1. Choose a business name for your sole proprietorship and check for availability.
- Please see our section on choosing and checking the availability of a name for your small business, as well as our section on the trademark law aspects of choosing a name. You can check the availability of your name at the Office of the Secretary of State of Arizona.
- You are not legally required to register your business name with Arizona state authorities, but doing so is an accepted business practice. See the Office of the Secretary of State’s Tradename Registration Guidelines for more information on how to register your business name.
- Although you are not required to do so, you should consider registering your business name as a federal and/or state trademark. Please see the Trademark for Business Naming section for details.
2. Obtain any required local licenses.
- Please see the general section for details.
3. Determine what tax and other regulatory obligations your sole proprietorship has, and take care of any necessary registrations.
- If you have an employee or employees, you need to apply for an Employment Identification Number (EIN) from the IRS. You can apply for an EIN online. You may apply for an EIN even if you have no employees. Doing so may make it easier to open a bank account and reduce your risk of identity theft. There is no filing fee.
- If you have an employee or employees to whom you page wages for services performed in Arizona, you must register complete the Joint Tax Application for employer withholding and unemployment insurance. You can do this via the Arizona Department of Revenue website (click on “License a New Business”), which you can also use to register for other business taxes (if applicable).
- Whenever you hire an employee in Arizona, you must inform both the IRS and the State of Arizona. You can find details of all the necessary steps, including verifying work eligibility and withholding allowances, on the Hiring Employees section of the IRS website. You can find state-level information about reporting new hires at the Arizona New Hire Reporting website.
- All employers who regularly hire workers in their customary business must carry workers' compensation insurance. A.R.S. § 23-902. The Industrial Commission of Arizona administers the Arizona workers’ compensation program. For more information, see their Employers’ Frequently Asked Questions.
- Arizona law requires employers in Arizona to use the “E-Verify” system (a free Web-based service offered by the federal Department of Homeland Security) to verify the employment authorization of all new employees hired after December 31, 2007. A.R.S. 23-214.
- As a small business owner or employer, there may be other informational returns that you have to file annually or semi-annually with the IRS. For more information, take a look at the IRS Guide To Information Returns.
4. Open a bank account for your business.
- It is a good idea to keep your business's finances separate from your personal accounts. A good way to do this early on is by opening a bank account for your business. The bank will probably require your Social Security Number or EIN and a copy of your business name filing, although you may not need any documentation if your business's name includes your surname. (Here is an example of what banks may require.)