Starting a business in Arizona is an exciting venture, but before you dive in, it’s essential you secure the right business licenses so that you can operate legally in the state.

Unfortunately, this process isn’t always so clear-cut due to the lack of a general, universal business license. Instead, this means that several factors, like your business type, location, and the kind of products or services you plan to offer, will influence your exact licensing requirements.

In this article, we’ll guide you through the nuances of identifying which business licenses you’ll need, how you can obtain them, and the potential costs involved. Ready to take the next step?

Let’s begin!

Do I Need a Business License in Arizona

In Arizona, there isn’t a business license that works for every kind of business across the state. Instead, whether you’ll need a business license will depend on what kind of business you have, what goods or services it plans to offer, and where it’s located.

Type of Business

Below, we’ve detailed common ways in which your business type can dictate the licenses you’ll be required to obtain, as well as specific examples of these:

• Transaction Privilege Tax (TPT) Licenses: Any business selling products or services that are taxed under the state’s transaction privilege tax will need to apply for this tax license with the Arizona Department of Revenue before it can carry out any business activities that are subject to tax
• Regulatory (Professional/Special) Licensing and Permits: Certain specific professions must obtain licenses in order to conduct business. For example, medical professionals must obtain their licenses through the Arizona Medical Board, though the rules for these licenses can vary based on your industry and regulatory board
• Environmental Permits: The Arizona Department of Environmental Quality (ADEQ) provides water quality, air quality, and hazardous waste permits that businesses may be required to obtain if their activities threaten any of these aspects of the environment. The specific licenses you need will vary according to the exact nature of your business

However, this is not the only factor influencing the exact combination of licenses you’ll need — the location of your business within Arizona plays an important role as well.

Location

In this section, we’ve provided a succinct overview of the potential licenses and permits that your business may need due to local, state, and federal requirements:

• Local: Depending on your city and/or county, you may be required to obtain certain local licenses or permits in order to operate legitimately. The best way to find out which ones you’ll need in particular is by reaching out to your local commerce office, by using a specialized third-party service, or by working with a business attorney
• State: If you’re selling a product or offering a service that gets taxed, you’ll need to get a TPT license, which is also sometimes called a seller’s permit, through the Arizona Department of Revenue
• Federal: If you operate in an industry that’s federally regulated — such as broadcasting, aviation, alcohol, fish and wildlife, and pharmaceuticals — you may be required to obtain a federal license and/or permit for your business to operate legally

Since the exact permits and licenses your business will need are entirely unique to your situation, you’ll have to conduct thorough research into your own local, state and federal regulations to smoothly launch your business.

Alternatively, many entrepreneurs opt to leverage the expertise of third-party services to handle this on their behalf.

How to Get a Business License in Arizona

In order to get your business license(s) in Arizona, you will need to complete the following steps:

• Form Your Business
• Obtain an Employer Identification Number (EIN)
• Apply for the Required Licenses and Permits

Let’s take a look at each step in more detail below.

Step 1: Form Your Business

Before setting out to obtain a business license in Arizona, it’s pivotal that you first choose an appropriate structure for your business. Sole proprietorships, general partnerships, and corporations are all common choices, however it’s often seen as the most advantageous for small businesses in Arizona to register as a Limited Liability Company (LLC). Here are a few reasons for why:

• Limited Liability: Members are protected from personal liability for business debts, safeguarding personal assets
• Tax Benefits: LLCs typically enjoy a pass-through tax treatment, avoiding the double taxation that corporations are subjected to
• Management Flexibility: LLCs allow for flexibility in management structure, either being member-managed or manager-managed based on the preferences outlined in the certificate of formation
• Ease of Formation: With the Arizona Secretary of State providing forms that meet the minimum state law requirements and the option to file online, setting up an LLC is relatively straightforward

Many small business owners opt to avoid the tricky process of forming an LLC by instead leveraging the help of third-party LLC formation services.

Step 2: Obtain an EIN

The second step you’ll need to complete before applying for your business license is to obtain your EIN. This is a unique nine-digit number assigned by the Internal Revenue Service (IRS) to businesses in the United States so that their financial transactions can be identified and tracked.

An EIN is often necessitated when applying for various permits and licenses as it allows local and state governments to ensure your business is operating within the confines of the law. You can obtain it in a number of ways:

• Online: You can apply for your EIN on the IRS’s official website by using the EIN Assistant. You should be granted your EIN shortly after completing this application
• By Fax/Mail: After completing Form SS-4, you can apply for an EIN by submitting it to the IRS via mail or fax.
• By Phone: International applicants and businesses located outside US Territories are required to call the IRS at (267) 941-1099 to obtain their EIN — which they should receive during this call.

Note: If you are a sole proprietor, you will be able to use your Social Security Number (SSN) instead (as long as you do not have employees).

Step 3: Apply for Licenses and Permits

After settling on the appropriate structure for your business and initiating the application for your EIN, the next step is to focus on securing the necessary licenses and permits to operate legally within your locale and industry.

• Local Licenses: In Arizona, every city or county has distinct permits and licenses covering a variety of key areas, such as health, zoning, building, signage, and hazardous waste permits. Be sure to consult the local government of the city or county your business is based in to understand any local permits that your business may need.
• Statewide Licenses: In addition to local licenses, you’ll also need to worry about those managed at a state level. One of the most common statewide licenses in Arizona is the TPT license, which you can apply for using the Arizona Joint Tax Application (JT-1).
• Federal Licenses: While the federal government doesn’t mandate licenses for general business operations, if your business falls under any government-regulated category, such as agriculture, fishing, firearms, and alcohol sales, it may be required to obtain additional federal licenses or permits.

Note: The Arizona Commerce Authority has an Individual Cities/Towns List that contains detailed information on municipalities and their respective websites.

Step 4: Renewal of Licenses and Permits

The exact renewal requirements of your licenses will depend on which ones you hold, however most are typically valid for a period of one to three years. For example, a TPT license is valid for one calendar year, and must be renewed by January 1.

If you’re uncertain whether you need to renew any of your business’s licenses, we recommend reaching out to the agency that issued your business license for clarification.

Alternatively, due to how complicated each step of applying for and renewing business licenses is, you can use a third-party service (or a business attorney) instead.

How Much is a Business License in Arizona

In Arizona, working out the total cost for your business licenses can be kind of tough since there’s no standard license that fits all businesses. The actual amount you’ll end up paying mostly depends on the specific licenses your business requires, if any.

The TPT license, which is required by most businesses, generally only costs $12. However, fees can vary depending on the type of license in question and the location of your business because many cities have their own fees.

On top of this, you’ll also need to consider the total cost of the exact combination of licenses you require, which is unique to each business depending on its location and nature. To streamline the process of calculating how much it will cost, many business owners hire an expert to handle this process.