Startup founders who have just launched their business are usually focused squarely on developing their MVP and are not quite at the point where they need office space or want to take on the expense of an actual lease. These business owners will frequently ask our Phoenix startup law practice if they can use a home address (usually that of the company owner or a shareholder) as the known place of business for their Arizona corporation?
First of all, the usual caveats. This post deals strictly with Arizona law and requirements. You should always examine the applicable law of your state of formation or consult an attorney practicing there. For purposes of this article, we also are focusing on Arizona domestic corporations.
Now, let’s take a look at what Arizona requires.
Known Place of Business (KPB) in Arizona
§10-501 of the Arizona Revised Statutes is the specific law dealing with the “known place of business” of an Arizona corporation. It’s pretty short, so I encourage anyone looking to start a business here in Arizona to give it a read-through.
The statute tells us that,
Each corporation shall continuously maintain in this state both:
- A known place of business that may be the address of its statutory agent.
- A statutory agent:
Don’t forget Your Statutory Agent
A.R.S. §10-501 goes on to explain that the required statutory agent of the corporation may be any of the following:
(a) An individual who resides in this state.
(b) A domestic corporation formed under this title.
(c) A foreign corporation authorized to transact business in this state.
(d) A limited liability company formed under Title 29.
(e) A limited liability company authorized to transact business in this state.
Therefore, when you form up as an Arizona corporation, you must at least designate and “continuously maintain” a known place of business in Arizona. Thus, as a founder, technically speaking if your residence or dwelling is located within the State, then, yes, it would technically meet the KPB requirements of Arizona law.
KPB as Home Address = Not The Best Idea
However, leaving aside the practical, “search engine optimization” considerations for your new business (a big concern of at least one startup owner recently), being able to show up in Google’s “map pack”, etc., having your business address as your residential address is not always ideal. For one thing, if (as was the case with a recent founder) you are a woman who lives alone (and also happens to have a very public-facing, social-oriented startup), then there are the obvious personal safety and privacy concerns.
Next, from the legal perspective, your homeowners insurance policy (and possibly your homeowners association rules and regulations) likely have some restrictions on operating a business out of your home. Sure, you can say, “Hey, everyone does it…”, and you might be right. However, “everyone does it” isn’t exactly binding legal precedent; the last thing you want is for your homeowners policy to invalidate your policy or deny coverage based upon a policy technicality, or subject yourself to possible HOA fines, or both!
Lastly, there is the “corporate formalities” problem. I have discussed the importance of corporate formalities ad nauseum in other blog posts, so I won’t touch on them here. Let’s just say that having your business KPB be the same as your personal residence isn’t helpful if you ever have to argue to a judge or jury that your corporation is its own separate entity apart from you, its owner, and not just your “alter-ego”.
So, an actual, physical business address location is the ideal way to satisfy the statutory requirement, as well as some of the practical considerations discussed above. However, especially for new companies in “lean startup” mode, this is not always practical or financially feasible.
Next Best Choice: Statutory Agent Address
Fortunately, A.R.S. §10-501 provides Arizona corporation owners with a bit of a break of sorts, permitting the KPB for the corporation to be the same as that of its appointed statutory agent. Assuming your designated statutory agent for the corporation that is located within the State and meets at least one of the criteria outlined in subparts 2(a) through (e), then your statutory agent’s address can be your startup corporation’s KPB.
The bottom line: if you’re a smaller Arizona startup that does not have, need, or cannot afford to have a physical office as your KPB right now, one possible solution is to see if your designated statutory agent is okay with your using their address as your KPB as a stopgap solution. There are plenty of statutory agent
mills, er, I mean services, out there that offer not only the standard flat-fee statutory agent services but also (for an additional monthly or annual fee) to use their Arizona location as the KPB of your corporation, as well.
Image courtesy of Vlada Karpovich via Pexels
Ben Bhandhusavee is the Managing Attorney for BHANDLAW, PLLC, a startup, technology, and e-commerce law practice advising founders and management teams on company startup, corporate and technology transactions, e-commerce, as well as Internet privacy concerns. The firm serves corporate and individual clients throughout Arizona, the United States, and internationally. Our offices are conveniently located along the Camelback corridor in Phoenix’s financial district. For more information about our Company Startup practice, feel free to reach out using the contact form on the right or call us at (602) 222-5542 to schedule a meeting. Connect with Ben on LinkedIn or Avvo.