An out-of-state LLC can change its state of organization to Arizona through statutory domestication. Arizona domestication is a legal transaction that changes an LLC’s state of organization, the state whose law primarily governs the company.
An out-of-state LLC, also called a foreign LLC, that domesticates to Arizona becomes an Arizona LLC governed by the Arizona Limited Liability Company Act (Ariz. Rev. Stat. sections 29-3101 through 29-4202). The LLC is otherwise the same business entity before and after the domestication process.
Whether the domestication can proceed also depends on the laws of the state the LLC is leaving. To find out whether your LLC qualifies and what the process involves, request a free analysis of your LLC move.
Some states use the name domestication for the legal procedure that changes an LLC’s state of organization, also called its domicile. In other states, a business can complete a conversion to change its domicile or to change its entity type.
Arizona’s procedure is called domestication. An Arizona domestication changes a company’s domicile only. A conversion changes a business from one entity form to another, such as a corporation converting to an LLC. This article deals with domestications that change an out-of-state LLC into an Arizona LLC.
Why Business Owners Move LLCs to Arizona
Businesses change their home states for a variety of reasons. An Arizona LLC domestication may make sense if a business owner moves to Arizona or if the owners prefer to have Arizona law govern the company. An owner might transfer an LLC to Arizona for any of the following reasons:
Owner convenience is a significant factor. Domestication can be convenient for business owners, particularly when moving to a new state. Arizona is one of the nation’s fastest-growing states. Business owners who move to Arizona may enjoy the convenience of having their businesses governed by the LLC laws of the owner’s new state of residence.
Streamlined filing requirements can reduce a company’s paperwork and annual reporting burdens. A Colorado LLC that does most of its business in Arizona must file an annual report with the Colorado Secretary of State. Arizona does not require LLCs to file annual reports. So, a Colorado LLC that does not actually transact business in Colorado can cut down on paperwork by domesticating to Arizona.
Tax savings are possible through domestication. A state’s power to tax an LLC depends on the connection (nexus) between the company and the state. An LLC that goes through domestication establishes a nexus with the new state and, in some cases, may end the nexus with the old state.
An LLC that domesticates from a high-tax state like California or New Jersey to Arizona may save on taxes if it severs its connection with the old state. Relocating business owners might potentially save on personal income tax, too.
A better legal climate can be an advantage of Arizona LLC domestication. An out-of-state LLC may benefit from Arizona laws designed to spur economic growth. Arizona’s legislature has revamped the state’s LLC law to allow more flexibility in operating agreements among other things.
Domestication could be a smart business move if a new operating agreement tailored to Arizona law promotes an LLC’s long-term plans.
Professional networking benefits arise from domestication. A business owner who moves to Arizona can more readily hire local lawyers and accountants if the LLC is chartered in Arizona. After all, professionals who live in Arizona know more about Arizona law than those outside the state.
A true Arizona LLC might also enjoy marketing and networking advantages over an out-of-state LLC operating in Arizona.
Arizona LLC Domestication Requirements
Arizona LLC domestication is not available for every out-of-state LLC. An LLC domesticating to Arizona must comply with both Arizona law and the current state’s law.
Arizona law controls the process and documents filed in Arizona and determines the domestication’s legal effects. The current state’s law governs whether the LLC can domesticate to Arizona (the state must authorize domestication), the content of the written plan of domestication if required, the standard under which the LLC’s members or managers must approve the plan of domestication, and the effective date for the domestication.
An out-of-state LLC considering domestication to Arizona must first determine whether its current state allows domestication. Not all states do. The current state might use a different term, like conversion.
What matters is that the state has a legal process for an LLC organized in that state to change its state of organization to a new state. Domestication also depends on whether Arizona allows LLCs to conduct the type of business the company does.
Arizona does not allow LLCs to do banking or most insurance business. A bank or insurer organized as an LLC in another state cannot successfully domesticate as an Arizona LLC.
Arizona law authorizes professional limited liability companies (PLLCs) that provide professional services. Some states, including California, limit the power of LLCs to offer professional services that require a license. An out-of-state professional company should make sure that Arizona PLLCs can provide the type of services the company offers.
It is best to check before starting the LLC domestication process. Business owners must also review the LLC’s articles of organization and operating agreement to ensure there are no provisions that prevent domestication to a new state.
If any restrictions are present, the LLC may need to formally amend the documents to allow the procedure.
Arizona’s LLC domestication process is also available only to out-of-state businesses organized as LLCs. An out-of-state corporation or partnership that wants to become an Arizona LLC can do so using the conversion process instead.
One key benefit of domestication over other business-transfer methods is that domestication is almost always the easiest and cheapest way for an out-of-state LLC to change its charter state to Arizona.
Eligibility for Arizona LLC Domestication
Arizona authorizes inbound domestication under Ariz. Rev. Stat. SS 29-2501(B), which permits a foreign entity to become a domestic entity of the same type. For LLCs, the foreign LLC must be authorized to domesticate under its current jurisdiction’s law and must comply with Arizona’s domestication filing requirements. The LLC must be in good standing in its originating state. Arizona does not impose entity-type restrictions or additional eligibility conditions beyond these statutory requirements.
Documents Required for Arizona LLC Domestication
The Arizona LLC domestication process involves preparing and adopting several domestication documents that must satisfy both states’ requirements. The domestication documents memorialize the terms of the domestication and control the company when the domestication takes effect.
- Plan of Domestication, which authorizes the domestication and addresses the terms of the LLC’s governance under Arizona law
- Statement of Domestication, the document filed with the Arizona state agency to effectuate the domestication
- Articles of Organization, a separate formation document required alongside the domestication filing
All documents must be carefully drafted to ensure a smooth, successful domestication that complies with both states’ laws.
A Plan of Domestication must be designed to comply with the requirements of both Arizona law and the law of the state that the LLC is moving from. The Arizona Statement of Domestication must contain all information and any related documents needed for filing with the Business Services Division of the Secretary of State.
Depending on state law, the domestication document for filing in the prior state may be called articles of domestication, statement of domestication, articles of conversion, certificate of conversion, statement of conversion, or a similar term.
The Arizona Articles of Organization must be filed with the Business Services Division of the Secretary of State. A state-specific Operating Agreement is essential to properly structure the LLC as an Arizona LLC, provide rules for profit distributions and decision-making, clarify the federal income tax classification, and help provide maximum liability protection.
A Resolution Authorizing Domestication must be prepared approving the transaction and adopting the Arizona organizational documents as the LLC’s governing documents.
The Statement of Domestication and Articles of Organization accept electronic signatures under Arizona law. Filing through the Arizona Corporation Commission allows e-filing for documents that have been electronically signed.
An LLC that has carefully prepared and reviewed the necessary paperwork must also complete several administrative tasks to formally adopt the documents and implement the domestication. The domestication to Arizona takes effect upon successful completion of the administrative tasks, and the company is officially an Arizona LLC.
Filing Arizona LLC Domestication Documents
An LLC domesticating to Arizona must complete several administrative tasks to implement the domestication. First, the LLC should conduct a preliminary name search with the Business Services Division of the Secretary of State to determine whether the LLC’s name is available in Arizona.
If the name is unavailable, a slight name change may be required to complete the domestication.
Next, the LLC must obtain signatures on the Statement of Domestication and the Articles of Organization from the required parties. The Business Services Division of the Secretary of State allows both documents to be e-signed.
The Statement of Domestication and Articles of Organization must both be filed with the Business Services Division of the Secretary of State. The Business Services Division allows e-filing for electronically signed documents.
After the Arizona Corporation Commission accepts the LLC’s articles of organization for filing, the LLC must publish notice of filing. Upon accepting a filing, the commission sends a letter to the filer with information about the publication requirement.
A published notice of filing must include the names and addresses of the LLC and its registered agent. The notice must also state whether the LLC is member-managed or manager-managed and must list the members’ names and addresses (if member-managed) or the names and address of each manager and member with a 20 percent or greater interest in the LLC (if manager-managed).
The Corporation Commission itself publishes the notice of filing if the LLC’s registered agent address is in Maricopa or Pima Counties. An LLC that is not in Maricopa County or Pima County must arrange for publication in a newspaper of general circulation in the county where its registered agent is located.
The notice must run for three consecutive publications. The newspaper provides an affidavit of publication after running the notice for the required period. The LLC may file the affidavit of publication with the Arizona Corporation Commission to verify completion of the requirement, but filing of the affidavit is not mandatory.
Finally, the LLC must file domestication documents with the Secretary of State or equivalent agency for the state that the LLC is moving from. Some LLCs may need to take the additional step of notifying a government agency or securing its approval before undertaking domestication.
This additional requirement applies only if the LLC is legally required to give the agency notice or secure its approval if the company participates in a merger.
Cost of Moving an LLC to Arizona
The cost of moving an LLC to Arizona depends on the scope of work involved. The documents and filings described above require professional preparation to comply with both states’ requirements.
Coordinating submissions with two separate state agencies adds further complexity. To find out what your specific move will cost, request a free analysis of your LLC move.
Arizona Corporation Commission Filing Fees
In addition to professional service costs, the Arizona Corporation Commission charges filing fees when an LLC submits its statement of domestication and articles of organization. The fee for each document is $50.00, resulting in total filing fees of $100.00 for the Arizona portion of the domestication.
The LLC’s original state will also charge filing fees. The amount varies by state.
Additional Costs of Arizona LLC Domestication
Service-provider charges are the labor costs billed by the provider the LLC hires to manage the domestication. A service provider preparing an Arizona LLC domestication may charge a flat fee or bill hourly, depending on the provider.
Work needed for a domestication typically includes gathering information needed for document preparation; preparing documents such as the plan of domestication, statement of domestication, and articles of organization; communicating with the business owners, including sending documents for review and signing; and filing documents and communicating with the Arizona Corporation Commission.
An Arizona LLC must appoint and register a statutory agent (also called a registered agent) with the Arizona Corporation Commission. The statutory agent has legal power to accept official documents for the LLC.
A statutory agent’s address is a public record readily available online, so companies often hire commercial statutory agents to promote privacy and stability. The cost to hire a statutory agent in Arizona is typically $100 to $200 per year.
Processing Time for Arizona LLC Domestication Filings
An Arizona LLC domestication in general is not a lengthy process. The total time needed for the transaction depends mostly on the parties involved.
Factors include how long it takes the owners to provide necessary information to the service provider, how long it takes the service provider to prepare documents, how long it takes to circulate documents for review and signing, and how long it takes the Arizona Corporation Commission to process the request.
The Corporation Commission estimates a turnaround time of between two and three weeks for processing new LLC filings. However, times can vary throughout the year.
Quicker processing, which reduces turnaround time to around one week, costs an extra $35.00. The Corporation Commission offers same-day and next-day processing for $200.00 and $100.00 respectively.
Legal Effects of Arizona LLC Domestication
Arizona law defines the legal effects of an LLC domestication to Arizona in detail. An out-of-state LLC that domesticates to Arizona remains the same entity without interruption. Domestication does not create a new LLC.
The same company continues its same operations with a new jurisdiction of organization. Arizona law and the company’s new articles of organization and operating agreement (if applicable) govern the LLC after domestication.
The LLC is now organized under and must comply with the Arizona Limited Liability Company Act.
Ownership rights in the out-of-state LLC become ownership rights in the Arizona LLC after domestication. The process does not affect members’ rights in the company unless the plan of domestication describes changes to those rights.
The LLC owns all the same assets and has all the same contractual rights before and after domestication. It still owes the same debts and contractual obligations that were in place before the change.
Domestication does not require an LLC to transfer property to the new Arizona entity. An LLC that owns Arizona real estate need not record a deed or other transfer document, but it can record a certified copy of its statement of domestication to provide formal notice of the domestication.
Domestication does not formally terminate the LLC in the original state. Dissolution, liquidation, and winding up affairs are unnecessary. Domestication does not trigger contractual rights that take effect in the event of dissolution, liquidation, or winding up.
Filings in the original state are limited to the equivalent of the statement of domestication.
Arizona LLC Laws That Apply After the Move
Arizona LLC domestications must follow Arizona law and the law of the LLC’s current state. Arizona governs many of the steps and filing requirements.
The current state’s laws control whether domestication to Arizona is possible, what the plan of domestication must include, the basic standard for approving the plan of domestication (often a certain number of votes), filing requirements for LLCs moving out of the state, requirements for the LLC to continue doing business in the state as an out-of-state LLC (if applicable), and any other requirements described in the current state’s LLC domestication law.
State domestication laws are sometimes similar but can, and often do, have different requirements for LLCs leaving the state. Domesticating LLCs must make sure the domestication satisfies both states’ laws and any rules in the company’s governing documents.
An LLC that domesticates to Arizona becomes subject to Arizona’s ongoing compliance obligations immediately upon effectiveness of the domestication. The Arizona Limited Liability Company Act (Ariz. Rev. Stat. sections 29-3101 through 29-4202) imposes specific requirements on all domestic LLCs, including those formed through domestication from another state.
Unlike many other states, Arizona does not require LLCs to file annual reports. This reduced reporting requirement is one advantage of domesticating to Arizona, as it eliminates the burden of annual compliance filings common in other states.
An Arizona LLC’s governing document is called an Operating Agreement under Arizona law. The Operating Agreement governs the LLC’s internal affairs, including the rights and obligations of members and managers, profit distributions, and management structure.
The Operating Agreement is not filed with the state; it is maintained by the LLC as a private document. Arizona does not require LLCs to appoint a registered agent with authority to accept service of process on the LLC, as many states do.
Instead, Arizona requires LLCs to appoint and register a statutory agent with the Arizona Corporation Commission. The statutory agent accepts official documents for the LLC on its behalf.
Moving an LLC Out of Arizona
Arizona also allows outbound domestication under the Arizona Limited Liability Company Act. An LLC organized in Arizona can domesticate to another state by filing a Statement of Domestication with the Arizona Corporation Commission and paying a $50 filing fee.
The outbound domestication requires a Plan of Domestication approved by the LLC’s members.
Alternatives to Arizona LLC Domestication
When domestication is not available because the other state’s law does not allow it, a merger-based reorganization achieves the same result. Reorganization requires forming a new LLC in the destination state and merging the original LLC into it.
Arizona permits LLC mergers, and the Arizona Corporation Commission charges a $50 filing fee for the merger filing. For a detailed explanation of how reorganization works as an alternative to domestication, see our guide to the LLC reorganization process.
Get a Free Analysis of Your LLC Move to Arizona
Every LLC move depends on the laws of two states. Our free analysis compares the requirements of your current state and Arizona, confirms whether domestication is available, and provides a step-by-step roadmap with cost estimates.
Understanding the full domestication process, including document preparation and coordination between both states, is covered in detail in our guide to LLC domestication.
For a complete directory of states and the domestication or conversion procedures available in each, see our state-by-state LLC domestication directory.
Get a Free Analysis of Your LLC Move to Arizona
Every LLC move depends on the laws of two states. Our free analysis compares the requirements of your current state and Arizona, confirms whether domestication is available, and provides a step-by-step roadmap with cost estimates.