Law Firm.

How To Change Your Business Address with the Arizona Corporation Commission

A.C.C. Statement of Change Paperwork for Carter Law Firm

A.C.C. Statement of Change Paperwork for Carter Law Firm

One of the exciting things that’s happened at Carter Law Firm in the last few months is we’ve moved from being a virtual law practice to having a brick-and-mortar office. It’s been wonderful settling in to our new digs.

My New Office!

It’s Official!

As you all know, one of the things you have to do when you move is update your address. The firm’s mail service is paid up until March 2014 so we have plenty of time to update our information with all of our vendors, but then I started thinking about what we’d have to do with State and these were the type of questions that went through my head:

  • Ugh – How much of a pain in the ass is it going to be to update our information at the Corporation Commission?
  • Is it going to be expensive?
  • Do we have to publish?

I jumped on the Corporation Commission’s forms page for LLCs and started digging around. I was pleasantly surprised to learn that updating the business and statutory agent’s address would be relatively simple to do. According to them, all it takes is a Statement of Change and a $5.00 fee – and no publication required. The paperwork was straightforward – old address, new address, and a signature. I didn’t change my statutory agent, just their address, so I didn’t have to complete the statutory agent acceptance form. I slapped on their cover sheet, wrote a check, made a copy of the paperwork for my records, and popped it into the mail.

Rosie Watching the Office Through her Baby Gate

Rosie Watching the Office Through her Baby Gate

I could have paid an extra $35.00 to expedite it, but it wasn’t necessary so I didn’t. It will take them up to a month to update my file at the Corporation Commission, but I’ve had no trouble updating my address with anyone. I was surprised the bank didn’t ask to see my paperwork; they just took my word for it when I showed them my driver’s license.

Now we’re in the process of getting everything updated – ordering new business cards and checks, updating the website, etc. It feels good to be in a proper office – especially one that lets Rosie come to work with me. She’s still getting used to office life. Watching the world through the office baby gate is less exciting than watching the street through the front door screen, but she loves the attention from my officemates.

You can connected with me on TwitterGoogle+FacebookYouTubeLinkedIn, or you can email me. You can also subscribe to the Carter Law Firm newsletter.
Please visit my homepage for more information about Carter Law Firm.

How To Start a Business in Arizona

National Geospatial-Intelligence Agency Ribbon Cutting by US Army Corps of Engineers, Carter Law Firm, Ruth Carter

National Geospatial-Intelligence Agency Ribbon Cutting by US Army Corps of Engineers

This week I had two speaking engagements on the basics of starting a business in Arizona. I thought I’d expand my list of tips into the ideal timeline an entrepreneur should follow for setting up their business.

  1. Figure out what type of business you want to have.
  2. Select a name for your business. From a trademark registration perspective, it’s best to pick a name that contains a word or words that don’t already exist. Also be mindful of any business name restrictions that exist in your industry.
  3. Do a search on the U.S. Patent and Trademark Office (USPTO) website to see if someone in a similar business has registered a similar name for their business. If they have, they can prevent you from using your desired trade name. Run a Google search as well to see if someone has a similar name but hasn’t registered it with the USPTO.
  4. Create a business entity by sending the appropriate form and payment to the Arizona Corporation Commission.
  5. Open a bank account for your business. Never use your personal accounts for business expenses or your business accounts for personal expenses.
  6. If you have more than one owner, create an operating agreement. This is a contract that dictates how the company is owned, how you will run your business, and how you will resolve problems. You need this no matter who your partners are, including your spouse and family members.
  7. When you have a business, you have intellectual property – at least copyrights and trademarks, and perhaps trade secrets and patentable ideas. Create an intellectual property strategy to protect these things. This is another time when you should at least buy an hour with a lawyer.
  8. Draft contract templates for documents you will regularly use with vendors and customers. Many business owners get contract templates from the internet. This is an acceptable way to start this project, but you should have a lawyer review them to make sure they are legal and address your needs.
  9. Register your trademark with the USPTO.
  10. If you have employees, you will need employment contracts and an employee handbook that includes a social media policy that complies with the National Labor Relations Act.

Ideally, every new business would have a lawyer to help them set up avoid any legal missteps, but many entrepreneurs can’t afford it. There are a lot of things you can do without a lawyer’s help, but you need to be well-informed about what your’e required to do when going into business for yourself and when it’s worth it to pay for a lawyer (like me).

It’s much easier and cheaper in the long run to consult a lawyer a few times when you’re starting your business than to have to hire one to clean up the mess that can result if you do it the wrong way.

Feel free to connect with me via TwitterGoogle+Facebook, and LinkedIn.
Please visit my homepage for more information about Carter Law Firm.

When Does A Business Exist?

La Divina Maple Now Open by Infrogmation of New Orleans

Last Friday I had dinner with friends. Many of them are entrepreneurs and/or have major creative side endeavors. One of my friends, Sam, was excited to share that she had created an LLC for her new business. We were all happy for her to strike out on her own. I asked her how long it took to get the approval back from the Arizona Corporation Commission.

“Five days. I had it expedited because I didn’t want to wait,” she said.

Then it struck me – no one tells entrepreneurs that they don’t have to wait to get their LLC approved by the Arizona Corporation Commission before they can open their doors. Unless you’ve taken a class on business formation, you don’t know that you’re are allowed to call your business an LLC and conduct business as an LLC as soon as your file the paperwork and pay the fee. My friend paid an extra $35 for expedited filing because she thought her hands were tied until she her business had been approved. I bet a lot of people make the same mistake because it’s a logical assumption.

One of the first things I did when I opened this firm was file an application for a PLLC. It took almost six weeks to get the letter from the State saying that the Articles of Organization for my business were approved.  While I waited for my approval, I opened bank accounts, purchased software and equipment, created a website, filed my application for trade name protection, and entered into contracts as a PLLC. All of those activities were completely legitimate.  I kept a copy of my PLLC application in case anyone needed proof that I had filed it.

So what’s the take-home lesson? For most people, you can save yourself $35, file a regular LLC application, and conduct your business as an LLC once you’ve sent in your LLC application and fee. Don’t wait for approval from the Arizona Corporation Commission to get your business up and running.