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Arizona Corporations

Formation

An Arizona corporation is formed by filing Articles of Incorporation and a Disclosure Certificate with the Arizona Corporation Commission and paying the appropriate fee. The corporate name should be checked with the Commission before filing to assure availability and may be reserved for a modest fee. Articles of Incorporation must be published at least three consecutive times in a newspaper of general circulation in the county in the corporation maintains its principal place of business. An out of state corporation may do business in Arizona by registering with the Commission, submitting the required documents and paying the appropriate fee. An out of state corporation can also transfer its corporate charter to Arizona and become an Arizona corporation by following the statutory procedure.

Name and Title of Assets

Bank accounts, vehicles and other assets as well as contracts should be in the corporate name. Failure to observe this formality could lead to loss of corporate protection from personal liability.

Taxation

The corporation is a separate taxpayer subject to corporate income tax unless a valid election is filed with the IRS to be taxed as a Subchapter S corporation. This election will eliminate the corporate level tax in most circumstances and corporate income will flow through and be taxed to individual shareholders.

• • If no election is made to be treated as an S corporation, the corporation must make quarterly payments of estimated income tax and file form 1120 at the end of its tax year.

  • If a Subchapter S election is in effect, the shareholders must make quarterly payments of estimated income tax taking into account their share of corporate income.

  • The corporation has its own employer identification number and this number must be used on all tax and information returns filed for the corporation, whether or not it is an S corporation.

Distributions

Shareholders and officers who draw regular checks from the company must treat these as payroll checks and must withhold social security, Medicare and income tax. Deposits of the withheld taxes as well as the corporate share of the social security and Medicare taxes must be made and quarterly payroll tax returns filed with the federal and state governments. Distributions of corporate profits after payroll can be made as dividends without withholding tax. No dividend distributions may be made if the corporation will be rendered insolvent (that is, its debts and other liabilities will exceed its assets) as a result.

Personal Expenses

Only business expenses should be disbursed from the corporate checking accounts.

Annual Report

An annual report must be filed with the Arizona Corporation Commission. The commission will mail a form for the report before it is due. A small annual filing fee must be made with the report.

Corporate Meetings and Records

Shareholder and director meetings should be held at least annually and minutes of the meetings entered into the minute book. A single combined meeting of directors and shareholders may occur in the case where directors and shareholders are the same individuals. Meetings may be held provided notice is given to each shareholder/director. The notice can be given by mail, fax or other written means. A valid meeting can be held without notice if all directors or shareholders attend the meeting or if written waivers of notice are signed by all directors or shareholders. The corporation’s by-laws have provisions concerning notice, meetings and quorum which may differ from the above and the by-laws should be checked concerning particular requirements. Corporate records such as minutes of annual meetings generally do not need to be notarized or filed with any government agency.

Shareholder meetings must be held whenever a director is elected to the board of directors.

Corporate Resolutions

Corporate resolutions are used to officially empower the corporation to do certain things. They may be passed at directors meetings and should be entered into the written minutes of the meeting. Resolutions are not needed to run the day-to-day business of the corporation but should be obtained before major actions such as a sale of the business, a merger or consolidation, or a significant acquisition or sale (such as real estate). Corporate resolutions may also be needed to empower officers to incur debt on behalf of the corporation. Banks often require a corporate resolution prior to obtaining a loan or opening an account. Any request for a resolution may be accommodated by providing a copy of the resolution from the minutes and having the corporate secretary or president sign a statement attesting to the fact that the document provided is a true and accurate copy of the resolution.

Stock Certificates and Ledger

Stock certificates evidence share ownership. Whenever additional shares are issued to any person, certificates must be issued and signed by the president and treasurer or other officers empowered by the directors to sign certificates. The name of the shareholder, number of shares issued, date, and consideration received should be entered into the stock transfer ledger. When shares are surrendered, the certificates should be marked "canceled" and filed with the transfer ledger. If shares are sold, the information concerning the sale should be entered into the ledger and new certificates issued to the acquiring party. Any restrictions on the stock, such as a restriction on sale, should be marked on the certificate before issuance.

By-Laws

The corporate by-laws can only be amended by action of the shareholders in conformity with the Articles of Incorporation. Corporate legal counsel should be consulted prior to amending the by-laws.

Articles of Incorporation

The Articles of Incorporation are on file with the Arizona Corporation Commission and can only be amended by filing Articles of Amendment with the commission.

Statutory Agent

Every corporation is required to designate an individual or entity to act as its statutory agent for service of legal process. Legal papers served on this individual or entity will be considered served on the corporation. The agent must accept the position and the name and address of the agent must be on file with the Corporation Commission. If the identity or address of the agent is changed, the Corporation Commission must be notified.

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