Arizona sole proprietorship registrations is fairly easy, as they usually have only one business owner.

Setting Up a Sole Proprietorship in Arizona

The benefits of starting a sole proprietorship in Arizona include:

  • Getting the state's permission is not typically required
  • A personal social security number can be used as a business tax ID number

However, additional steps are necessary if you want to hire employees or if you desire a trade name for the business.

Determine If You Want a Specific Business Name

Using your legal name is allowed. For example, an electrician can utilize the name, “Michael Smith, Electrician.“ However, you may want to create a business name, also referred to as a trade name. A trade name is advised if someone has a similar name within your field or if you plan on advertising.

Choose a Trade Name That Is Memorable

It is important to select a name that is unique and one that people will remember. The name should also imply attractive and positive qualities about your business. Consider how a generic business name such as “Smith Family Electricians” can be forgettable.

Check the Availability of Your Desired Name

If another business is using your desired trade name, you won't be able to use that name or something similar. Search the website of the Arizona Secretary of State to check availability. Also, check with the county recorder's office where your main office will be located. There are a few other important points to consider, such as:

  • Names that have been trademarked cannot be used
  • The majority of businesses often want a corresponding website
    • Verify that your preferred domain is available

Register Your Trade Name

The state of Arizona does not require you to register your trade name. If you decide to do so, the cost is $10 and registration is completed online. Trade names are held for five years. Afterward, a renewal process is necessary. Remember, trade names are not required by federal law, and it is your decision whether or not to trademark your business name. Doing so offers many advantages, such as the ability to sue in federal court if your trademark is used without your permission.

Secure the Necessary Permits or Licenses

Licenses or permits may be required based on your occupation or where your business operates. You can find assistance with what exactly is needed at the Arizona Commerce Authority website. If you have questions or require further help, contact the nearest Small Business Development Center to speak with a counselor who can share with you the necessary permits and licenses needed.

Register to Pay State Taxes

If your business sells services or tangible goods, you must collect and remit use or sales taxes. Contact the Arizona Department of Revenue to get a state transaction privilege tax (TPT) license. If your business has employees, you will need to file a Joint Tax Application in order to register to pay for unemployment insurance and withholding tax. Applications can be found online, or you can submit a paper application.

Get Your Employer Identification Number (EIN)

An EIN will be used as your business tax ID. If you are a sole proprietor, your social security number can be used. Keep in mind that if you want to open a business bank account or hire employees, you should get an EIN.

Hire Employees Legally

Within 20 days of hiring, all new hires must be reported to the Arizona New Hire Reporting Center. Accounts can be created and registered at the Reporting Center. If you need assistance, representatives can be reached at 888-282-2064, Monday through Friday from 8:00 a.m. to 5:00 p.m. Sole proprietors who have employees generally have workers' compensation insurance. A list of licensed insurers who offer workers' compensation can be found by calling 800-325-2548.

Obtain Sufficient Insurance

As the owner of a sole proprietorship, you are personally responsible for any injuries caused by your business and for the debts of your business. If an employee gets injured while on the job, remember that they can sue your business. If the employee wins and there is no legal distinction between you and your business, they can go after your personal assets. To protect you and your home, it is advisable to get general business liability insurance. Insurance brokers can help you determine how much liability insurance you will need.

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