Tucson has emerged as a growing business hub over the last decade. Arizona’s business-friendly regulatory system and established and emerging markets have made Tucson an attractive destination for entrepreneurs. However, transforming an idea into a business can be challenging. Even in business-friendly places like Tucson, you need to understand the legal framework before starting a business. You need to get it right from the start.
Understanding the legal steps and general requirements of starting a business helps navigate critical aspects like business structure, licensing, taxes, funding, profitability, and growth. A skilled Tucson business attorney can review your business idea and guide you through the relevant legal steps and considerations.
Choosing the Right Business Structure
Choosing a business structure is an important decision when starting a business. A business structure determines your legal rights and responsibilities, including taxes. Some of the most common business structures in Arizona include:
- Sole proprietorship
- General partnership
- Limited partnership
- Limited liability company (LLC)
- Corporation
Your business activities, size, and specific industry can help determine your appropriate business formation. But, there are some factors you must consider when choosing a business structure, including:
Control – The degree of control or authority you want to have over your business is a major consideration when choosing a business structure. For instance, a sole proprietorship allows you to have full control over your business where you are the owner and operator. In contrast, business structures like LLCs and corporations allow you minimal or zero involvement in the day-to-day operations even as an owner.
Liability – The extent of personal liability for business debts, liabilities, and other obligations also depends on the business structure. Your degree of control determines your level of personal liability. For example, the owner is personally liable for business debts and liabilities in a sole proprietorship. Their assets can be used to settle business debts.
In contrast, partners in a limited partnership are not personally liable for business debts and liabilities. Their legal identity is distinct from the businesses and each partner’s liability is limited to the amount they have invested in the business.
Taxes – the business structure you choose determines your tax regime, including rates and exemptions if any. Some business structures like sole proprietorships, partnerships, and LLCs pass their tax liability to owners. In contrast, C corporations pay taxes as separate entities from the owners.
Other factors – You also need to consider the degree of administration and management when choosing a business structure. Typically, corporations require complex paperwork and strict regulations to start and operate compared to sole proprietorships and partnerships.
Legal Steps of Starting a Business in Tucson
Step 1: Choose a Name and Business Entity
The first legal step when starting a business is to choose a unique business name and register it with the Arizona Corporation Commission. You may also need to reserve the name and purchase a domain if you are going to have a website. You should then choose a legal entity or a business structure.
Step 2: Register Your Business
The next step is to register your business. Registration requirements vary depending on your business entity. For instance, while you must complete and file Articles of Organization/Incorporation when registering an LLC/Corporation, there are no such requirements for a partnership or sole proprietorship.
Step 3: Get Business Licenses and Permits
After registering your business, you need to obtain the necessary federal, state, and local business licenses and permits. Typically, the permits, certifications, and licenses you need depend on your type of business and industry.
Step 4: Register for Taxes
You need to register your business for the relevant taxes, including withholding tax, corporate income tax, and transaction privilege tax (TPT). The type of taxes depends on your business structure. You also need to get an employer identification number.
Step 5: Hire Employees
The next step is hiring employees and complying with the necessary state requirements, including reporting new hires to the state and obtaining workers’ compensation insurance.
Other steps that you need to take when forming a business include creating a business plan and getting funding where necessary. You also need to obtain insurance coverage and open a business bank account.
Why You Need the Help of a Tucson Business Lawyer
- A business lawyer will help you choose the right business structure. Choosing a business structure relevant to your circumstances helps lay a strong foundation for your business. It also helps protect personal and business interests, now and in the future.
- They will help prepare legal documents. Starting a business involves drafting and filing a range of documents, including registration paperwork. A lawyer will help you draft legally binding documents and contracts. They will also negotiate the terms of these contracts, including partnership agreements.
- They will help you understand your tax obligations. Taxation is a complex concept and failing to understand or comply with tax requirements can be costly in the future. With the help of a qualified accountant, a business lawyer will advise you on your tax obligations and tax breaks and deductions where applicable.
- They help you understand and comply with other business regulations. Besides taxation, you need to comply with various regulations when starting or operating a business. A lawyer will advise you on compliance, including getting proper licensing, permits, and certifications.
Contact a Tucson Business Formation Lawyer
Starting a business can be complicated. You need to navigate various legal complexities and adhere to several regulations even before you start operations. Getting it wrong when starting can be the difference between your business surviving or closing in its first years. A skilled Tucson business attorney can guide you on a range of issues and ensure you start the right way.
If you are considering starting a business in Tucson, contact our knowledgeable and experienced business lawyers at St. Clair Law, P.C. We will help you navigate the legal complexities, adhere to regulations, and offer strategic guidance for business success. Contact us today to schedule a consultation and learn more about our services.