Arizona vs. Ohio LLC: Choosing the Right State for Your Business

Are you considering starting a business in either Arizona 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 Arizona vs. Ohio LLCs, highlighting the key differences in company formation, operating agreements, management structures, taxes, and asset protection.

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Arizona vs. Ohio LLC

The process and requirements for forming an LLC differ between Arizona and Ohio.

Both Arizona and Ohio allow LLCs to have an operating agreement, which outlines internal operations and member responsibilities.

LLCs in Arizona and Ohio are not subject to an annual LLC tax based on income.

Arizona LLC	Ohio LLC
Arizona requires a $50 filing fee for formation.	Ohio requires a $99 filing fee for formation.
It is not subject to an annual LLC tax based on income.	It does not impose a flat annual filing fee for LLCs.
Hiring a registered agent in Arizona typically costs between $100 and $300 per year.	Hiring a registered agent in Ohio typically costs between $50 and $200 per year.
Arizona imposes a flat income tax rate of 2.5%.	Ohio has a progressive income tax system with seven tax brackets, from 0% to 4.99%.
It has a state sales tax rate of 6.5%, with additional local taxes.	It has a state sales tax rate of 5.75%, with additional local taxes.
Arizona generally has relatively low property tax rates compared to many other states.	Ohio’s property tax rates are moderate compared to the national average.
It imposes a flat corporate income tax rate of 4.54% on corporate profits.	It has a progressive corporate income tax system with four tax brackets, from 4.79% to 7.99%.

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.

Arizona LLC

The filing fee for the Articles of Organization with the Arizona Corporation Commission is $50.

An Arizona LLC is required to have a registered agent with a physical address in the state. The cost of hiring a registered agent can vary, but it typically ranges from $100 to $300 per year.

Arizona does not impose an annual LLC tax based on the LLC’s income.

Ohio LLC

The filing fee for the Articles of Organization with the Ohio Secretary of State is $99.

Ohio LLC needs to have a statutory agent with a physical address in the state. The cost of hiring a statutory agent can vary, but it typically ranges from $50 to $200 per year.

Ohio does not impose a flat annual filing fee for LLCs.

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Similarities Between Arizona and Ohio LLC

Both Arizona and Ohio offer limited liability protection to LLC owners.

This means that the personal assets of the LLC members are generally protected from the debts and liabilities of the business.

In case of legal actions or financial obligations, the liability is typically limited to the assets of the LLC itself.

Both states allow for flexible ownership and management structures in LLCs. LLCs can have one or more members, and members can be individuals, corporations, or other entities.

Additionally, LLCs have the flexibility to choose how they are managed, whether it’s by the members themselves (member-managed) or by designated managers (manager-managed).

Both Arizona and Ohio treat LLCs as pass-through entities for federal tax purposes. This means that the LLC itself does not pay federal income tax.

Instead, the profits and losses of the LLC “pass-through” to the individual members, who report them on their personal tax returns.

This avoids the issue of double taxation that can occur in certain types of corporations.

While not required by law, both Arizona and Ohio allow LLCs to have an operating agreement.

An operating agreement is a document that outlines the internal operations, management structure, member rights, and responsibilities, profit distribution, and other important provisions of the LLC.

Having an operating agreement in place is highly recommended as it helps establish clear guidelines and avoid potential conflicts among members.

Both states allow LLCs to have perpetual existence, meaning they can continue their operations indefinitely unless dissolved or terminated according to the laws and provisions outlined in their respective states.

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Steps to Form LLC in Arizona

Choose a name for your LLC that complies with Arizona naming requirements.

Conduct a name availability search with the Arizona Corporation Commission to ensure your desired name is not already in use.

Prepare and file the Articles of Organization with the Arizona Corporation Commission.

Pay the required filing fee, which is currently $50.

Appoint a registered agent with a physical address in Arizona.

Create an Operating Agreement that outlines the internal workings of your LLC.

Obtain any necessary licenses or permits for your specific business activities.

Comply with any additional state and local requirements.

Obtain an Employer Identification Number (EIN) from the IRS if you have employees or plan to have a multi-member LLC.

Steps to Form LLC in Ohio

Choose a name for your LLC that complies with Ohio naming requirements.

Conduct a name availability search with the Ohio Secretary of State to ensure your desired name is not already in use.

Prepare and file the Articles of Organization with the Ohio Secretary of State.

Pay the required filing fee, which is currently $99.

Designate a statutory agent with a physical address in Ohio.

Create an Operating Agreement that outlines the internal workings of your LLC.

Obtain any necessary licenses or permits for your specific business activities.

Comply with any additional state and local requirements.

Obtain an Employer Identification Number (EIN) from the IRS if you have employees or plan to have a multi-member LLC.

Feature Comparisons Between Arizona LLC vs. Ohio LLC

Formation Process: Both Arizona and Ohio require filing the Articles of Organization with the respective state authorities.

The specific forms and fees may vary slightly, but the general process is similar.

Limited Liability Protection: Both Arizona and Ohio offer limited liability protection to LLC owners, meaning that the personal assets of the members are generally shielded from the debts and liabilities of the business.

Management Structure: Both states allow for flexible management structures in LLCs. LLCs can be member-managed, where all members participate in the management, or manager-managed, where designated managers handle the day-to-day operations.

Operating Agreement: Both Arizona and Ohio allow LLCs to have an operating agreement.

While it is not required by law, having an operating agreement is highly recommended as it outlines the internal operations, member rights and responsibilities, profit distribution, and other important provisions of the LLC.

Taxation: Both states treat LLCs as pass-through entities for federal tax purposes, meaning the LLC itself does not pay federal income tax.

Instead, the profits and losses “pass-through” to the individual members’ personal tax returns. However, the specific state-level taxation and fees may differ.

Business Environment

Both Arizona and Ohio have diverse economies with various industries and sectors. Arizona has a strong presence in sectors such as healthcare, manufacturing, tourism, and technology.

Ohio has a diverse economy with strengths in manufacturing, automotive, aerospace, healthcare, and logistics.

Both states have implemented policies to attract and support businesses. They offer various incentives, tax credits, and programs to promote economic growth and entrepreneurship.

It is important to research and understand the specific incentives and support programs available in each state.

While both states have regulations in place to govern businesses, the specific regulatory environment may differ.

It is advisable to review the regulatory requirements and compliance obligations specific to your industry and business activities in each state.

Both Arizona and Ohio have skilled workforces and access to educational institutions that provide a pipeline of talent.

The availability and cost of labor may vary depending on the specific location within each state.

Both states have active business communities and support organizations such as chambers of commerce, industry associations, and business development centers that provide networking opportunities, resources, and support for businesses.

The cost of living and business expenses can vary between Arizona and Ohio. It is important to consider factors such as real estate costs, taxes, utilities, and other overhead expenses when evaluating the overall cost of doing business in each state.

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Arizona vs. Ohio Taxes

Arizona Taxes

Arizona imposes a flat income tax rate of 2.5%.

The state sales tax rate in Arizona is currently 6.5%. However, local jurisdictions can impose additional sales taxes, resulting in varying total sales tax rates across the state.

Arizona has relatively low property tax rates compared to many other states. The exact property tax rates can vary depending on the county and local jurisdictions.

Arizona imposes a flat corporate income tax rate of 4.9% on corporate profits.

Ohio Taxes

Ohio has a progressive income tax system with seven tax brackets, from 0% to 4.99%.

The state sales tax rate in Ohio is currently 5.75%. Similarly to Arizona, local jurisdictions can impose additional sales taxes, resulting in varying total sales tax rates.

Ohio’s property tax rates vary across different counties and local jurisdictions. Generally, the property tax rates in Ohio are moderate compared to the national average.

Ohio has a progressive corporate income tax system with four tax brackets, from 4.79% to 7.99%.

It’s important to note that tax laws can change over time, and there may be additional taxes or exemptions that apply to specific industries or situations.

It’s recommended to consult with a tax professional or advisor to understand the specific tax implications for your business and personal circumstances in Arizona or Ohio.

Flexibility in Rules and Regulations

Both Arizona and Ohio offer various business entity options, including LLCs, corporations, partnerships, and sole proprietorships.

This provides flexibility for entrepreneurs to choose the business structure that best suits their needs and goals.

The formation requirements for business entities can vary between states.

While both states have specific filing and registration processes, the specific details and paperwork may differ. It’s important to research and understand the specific formation requirements in each state.

Both Arizona and Ohio allow LLCs to have operating agreements.

These agreements provide flexibility for LLC members to define their own internal rules and procedures, including management structure, decision-making processes, profit distribution, and more.

Both states have regulations and requirements for obtaining business licenses and permits, which may vary depending on the industry and location.

The flexibility in licensing and permits can differ based on the specific requirements of each state and local jurisdiction.

Both states have certain compliance obligations for businesses, such as annual reports, tax filings, and other regulatory requirements.

The flexibility in compliance obligations may differ based on the specific regulations and reporting systems in each state.

Key Differences Between Arizona and Ohio- An Overview

Differences between Arizona and Ohio LLC