Arizona · LLC tax election
Arizona LLC: S corp or C corp?
Arizona uses flat rates, which makes the comparison unusually easy to run.
See Arizona at a glanceShort answer
In Arizona an S election usually beats a C corp for tax. Arizona's S corporation owes tax itself only on income taxed at the corporate level federally, while a C corp pays a flat 4.9%. Owners of an S corp are taxed at Arizona's flat 2.5% personal rate on passed-through income.
Last checked .Arizona at a glance
| Question | Arizona |
|---|---|
| S election recognized? | Yes, Arizona follows the federal election1 |
| Separate state form and deadline | No separate state form2 |
| Tax the S corp itself pays | Only on income taxed at the corporate level, such as built-in gains: 4.9%, minimum $50.3 |
| C corp rate and minimum | 4.9% flat4 |
| Entity tax on a default LLC | None for a default LLC5 |
| Personal income tax | Yes, on wages and pass-through income6 |
What is different about Arizona?
Arizona boils the choice down to three flat numbers. A C corporation pays 4.9% on Arizona taxable income. An individual pays a flat 2.5%. And an S corporation, recognized by Arizona the moment your federal election is valid, owes the greater of $50 or 4.9% only if it has income taxed at the corporate level on its federal Form 1120S, such as built-in gains. An LLC that makes the federal S election files Form 120S, and a disregarded single-member LLC is treated as a branch of its owner. The gap between 2.5% and 4.9% is the Arizona story: pass-through income is taxed at the lower rate, once.
Does Arizona recognize a federal S corp election?
Arizona recognizes your federal S election, and an LLC that makes a valid election files Arizona Form 120S. There is no separate state election form. The S corp owes tax itself, the greater of $50 or 4.9%, only if it has income taxed at the corporate level on its federal return. Otherwise income passes to you, and you pay Arizona's flat 2.5% personal rate. Arizona also lets S corporation shareholders consent to entity-level PTE tax, with a 2.5% rate in ADOR's 2025 instructions.
Does my LLC need a separate Arizona election or form?
Arizona has no separate S election form; a valid federal election means you file Form 120S.2
What does Arizona tax an S corp or LLC at the entity level?
Is a Arizona LLC taxed as a C corp ever better?
An Arizona C corporation pays a flat 4.9% of Arizona taxable income, per ADOR's 2025 forms. There is no graduated schedule. When the corporation pays you a dividend, you owe Arizona's flat 2.5% on it as personal income. So the combined Arizona cost of getting C corp profit into your pocket is higher than the S corp path, where the profit is taxed once at 2.5%.
Run your Arizona numbers
In Arizona the S election tends to pay once your profit is high enough that avoiding the 4.9% corporate tax outweighs payroll and filing costs. The Arizona costs of electing S are small: the $50 minimum applies only when the S corp has corporate-level federal income, and the personal rate is a flat 2.5%.
Result
How much would a Arizona LLC owner save as an S corp?
| Taxed as | At $80,000 profit | At $150,000 profit |
|---|---|---|
| Default LLC | $11,304self-employment tax $11,304 + Arizona LLC tax $0 | $21,194self-employment tax $21,194 + Arizona LLC tax $0 |
| S corp | $9,344payroll tax $7,344 + Arizona S corp tax $0 + $2,000 payroll and prep | $15,770payroll tax $13,770 + Arizona S corp tax $0 + $2,000 payroll and prep |
| C corp | $17,303payroll tax $7,344 + Arizona tax $1,568 + federal $6,391 + $2,000 payroll and prep | $30,693payroll tax $13,770 + Arizona tax $2,940 + federal $11,983 + $2,000 payroll and prep |
Assumes a 60% salary8 and a single filer. Income tax is left out. C corp dividends are taxed again. Arizona's S corp tax reaches only income taxed at the corporate level, such as built-in gains, so it is $0 here.
When is the Form 2553 deadline for a Arizona LLC, and what if I miss it?
Late relief: federal steps, deadline guide.
What to do next
How to start one, or have us form it from $123.75.
Registered agent $74.25/yr, annual report.
LLC vs S corp guide, election deadline, Form 2553 filed for $165.
More on Arizona: How to start a Arizona LLC · How to start a Arizona corporation · Arizona LLC cost · Arizona annual report · Annual report late fees by state
File the S-Corp Election for your Arizona LLC
We file Form 2553 for a flat $165.
Get the S-Corp ElectionCommon questions
Does Arizona recognize S corporations?
Yes. Corporations taxed as S corporations under Subchapter S must file Arizona Form 120S, and an LLC with a valid federal S election files it too. There is no separate Arizona election.
What is the Arizona corporate income tax rate?
4.9% of Arizona taxable income, according to ADOR's 2025 corporate instructions.
Does an Arizona S corporation pay tax itself?
Only on income taxed at the corporate level for federal purposes. In that case Arizona tax is the greater of $50 or 4.9%. Other income passes through to shareholders.
What is Arizona's individual income tax rate?
A flat 2.5%, as ADOR states: there are no tax tables for 2023 onward because of Arizona's flat tax rate of 2.5%.
What is Arizona's pass-through entity tax election?
S corporation shareholders may consent to have pass-through income taxed at the entity level. ADOR's 2025 instructions use a 2.5% PTE tax rate for this income.
Sources 9 links, checked Nov 6, 2026
- Arizona recognizes the federal S election; S corporations and LLCs that elect S status file Arizona Form 120S. azdor.gov, checked Nov 6, 2026
- Arizona has no separate S election form; a valid federal election means you file Form 120S. azdor.gov, checked Nov 6, 2026
- An Arizona S corporation owes the greater of $50 or 4.9% only if it has income taxed at the corporate level on its federal Form 1120S. azdor.gov, checked Nov 6, 2026
- An Arizona C corporation pays a flat 4.9% of Arizona taxable income (ADOR's 2025 forms). azdor.gov, checked Nov 6, 2026
- A disregarded single-member Arizona LLC is treated as a branch of its owner and owes no separate entity-level income tax. azdor.gov, checked Nov 6, 2026
- Arizona taxes individual income at a flat 2.5% rate. azdor.gov, checked Nov 6, 2026
- IRS: Form 1120 instructions, C corp rate irs.gov, checked Nov 6, 2026
- IRS: S corp reasonable compensation irs.gov, checked Nov 6, 2026
- IRS: Form 2553 instructions irs.gov, checked Nov 6, 2026
Last verified Nov 6, 2026.
This page explains the rules; it is not tax advice. Run your numbers with a CPA or enrolled agent before you elect.
Last verified Nov 6, 2026.