Starting a Business in Arizona

A new business in Arizona is in your reach. Have you been thinking about what you need to start a business in Arizona? And more importantly, can I do so no matter what the economic conditions are? Can I start a new business in Arizona during a recession?

A New Business in Arizona: Pluses and Minuses

Business Insider puts Arizona in the middle ten when it comes to starting a new business; this is for the entire nation.  And it is according to a 2016 article.

The state’s per capita GDP is in the bottom half of the country.

It also does not do well in education levels for possible employees.
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But Arizona also has a large availability of employees. There is also a high density of startup companies.

Hence if you want to start business in Arizona, you will have company. And you will have your choice of workers, when it is time to start hiring staff.

Changes for the Better, or for the Worse?

In 2018, Forbes put Arizona in the somewhat covet-worthy 17^th slot. But Fit Small Business tossed Arizona into the cellar, giving it number 47.

But which is right?

Of course, keep in mind all three of these sites have differing methodologies.

Forbes praises Arizona for its fifth-best growth prospects and its tenth-best labor supply. The state’s economic climate also has a decent ranking. Its regulatory environment is nearly in the middle, at 23. But business costs and quality of life both rank below average.

Fit Small Business says Arizona’s two best features are its taxes and its cost of living. But both of those only scored 21. The labor market was an abysmal 45^th – this is a measurement of the desirability of living in an area and the number of people with bachelor degrees. And its cost of starting a business was a sorry 48.

Hence Arizona will have a pool of available workers – but they might not have the educational level you need. Are you prepared to pay for training?

Start a New Business in Arizona – Sole Proprietors in Arizona

Companies that are sole proprietorships can often come with risks.

One is that an owner’s personal assets could be at risk in the event of a business lawsuit.

If a business owner wishes to avoid these risks, they can register for a trade name in Arizona.

They can create a fictitious name for a business different from their own personal identity.

Visit the Tradenames and Trademarks Questions and Answers webpage, run by the Arizona Department of State, for more information.

Start a New Business in Arizona – Arizona Top Industries

According to the Arizona Commerce Authority, the top industries for the state are technology and innovation; and aerospace and defense.

More top industries are bioscience and health care; and manufacturing.

Even more top industries include film and digital media; and business and financial services.

Arizona is also a location which many people retire to these days.

Savvy business owners should be able to cater to one of these popular niches. Such potential new business opportunities can maybe include trucking in parts for virtually any industry; or food services and hospitality for the film industry.

More ideas are maybe parts manufacturing and invention for the sciences or defense. Still more ideas are inventions and services for doctors and nurses and the various places where they work.

These can include hospitals, hospices, nursing homes, and all other public and private medical care facilities.

Here is everything that is required to start a business in Arizona.

Start a New Business in Arizona – Arizona New Business Secretary of State Requirements

Register a Business Name

To avoid some risk, the sole proprietor can register for a trade name. This allows for the creation of fictitious name for a business different from an owner’s personal identity.

 

Visit the Tradenames and Trademarks Questions and Answers webpage run by the Arizona Department of State for more information. Check the Arizona state corporation database online at the official Arizona government website.

Business Permits and Licenses

Go to the Arizona Business One Stop website. It simplifies the job of determining which licenses and permits you need. The Arizona Commerce Authority also has information.

Local Permits and Licenses

The Arizona Commerce Authority keeps a handy list of all county offices. They also have information about city requirements.

Business Registration

Go to the Arizona Corporation Commission. Here is a list of office numbers that may prove helpful at the Arizona Secretary of State.

Tax Registration

Check out the State of Arizona Department of Revenue website.

Virtual Office

Alliance has Arizona virtual business offices in Phoenix, Scottsdale, and Tucson.

For Arizona virtual office space in Chandler, Gilbert, Mesa, or Oro Valley, a business owner can go to DaVinci.

For other areas of the state, business owners might want to try Regus for Arizona virtual business space.

Also, business owners can maybe talk to local entrepreneurs.

Or they can maybe even talk to computer user groups in an effort to find help in this area.

Start a New Business in Arizona – Build Business Credit

Business credit is credit in a small business’s name. It doesn’t link to an entrepreneur’s individual credit, not even if the owner is a sole proprietor and the only employee of the business.

As a result, a business owner’s business and individual credit scores can be very different.

The Advantages

Due to the fact that company credit is separate from personal, it helps to protect a business owner’s personal assets, in case of legal action or business insolvency.

Also, with two distinct credit scores, an entrepreneur can get two different cards from the same merchant. This effectively doubles buying power.

Another advantage is that even startups can do this. Heading to a bank for a business loan can be a formula for frustration. But building small business credit, when done the right way, is a plan for success.

Individual credit scores are dependent on payments but also other components like credit utilization percentages.

But for small business credit, the scores really merely hinge on whether a business pays its bills in a timely manner.

Learn more here and get started toward building business credit attached to your company’s EIN and not your SSN.

The Process

Establishing company credit is a process, and it does not occur automatically. A business has to actively work to establish company credit.

Nonetheless, it can be done easily and quickly, and it is much quicker than developing personal credit scores.

Vendors are a big part of this process.

Accomplishing the steps out of order will lead to repetitive rejections. No one can start at the top with business credit. For instance, you can’t start with retail or cash credit from your bank. If you do, you’ll get a rejection 100% of the time.

Start a New Business in Arizona – Small Business Fundability

A small business needs to be fundable to credit issuers and merchants.

That’s why, a business will need a professional-looking website and email address. And it needs to have website hosting bought from a merchant such as GoDaddy.

Plus, company telephone and fax numbers must have a listing on ListYourself.net.

Additionally, the company telephone number should be toll-free (800 exchange or the like).

A company will also need a bank account devoted strictly to it, and it must have all of the licenses essential for operating.

Learn more here and get started toward building business credit attached to your company’s EIN and not your SSN.

Start a New Business in Arizona – Dealing with the IRS

Visit the Internal Revenue Service website and obtain an EIN for the small business. They’re free of charge. Select a business entity such as corporation, LLC, etc.

A business can start off as a sole proprietor. But they will most likely want to change to a kind of corporation or an LLC.

This is in order to reduce risk. And it will take full advantage of tax benefits.

A business entity will matter when it pertains to taxes and liability in case of a lawsuit. A sole proprietorship means the business owner is it when it comes to liability and tax obligations. No one else is responsible.

Sole Proprietors Take Note

If you run a business as a sole proprietor, then at the very least be sure to file for a DBA. This is ‘doing business as’ status.

If you do not, then your personal name is the same as the small business name. Because of this, you can end up being directly liable for all company debts.

Additionally, per the IRS, using this structure there is a 1 in 7 chance of an IRS audit. There is a 1 in 50 probability for corporations! Steer clear of confusion and substantially lower the chances of an Internal Revenue Service audit at the same time.

Start a New Business in Arizona – Starting Off the Business Credit Reporting Process

Begin at the D&B website and get a free D-U-N-S number. A D-U-N-S number is how D&B gets a small business into their system, to generate a PAYDEX score. If there is no D-U-N-S number, then there is no record and no PAYDEX score.

Once in D&B’s system, search Equifax and Experian’s websites for the business. You can do this at fastcs.wpengine.com/reports. If there is a record with them, check it for correctness and completeness. If there are no records with them, go to the next step in the process.

In this manner, Experian and Equifax will have activity to report on.

Vendor Credit Tier

First you must build trade lines that report. This is also known as the vendor credit tier. Then you’ll have an established credit profile, and you’ll get a business credit score.

And with an established business credit profile and score you can begin to get credit in the retail and cash credit tiers.

These types of accounts often tend to be for the things bought all the time, like marketing materials, shipping boxes, outdoor work wear, ink and toner, and office furniture.

But first of all, what is trade credit? These trade lines are credit issuers who will give you starter credit when you have none now. Terms are typically Net 30, instead of revolving.

Therefore, if you get approval for $1,000 in vendor credit and use all of it, you will need to pay that money back in a set term, like within 30 days on a Net 30 account.

Details

Net 30 accounts must be paid in full within 30 days. 60 accounts need to be paid in full within 60 days. Compared to with revolving accounts, you have a set time when you have to pay back what you borrowed or the credit you used.

To begin your business credit profile properly, you should get approval for vendor accounts that report to the business credit reporting agencies. As soon as that’s done, you can then use the credit.

Then repay what you used, and the account is on report to Dun & Bradstreet, Experian, or Equifax.

Vendor Credit Tier – It Makes Sense

Not every vendor can help like true starter credit can. These are merchants that will grant an approval with nominal effort. You also need them to be reporting to one or more of the big three CRAs: Dun & Bradstreet, Equifax, and Experian.

You want 5 to 8 of these to move onto the next step, which is the retail credit tier. But you may need to apply more than one time to these vendors. So, this is to demonstrate you are trustworthy and will pay punctually.

Retail Credit Tier

Once there are 5 to 8 or more vendor trade accounts reporting to at least one of the CRAs, then move onto the retail credit tier. These are service providers which include Office Depot and Staples.

Only use your Social Security Number and date of birth on these applications for verification purposes. For credit checks and guarantees, use the company’s EIN on these credit applications.

One instance is Lowe’s. They report to D&B, Equifax and Business Experian. They want to see a D-U-N-S and a PAYDEX score of 78 or better.

Fleet Credit Tier

Are there 8 to 10 accounts reporting? Then move to the fleet credit tier. These are businesses like BP and Conoco. Use this credit to buy fuel, and to fix, and maintain vehicles. Only use your Social Security Number and date of birth on these applications for verification purposes. For credit checks and guarantees, make sure to apply using the small business’s EIN.

One such example is Shell. They report to D&B and Business Experian. They want to see a PAYDEX Score of 78 or more and a 411 small business phone listing.

Shell might say they want a particular amount of time in business or profits. But if you already have adequate vendor accounts, that won’t be necessary. And you can still get an approval.

Learn more here and get started toward building business credit attached to your company’s EIN and not your SSN.

Cash Credit Tier

Have you been sensibly handling the credit you’ve gotten up to this point? Then move to the cash credit tier. These are service providers such as Visa and MasterCard. Just use your SSN and date of birth on these applications for verification purposes. For credit checks and guarantees, use your EIN instead.

One example is the Fuelman MasterCard. They report to D&B and Equifax Business. They need to see a PAYDEX Score of 78 or better. And they also want you to have 10 trade lines reporting on your D&B report.

Plus, they want to see a $10,000 high credit limit reporting on your D&B report (other account reporting).

Additionally, they want you to have an established business.

These are companies such as Walmart and Dell, and also Home Depot, BP, and Racetrac. These are usually MasterCard credit cards. If you have 14 trade accounts reporting, then these are feasible.

Start a New Business in Arizona – Monitor Your Business Credit

Know what is happening with your credit. Make certain it is being reported and fix any mistakes as soon as possible. Get in the practice of checking credit reports and digging into the particulars, and not just the scores.

We can help you monitor business credit at Experian and D&B for only $24/month. See: fastcs.wpengine.com/monitoring.

Update Your Information

Update the details if there are inaccuracies or the relevant information is incomplete.

Start a New Business in Arizona – Fix Your Business Credit

So, what’s all this monitoring for? It’s to challenge any inaccuracies in your records. Mistakes in your credit report(s) can be corrected. But the CRAs typically want you to dispute in a particular way.

Disputes

Disputing credit report mistakes typically means you send a paper letter with duplicates of any evidence of payment with it. These are documents like receipts and cancelled checks. Never mail the originals. Always mail copies and retain the originals.

Fixing credit report mistakes also means you specifically spell out any charges you dispute. Make your dispute letter as clear as possible. Be specific about the issues with your report. Use certified mail so that you will have proof that you sent in your dispute.

A Word about Business Credit Building

Always use credit smartly! Never borrow more than what you can pay off. Track balances and deadlines for payments. Paying off on schedule and fully will do more to increase business credit scores than almost anything else.

Building business credit pays off. Good business credit scores help a company get loans. Your lending institution knows the company can pay its debts. They understand the small business is bona fide.

The business’s EIN connects to high scores and lenders won’t feel the need to require a personal guarantee.

Business credit is an asset which can help your small business for many years to come. Learn more here and get started toward establishing business credit.

Learn more here and get started toward opening a new business in Arizona.

Want to start a new business someplace else in America? Then check out our handy guide to starting a business in any state in the country.

Arizona’s Response to COVID-19

Here’s what Arizona is doing about the novel coronavirus. On March 11, Governor Doug Ducey declared a state of emergency. The Arizona Department of Health Services (ADHS) was allowed ADHS to waive licensing requirements to provide healthcare officials with assistance in delivering services during times of heightened demand. The Governor has communicated with the SBA, seeking an Economic Injury Disaster Loan declaration. 

See: azgovernor.gov/governor/news/2020/03/governor-doug-ducey-issues-declaration-emergency-executive-order-combat