Arizona, thank you. You gave us Steven Spielberg, Stevie Nicks, John McCain and Cesar Chaves. We gaze in awe at your Grand Canyon and Petrified Forest. We don’t know how to translate your state tree, the Palo Verde, but we love it anyway.
Your highways are mosaic-ed, you are decorated with more types of cacti than we know how to pronounce, and we don’t need to own galoshes to trek your fields. You’re awesome, Arizona.
Arizona is also a supportive and friendly environment in which to register a small escort business – heck, they even have some joint forms so you can reduce the paperwork headache! In this article you’ll find clear step-by-step advice on how to do just that. For more information on why it’s vitally important to register your business, refer to our article Don’t get busted for tax evasion: Why registering your escort business is the only option.
Step one: Define and describe your business
There are several kinds of business structures applicable for registering your escort business with the government, and picking the right one for you is important. For example, someone working completely as an independent escort and someone who wants to run an agency would file for different types of businesses. Ask yourself these questions to define what your business is / will be and under which structure you should register:
- How do I define my work? What is it, in essence, that I serve? Do I supply the connections between escorts and clients, or am I myself the escort and am providing the company?
- Am I the only one who will benefit monetarily from my business? If not, who else will and why are they collecting profits?
- Am I the only one who will manage my business – schedule clients, hire drivers etc.? If not, will it be another owner doing this or someone I employ?
- Will I be hiring regular employees to take calls, set up appointments, manage any office work on a regular basis etc., or will I maintain my business by myself?
- Will I be hiring independent consultants (freelance escorts) and, if so, how do I expect to manage and pay them?
- Who will fund costs such as buying advertisements in newspapers, renting an office or the cost of running a website?
- Would I ever want to brand my business name or logo?
- Who will be responsible for my business if I run into debt? Is this just me?
- Will I ever want to sell my business?
Write the answers to these questions down and your business model will start to take shape for you.
Another step in articulating your business is to write a one-sentence summary of what the business actually does. As an escort you’re registering a service you provide, rather than a product that you sell, and this service will need to be articulated. Having this readily on hand will save you time when filling out various forms. Make this unique to you from the questions you’ve answered above, along the lines of “We provide company to our clients in a social setting”.
For information on what terms you legally can and cannot use, refer to our article The fine legal line between escort and prostitute: some strategies for an escort to stay out of trouble.
Step two: Choose your business structure
Once you have a handle of what your business is and how it will be run, it’s time to pick out a business model. Below are four quick definitions of what it means to be one of the four business models that make sense for an escorting service: a sole proprietorship, a partnership, a corporation and an LLC.
- Sole Proprietorship: One person owns and operates the business, and is responsible for all profits and losses. Legally, there is no difference between your business and you. If you are just starting out and/or will be working and managing and collecting your fees alone, this is what you want.
- Partnership: Two or more people own and are responsible for the business. If you have a small group of close friends who will share contacts and the actual time spent with clients or will work with one person as a manager and you as the only escort, this is what you should choose. However, as you are equally responsible for losses and this structure requires more paperwork, it can be a risky investment.
- Corporation: The business is a legal entity owned by shareholders. While the shareholders may invest money and collect in profits, they are not responsible for losses or claiming personal bankruptcy if the business claims it. This model requires much more paperwork, and most likely the addition of an accountant and possibly a business lawyer as well. A corporation is definitely the way to go if you have been in business for a few years, juggle many consultants and clients, and want to expand and legitimize your work on a higher platform. If that’s not you, don’t become a corporation.
- Limited Liability Company (LLC): An LLC provides the liability insurance of a corporation with the tax efficiencies of a sole proprietorship or partnership. One or more owners are referred to as members. The taxes of the business are filed with the income taxes of the members, but they are not responsible for (most) company losses. If you have a small company involving a few close friends and want to expand to having a separate bank account and records slightly more independent than your own, an LLC is for you.
Step three: Create your name
Let’s pretend your name is “Jane Doe”. First, decide whether you simply want to call your business your name — “Jane Doe” — or take on a DBA name (‘doing business as’ name, also called an ‘assumed name’ or ‘trade name’).
With a sole proprietorship or partnership, you have the option of using your own name as your business name, and won’t be required to register your business name in Alaska. If you’re a corporation or LLC, you will have to take on a DBA name. If you’re required to or simply want to take on a DBA, have fun picking your company name.
Do you want to be brassy and devil-may-care? Pick something as straightforward as “Jane Doe Escort Service”. Want to be flirty and funny? “Jane Doe—The Company Company”. Feel like being a little more discreet and want to stay out of the limelight? Try something demure, like “Jane Doe Social Consulting”. Your name can be as simple or as flashy as you’d like, just make sure it’s honest to what you want your business to be. And keep in mind that escorting is a controversial issue in the United States. Do you want to push the envelope of acceptability or maintain a low profile?
Make sure the DBA name is not already being used in Arizona. You’ll have wasted time and money if you apply to register the name and it’s already been taken. A simple internet search and comb through the yellow pages will take care of this. Also know that you shouldn’t do business with a DBA name until the registration has been approved.
Your state has provided you with a nifty little search engine that can help you discover if your desired name is taken in Arizona.
For more information on DBA names and limitations in Arizona, go to AZsos.gov/business_services.
Step four: Register your business / business name
In Arizona you are not required to register your sole proprietorship as a business with the state, and will file with your personal taxes. However, it is common practice to register your name / DBA as a trade name with the state. For more information on if this is a good choice for your business, refer to our article Do I want to be a sole proprietor?.
To register your trade name in Arizona, you need to fill out a trade name application. The form contains basic information about what the business is, who owns it, where, and anyone else responsible. A $10 filing fee is due, and the registration will be complete in 2-3 weeks. Download the form from AZsos.gov.
If forming a partnership in Arizona, it must be a limited partnership. This means at least one person act as a general partner, running and maintaining the business, and at least one acts as a limited partner, being responsible for nothing but an investment. To register your partnership you need to fill out an lpcert97 form. It contains basic information such as the name, business, location and applicable dates of partnership creation, and must be signed by all the members. You can get more information at AZsos.gov/business_services/partnerships/.
To register your corporation in Arizona, you’ll need to know a few things. You’ll have to have a Board of Directors set, and their signatures at the ready to be signed on the articles. Once your corporation has been approved, you’ll need to publish copy of the document / announcement of your company within 60 days in a local or state newspaper. So this is a big step when going public with an escort service.
The Arizona Articles of Incorporation is a form that you can download at AZcc.gov/divisions/corporations. The document contains some helpful resources and a checklist of things to do before filing the form, as well as what you’ll have to attend to after you’ve been approved. There is a $60 application fee for this form, with an additional $35 if you want the process expedited.
In Arizona, you’ll need to file an Article of Organization form. You’ll need basic information, such as who your members are, what your business does, where it’s located etc. You can find this ll004 form and more information, including what other forms you’ll need to file throughout the process here. There is a $50 filing fee for this form, with an additional $35 if you want the process expedited.
More information on how to register your corporation or LLC in Arizona.
Step five: Get an Employer Tax Identification Number (EIN)
If you are a sole proprietor in Arizona, your EIN will be your own social security number, whether you do or do not register a DBA/trade name. But if you are a partnership, corporation or LLC or say YES to any of the following questions, you’ll have to apply for a new EIN.
- Do you have employees? This means anyone you pay regularly, such as a personal assistant, office manager, driver etc.
- Do you plan to open a bank account solely for the business? Will you be collecting money from clients and then using that money to pay escort or other employees (if you have any employees, you should have a separate bank account for this)?
- Do you operate your business as a corporation or a partnership?
- Do you file any of these tax returns: Employment, Excise, Alcohol, Tobacco, Firearms? If you hire employees, you’ll need to pay employment taxes. Other than that, as an escort service this answer is most likely no.
- Do you withhold taxes on income, other than wages, paid to a non-resident alien? Are any of your employees non-Americans?
- Do you have a Keogh plan? (A retirement plan you set up for yourself in the business)
- Are you involved with any of the following types of organizations? (I’m going to save you an explanation of what all of these mean, because you’ll most likely know if your business is involved with such, and the answer is probably no.)
- Trusts, except certain grantor-owned revocable trusts, IRAs, Exempt Organization Business Income Tax Returns
- Real estate mortgage investment conduits
- Non-profit organizations
- Farmers’ cooperatives
- Plan administrators
All application processes require only basic information: your legal name and contact information, a name and description of your business, the type of entity, your social security number, employees etc. And there is no fee.
- Online: This is the currently preferred way to obtain your EIN, and you’ll get the results immediately as soon as your business is approved without needing to fill out a separate SS-4. You have 15-minutes to complete the form. Go to IRS.gov to apply for an online EIN.
- By Mail: Fill out an SS-4 form, which you can obtain on IRS.gov. and mail to Internal Revenue Service, Attn: EIN Operations, Philadelphia, PA 19255. It takes about 4 weeks to get the EIN once your application has been processed.
- By Fax: Fill out and fax an SS-4 form to (859) 669-5760. If you include your fax number on the form, they’ll fax your EIN within 4 business days.
- By Phone: Call toll-free (800) 829-4933, 7am-10pm, Monday—Friday. An assignor will take your information over the phone and then directly process the application and give you your EIN.
Step six: Register for your Arizona state and local city taxes
There are a few basic types of taxes small businesses in Arizona may register for:
- Individual Income Tax: The state collects income tax on each person making a buck in Arizona. If you’re a sole proprietor, you’ll file your business profits along with your income tax, completed after you’ve filed your federal return.
- License and Registration Tax: If you have employees, you’ll file an Arizona Joint Tax Application (form JT-1) to cover Employer Withholding and Unemployment Insurance. This form helps you file for several on one application!
- Partnerships Tax Returns: Partnerships must file a 165 tax return form to determine what taxes are required of them. You can get this form at AZdor.gov.
- Corporate Income Taxes: If you are a corporation, you do need to pay income taxes, as well as employment taxes. This tax varies by level of your profits. More information can be found at AZ.gov.
- Self-Employment Taxes: If you own and operate your business and are not paid as an employee, you’ll need to file your own self-employment taxes for social security and Medicaid. You can download form 1040 and get more information at IRS.gov/formspubs.
You can file some taxes electronically and get more information at AZtaxes.gov.
Step seven: Get necessary licenses and permits
There is no one basic “business license” in Arizona, and chances are you won’t have to register any for your escort service. Because you most likely won’t have a storefront or need something like a health or sign permit, you’re probably good to go. However, you can search on your city’s website to see if there are local permits you may need to conduct business at AZcommerce.com.
Search for license and permit information in your region at Business.Gov.
More information on corporations and LLCs is available at The Arizona Corporate Commission.