The First Steps to Starting a Business in Arizona

Becoming an entrepreneur is a viable option for many people in our modern world. A college degree, business experience, and large sums of money may all be helpful, but aren’t strictly necessary for success. However, you will need enthusiasm, a solid plan, and some other tools to get started.

The first question you should ask yourself is why you would like to start a business. This will help you discover which type of company you should run. If your main goal is extra money, a side gig could work. But if your motivation is complete financial freedom, you’ll need to dedicate more time to this pursuit. As soon as you have defined your reason, you can look into the following steps for achieving your dream.

For many entrepreneurs, they simply “know” instinctively that starting a business is right for them. “If your gut tells you that it’s what you’re meant to do, that it’s your destiny, then you should consider it, especially if your instincts have served you well in the past,” writes Steve Tobak at

Write a Business Plan

Many people choose to write a plan because it’s required by banks to obtain a loan. While this is a good reason to write one, it’s far from the only benefit. A strong business plan will be your roadmap for the future of your company.

There is no strict formula for a successful roadmap because every plan will be unique. But here are some sections you will want to include, regardless of which type of business you start:

Executive Summary

Your business plan summary will give potential investors and lenders an idea of your goals with starting the company. Although this section will come first in your plan, it’s typically written last.


Your business overview will define what your business will sell and the value it will offer customers. This is your chance to cover all the relevant details that a review committee will want to see. Make it simple and show that there’s an existing need in the market your business can provide for.

Employees and Management

This is where you will cover employee salaries, staffing needs, and operations for day-to-day transactions and activities. You will also cover your experience as the owner here, which is highly relevant for obtaining a loan.

Marketing Strategy

Any potential business owner must develop a strategy for marketing to make sure enough customers exist to support the business, and to figure out how to advertise. Every successful company needs a plan for finding its customers, or a profitable business may not be possible.

Look into Licensing in Arizona

Next, you will have to think about the necessary licensing for your Arizona business. Check out some of the categories below to see which of them apply to your situation:

Local Licenses for Business

Most counties, towns, and cities in the state will require registration for a business, even if it’s home-based. These business activity rules will vary according to each local entity. This means that some locations will call for a license, and others will have specific rules for signage, liquor licenses, construction or building changes, zoning, and more.

The State Transaction Privilege Tax

Arizona may require that you register for a transaction privilege tax (TPT), which taxes a business based on its sales. Also called a vendor, wholesale, or sales tax license, the TPT applies to construction contracting, motels, property rental services, restaurants, retail, and more. The state Department of Revenue determines tax rates based on the physical location of the business.

Occupational and Professional Licensing

Some professionals in Arizona will be subject to regulation including those who sell tobacco or alcohol, pest control services, daycare services, adult care, message therapy, construction contracting, and more. Find out whether your business will be subject to this regulation on Arizona Business One Stop.

Conduct Market Research

Market research is how you will determine why people will want your service or product. It will look at consumer patterns, behavior, and factors that influence behavior (including personal, societal, and cultural conditions). This section is often split into two categories: primary and secondary research. For your business plan, you can focus on both, or just one:

  • Primary Research: This research will directly study customers using online polls or phone interviews with random target group members. Many business owners also use their sales records to obtain this information.
  • Secondary Research: This research is focused on finding the data that has already been collected about customers. It may come from existing blogs on your industry, along with reports posted on organization or business websites.

Market research is essential to the long-term success of your business, and is one of the first ways you can ensure – or at least predict – the viability of your business idea. “You may have all the aspirations and ideas in the world,” says Cozzi Recycling Director Albert Cozzi, “but until you put together the necessary market research and demographic studies, you won’t actually know your business landscape as intimately and realistically as you need to.”

Market Research Questions

Whether you decide to focus more on primary research, secondary research, or both, you will want to answer some basic questions when gathering market information.

Who will be buying your product or service? Describe your customers in regards to occupation, age range, income, education level, lifestyle, and any other potentially relevant factors.

What is their motivation for buying? Answers to this question will vary widely depending on your specific service or product and what it’s used for. Try to place yourself in your customers’ shoes to figure out why they buy what they buy, whether it’s saving money, finding a product that will last, or making their lives easier.

What are they currently buying? In answering this question, you’ll be describing the buying habits of your customers in terms of your service or product. You will also cover popular features of the product, general price points, how much they purchase, and from which suppliers.

Look at Similar Businesses

Every successful future business owner should conduct due diligence for their industry. Check out comparable business by finding those that serve the same area or location as you. Look for businesses that are somewhat new, are of relative size and that have an ownership structure as close to yours as possible. For example, if you have two people running your company, try to find businesses that mirror that instead of single-ownership entities.

This information will help you get a realistic idea of how much demand there is for your product and also how you can adapt to the existing marketplace.

Choose a Business Entity

Also called the business structure, selecting your business entity is legally required in the state of Arizona. There are four categories that your company can potentially fit into. They are partnership, sole proprietorship, LLC, and corporation. Let’s look a bit closer at each.


A general partnership applies to businesses which have at least two people running the company together. There isn’t any formal filing required for this category, and partnerships have unlimited liability. This means that in the event of the partnership being sued, there are consequences for both (or all) partners.

The entity itself won’t be subject to business income tax. Instead, losses and profits will be passed onto the business owner’s tax return, where the income will be subjected to self-employment taxes.

Sole Proprietorships

This category applies to individual entrepreneurs who wish to start a business on their own. The least expensive and simplest to set up, with a sole proprietorship, the business owner is the overseer of all actions and debts in their business.

Although it is the easiest entity to start, it comes with the downside of unlimited liability. If someone sues the business, the personal assets of the owner are put at risk. Business profits will be subject to self-employment tax, which may be higher than other categories.

LLC or Limited Liability Companies

This is a popular choice for business entities as it offers liability protection. It doesn’t have burdens such as taking minutes, conducting shareholders’ meetings, or holding board of directors’ meetings. It also comes with greater tax flexibility than the other three entities available.


This legal entity is considered separate from the business owner. Although it’s a more complicated and expensive path than a partnership or sole proprietorship, it also shields the owner’s assets in the event of a lawsuit. Corporations also have the benefit of choosing how to be taxed. Since income will come to the business owner or owners through dividends or salary, corporations are not subject to self-employment taxes.

Of every decision you’ll need to make in starting your business, the legal structure you choose is one of the most crucial. This will affect the amount you’re taxed, how much paperwork will be required of you, and your business funding. When in doubt, don’t be afraid to consult a professional. There is much more to starting a business, but the information in this article is a good place to start.

If you’re considering starting a business, know that there are risks involved, but there are also great rewards. “I used to find it hard to picture myself getting old and becoming like my boss and wondering at the age of 60 if I should have given it a shot when I was 30,” says entrepreneur Prashant Singh. If you’re in the same boat, the regret of missing your opportunity may far outweigh the regret of a business chance that didn’t work out the way you imagined.

Call JacksonWhite’s Small Business Law Team at (480) 464-1111 to discuss your case today!

Contact Small Business Representation Attorney Dave Weed

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