How to start a business in Arizona (7 Simple Steps)

Man starting a business in Arizona.

Step 1: Plan Your Business Idea

Write a Business PlanBefore taking any big leaps, you need to have a solid business plan. Business planning isn’t just smart — it’s essential for determining the validity of your business idea. Here are a few things you’ll outline in your business plan:

  • Your target market. Who exactly are you selling to? Be specific. Think about age, gender, occupation, income level, physical location, and any other relevant details. Once you know who they are, figure out the best ways to communicate with them. Are they active on FaceBook? YouTube? LinkedIn? Do they not use social media at all?
  • The market need. What problem does your product/service solve for your target market? How will you solve the problem better than your competitors?
  • Your mini-pitch and USP. Your unique selling proposition and mini-pitch are both intended to capture the mission of your business in a concise and catchy way. A USP should be a short phrase, and a mini-pitch should be one to two sentences long.
  • Your milestones. What do you plan to achieve in the next 3 months? 6 months? 2 years? Sure, you may not reach these at the exact increments you originally plan, but setting major milestones is still an important practice for keeping you motivated and on-track.
  • Your marketing plan. What’s your marketing budget? How and where do you plan on reaching your target market? Your strategy is bound to evolve over time, but you’ll lay out an initial approach in your business plan. 

Again, this is a super trimmed-down introduction to writing a business plan -- there’s much more you’ll need to include, especially if you’re hoping to secure funding.

 

Resource Recommendation:

If you feel like taking a crack at this on your own, read through our definitive guide to writing a business plan for a look at everything it will entail. If you’re still up for the task, go for it — but if you’re like most new business owners out there, you could use some professional assistance.

Business planning software is a great way to hunker down on your business plan without having to write all the content off the top of your head. Check out our top 7 business planning software tools for a look at our favorite services!

Business Ideas: Find the Idea That Fits You Image

Don’t know what kind of business to start?

Our friends over at howtostartanllc.com have compiled a massive list of business ideas, ranging from personal styling to axe-throwing businesses.

If you’re having trouble finding the perfect business idea for you, we encourage you to check them out!

Step 2: Register Your Business

How to Choose a Business StructureYour next major task is going to be registering your business with the state of Arizona. Before you can do that, though, you have to figure out what type of business you want to form: an LLC, S Corp, C Corp, or Sole Proprietorship. Let’s take a quick look at each:

  • LLC: The most popular business structure. Limited Liability Companies give small business owners the flexibility to choose how they’d like to be treated come tax time, and the same personal protection of a corporation. Arizona, like most states, also allows single-member LLCs, so you can reap the rewards of an LLC even if you’re the sole member of your company.
  • S Corp: Much more formal structure than an LLC, including a board of directors, corporate officers, and up to 100 shareholders. All the profit is claimed on the shareholders’ personal tax returns.
  • C Corp: No limit to the number of shareholders. The only structure that faces double taxation, as the shareholders and the business itself are both responsible for paying taxes on the profits. Check out our guide to forming a corporation in Arizona for more details.
  • Sole Proprietorship: The least formal structure possible -- no need to file articles of incorporation/organization. You may want to file a DBA, though, in order to legally operate your business under a fictional name. Sole proprietorships are the highest-risk businesses, though, as there’s nothing protecting you from business liability. 

It’s extremely important to choose the right structure for your business, so don’t just choose one by default. Read over our business structure comparison guide to get a closer look at each option.

 

Resource Recommendation:

Filing all the necessary legal documents with the state can get technical depending on your business structure, and recruiting the help of an incorporation service is worth considering. Our top 7 business incorporation services is a great resource for learning about the best providers in the online filing industry.

Step 3: Tackle License & Tax Obligations

Small Business TaxesOnce you’ve formed your Arizona business, it’s time to make sure you’re totally compliant with the state.

Unlike most states, Arizona doesn’t require you to have a “general” business license, but depending on the nature of your business you may be obligated to obtain several permits and pay special taxes on a federal, state and local level. Trust us, it’s worth putting the effort in now to avoid getting hit with a hefty fine later on.

Here are some great resources for learning about what taxes/licenses you might need to take care of:

  • Federal: The Small Business Association website’s federal licenses and permits page is a great place to find the federal departments you may need to get in touch with (Department of Agriculture, Alcohol and Tobacco Tax and Trade Bureau, etc.) if your business deals with highly monitored goods or activities. They've got some information on business taxes too, but ultimately IRS is the best resource for finding out about federal tax requirements.
  • State: This free PDF from the Department of Revenue outlines Arizona business taxes pretty succinctly, and directs you to the governmental units you may need to get in contact with. For licensing information, take advantage of their interactive licensing checklist.
  • Local: Since regulations can vary from county to county and city to city, you’ll have to get in contact with your local chamber of commerce to find out if there are any local requirements your business needs to fulfill.

Since Arizona doesn’t require you to obtain a general business license, it’s possible that you won’t have to obtain any permits or licenses whatsoever -- but it’s still important to put in the research to make sure!

 

Resource Recommendation:

If you end up feeling completely swamped with federal, state and local license applications, you can always enlist the help of a business license service. These companies specialize in doing all the research on your behalf based on the specifics of your business, so all you’ll have to do is fill in a few details and sign your name on the forms. This isn’t necessary for every business, but it can be a real lifesaver in certain circumstances.

Step 4: Separate Your Personal and Business Assets

Best Business Bank AccountUsing dedicated business banking and credit accounts is essential for personal asset protection.

Now that you’ve made it through registering and setting up taxes and licensing for your business, you’ll need to take steps to protect your personal assets and establish your business as an independent entity.

When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.

You can go a long way in protecting your assets with these three steps:

  1. Open a business bank account.

A business bank account separates your personal assets from your company's assets, which is necessary for personal asset protection. A designated business bank account also makes accounting and tax filing easier.

To open up a bank account for your business, you’ll need to obtain an EIN (Employer Identification Number). You’ll use your EIN in place of your social security number so that this account is completely separate from your personal finances. After this, start doing your research on various business bank accounts. Local options, like Bank of Arizona and OneAZ Credit Union, and national banks, like Chase, both have their perks.

Get $200 when you open a business checking account with Chase. Learn more

  1. Get a business credit card.

A business credit card helps you separate personal and business expenses. A business credit card will also build your company's credit history, which can be useful to raise capital later on.

Learn about the best small business credit cards here.

  1. Designate an authorized representative.

Make sure all documents are signed by a representative of your LLC and not by you (or other LLC members) directly. This will help separate you from liability incurred by the LLC.

  1. Keep your accounting and bookkeeping up to date

Make sure to sync up your banking and credit card accounts with an accounting software like QuickBooks as soon as you get the chance. It’s never too soon to start organizing your business’ finances!

Step 5: Finance Your New Business

How to Finance a BusinessOnce you’ve got the fundamentals of your finances sorted, it’s time to get some money rolling in. The question is, from where? There are tons of funding options out there, so it’s best to decide based on:

  • The ownership structure of your business
  • Your current level of financial security
  • Your sales forecast
  • Whether your product/service could attract crowdfunding
  • Your personal credit

… and some other factors, depending on what approach you’re considering.

 

Resource Recommendation:

First, check out our guide to financing your new business where we cover everything from trade credit to social lending to angel investors. Once you feel like you’ve got a handle on the basics, reach out to your local Small Business Development Center. Arizona has dozens of SBDC locations across the state where you can get help with:

  • Identifying sources of capital
  • Finding loans
  • Analyzing your cash flow
  • Creating financial projections

The best part is that their business counseling is completely free, unless you sign up for a paid workshop.

Step 6: Build A Brand

Build a Business WebsiteWhile every step so far has been largely logistical, this one gets down to the heart and soul of your business. Building your brand is all about capturing the essence of your company: your mission, your product/service, what sets you apart from your competition. Ideally, your company’s logo will encapsulate all of these to some degree.

When designing your logo, keep in mind:

  • Color counts. The colors your logo includes will play a significant role in a person’s initial impression of, and feelings toward, your business.
  • Distinctiveness is key. Your logo has to visually communicate that you’re different from your competitors. It’s better to be unique and memorable than to blend in with the crowd!
  • Professional aesthetic implies higher merit. Having a professional design is a great way to automatically increase your company’s perceived merit. Folks are more willing to trust a business that looks legit, and your logo is a big part of that.

 

Resource Recommendation:

For more information on choosing the perfect logo for your business, read our definitive guide!

Your website is another place where you can build your brand image, and a professional, relevant aesthetic will go a long way here, too. We think the best way to create a beautiful business website is through a service like StudioPress. Their platform is super user-friendly, and a great alternative to building a website from scratch. Check out StudioPress and some of our other favorite website builders!

Step 7: Market Your Business

Social Media ChannelHere comes the step that never ends: marketing your business! You’ve been doing this all along — including every barista, bartender and grocery clerk you’ve chatted with about your innovative idea. It’s a natural process in many ways, but also one that you need to approach strategically in order to maximize results. Merely networking isn’t enough anymore.

There’s so much to be said about marketing your business in the 21st century, but here’s a few main bullet points:

  • Know your target market. Without knowing who you’re selling to, you’ll be at a total loss when it comes to communicating with them. Knowing who your target customer is and where to find them — and we mean specifically, not just “25-30 year olds on social media” — is essential to successful marketing.
  • Don’t spread yourself too thin. Too often, small businesses’ marketing efforts fail because they try to take on too much at one time. Don’t try to master FaceBook and Twitter while running an email campaign and local newspaper ads. If you’ve done the proper research, you’ll know where the best place to reach your target audience is — odds are, dedicating consistent effort to marketing on that medium will pay off.
  • Make sure your strategy is measurable. If your marketing strategy isn’t measurable, you’ll have no clue what works and what doesn’t. You must have a way to gather analytics, and not just about vanity metrics (clicks, views, likes, etc.) — about the amount of sales you’re generating, too.
  • Be willing to evolve. If after a few months you find that your efforts simply aren’t getting results, you must be willing to revisit your strategy. This doesn’t necessarily mean throwing it all out and starting from scratch, but perhaps finding new, more effective ways to communicate with your audience. Or, maybe it does mean switching courses entirely. Be ready and willing to make calculated marketing decisions for your business.

 

Resource Recommendation:

Mastering the art of marketing is a full-time job, so naturally it’s best to delegate it to a professional. However, if hiring a marketer simply isn’t in the cards right now, read through our marketing guide for more tips and tricks.

There are tons of software solutions out there that can make marketing your business much, much easier. From scheduling social media posts to calculating ROI, modern software tools have truly revolutionized the way many entrepreneurs go about marketing — and many of them are quite inexpensive or totally free. We list several of our favorite resources at the tail end of our marketing guide!

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