Legal Question in Business Law in Arizona

No, they can't require you to form a corporation. It is obvious that they are trying to hire you as an independent contractor, not as an employee of the company, to avoid the employer's tax burden, workman's compensation coverage and other benefits to which an employee would be entitled. They don't have to hire you either. If they want to treat you like an employee, but pay you as an independent contractor, they may find that you are in fact an employee and the IRS will treat you as such.

It is not as simple as that to convert you from an employee to an independent contractor. There are other factors including their control of your hours and tools and whether or not you have any other "clients" apart from them. Having your own separate business, which is what they are trying to create with the corporation, is only one factor.