Setting Up a Business Partnership in Arizona

Research the different types of partnerships available in Arizona (general partnership, limited partnership, limited liability partnership) to determine which structure best suits your business needs. Consider liability protection, tax implications, and management structure for each option. Consult with a business attorney if you're unsure which type is most appropriate for your situation.

Select a name for your partnership that complies with Arizona naming requirements. Conduct a name search through the Arizona Secretary of State's website to ensure the name is available. If you plan to operate under a name different from the partners' names, you'll need to file a fictitious business name statement (trade name).

Create a comprehensive partnership agreement that outlines the rights and responsibilities of all partners, profit and loss allocation, decision-making processes, dispute resolution procedures, and dissolution terms. While not legally required in Arizona, a written partnership agreement is strongly recommended to prevent future conflicts and misunderstandings.

For limited partnerships or limited liability partnerships in Arizona, you must file a Certificate of Partnership with the Arizona Secretary of State. General partnerships are not required to file, but may choose to file a Statement of Partnership Authority. The filing fee varies based on partnership type.

Apply for an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). This is required for partnerships even if you don't have employees, as it serves as your business tax ID. You can apply online through the IRS website at no cost.

If your partnership will operate under a name other than the legal names of the partners, file a Trade Name Application with the Arizona Secretary of State. This is also known as a 'doing business as' (DBA) registration. The filing fee is approximately $10.

Research and obtain all necessary business licenses and permits required for your specific business activities in Arizona. This may include state, county, and city licenses. Start with the Arizona Commerce Authority for guidance on which licenses apply to your business.

Register with the Arizona Department of Revenue for applicable state taxes, including Transaction Privilege Tax (TPT) if you'll be selling goods or certain services. Some businesses may also need to register for employer withholding taxes if they plan to have employees.

If your partnership will sell tangible goods or certain services in Arizona, apply for a Transaction Privilege Tax (TPT) license (sales tax permit) through the Arizona Department of Revenue. The application fee varies based on business type and location.

Open a separate business bank account for your partnership using your EIN. This helps maintain the separation between business and personal finances. Bring your EIN confirmation, partnership agreement, and any filed partnership certificates to the bank.

Document the initial capital contributions of each partner, including cash, property, or services contributed to start the business. This agreement should specify the value of each contribution and how it affects ownership percentages and profit distribution.

Create a document outlining the day-to-day operational procedures for your partnership, including roles and responsibilities, meeting schedules, reporting requirements, and internal controls. This helps ensure smooth operations and clear expectations among partners.

Create a buy-sell agreement that outlines what happens if a partner wants to leave the business, becomes disabled, or dies. This agreement should include valuation methods for the business, payment terms, and procedures for transferring ownership interests.

Research and purchase appropriate business insurance for your partnership. This may include general liability insurance, professional liability insurance, property insurance, and workers' compensation insurance if you have employees. Arizona law requires workers' compensation coverage for businesses with employees.

If hiring employees, ensure compliance with Arizona employment laws, including minimum wage requirements ($13.85/hour as of 2023), new hire reporting, and workplace safety regulations. Register with the Arizona Department of Economic Security for unemployment insurance if you have employees.

Establish an accounting system to track partnership income, expenses, assets, and liabilities. Consider consulting with an accountant familiar with partnership taxation to ensure proper record-keeping and tax compliance.

Set up a system to review and maintain ongoing compliance requirements, including annual report filings (for LLPs), license renewals, tax filings, and any changes to Arizona business regulations. Partnerships must file annual federal tax returns (Form 1065) and provide Schedule K-1 forms to each partner.