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What are the three types of LLC structures in Arizona?

On Behalf of | Mar 26, 2024 | Business & Commercial Law

Entrepreneurs in Arizona can start a variety of businesses. These can range from medical practices and professional services to technology-based startups. These businesses can take the form of sole proprietorships, partnerships or, more notably, Limited Liability Companies (LLCs).

The state simplifies the creation of three common types of LLC structures. Here is a look at each.

Single-member LLC

A single-member LLC is a business that has just one owner or member. This type of LLC is a good fit for solopreneurs who want complete control over the company and limited personal liability for the business’s debts and obligations.

In this LLC, the owner’s personal assets, like homes, bank accounts or vehicles, are generally safe from the business’s debts and liabilities. The perk of personal liability protection is a key reason most people form an LLC.

Multi-member LLC

A multi-member LLC, true to its name, includes two or more members or owners. This structure works well for business partnerships or teams wanting to own and manage a business together. In a multi-member LLC, each member’s assets typically have protection from the business’s debts and liabilities. This means the members’ assets usually stay unaffected even if the company faces financial troubles.

In addition, the members can distribute the business’s profits and losses among themselves based on their ownership shares in the LLC, which are not necessarily equal. These shares are defined or decided upon in the LLC’s operating agreement, often during member meetings.

Professional LLC

A professional LLC, or a PLLC, is a business formed by professionals. This includes professions such as physicians, dentists, accountants, lawyers, architects, engineers and others. However, only certain types of professionals—typically those requiring a state professional license—can form a PLLC in Arizona.

Those without the necessary professional licenses, such as consultants, marketers or general contractors, cannot form a PLLC. These individuals might need to consider other structures, like a standard LLC or a corporation, to start a business.

Legal help

Starting a business is an exciting venture. But, choosing the right business structure is a crucial and often complex step. In Arizona, forming an LLC, whether it’s a single-member, multi-member, or professional LLC, comes with its own set of rules and procedures. This can be overwhelming for entrepreneurs to work out on their own. An attorney can guide them through forming an LLC with state laws and their specific needs in mind.