Are you considering starting a business in either Arkansas or Ohio? One of the first steps is deciding which type of legal entity to form.
Limited Liability Companies (LLCs) are becoming an increasingly popular choice due to their flexibility and liability protection benefits.
Here we will provide a side-by-side comparison of
Arkansas vs. Ohio LLCs, highlighting the key differences in company formation, operating agreements, management structures, taxes, and asset protection.
Arkansas vs. Ohio LLC
Arkansas LLCs require filing Articles of Organization with the Arkansas Secretary of State, while Ohio LLCs require filing Articles of Organization with the Ohio Secretary of State.
Arkansas LLCs are subject to the state’s income tax, with income passed through to individual members. Ohio imposes a Commercial Activity Tax (CAT) based on gross receipts.
Although not required by law, having an operating agreement is recommended for both Arkansas and Ohio LLCs to establish guidelines and protect members’ interests.
| Arkansas LLC | Ohio LLC |
|---|---|
| In Arkansas, LLCs are formed by filing Articles of Organization with the Arkansas Secretary of State. | In Ohio, LLCs are formed by filing Articles of Organization with the Ohio Secretary of State. |
| It charges a filing fee of $45 for the formation of an LLC. | It charges a filing fee of $99 for the formation of an LLC. |
| Arkansas imposes an annual franchise tax on LLCs, with the minimum tax being $150 and the maximum tax reaching $1,000. | Ohio does not impose an annual franchise tax on LLCs. |
| It has a progressive individual income tax system with five tax brackets. The top marginal tax rate is 5.9%. | It has a progressive individual income tax system with seven tax brackets. The top marginal tax rate is 4.99%. |
| Arkansas has a state sales tax rate of 6.5%, and additional local sales taxes may apply depending on the jurisdiction. | Ohio has a state sales tax rate of 5.75%, and additional local sales taxes may also apply based on the jurisdiction. |
| Property taxes in Arkansas are primarily assessed and levied at the local level, with rates varying based on the county and property type. | Property taxes in Ohio are primarily assessed and levied at the local level, with rates varying depending on the county and specific location. |
| Arkansas has a flat corporate income tax rate of 5.3%. | Ohio has a flat corporate income tax rate of 3.99%. |
Cost Breakdown of The Two
You may use our free LLC cost calculator by state to find out filing fees, tax percentages, income taxes, and more.
Arkansas LLC
The fee for filing the Articles of Organization in Arkansas is $45.
LLCs in Arkansas are required to have a registered agent, and the cost of hiring a registered agent can range from $50 to $300 per year.
Arkansas imposes an annual franchise tax on LLCs, which is based on the LLC’s net worth or capital. The minimum tax is $150, and the maximum tax is $1,000.
Ohio LLC
The fee for filing the Articles of Organization in Ohio is $99.
Similar to Arkansas, LLCs in Ohio are required to have a registered agent, and the cost can range from $50 to $300 per year.
Ohio LLCs are not required to file an annual report to maintain active status and the filing fee.
Related Posts:
- Arkansas LLC: Cost Breakdown, Pros and Cons, Requirements
- Ohio LLC: Cost Breakdown, pros and cons, requirements
Similarities Between Arkansas and Ohio LLC
Both Arkansas and Ohio LLCs provide limited liability protection to their members.
This means that the personal assets of the members are generally protected from the debts and liabilities of the LLC. Members’ liability is typically limited to their investment in the company.
Both Arkansas and Ohio allow LLCs to have flexible management structures.
LLCs can be member-managed, where all members participate in the management and decision-making, or they can be manager-managed, where designated managers handle the day-to-day operations.
Both Arkansas and Ohio LLCs are typically taxed as pass-through entities.
This means that the income or losses of the LLC are passed through to the individual members, who report them on their personal tax returns. This avoids double taxation at the entity level.
Both states have relatively straightforward compliance requirements for LLCs.
While there are filing fees and annual reporting obligations, the ongoing administrative obligations are generally less burdensome compared to other business entities such as corporations.
Both Arkansas and Ohio do not require LLCs to have an operating agreement, but it is highly recommended to have one.
The operating agreement is a legal document that outlines the internal workings, ownership structure, and management of the LLC.
It provides flexibility for members to customize the governance and operational rules of the company.
Additional Resources:
Steps to Form LLC in Arkansas
Choose a name for your LLC that complies with Arkansas naming requirements.
File Articles of Organization with the Arkansas Secretary of State, providing necessary information such as LLC name, registered agent, and purpose of the company.
Pay the required filing fee, which is currently $45.
Consider drafting an operating agreement, although it is not required by law.
Obtain any required business licenses or permits at the local or state level.
Obtain an Employer Identification Number (EIN) from the IRS if you have employees or plan to have one.
Comply with ongoing requirements, such as filing annual franchise tax reports and maintaining proper records.
Steps to Form LLC in Ohio
Choose a name for your LLC that complies with Ohio naming requirements and is distinguishable from existing entity names.
File Articles of Organization with the Ohio Secretary of State, providing necessary information such as LLC name, statutory agent, and principal place of business.
Pay the required filing fee, which is currently $99.
Consider drafting an operating agreement, although it is not required by law.
Obtain any required business licenses or permits at the local or state level.
Obtain an Employer Identification Number (EIN) from the IRS if you have employees or plan to have one.
Feature Comparisons Between Arkansas LLC vs. Ohio LLC
Formation Requirements: Both Arkansas and Ohio require filing Articles of Organization with their respective Secretary of State offices to form an LLC.
However, specific information and filing fees may vary between the two states.
Name Availability: Both states have naming requirements, such as ensuring the LLC name is unique and does not infringe on existing entity names.
Checking name availability can be done through the respective Secretary of State websites.
Limited Liability Protection: Both Arkansas and Ohio LLCs provide limited liability protection, shielding the personal assets of members from the debts and liabilities of the LLC.
Taxation: Both states generally tax LLCs as pass-through entities, meaning the income or losses are passed through to the individual members and reported on their personal tax returns.
However, tax rates, additional taxes (such as franchise tax in Arkansas or commercial activity tax in Ohio), and deductions may differ.
Management Structure: Both Arkansas and Ohio allow LLCs to have either member-managed or manager-managed structures.
Members participate in decision-making and management in member-managed LLCs, while designated managers handle operations in manager-managed LLCs.
Business Environment
Both Arkansas and Ohio have diverse economies, but they differ in their key industries.
Arkansas has a strong presence in the agriculture, manufacturing, transportation, and healthcare sectors.
Ohio has a more diverse economy with significant contributions from manufacturing, financial services, healthcare, technology, and research institutions.
The cost of doing business can vary between the two states. Factors such as taxes, utility costs, real estate expenses, and labor costs may differ.
It’s advisable to research and compare the specific costs relevant to your industry and location within each state.
Both Arkansas and Ohio offer various business incentives and support programs to encourage entrepreneurship and economic growth.
These incentives can include tax credits, grants, loans, and workforce training programs. Researching and exploring the specific incentives and support available in each state can be beneficial.
The regulatory environment, including licensing requirements, permits, and compliance obligations, can differ between Arkansas and Ohio.
Understanding the specific regulatory frameworks in each state is important to ensure compliance and smooth operations.
The geographic location and infrastructure of each state may provide different advantages in terms of access to markets and customers.
Consider factors such as transportation networks, proximity to major cities, and trade relationships when evaluating market opportunities.
Read Also:
Arkansas vs. Ohio Taxes
Arkansas Taxes
Firstly, Arkansas imposes a state income tax on individuals and businesses, including LLCs. The individual income tax rates range from 2% to 5.9%, with different tax brackets based on income levels.
The state sales tax rate in Arkansas is currently 6.5%. However, local jurisdictions may impose additional sales taxes, resulting in varying total sales tax rates across the state.
Property taxes in Arkansas are primarily assessed and levied at the local level. The rates can vary depending on the county and the type of property.
Ohio Taxes
Ohio also imposes a state income tax on individuals and businesses, including LLCs.
The individual income tax rates in Ohio are progressive and range from 0.495% to 4.9%, with several tax brackets based on income levels.
The state sales tax rate in Ohio is currently 5.75%. Like Arkansas, additional local sales taxes may apply in various jurisdictions, resulting in different total sales tax rates across the state.
Property taxes in Ohio are primarily assessed and levied at the local level. The rates can vary significantly depending on the county and the specific location within the county.
Flexibility in Rules and Regulations
Operating Agreement: Both states allow LLCs to create operating agreements,
Which are legal documents that outline the internal workings, management structure, and member rights of the company.
LLCs have the flexibility to customize their operating agreement to suit their specific needs and goals.
While an operating agreement is not required by law in either state, having one is highly recommended.
Management Structure: LLCs in both Arkansas and Ohio have the flexibility to choose between a member-managed or manager-managed structure.
In a member-managed LLC, all members participate in the management and decision-making of the company.
In a manager-managed LLC, designated managers handle the day-to-day operations, while the members have a more passive role.
Business Activities: Both states provide flexibility in terms of the types of business activities an LLC can engage in.
As long as the activities are lawful and comply with applicable regulations and licensing requirements, LLCs in
Arkansas and Ohio have the freedom to pursue a wide range of business ventures.
Licensing and Permits: While there are regulatory requirements for certain types of businesses and industries,
Both states aim to provide a streamlined and efficient process for obtaining necessary licenses and permits.
The specific requirements and processes may vary depending on the nature of the business, but generally, there is a degree of flexibility in meeting these regulatory obligations.
Key Differences Between Arkansas and Ohio- An Overview
