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What is an Arizona LLC Domestication?

The term domestication refers to a statutory process for moving an LLC from one state to another. After domestication is complete, the LLC is treated as though it were formed in the new state and is no longer governed by the law of the old state.

The Arizona Entity Restructuring Act1 outlines the steps to formally transfer an out-of-state LLC to Arizona. An out-of-state LLC that goes through this legal process—called domestication—changes its official state of residence to Arizona. After completing domestication, the LLC is an Arizona LLC. It is no longer chartered in its original state and is no longer a foreign entity in Arizona.2

What is the Difference Between LLC Domestication and LLC Conversion?

The terms domestication and conversion are sometimes used to mean the same thing, but they can mean different things in different states. Arizona domestications and conversions follow similar steps but accomplish different goals.

  • Arizona domestication. An Arizona domestication changes an entity’s jurisdiction of organization—or charter state. An LLC’s charter state is the state where the LLC organized and whose laws govern the company.3
  • Arizona conversion. An Arizona conversion changes the business from one type of business entity to another (from a corporation to an LLC, for example).4

The difference is important because some states call either transaction a conversion.5 A Colorado LLC moving to Arizona, for example, is engaged in a conversion under Colorado law and a domestication in Arizona. This article describes the process and rules for domesticating an out-of-state LLC to Arizona and exclusively uses the term domestication for that transaction.

Why Domesticate an Out-of-State LLC to Arizona?

Businesses change their charter states for a variety of reasons. These are some of the more popular reasons LLCs domesticate to Arizona, but there could be plenty of others not in this list:

  • Owner convenience. 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. Domestication sometimes reduces a company’s paperwork and annual reporting burdens. A Colorado LLC that does most of its business in Arizona—for example—needs to file a report with the Colorado Secretary of State each year. Arizona does not require LLCs to file annual reports. If the company does not actually transact business in Colorado, it can cut down on paperwork by domesticating to Arizona.
  • Tax savings. A state’s power to tax an LLC depends on the connection (nexus) between the company and the state. Moving an LLC to a new state establishes a nexus with the new state and, depending on the circumstances, may end the nexus with the old state. An LLC that moves to Arizona—ending its connection with a high-tax state like California or New Jersey—may save on taxes. In some cases, relocating with a business may let business owners save on personal income tax, too.
  • Better legal climate. An Arizona LLC domestication can be good for business if Arizona’s legal climate is better for the LLC’s operations. Arizona is trying to pass laws designed to spur economic growth. An out-of-state LLC could benefit from transferring to Arizona if Arizona’s pro-growth policies fit the company’s business plan. Arizona’s legislature also recently revamped the state’s LLC law. Now, it allows more flexibility in operating agreements (among other things).6 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. Lawyers and accountants in Arizona know more about Arizona law than those outside the state. A business owner who moves to Arizona can more readily hire local professionals for help if the LLC is chartered in Arizona. A true Arizona LLC might also enjoy marketing and networking advantages over an out-of-state LLC operating in Arizona.

What Are the Benefits of an Arizona LLC Domestication?

Domestication is almost always the easiest and cheapest way for an out-of-state LLC to change its charter state to Arizona. Practical benefits of domestication over other business-transfer methods include:

  • Company identity consistency. An out-of-state LLC that completes an Arizona LLC domestication is the same entity before, during, and after domestication.7 The company’s EIN (Employer Identification Number) and tax identity are unchanged. Domestication does not affect pending legal proceedings. If the LLC’s name changes in connection with domestication, the new name simply replaces the old one.8
  • Asset consistency. A domesticating LLC keeps all the same assets throughout a domestication.9 The company is not required to open new bank accounts or close existing ones unless it wants to. Signing deeds and other documents to transfer assets is unnecessary. However, an LLC can file its statement of domestication in county land records to avoid confusion about real estate ownership.10
  • Preservation of contracts. An Arizona LLC domestication does not affect an LLC’s existing contracts. The company has the same contractual rights and duties before and after domestication.11
  • Business continuity. Domestication does not slow or stop the business’s everyday operations. The change occurs mostly on paper, and the company can remain open for business. Employment relationships also do not change, so there is no need to fire, hire, or transfer employees.
  • Avoiding dissolution. Dissolution, winding up, and asset liquidation are not part of an Arizona LLC domestication.12 Because LLC termination proceedings like dissolution and winding-up are long, difficult, expensive processes, avoiding them can save time and money.

While domestication is usually best, Arizona’s Entity Restructuring Act lets a business use other methods to change its charter state when domestication is impossible.13 These options are almost always more stressful, complex, and costly than domestication. They include the following:

  • Company identity consistency. Owners of an out-of-state LLC move the business to Arizona by forming a new Arizona LLC and then combining the two entities.14 The out-of-state LLC stops existing as a separate business after the merger.15
  • Interest exchange. In an interest exchange, an Arizona LLC acquires all ownership rights in an out-of-state LLC.16 After the exchange, the Arizona LLC continues the business’s operations.17
  • Dissolution and transfer. A final option is to dissolve and wind up an out-of-state LLC. The owners then transfer its assets and liabilities to an Arizona LLC formed to continue the business’s operations. While the concept is simple, the process is long and expensive and is usually viewed as a last resort.

What LLCs Can Domesticate in Arizona?

The Arizona LLC domestication process is not possible for every company. An out-of-state business thinking of domesticating to Arizona must consider the following factors:

  • Does the company’s current state allow domestication? An LLC cannot domesticate to Arizona unless its current charter state allows domestication.18 The current state might use a different term—like conversion. What matters is that the state has a legal process for an LLC to change its state of organization.
  • Does Arizona allow LLCs to do the type of business the company does? Arizona generally lets LLCs “have any lawful purpose.”19 An Arizona LLC domestication is not a good idea if an LLC’s business is illegal in Arizona. This remains true even if the business is legal in the current state. Arizona also does not allow LLCs to do banking or most insurance business.20 A bank or insurer organized as an LLC in another state cannot successfully domesticate as an Arizona LLC.
  • Does the out-of-state business provide professional services? Some states—including California—restrict the power of LLCs to engage in professional services requiring a license. Arizona law allows professional limited liability companies—or PLLCs—that provide professional services.21 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.

Arizona domestications allow out-of-state business entities to become Arizona entities of the same type.22 For example, an out-of-state corporation or partnership cannot become an Arizona LLC through domestication (though Arizona law allows out-of-state entities that are not LLCs to become Arizona LLCs using the conversion process).23

See Which States Allow LLC Conversion or Domestication? for a list of the states that currently allow LLC domestication or conversion.

How Much Does an Arizona LLC Domestication Cost?

The cost of moving an out-of-state LLC to Arizona can vary between transactions. The total cost will include service-provider costs, filing fees, and sometimes charges from the LLC’s statutory agent.

Service-Provider Costs

A domesticating LLC’s service-provider costs are the fees 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 each provider. Work necessary for a domestication typically includes:

  • Gathering information needed for document preparation;
  • Preparing domestication documents such as the plan of domestication, statement of domestication, and articles of organization;
  • Communicating with the business owners, including passing around documents for review and signing; and
  • Filing documents and communicating with the Arizona Corporation Commission.

Filing Fees

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.24 Filing fees for the original state vary depending on the amount charged by that state.

Statutory Agent Fees

An Arizona LLC must appoint and register a statutory agent or registered agent with the Arizona Corporation Commission. This person or entity has legal power to accept official documents for the LLC.25 A person who is a statutory agent must be a permanent, full-time Arizona resident. An entity serving as statutory agent must be legally allowed to do business in Arizona.

An Arizona LLC cannot act as its own statutory agent, but a member or manager of the company can serve in that role. The agent’s address is a public record readily available online. To maintain privacy and promote stability, companies often choose to hire a commercial statutory agent to accept process for the company. The cost of hiring a statutory agent in Arizona is typically $100–$200 per year.

How Long Does an Arizona Domestication Take?

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 the owners take to provide necessary information to the service provider;
  • How long the service provider takes to prepare documents;
  • How long it takes to pass documents around 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 and $100 respectively.

See How Long Does the LLC Domestication Process Take? for a more detailed explanation of the LLC domestication timeframe.

What Laws Regulate Arizona LLC Domestications?

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;26
  • What must be included in the plan of domestication;
  • 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 similarly structured but can—and often do—have different requirements for LLCs leaving the state. Domesticating LLCs must make sure the domestication fits into both states’ laws and any rules in the company’s governing documents.

What Is the Arizona LLC Domestication Process?

As with many other legal processes, the steps in LLC domestication vary by state. The general LLC domestication process is described in the LLC Domestication or Conversion Checklist. An Arizona LLC domestication takes the steps described below:

  • Plan of domestication. The LLC begins the Arizona domestication process by preparing and approving a plan of domestication. This plan must meet the requirements of the LLC’s governing documents and laws of both the current state and Arizona law.27
  • Statement of domestication. The LLC next files a statement of domestication with the Arizona Corporation Commission.28
  • Articles of organization. A domesticating LLC files its new Arizona articles of organization at the same time as the statement of domestication.29
  • Current state filing. The LLC will likely need to file a document like the statement of domestication with its current state’s corresponding agency.
  • Effective date. Domestication starts when the company files its statement of domestication—unless the document names a delayed effective date.30 A delayed effective date can be up to 90 days after filing.

When domestication takes effect, the company is officially an Arizona LLC.31 Arizona law, the new articles of organization, and the new operating agreement (if the company adopted one) are binding on the members and managers.32

Adopting a Plan of Domestication

A plan of domestication is a customized document laying out the details of how a domestication will be done. It is typically the part of the process that requires the most care.

An out-of-state LLC’s plan of domestication must comply with the law of the LLC’s current state and Arizona law.33 Specific contents depend on the LLC’s current state, but states often have similar requirements. As an example, Arizona law requires an Arizona LLC domesticating to another state to adopt a written plan of domestication that identifies each of the following:

  • The company’s current name and entity structure;
  • The company’s new name and charter state;
  • How LLC membership interest will be converted into membership interests in the LLC’s new state or other payment;
  • The LLC’s proposed articles of organization or comparable document in the new state;
  • Text of the company’s operating agreement or comparable document if it will be kept in a written or electronic record;
  • Other terms and conditions of the domestication, if any; and
  • Any other provisions required by Arizona law or the LLC’s governing documents.34

Approving the Plan of Domestication

The LLC’s members or managers must approve an out-of-state LLC’s plan of domestication. In doing so, they must follow the approval standard set by the current state’s LLC domestication law or the LLC’s governing documents.35 In some cases, neither the current state nor the governing documents have set an approval standard. When this happens, the LLC approves the plan based on these standards (in order):

  1. Under the standard applicable to mergers;
  2. By vote of all interest holders; or
  3. By unanimous consent.36

Completing a Statement of Domestication

The statement of domestication is a two-page document that can be completed on a form published by Arizona’s Corporation Commission. The LLC gives the following information in the statement of organization:

  • Its current name and state of organization;
  • Its new name and state of organization;
  • Its original date of formation; and
  • The effective date of the domestication if not effective upon filing.37

An authorized member (if a member-managed LLC) or manager (if a manager-managed LLC) signs the statement of domestication on the company’s behalf. The authorized signature shows the LLC agrees that its plan of domestication was approved under the laws of its current state.

Along with its statement of domestication, the domesticating LLC includes these enclosures:

  • The company’s Arizona articles of organization;
  • The Arizona Corporation Commission’s cover sheet; and
  • Filing fees totaling $100 for the statement of domestication and articles of organization fees.38

The Arizona Corporation Commission accepts filings by mail or hand-delivery at its Phoenix office, and electronic filing is available for registered users.

Completing the Articles of Organization

A completed Arizona Articles of Organization is filed alongside the statement of domestication.39 General information like the company’s name, address, and entity type appear in the document. The articles of organization also name a statutory-agent appointment and describe the company’s management model.40

An out-of-state LLC moving to Arizona must ensure that the entity name shown on its articles of organization satisfies Arizona’s LLC naming rules.41

Depending on its management model, the LLC must provide either a Manager Structure Attachment or Member Structure Attachment with the articles of organization. The forms give name and address information for members and managers.42

Preparing an Operating Agreement

An out-of-state LLC domesticating in Arizona should strongly consider preparing a new operating agreement based on Arizona law.43 This agreement governs the relationships between members and the LLC, the company’s management, and its general affairs, among other things.44

Follow-Up Steps

A new Arizona LLC must publish notice of filing its articles of organization after the Corporation Commission accepts the articles for filing.45 The commission automatically publishes the notice if the LLC’s registered agent address is in Maricopa or Pima Counties. An LLC with a registered agent in another county must publish the notice in a newspaper of general circulation in that county.

Unlike the law of most states—which require LLCs to submit a report and filing fee once per year or every two years—Arizona law does not require LLCs to file annual reports.

What Happens Legally When an Out-of-State LLC Domesticates to Arizona?

The domestication process is designed to keep things simple and to keep contractual rights and relationships in place. An out-of-state LLC that domesticates to Arizona remains “the same entity without interruption.”46 Domestication does not create a new LLC. The same company continues its same operations—just with a new jurisdiction of organization.

Company Governance

The biggest legal effect of an Arizona LLC domestication is that Arizona law and the company’s new organizational documents govern the LLC.47 The LLC is now organized under and must comply with the Arizona Limited Liability Company Act. It can also adopt a new operating agreement tailored to Arizona law.48

Ownership Interests

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.49

Assets and Liabilities

A domesticating LLC owns all of the same assets and has all of the same contractual rights before and after domestication.50 It likewise still owes any debts, follows any contracts, and meets any obligations that were in place before the change.51

Deeds and Assignments of Property

Domestication does not require an LLC to transfer property to the new Arizona entity.52 An LLC that owns Arizona real estate can record a certified copy of its statement of domestication in the county where the property is located.53 The recorded statement provides formal notice that title rests with the domesticated LLC. There is no need to file a deed to real estate or other transfer documents.

Liquidation and Dissolution

Domestication does not trigger any member or third-party rights relating to dissolution, liquidation, or winding up of the company, but the LLC’s plan of domestication or governing documents can provide otherwise.54

Legal Proceedings

Domestication does not affect ongoing court cases or other legal processes in which the company is involved. An LLC that changes its name during the transaction need only substitute the new name for the former name in these matters.55

By conforming to Arizona’s laws for LLC domestication, LLCs can ensure a smooth transition and enjoy the benefits of doing business in Arizona.

Legal References

  1. Ariz. Rev. Stat. §§ 29-2101, et seq.
  2. Ariz. Rev. Stat. § 29-2506; Ariz. Rev. Stat. § 29-2102(19).
  3. Ariz. Rev. Stat. § 29-2501; Ariz. Rev. Stat. § 29-2102(28).
  4. Ariz. Rev. Stat. § 29-2401.
  5. See, e.g., Colo. Rev. Stat. § 7-90-201.
  6. See Ariz. Rev. Stat. § 29-3105(A).
  7. Ariz. Rev. Stat. § 29-2506(A)(1).
  8. Ariz. Rev. Stat. § 29-2506(A)(5).
  9. Ariz. Rev. Stat. § 29-2506(A)(2).
  10. Ariz. Rev. Stat. § 29-2110.
  11. Ariz. Rev. Stat. § 29-2506(A)(3).
  12. Ariz. Rev. Stat. § 29-2506(B).
  13. Ariz. Rev. Stat. § 29-2106.
  14. Ariz. Rev. Stat. § 29-2102(30).
  15. Ariz. Rev. Stat. § 29-2206.
  16. Ariz. Rev. Stat. § 29-2301.
  17. Ariz. Rev. Stat. §§ 29-2102(1) and (2); Ariz. Rev. Stat. § 29-2306.
  18. Ariz. Rev. Stat. § 29-2501(A).
  19. Ariz. Rev. Stat. § 29-3108.
  20. Ariz. Rev. Stat. §§ 29-3108(C) and (D).
  21. See Ariz. Rev. Stat. §§ 29-4101, et seq.
  22. A.R.S. § 29-2401(B).
  23. A.R.S. § 29-2401(B).
  24. Ariz. Rev. Stat. § 29-3213(1) and (6).
  25. A.R.S. § 29-3115.
  26. Ariz. Rev. Stat. § 29-2501(B).
  27. See Ariz. Rev. Stat. § 29-4003(A); Ariz. Rev. Stat. § 29-2502.
  28. Ariz. Rev. Stat. § 29-2505.
  29. Ariz. Rev. Stat. § 29-3201.
  30. Ariz. Rev. Stat. § 29-2505.
  31. Arizona has additional requirements that apply only to some companies. For example, an LLC legally obligated to notify a government agency or officer if the LLC intends to participate in a merger must provide the same notice with regard to domestication. See Ariz. Rev. Stat. § 29-2104(A).
  32. Ariz. Rev. Stat. § 29-2506(6).
  33. Ariz. Rev. Stat. § 29-2502.
  34. Ariz. Rev. Stat. § 29-2502(A).
  35. Ariz. Rev. Stat. § 29-2503(1)(a).
  36. Ariz. Rev. Stat. §§ 29-2503(1)(b) and (1)(c); Ariz. Rev. Stat. § 29-2108.
  37. Ariz. Rev. Stat. § 29-2505.
  38. Ariz. Rev. Stat. § 29-3213.
  39. Ariz. Rev. Stat. § 29-3201.
  40. Ariz. Rev. Stat. § 29-3201(B).
  41. An Arizona LLC’s name must be distinguishable from names already registered in Arizona and must include limited liability company or an accepted abbreviation. An LLC’s name cannot include terms suggesting a different business structure or showing that the LLC is a bank or insurance company. See Ariz. Rev. Stat. § 29-3112.
  42. See Ariz. Rev. Stat. §§ 29-3201(B)(4)(a)-(B)(4)(b).
  43. Ariz. Rev. Stat. § 29-3105.
  44. Ariz. Rev. Stat. § 29-3105(A).
  45. Ariz. Rev. Stat. § 29-3201(G).
  46. Ariz. Rev. Stat. § 29-2506(A)(1).
  47. Ariz. Rev. Stat. §§ 29-2506(A)(6) and (A)(9).
  48. See Ariz. Rev. Stat. §§ 29-3101, et seq.
  49. Ariz. Rev. Stat. § 29-2506(A)(10).
  50. Ariz. Rev. Stat. § 29-2506(A)(2).
  51. Ariz. Rev. Stat. § 29-2506(A)(3).
  52. Ariz. Rev. Stat. § 29-2506(A)(2).
  53. Ariz. Rev. Stat. § 29-2110.
  54. Ariz. Rev. Stat. § 29-2506(B).
  55. Ariz. Rev. Stat. § 29-2506(A)(5).