In this side-by-side comparison, we will explore the key differences and similarities between Arizona LLCs and North Dakota LLCs.
Both states offer a favorable business environment for entrepreneurs and provide distinct benefits and considerations for forming and operating a limited liability company.
By examining the legal requirements, taxation policies, and other relevant factors, we aim to provide a comprehensive overview to help individuals make informed decisions when choosing between Arizona and North Dakota as their preferred jurisdiction for establishing an LLC.
Arizona vs. North Dakota LLC
Arizona
Annual filing fee: $50
State income tax: None
Sales tax: 5.6%
Unemployment insurance tax: 1.2%
Foreign qualification fee: $100
North Dakota
Annual filing fee: $135
State income tax: None
Sales tax: 5%
Unemployment insurance tax: 2.0%
Foreign qualification fee: $100
| Arizona LLC | North Dakota LLC |
|---|---|
| Filing Articles of Organization with the Arizona Secretary of State at a fee of $50. | Filing Articles of Organization with the North Dakota Secretary of State at a fee of $135. |
| Members enjoy limited liability protection, shielding personal assets from business debts. | Members benefit from limited liability protection, safeguarding personal assets from company liabilities. |
| Flexibility to choose between member-managed or manager-managed structures. | Offers the option to select a member-managed or manager-managed structure for the LLC. |
| Arizona imposes a flat corporate income tax rate of 4.9% on business profits. | Arizona has a state sales tax rate of 5.6%, which is levied on most retail sales of tangible goods. |
| The Arizona Corporation Commission (AZCC) doesn’t require an Annual Report (or fee) for an Arizona LLC. | The North Dakota LLC Annual Report fee is $50. |
| LLC names must include “Limited Liability Company” or an appropriate abbreviation like “LLC.” | Naming requirements mandate the inclusion of “Limited Liability Company” or an acceptable abbreviation such as “LLC.” |
| Although not legally required, having an operating agreement is highly recommended. | While not mandatory, it is advisable for LLCs to create an operating agreement outlining internal operations and member roles. |
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.
Arizona:
Initial filing fee: $50
Annual report fee: $45
North Dakota:
Initial filing fee: $135
Annual report fee: $50
These numbers represent the specific costs associated with establishing an LLC and fulfilling annual reporting requirements in each state.
It’s important to consider these figures when budgeting and comparing the financial implications of forming and maintaining an LLC in Arizona versus North Dakota.
Related Posts:
- Arizona LLC: Cost Breakdown, Pros and Cons, Requirements
- North Dakota LLC: Cost Breakdown, pros and cons, requirements
Similarities Between Arizona and North Dakota LLC
Limited Liability Protection: Both Arizona and North Dakota LLCs provide limited liability protection to their members.
This means that the personal assets of the LLC owners are generally protected from the company’s debts and liabilities.
Formation Process: Both states require filing the necessary formation documents, such as Articles of Organization, with the respective Secretary of State’s office to establish an LLC.
Operating Agreement: Although not mandatory in either state, it is highly recommended to have an operating agreement for an LLC in both Arizona and North Dakota.
This agreement outlines the internal operations, management structure, and member roles within the company.
Pass-through Taxation: Both states follow a pass-through taxation model, where the LLC itself does not pay income taxes.
Instead, profits and losses flow through to the individual members, who report them on their personal tax returns.
Annual Reporting: Both Arizona and North Dakota require LLCs to file annual reports with the Secretary of State’s office to ensure they have up-to-date information on the company’s status.
Additional Resources:
Steps to Form LLC in Arizona
Choose a Name: Select a unique name for your LLC that complies with Arizona’s naming requirements. The name should include the words “Limited Liability Company” or the abbreviation “LLC.”
Appoint a Statutory Agent: Designate a statutory agent, also known as a registered agent, who will receive legal and official documents on behalf of the LLC.
The agent must have a physical address in Arizona.
File Articles of Organization: Prepare and file the Articles of Organization with the Arizona Corporation Commission (ACC).
This document officially establishes your LLC and includes information such as the LLC’s name, statutory agent details, management structure, and purpose.
Create an Operating Agreement: Although not required by law in Arizona, it is recommended to create an operating agreement.
This document outlines the ownership, management, and operational procedures of your LLC.
It helps establish clear guidelines and prevent misunderstandings among members.
Obtain an EIN: If your LLC has multiple members or if you plan to hire employees, you’ll need to obtain an Employer Identification Number (EIN) from the Internal Revenue Service (IRS).
You can apply for an EIN online through the IRS website.
Comply with Tax and Regulatory Requirements: Register for state and local taxes, such as sales tax or employer withholding tax, if applicable.
Additionally, ensure compliance with any specific industry regulations or licenses that may apply to your business.
Annual Reports: Arizona LLCs are required to file an annual report with the ACC. The report includes basic information about your LLC and requires a filing fee.
Steps to Form LLC in North Dakota
Choose a Name: Select a unique name for your LLC that complies with North Dakota’s naming requirements.
The name must include the words “Limited Liability Company” or an appropriate abbreviation like “LLC.”
Appoint a Registered Agent: Designate a registered agent who will receive legal documents on behalf of your LLC in North Dakota. The registered agent must have a physical address in the state.
File Articles of Organization: Prepare and file the Articles of Organization with the North Dakota Secretary of State.
This document includes essential information about your LLC, such as its name, registered agent details, principal address, and duration.
Create an Operating Agreement: While not required by law, it is highly recommended to draft an operating agreement.
This document outlines the internal operations, management structure, and member rights and responsibilities.
Obtain an EIN: Obtain an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). This number is necessary for tax purposes and opening bank accounts.
File Annual Reports: North Dakota requires LLCs to file annual reports to maintain their good standing.
These reports update the state on changes in the company’s information and are typically due by November 15th each year.
Feature Comparisons Between Arizona LLC vs. North Dakot LLC
Formation Requirements: Both states require filing the necessary formation documents, such as Articles of Organization, with the respective Secretary of State’s office to establish an LLC.
The specific information and filing fees may vary.
Limited Liability Protection: Both Arizona and North Dakota LLCs provide limited liability protection to their members, safeguarding personal assets from the company’s debts and liabilities.
Management Structure: Both states allow for flexibility in choosing the management structure of an LLC.
Members can opt for a member-managed structure, where all members participate in decision-making, or a manager-managed structure, where a designated manager oversees operations.
Taxation: Both states follow a pass-through taxation model for LLCs.
This means that the LLC itself does not pay income taxes. Instead, profits and losses are passed through to the individual members, who report them on their personal tax returns.
Annual Reporting: Both Arizona and North Dakota require LLCs to file annual reports with the Secretary of State’s office.
These reports update the state on changes in the company’s information and are typically accompanied by a filing fee.
Naming Requirements: Each state has specific naming requirements for LLCs.
The names must be unique and include the appropriate designator, such as “Limited Liability Company” or “LLC.”
Operating Agreement: While not legally required in either state, it is highly recommended to have an operating agreement for an LLC.
This document outlines the internal operations, management structure, and member roles within the company.
Business Environment
Arizona:
Economic Diversity: Arizona boasts a diverse economy with thriving industries such as aerospace, technology, healthcare, tourism, and manufacturing.
This diversity provides opportunities for businesses across various sectors.
Entrepreneurial Culture: Arizona fosters an entrepreneurial spirit and is home to a vibrant startup ecosystem.
The state encourages innovation, offers support through business incubators and accelerators, and has a robust network of investors and mentors.
Population and Market: Arizona has a large and growing population, providing businesses with a substantial customer base.
The state’s proximity to major markets in California and the southwestern region of the United States offers additional opportunities for expansion.
North Dakota:
Energy and Agriculture: North Dakota has a strong economy driven by energy production, particularly oil and natural gas.
The state also has a thriving agriculture sector, with significant production of crops and livestock. Businesses related to these industries can find opportunities and support in North Dakota.
Pro-Business Policies: North Dakota has implemented pro-business policies, including business-friendly regulations and streamlined licensing processes.
The state aims to attract and retain businesses by creating a supportive and predictable environment.
Workforce Availability: North Dakota offers a relatively low unemployment rate and a workforce with a strong work ethic.
The state’s commitment to education and vocational training programs ensures a skilled labor pool for businesses.
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Arizona vs. North Dakota Taxes
Arizona:
Corporate Income Tax: Arizona imposes a flat corporate income tax rate of 4.9% on business profits.
This rate applies to both C-corporations and pass-through entities, such as LLCs, S-corporations, and partnerships.
Sales Tax: Arizona has a state sales tax rate of 5.6%, which is levied on most retail sales of tangible goods.
However, local governments can add their own sales tax, resulting in varying rates throughout the state. The combined sales tax rate can range from 5.6% to 11.2%.
Personal Income Tax: Arizona has a progressive income tax system with five tax brackets.
The rates range from 2.59% to 4.5%, based on income levels. Additionally, Arizona does not tax Social Security benefits.
North Dakota:
Corporate Income Tax: North Dakota imposes a corporate income tax on C-corporations, with a flat rate of 4.31% on net income.
Pass-through entities, such as LLCs, S-corporations, and partnerships, are not subject to a separate state-level corporate income tax.
Sales Tax: North Dakota has a state sales tax rate of 5%, which is applied to most retail sales of tangible goods.
Local governments can also add their own sales tax, leading to varying rates across the state. The combined sales tax rate can range from 5% to 8.5%.
Personal Income Tax: North Dakota has a progressive income tax system with five tax brackets.
The rates range from 1.1% to 2.9%, based on income levels. Social Security benefits and pension income are fully exempt from state income tax.
Flexibility in Rules and Regulations
Arizona:
Business-friendly Environment: Arizona is often considered to have a business-friendly environment with relatively lenient regulations.
The state aims to attract and support businesses by creating a favorable climate for entrepreneurship and economic growth.
Regulatory Flexibility: Arizona has implemented measures to streamline regulations and reduce bureaucratic barriers for businesses.
The state has taken steps to simplify licensing processes and improve the ease of doing business.
Labor Laws: Arizona has laws that offer some flexibility in terms of employment and labor regulations.
For example, the state allows for at-will employment, which provides flexibility in hiring and termination practices.
Zoning and Land Use: Arizona has zoning laws and regulations in place, but the level of flexibility may vary depending on the local jurisdiction.
Some areas may have more flexible zoning regulations that accommodate different types of businesses and land use.
North Dakota:
Pro-Business Policies: North Dakota has implemented pro-business policies, aiming to create a supportive and predictable environment for businesses.
The state has worked towards reducing regulatory burdens and encouraging economic development.
Streamlined Regulations: North Dakota has taken steps to streamline regulations and reduce administrative barriers for businesses.
The state offers online resources and assistance to help businesses navigate regulatory requirements efficiently.
Workforce Regulations: North Dakota has labor laws that provide some flexibility to employers.
For example, the state allows for at-will employment and has fewer restrictions on overtime and minimum wage compared to some other states.
Zoning and Land Use: Like Arizona, North Dakota has zoning laws and regulations that vary across different local jurisdictions.
The level of flexibility in zoning and land use regulations may depend on the specific location and its governing authorities.
Key Differences Between Arizona and North Dakota
