Arkansas vs. Tennessee LLC: A Side-by-Side Comparison

In the business world, choosing the right legal structure for a company is crucial, and two popular options are Limited Liability Companies (LLCs).

This article provides a concise side-by-side comparison of the key features and attributes of Arkansas LLCs and Tennessee LLCs.

Understanding the similarities and differences between these structures can help entrepreneurs and business owners make informed decisions tailored to their specific needs and aspirations.

Explore the following breakdown to gain valuable insights into the distinct regulations and advantages each state offers for establishing and running an LLC.

Arkansas vs. Tennessee LLC


State income tax: 4.7%

Sales tax: 6.5%

Property taxes: High

Ease of registering an LLC: Easy

Annual report requirement: No

Annual report fees: $150


Filing fee: $300

Annual report fee: $300

State sales tax: 7%

Foreign qualification fee: $200

Asset protection: Strong

Management structure: Flexible

Tax treatment: Pass-through

Arkansas LLCTennessee LLC
Formation costs may vary based on filing fees and additional services required for registration.Arkansas requires a filing fee of $50 to establish an LLC.Similar to Arkansas, formation costs depend on state filing fees and optional services selected during registration.Tennessee LLC Filing Fee is $300
Arkansas LLCs are subject to an annual franchise tax based on net worth. Arkansas imposes an annual franchise tax of $150 for LLCs.Tennessee LLCs require an annual franchise tax and an excise tax based on net earnings.Your filing fee is $300.
Arkansas LLCs do not have publication requirements during the formation process.Tennessee’s former publication requirements were repealed in 2021, making them no longer applicable for LLCs.
Arkansas LLCs must maintain a registered agent with a physical address in the state for legal documentation.Tennessee LLCs also require a registered agent for service of process and other communications.
Arkansas LLCs involve periodic reports and maintenance fees for compliance with state regulations.Tennessee LLCs require annual reports and other state filings to maintain good standing with the state.
Arkansas has a progressive income tax system with tax rates ranging from 1% to 4.7%Tennessee does not impose a state income tax on wages and salaries. However, it does tax certain types of income, such as interest and dividends, an average combined state and local sales tax rate of 9.55 percent.
Both states allow licensed professionals to form PLLCs, providing limited liability protection for their services.PLLCs in both Arkansas and Tennessee are specifically designed to protect professionals in various fields, such as doctors, lawyers, and accountants.

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.

Formation Costs:

Arkansas LLC: The formation costs for an Arkansas LLC typically include state filing fees,

Which can vary depending on the type of LLC and additional services you may require, such as expedited processing or name reservation fees.

Tennessee LLC: Similarly, forming a Tennessee LLC involves state filing fees, with costs varying based on the type of LLC and any optional services requested during the registration process.

Annual Fees and Taxes:

Arkansas LLC: In Arkansas, LLCs are subject to an annual franchise tax, which is based on the company’s net worth or its total property located within the state, whichever is higher.

Tennessee LLC: Tennessee imposes an annual state franchise tax and a separate excise tax based on the company’s net earnings.

Publication Requirements:

Arkansas LLC: Arkansas does not have a publication requirement for LLCs.

Tennessee LLC: Tennessee used to have a publication requirement, but it was repealed in 2021, making this no longer a consideration for LLC owners.

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Similarities Between Arkansas and Tennessee LLC

Limited Liability Protection: Both Arkansas and Tennessee LLCs offer limited liability protection to their members, shielding them from personal liability for the company’s debts and obligations.

This means that the members’ personal assets are generally protected from business-related lawsuits and financial liabilities.

Pass-Through Taxation: LLCs in both states are typically taxed as pass-through entities, which means that the business itself does not pay federal income taxes.

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

Flexible Management Structure: Both states allow for a flexible management structure within an LLC.

Members can choose to manage the business themselves (member-managed), or they can appoint managers to handle day-to-day operations (manager-managed).

Business Name Protection: In both Arkansas and Tennessee, registering an LLC provides some level of name protection.

Once the state approves the chosen business name during the formation process, other entities within the state cannot use an identical or deceptively similar name.

Renewal Requirements: Both states require LLCs to fulfill annual renewal or reporting obligations to maintain their good standing.

These requirements ensure that the state has updated information about the LLC’s activities and contact details.

Additional Resources:

Steps to Form LLC in Arkansas

Limited Liability Protection: Both Arkansas and Maryland provide 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.

Formation Process: The process of forming an LLC is generally similar in both Arkansas and Maryland.

It involves filing the necessary formation documents, such as Articles of Organization, with the respective state authorities and paying the required fees.

Registered Agent Requirement: Both states require LLCs to designate a registered agent.

A registered agent is an individual or entity responsible for receiving legal documents and official notices on behalf of the LLC.

The registered agent must have a physical address within the state.

Operating Agreement: While not legally required in either state, having an operating agreement is highly recommended for LLCs in both Arkansas and Maryland.

An operating agreement outlines the internal workings of the LLC, including ownership structure, management roles, decision-making processes, and profit distribution.

Compliance Obligations: Both states have compliance obligations that LLCs must meet. This typically includes filing annual reports and paying associated fees to maintain the

LLC’s good standing. Staying compliant with these requirements is crucial for the continued legal standing of the LLC.

Steps to Form LLC in Tennessee

Choose a Name for Your LLC: Select a unique and distinguishable name for your LLC that complies with Tennessee’s naming requirements.

The name must include the words “Limited Liability Company” or an abbreviation like “LLC.”

Appoint a Registered Agent: Designate a registered agent with a physical address in Tennessee to receive legal and official documents on behalf of the LLC.

File Articles of Organization: Prepare and file the Articles of Organization with the Tennessee Secretary of State. You can submit the filing online or by mail.

The articles include basic information about your LLC, such as its name, registered agent’s details, and principal place of business.

Obtain an Employer Identification Number (EIN): Apply for an EIN from the Internal Revenue Service (IRS).

This unique nine-digit number is necessary for tax purposes and is used to identify your LLC for federal tax filings.

Create an Operating Agreement: Although not required by Tennessee law, it is recommended to draft an operating agreement

That outlines the ownership, management structure, operating procedures of your LLC.

This document helps prevent misunderstandings among members and provides a clear framework for running the business.

Feature Comparisons Between Arkansas LLC vs. Tennessee LLC

Formation Costs:

Arkansas LLC: Formation costs can vary based on state filing fees and additional services required.

Tennessee LLC: Similar to Arkansas, the formation costs depend on state filing fees and optional services chosen.

Annual Fees and Taxes:

Arkansas LLC: Subject to an annual franchise tax based on net worth or property in the state.

Tennessee LLC: Requires an annual franchise tax and excise tax based on net earnings.

Publication Requirements:

Arkansas LLC: No publication requirements for LLC formation.

Tennessee LLC: Publication requirements were repealed no longer applicable.

Registered Agent Fees:

Arkansas LLC: Must maintain a registered agent with a physical address in the state.

Tennessee LLC: Similarly, requires a registered agent for service of process.

Business Environment

Economic Stability: A stable and growing economy fosters a favorable business environment, attracting investment and consumer spending.

Government Policies: Pro-business policies, supportive regulations, and tax incentives can stimulate business growth and entrepreneurship.

Infrastructure: Robust infrastructure, including transportation, communication, and utilities, facilitates business operations and distribution.

Legal System: A transparent and efficient legal system that upholds contract enforcement and intellectual property rights boosts investor confidence.

Workforce Quality: A skilled and educated workforce enhances productivity and innovation in the business sector.

Access to Capital: The availability of funding sources, such as venture capital, loans, and grants, enables business expansion and innovation.

Market Size and Demographics: A large and diverse market creates opportunities for businesses to target various customer segments.

Technology and Innovation: A supportive environment for research and development encourages technological advancements and competitiveness.

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Arkansas vs. Tennessee Taxes

Income Tax Rates:

Arkansas: Arkansas has a progressive income tax system with tax rates ranging from 1% to 4.7%.. The highest rate applies to taxable income above a certain threshold.

Tennessee: Tennessee does not impose a state income tax on wages and salaries.

However, it does tax certain types of income, such as interest and dividends, an average combined state and local sales tax rate of 9.55 percent.

Sales Tax Rates:

Arkansas: The statewide sales tax rate in Arkansas is 6.5%. However, local jurisdictions may add additional sales taxes, resulting in varying rates across the state.

Tennessee: Tennessee has a statewide sales tax rate of 7%, and local taxes may apply, leading to different rates in various areas.

Property Taxes:

Arkansas: Property taxes in Arkansas are relatively low compared to many other states. The rates vary by county and are typically assessed on the property’s appraised value.

Tennessee: Tennessee has relatively low property tax rates as well, with the rates varying by county and municipality.

The state does not levy property taxes on personal income or wages.

Flexibility in Rules and Regulations

Adaptation to Changing Needs: Flexible regulations can respond to emerging trends, technologies, and market demands, ensuring that businesses can evolve and remain competitive.

Streamlined Processes: Reduced bureaucratic hurdles and simplified procedures enable businesses to navigate regulatory requirements more efficiently.

Industry-Specific Regulations: Tailoring rules to suit the unique characteristics and challenges of different industries fosters targeted support and growth opportunities.

Incentives and Support: Offering incentives, grants, or tax breaks can encourage desired behaviors, such as investment in research and development or environmental sustainability.

Experimentation and Innovation: Flexible regulations can allow for pilot projects and experimentation, encouraging innovative approaches to problem-solving and business development.

Ease of Compliance: Clear, understandable, and consistent regulations facilitate compliance, reducing the risk of unintentional violations.

Business Startup and Growth: Flexible rules can encourage entrepreneurship and business formation by minimizing barriers to entry and facilitating expansion.

Balance Between Regulation and Freedom: Striking the right balance between regulation and freedom ensures protection for consumers.

The environment while allowing businesses to operate without unnecessary burdens.

Key Differences Between Arkansas and Tennessee

Differences between Arkansas and Tennessee LLC
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