Arkansas and Illinois, two states known for their unique landscapes and distinct qualities, offer different environments for businesses looking to form a Limited Liability Company (LLC).
In this side-by-side comparison, we will examine the key factors that entrepreneurs and business owners should consider when choosing between
Arkansas and Illinois for their LLC formation. From legal requirements and taxation policies to business opportunities and regulatory frameworks,
Exploring the similarities and differences between these states will help navigate the decision-making process effectively.
Arkansas vs. Illinois LLC
Arkansas and Illinois have different requirements and processes for forming and registering LLCs.
Arkansas allows for oral, written, or implied operating agreements, while Illinois requires a written agreement with specific details.
Each state has its own tax laws and compliance obligations for LLCs, including franchise taxes in Arkansas and annual filing fees based on paid-in capital in Illinois.
| Arkansas LLC | Illinois LLC |
|---|---|
| Arkansas charges a formation fee of $45. | Illinois has a higher formation fee of $150. |
| It is subject to an annual franchise tax of 0.3% of net income, with a minimum of $150. | It is subject to an annual franchise tax with a minimum of $50. |
| Arkansas is required to file an annual report with a fee of $150. | Illinois LLCs are required to file an annual report with a fee of $75. |
| It has a progressive income tax structure, ranging from 0.9% to 6.9% based on income levels. | It imposes a flat income tax rate of 4.95% for individuals. |
| Arkansas levies a flat corporate income tax rate of 5.3% on C corporations. | Illinois has a corporate income tax rate of 4.95%. |
| It has a state sales tax rate of 6.5%, with additional local rates depending on the jurisdiction. | It has a state sales tax rate of 6.25%, with additional local rates varying by location. |
| Property tax rates in Arkansas vary by local jurisdiction. | Property tax rates in Illinois also vary based on the specific locality. |
| Arkansas allows LLCs to have oral, written, or implied operating agreements. | Illinois requires LLCs to have a written operating agreement as a mandatory requirement. |
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
Filing the Articles of Organization with the Arkansas Secretary of State requires a fee, which is $45.
Arkansas LLCs are required to have a registered agent who accepts legal documents on behalf of the company.
This service may involve an annual fee, typically ranging from $100 to $300, depending on the provider.
LLCs in Arkansas are subject to an annual franchise tax based on their net income. The tax rate is currently 0.3% of net income, with a minimum tax of $150. The maximum tax is $1,000.
Illinois LLC
Filing the Articles of Organization with the Illinois Secretary of State incurs a filing fee, the fee was $150.
Similar to Arkansas, Illinois LLCs must have a registered agent. The annual fee for a registered agent can range from $100 to $300, depending on the provider.
Illinois LLCs must file an annual report with the Secretary of State and pay a filing fee. The fee was $75.
Related Posts:
- Arkansas LLC: Cost Breakdown, Pros and Cons, Requirements
- Illinois LLC: Cost Breakdown, Pros and Cons, Requirements
Similarities Between Arkansas and Illinois LLC
Both Arkansas and Illinois offer limited liability protection to LLC owners. This means that the personal assets of the owners are generally protected from the debts and liabilities of the LLC.
In both states, LLCs are recognized as separate legal entities distinct from their owners.
This provides the LLC with its own legal standing, allowing it to enter into contracts, own property, and conduct business activities.
Both Arkansas and Illinois provide flexibility in the management structure of LLCs.
Owners, known as members, have the freedom to choose whether the LLC will be member-managed or manager-managed.
Member-managed LLCs allow all members to participate in the decision-making and management of the company,
While manager-managed LLCs designate specific individuals or a group to handle day-to-day operations.
Both states follow the federal tax treatment of LLCs, known as pass-through taxation.
This means that the LLC itself does not pay income taxes at the entity level. Instead, the profits and losses “pass-through”
To the individual members, who report them on their personal tax returns.
Arkansas and Illinois have laws in place to protect the privacy of LLC owners.
The names and addresses of the members and managers are generally not publicly disclosed on the formation documents and annual reports filed with the state.
Additional Resources:
Steps to Form LLC in Arkansas
Choose a name for your LLC that complies with Arkansas naming requirements.
Check the availability of your chosen LLC name through the Arkansas Secretary of State’s website.
File Articles of Organization with the Arkansas Secretary of State, providing necessary information such as the LLC name, registered agent, and members’ names and addresses.
Pay the required filing fee, which was $45.
Consider drafting and executing an operating agreement, though it is not required by law.
Obtain any required licenses or permits for your specific business activities.
Obtain an Employer Identification Number (EIN) from the Internal Revenue Service (IRS) if you plan to hire employees or have multiple members.
Comply with any additional state and local requirements, such as registering for state taxes and obtaining local business licenses.
Steps to Form LLC in Illinois
Choose a name for your LLC that complies with Illinois naming requirements.
Check the availability of your chosen LLC name through the Illinois Secretary of State’s website.
Prepare and file Articles of Organization with the Illinois Secretary of State, including information such as the LLC name, registered agent, and purpose of the LLC.
Pay the required filing fee, which was $150.
Draft and execute a written operating agreement that outlines the rights and responsibilities of the LLC members.
Obtain an Employer Identification Number (EIN) from the Internal Revenue Service (IRS) if you plan to hire employees or have multiple members.
Consider registering for state taxes and other applicable permits or licenses based on your specific business activities.
File an Annual Report with the Illinois Secretary of State each year and pay the associated filing fee, which was $75.
Feature Comparisons Between Arkansas LLC vs. Illinois LLC
Formation Process: The process of forming an LLC in Arkansas and Illinois generally follows similar steps, including choosing a name, filing formation documents, and paying filing fees.
However, specific requirements and fees may differ between the two states.
Liability Protection: Both Arkansas and Illinois provide limited liability protection to LLC owners.
This means that the personal assets of the owners are typically shielded from the debts and liabilities of the LLC.
Operating Agreement: While an operating agreement is not legally required in either state, it is highly recommended to have one.
Arkansas allows for oral, written, or implied operating agreements, while Illinois mandates a written agreement with specific provisions.
Management Structure: Both states offer flexibility in the management structure of LLCs.
Owners can choose between member-managed or manager-managed LLCs, depending on their preferences and the desired level of involvement in the company’s operations.
Compliance Requirements: Both states have compliance obligations for LLCs, such as filing annual reports and maintaining good standing.
However, specific filing fees and reporting requirements may differ, so it’s important to stay updated with the respective state’s regulations.
Privacy Protection: Arkansas and Illinois have laws in place to protect the privacy of LLC owners.
Typically, the names and addresses of members and managers are not publicly disclosed on formation documents or annual reports.
Business Environment
Arkansas and Illinois have different economic profiles. Arkansas has a diverse economy with key sectors such as agriculture, manufacturing, retail trade, and healthcare.
Illinois, on the other hand, has a more diverse and robust economy, with sectors including finance, manufacturing, technology, transportation, and professional services.
The economic conditions, market opportunities, and industry presence can vary between the two states.
Illinois has a larger population and a more significant consumer market compared to Arkansas.
The larger population in Illinois can provide more potential customers and business opportunities, especially in metropolitan areas such as Chicago.
However, Arkansas may offer a more localized market with specific demographic characteristics that could be advantageous for certain types of businesses.
Both states have their own regulatory frameworks governing business operations. This includes licensing requirements, tax laws, employment regulations, and other business-specific regulations.
The regulatory environment may differ in terms of complexity, costs, and ease of compliance.
It’s essential to consider these factors and understand the specific requirements for your industry and business activities in each state.
Illinois generally has more extensive infrastructure, including networks, and utilities, and access to and major markets.
The state also offers a range of business support services, networking opportunities, and resources for entrepreneurs.
Arkansas, while more rural in nature, still provides essential infrastructure and resources for businesses, particularly in certain regions.
The availability of skilled labor and talent can vary between the two states.
Illinois, with its larger population and diverse economy, may offer a broader pool of skilled professionals and specialized talent across various industries.
Arkansas, may have a more localized talent pool with specific strengths in industries such as agriculture, manufacturing, and healthcare.
Read Also:
- 26 Best Business Ideas in Arkansas
- 32 Best Business Ideas in Illinois
- Best States to Form LLC For Non-resident Individuals
Arkansas vs. Illinois Taxes
Both Arkansas and Illinois impose income taxes on individuals and businesses.
Arkansas has a progressive income tax system with rates ranging from 0.9% to 6.9% for individuals. Illinois has a flat income tax rate of 4.95% for individuals.
Arkansas levies a corporate income tax on C corporations at a flat rate of 5.3%. In Illinois, C corporations are subject to a corporate income tax rate of 4.95%.
It’s important to note that Illinois also imposes a Personal Property Replacement Tax (PPRT) of 2.5% on C corporations.
Arkansas has a state sales tax rate of 6.5%, but local jurisdictions can add additional sales taxes, resulting in varying rates across the state.
In Illinois, the state sales tax rate is 6.25%, and local municipalities can impose additional sales taxes, leading to varying rates as well.
Property tax rates can vary within both states, as they are determined at the local level.
However, both Arkansas and Illinois have property tax exemptions and assessment limitations in place to provide some relief for certain properties or homeowners.
Both states may have additional taxes and fees, such as excise taxes on specific goods and services, franchise taxes, and local taxes.
These can vary depending on the nature of the business and the location within the state.
Flexibility in Rules and Regulations
Arkansas
Arkansas provides flexibility in the operating agreement requirements for LLCs.
While it is highly recommended to have a written operating agreement, Arkansas allows for oral, written, or implied agreements.
Arkansas imposes a franchise tax on LLCs based on their net income.
The tax rate is 0.3% of net income, with a minimum tax of $150 and a maximum tax of $1,000. This tax structure provides some flexibility as it is based on income rather than a fixed rate.
LLCs in Arkansas are required to file an annual report with the Arkansas Secretary of State,
Providing basic company information. However, the reporting requirements are relatively straightforward compared to some other states.
Illinois
Illinois requires LLCs to have a written operating agreement.
This provides clarity and structure to the internal operations of the LLC, ensuring that members understand their rights and responsibilities.
Illinois LLC Act provides flexibility in the content of the operating agreement.
Members have the freedom to customize the agreement to suit their specific needs and preferences, including provisions related to management, profit and loss allocation, member rights, and more.
Both Arkansas and Illinois offer strong limited liability protection to LLC owners, shielding their personal assets from the debts and liabilities of the LLC.
Key Differences Between Arkansas and Illinois- An Overview
