9 Steps to Starting a Business in Arizona

Arizona is a state of entrepreneurs, and with over 600,000 small businesses based within its borders, it certainly shows.

Want to start your own business in Arizona? Here's how you can do just that, step by step.

Before You Start a Business in Arizona, Consider This

Starting a business is a big decision, and so is choosing where to start it. From local economies to tax requirements to regional demand, there are a lot of reasons why you might want to base your business in one place rather than another.

Considering launching your business in Arizona? Here's what you need to know before pulling the trigger.

Industry Matters

The SBA found that among all small businesses in Arizona (i.e., those with less than 500 employees), these are the five largest industries as of 2021:

• Professional, scientific and technical services (88,000+ employees)
• Real estate, rentals and leasing (72,000+ employees)
• Other services excluding public administration (65,000+ employees)
• Administrative, support and waste management (56,000+ employees)
• Construction (55,000+ employees)

And among AZ small businesses with fewer than 20 employees, the five largest industries are:

• Professional, scientific and technical services (15,000+ employees)
• Health care and social assistance (12,000+ employees)
• Construction (10,000+ employees)
• Other services excluding public administration (9,000+ employees)
• Retail trade (8,000+ employees)

Depending on the type of company you're planning on starting, those numbers may give you an insight into the kinds of small businesses that tend to thrive in Arizona.

Most Arizonans Live in One County

Although Arizona is a fairly large state, over 60 percent of its inhabitants live in Maricopa County:

That makes sense when you consider that Maricopa County is home to many of the state's most populous cities, including Phoenix, Mesa and Chandler.

Pima County, home to Tucson, is the second-most populous county in the state, with over 14 percent of the population.

So if you're planning on starting a brick-and-mortar business that requires plenty of foot traffic, you might want to keep that population data in mind.

The Population Is Booming

Arizona's overall population is on the rise, increasing from 5.1 million in 2000 to 7.3 million in 2022. Phoenix's growth is even more staggering — from 2010 to 2020, it was the single fastest-growing city in the U.S.:

While this is great news for entrepreneurs on a number of levels, it's also important to know that population growth has its downsides, with higher real estate prices being one of the most major.

For instance, office space in Phoenix already costs $277 per square foot as of September 2022. That's a higher cost than you'll find in Tampa, Nashville, Atlanta, Portland and many other major cities. And if Phoenix's population keeps growing at its current pace, it's likely that price will rise — the same applies to the rest of Arizona's cities, too.

So if you're planning on starting a brick-and-mortar business or renting office space in a major Arizonan city, keep the state's booming population in mind.

Why Arizona Is a Good Place to Start a Business

Arizona's total number of small businesses is already impressive, but what's truly jaw-dropping is that they make up a staggering 99.5 percent of all Arizona businesses as of 2021.

What's more, the U.S. Small Business Administration (SBA) reports that the state is home to 1.1 million small business employees, who together account for about 43 percent of all Arizona employees:

Why are so many small businesses located in Arizona? The answer comes down to a combination of benefits that business owners appreciate. These include:

• Various business incentives, including tax relief, free resources and grants
• A much lower cost of living than that of its neighboring state of California
• Low flat tax rates
• A rapidly growing population

So as you embark on your entrepreneurial journey in Arizona, you can get your business up and running in nine steps.

1. Choose a Business Name

Not sure what to call your soon-to-be business? Now's the time to decide. When brainstorming business names, try to think of options that are:

• Unique and memorable
• Easy to pronounce and spell (even by voice assistants like Siri)
• Available on social media and as a domain name
• Brandable (if you can imagine it on a T-shirt, you're on the right track)

As you narrow down your choices, also consider whether you'd like to trademark your business name in the future. If you would, you'd be smart to choose one that's more arbitrary and fanciful than literal and descriptive.

For instance, you'll have an easier time trademarking a name like Cold Bay Coffee Roasters than San Francisco Cafe. Learn what can and cannot be trademarked for more trademarking tips.

If you're still struggling to come up with a catchy business name, don't sweat it — our Business Name Generator can give you the inspiration you need.

Once you've settled on a handful of favorite names, you'll need to make sure they're not already taken by performing a business name search. The Arizona government has its own online tool where you can do so, or you can use Bizee's free Business Name Search Tool instead.

(Quick tip: Arizona's naming policy requires businesses to include and omit certain words from their names depending on their entity type — more on entity types below).

2. Choose a Business Entity

Now it's time to get down to the nitty-gritty details by choosing a business entity type.

If your business will be for-profit, you'll have five entity types to choose from (nonprofits are their own separate entity type):

• Sole proprietorship: The "default" entity type, you don't have to file any paperwork to form a sole proprietorship. However, you also won't enjoy any extra legal protections.
• Partnership: Essentially a sole proprietorship, but with a partner.
• Limited Liability Company (LLC): LLCs are easy to set up and generally inexpensive to maintain, and the liability protection they offer will keep your personal assets safe if your business encounters problems down the road.
• S Corporation: Corporations with less than 100 shareholders may benefit from being an S Corp. Small businesses, however, typically won't.
• C Corporation: With their complex startup paperwork and demanding maintenance, C Corps usually aren't a practical choice for new business owners.

For most small businesses, an LLC is the most sensible, affordable and beneficial entity type. So while every business is different, you'll probably find that an LLC is the right choice for yours, too.

3. Create a Business Plan

Next, set your business up for success by writing a thoughtful business plan.

There are no hard and fast rules for what a business plan must contain, but we recommend including these key components:

• Executive summary: After you've finished writing the rest of your plan, summarize its most important points in the executive summary.
• Main goals: Note your primary business goals here. For instance, perhaps you want it to become the leading beauty salon in northern Arizona within five years.
• Business description: Explain what your business will be called, what it will do and how it will operate.
• Market analysis: Evaluate demand for your products or services, and analyze your prospective competitors to see what they're doing to succeed.
• Business structure: Specify the entity type you've chosen for your business, such as an LLC or S Corp.
• Business model: For example, are you planning to sell directly to customers, or will you be selling to other businesses?
• Marketing and sales plan: Describe how exactly you plan on marketing and selling your products or services.
• Financial details: Record your projected expenses, estimated revenue and current funding (more on that later).
• Appendices: Place any notes or additional information you've gathered here.

Once your business plan is complete, you'll be thoroughly prepared to make your new small business official.

4. Register Your Business

Ready to take your business from dream to reality? Register it with the state of Arizona.

Specifically, you'll need to file your LLC or corporation with the Arizona Corporations Commission (ACC). How much does an LLC cost in AZ? You'll pay $50 to file your Articles of Organization. Similarly, filing Articles of Corporation costs $60 for for-profit businesses and $40 for nonprofit ones.

To file, you can log in to the ACC's online portal and go from there. Alternatively, you can file with Bizee and let us do all the paperwork for you — the choice is yours.

Arizona is also one of the few states that requires new businesses (including LLCs) to publish notice of their formation, so don't forget to do so once your Articles of Organization are approved. For details, see Arizona's official legislature on the subject.

5. Get Funding, If Needed

Depending on the type of business you're establishing, you might need a significant amount of funding to get off the ground.

If you're starting a brewery, for example, you'll likely need about $250,000. And if you don't have that kind of money freely available, you'll need to get funding from outside sources.

Don't get us wrong, there are plenty of Arizona-based businesses you can start with little or no money. But if you've chosen to start a business that requires a little extra moolah, you have a range of options to choose from.

Namely, you may be able to secure funding from:

• Traditional business loans, such as those offered by major banks. These often have stringent requirements and attractively low interest rates.
• U.S. Small Business Association loans, or SBA loans for short, typically offer exceptionally low interest rates, long repayment times and a range of loan amounts.
• Startup business loans, which are designed for businesses with a limited credit history (but also tend to have higher interest rates).
• Venture capital from investors who have faith your business will succeed.
• Crowdfunding sites like Kickstarter and GoFundMe, where people can directly contribute to your business' funds.
• Friends and family who may be able to contribute funds from their personal assets.

6. Brick and Mortar or Online Only?

If you haven't already determined whether you want to have a brick-and-mortar location, an online-only model or a hybrid of the two, now's the time to make a decision.

Naturally, each option has its own set of perks and drawbacks.

With a brick-and-mortar business, you'll enjoy:

• Stronger local presence for your brand
• Face-to-face time with customers
• Defined separation between work and home
• Ample storage space for your products and business supplies

However, running a brick-and-mortar business comes with several downsides. These include:

• The cost of renting your retail or office space
• Increased cost of business liability insurance
• Increased maintenance and staffing costs

If you have an online-only business, on the other hand, you'll get benefits like:

• Lower overhead costs
• A broader audience that's not limited to Arizona
• Flexibility to work anytime, anywhere

On the flip side, online-only businesses have drawbacks such as:

• More competition
• Inconvenient shipping times and costs
• Less separation between work and home
• Little to no personal interaction with customers

And, of course, you'd be wise to consider that most brick-and-mortar businesses can greatly benefit from having an online presence via a business website, Google Business Profile and social media marketing. So depending on the kind of business you're opening, a hybrid approach might be the most beneficial one for you.

7. Get Small Business Licenses and Permits

Wondering if you need licenses or permits for your Arizona business? As per the Arizona Commerce Authority:

Arizona does not issue nor require a state business license, however, most city/town offices issue business licenses. Some may only require businesses that are based within their jurisdiction to obtain their license; others may require anyone conducting business within their city/town limits to obtain their license.

So to find out which municipal licenses you may need, you'll need to contact the office of the city or town in which your business is based, as well as any you expect to be doing business in.

Also remember that you may need to obtain federal or state licenses or permits depending on the type of business you're starting. If you're entering the agricultural industry, for instance, or if you're opening a tattoo shop, you'll need additional licenses or permits to operate legally.

Want to ensure you're not overlooking any required licenses or permits? Bizee's Business License Research Package takes the guesswork out of getting licensed.

8. Get a Business Website

As we mentioned above, just about any business can benefit from having a business website of its own. But if you haven't created a website before, the idea of doing so can sound daunting.

Luckily, the process of getting a business website is relatively straightforward. Just be sure to:

• Buy and register a domain name.
• Choose a website builder that's right for you (popular choices include Wix, Squarespace and Weebly).
• Create an attractive design and layout, either with the help of a template provided by your website builder, a professional website designer or your own design skills.
• Include all the information potential customers might want to know in an easily accessible format, including contact details, product information and pricing.

Remember, even a simple website is better than no website at all, and you can always improve it over time.

9. Get Small Business Insurance

The last step before opening your business is protecting you and your business's assets with business liability insurance.

Depending on the type of business you're starting, you might want your insurance to cover:

• Third-party medical expenses
• Legal expenses
• Libel, slander and copyright infringement
• Damage to the property you're renting for your business
• Errors in the products or services you sell

Once you've purchased an insurance policy that covers all your bases, you'll be ready to officially open your business' doors.

Starting a Business in Arizona Is Within Reach

Arizona is a state that's chock-full of small businesses, so why shouldn't yours join their ranks?

After all, there are only nine steps standing between you and the business you've been dreaming of opening. And once you're ready to make yours official, you can file your LLC for $0 + state fees with Bizee.