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Starting a limited liability company (LLC) in Arkansas can have a range of benefits. In addition to the general asset protection and income tax advantages, Arkansas offers some unique incentives to open and run your business in their state.
For example, Arkansas offers tax credits for new businesses. Advantage Arkansas, for instance, gives corporate income tax credits to startup companies in Arkansas once they create new full-time jobs. The tax credit is up to 4% of a new employee’s payroll, and the credit can be claimed for up to 5 years. Unused credits can be carried forward for up to 9 years.
Arkansas also provides tax incentives for expansion projects of up to 10% for some businesses through “ArkPlus.” This program requires companies to meet specific payroll and investment requirements, but a 10% discount on an investment in Arkansas can result in huge tax savings. Sales and Use Tax Credits for new startups are also available.
These are just quick examples of the available incentives and tax savings for those who want to do business in Arkansas. To take advantage of these benefits, you have to get your business off the ground—and an LLC formation in Arkansas can be a great way to get that process started.
Starting an LLC in Arkansas requires just 6 steps:
You can learn more about each of these steps by reviewing the details below.
Every business in Arkansas has the exclusive right to use the name of its business as soon as it is marked by the Secretary of State. However, a corporate filing with the Arkansas Secretary of State does not necessarily mean that your use of the name is allowed. If the name violates someone else’s trade name or trademark, it can cause significant legal problems.
In general, names are required to be unique. You can do a business entity name search on the Arkansas Secretary of State’s website to ensure that no other company has a name that is the same or similar to what you want to use.
In general, every LLC’s name in Arkansas must meet the following naming qualifications:
In Arkansas, you can reserve a business name with the Secretary of State. The reservation lasts for 120 days, and for LLCs and LPs, it can be renewed once. Corporate name reservations cannot be renewed.
You can reserve a business name in Arkansas online. You just need to include the entity name and the information related to the person or entity who is reserving the name (such as an entity name or individual’s name).
Applications for reservation of a limited liability company name are $22.50 if you complete the reservation online. If you submit a paper form to reserve the name, the fee is $25.00.
The name registration can be transferred to another person or entity as long as you provide a signed Notice of Transfer to the Secretary of State before the business is registered. The fee for the transfer is $22.50 if you complete the process online or $25.00 if you mail in a paper form for the Notice of Transfer.
You can also choose to get a DBA (“doing business as”) or fictitious name in Arkansas. This step is not required, but if you choose to operate under another name, you should file an application for a fictitious name for LLC.
You can complete the application process online. The fees are $22.50 if you go through the process online or $25.00 if you mail in an application.
Keep in mind that if you want to file this application online, you have to have a registered business name first because you will be required to submit a filing number to relate to the original business name.
The State of Arkansas does not have a formal trademark registration process. Instead, once you create your business, you have the exclusive right to use that business’s name. Essentially, the name of your business is automatically “trademarked” once it is registered in Arkansas.
You can register your trademark at the federal level if you would like, but it is not required. If you plan to operate in more than one state or you want to protect your business name throughout the country, registering your business name for trademark protection might be a good idea.
To start the federal trademark process, you should search to ensure that your business name is unique. This process is not the same as the search you did in Arkansas; it searches all trademarks registered in the United States. If you know that you will want to conduct business in more than one state (or online), checking the Trademark Electronic Search System (TESS) before you name your business is advisable.
Once you have made all the key decisions regarding your LLC’s name, you should draft and file the document that actually creates your LLC—the Certificate of Organization. Some states refer to this document as the Articles of Organization, but Arkansas uses the name “Certificate of Organization” for LLCs.
Drafting and filing your Certificate of Organization marks the beginning of your LLC’s corporate existence in Arkansas. The original Certificate of Organization must be signed by all organizers, and the Secretary of State requires that the original be filed (instead of a copy).
Filing your Certificate of Organization in Arkansas is only $45.00 if you submit an electronic filing or $50.00 if you submit a paper filing. These filing fees are some of the lowest in the country for LLCs.
If you decide to reserve your name ahead of time (which is not required), getting your LLC started in Arkansas can cost as little as $67.50 if you do all of your filing and applications online.
If your LLC is already formed in another state and you want to do business in Arkansas, you need to submit an Application for a Certificate of Registration of Foreign Limited Liability Company. The fee for filing that document is $270.00 if done online or $300.00 if completed on paper and via mail.
Every Certificate of Organization filed in Arkansas is required to have very basic information about your new LLC. This information includes:
It is important to note that the principal place of business for the LLC cannot be a PO Box. It has to be a physical address. In addition, the entity you are forming cannot be listed as the registered agent. The entity also cannot be its own organizer.
You have the option to enter a delayed effective date for the LLC to be formed if you complete the application process online. The delayed date can be no more than 90 days from the date you file the application.
The easiest way to file your Certificate of Organization is to use online filing. However, you can file via mail as well. You should send your completed Certificate of Organization to:
Arkansas Secretary of State
1401 W Capital, Suite 250
Little Rock, AR 72201
Be sure to include the $50.00 filing fee with the mailed application.
A registered agent must be designated when you file your Certificate of Organization, so you should choose your registered agent as part of the filing process.
Your registered agent is someone who will accept official service on behalf of your LLC. They also often get mail from the State of Arkansas regarding updates that affect your LLC. This person (or entity) will receive formal service of process in the event that you get sued or have to receive legal notice for any other reason.
Any registered agent in Arkansas must meet the following qualifications:
A PO Box can never be listed as the registered agent’s address.
You can also change your initial registered agent by filing a notice of change of registered agent information form. There is no fee to change your registered agent.
You can be your own registered agent in Arkansas. However, you may not want to fulfill this role and request that another entity becomes your registered agent for you. You will often have to pay a fee for registered agent services, but there are some benefits to having someone else be your registered agent for you.
For example, you might not want to be personally served with a lawsuit if your company gets sued. Being served can be embarrassing, especially if it occurs at work or in front of family and friends. In addition, your registered agent needs to be available during normal business hours, which might not always be possible if you work somewhere other than at your LLC’s location during the day or have other obligations aside from running and maintaining your LLC.
An operating agreement is a corporate document that sets out how the LLC will be run. It includes the rights and responsibilities of all the members of the LLC. It will usually address matters such as:
Having an in-depth and thorough operating agreement can help you avoid conflicts in the future. It also allows all owners to be on the same page about “big picture” items that can lead to disputes, such as income and management.
Having an operating agreement is not required in Arkansas, but it is a good idea. Going through this process now with all the members can address a lot of conflicts before they become a real problem for your LLC.
In most situations, you are not legally required to have an operating agreement for your LLC.
However, if you have a series LLC, you are required to have an operating agreement. Specifically, you have to have a master operating agreement that, at a minimum, provides:
Even though you need to have a master operating agreement, it does not need to be filed with the State.
Arkansas does not have any specific requirements regarding operating agreements for LLCs.
However, LLCs in Arkansas are not required to file an annual report. You must instead file and pay an annual Franchise Tax. Every LLC in Arkansas is required to pay a minimum $150 franchise tax payment. This tax is due each year by May 1.
Arkansas LLCs must also file informational returns with the IRS and Arkansas Income Tax Division each year.
If your LLC has more than one member, you are required to obtain an EIN. Even if you are the only member, it is still a good idea to get an EIN. An EIN is used as the tax identification number for your LLC. It is used to file taxes (if you opt to have your LLC taxed as a corporation) and provide tax information to your employees.
Your EIN also allows you to take other actions that might not be available otherwise, including:
It also adds to your business’s credibility as a whole, both with your employees and your vendors.
You can apply online for an EIN. You can also apply via fax. Getting an EIN is free.
Once you have a federal EIN, you do not need to do anything else at the state level to get an EIN; your EIN will be used for both state and federal income tax purposes. In general, once you apply, you will get your EIN in about 4 business days.
Tax requirements for your new LLC can be a bit overwhelming. However, understanding the basics of this process and having some simple guidelines on what you can expect can be very helpful.
You must pay both state and federal taxes on the income that your LLC generates. However, how you report your income, file your taxes, and the tax rate you pay will depend on whether you choose to have the LLC taxed as a partnership (or sole proprietorship if there is only one member) or as a corporation.
You are also taxed on any income you receive from the LLC as an owner. Filing your taxes as a partnership/sole proprietorship can decrease the overall income tax burden you may face in some cases.
Tax preparation as an LLC can be complicated, so having an experienced tax professional help you with this process is a good idea.
Taxpayers, including LLCs, use the same filing status they use at the federal level in Arkansas. For LLCs, that means if you elect to be taxed as a partnership or sole proprietorship at the federal level, that is the same tax filing status you will use in Arkansas. If you have this type of tax treatment, you will usually use Schedule C to report your income from the LLC, and the rate that applies to this income will be the same as your normal income tax rate.
Arkansas uses a graduated individual income tax similar to the federal tax rate. It ranges from 2 to 5.5%. Corporations are also taxed at 1.0 to 5.9%.
Arkansas has a 6.5% state sales tax, which includes the sale of physical personal property and some services. Many local areas also have local sales taxes. The maximum local sales tax is 6.125%. The average combined state and local sales tax is 9.47%.
You must have a separate sales and use tax number in Arkansas, and you can apply for that number with the Arkansas Department of Finance and Administration. This is not the same number as your EIN. There is a nonrefundable fee of $50 required for the application.
Sales taxes are paid monthly, so it is important that you track and collect these taxes regularly. You can only report sales tax less if you sell goods or services valued at $25 or less per month.
Arkansas does not have a separate self-employment tax. Instead, the federal rate of 15.3% for self-employment income (with half as a deduction) applies to those who are self-employed in Arkansas. This 15.3% makes up what would otherwise be the employer’s portion of Social Security and Medicare taxes.
Many self-employed taxpayers need to pay quarterly payments to account for estimated taxes in Arkansas. These are in addition to any quarterly payments you make to the IRS for federal taxes.
Filing quarterly payments starts with filing an Estimated Tax for Individuals (Declaration), which provides what you believe your tax obligation will be for the coming year. You mail this declaration to:
Department of Finance and Administration
Income Tax Section
PO Box 9941
Little Rock, AR 72203
You can also make quarterly payments online or by mail.
If you have employees working for your LLC, you will be required to withhold payroll taxes. These taxes include both federal and state obligations.
At the state level, Arkansas requires that you withhold between 0.3% and 14.2% of the first $10,000 of wages paid to each employee. This amount accounts for fees related to unemployment insurance. However, if you are a new employer, you might be able to just withhold a flat 3.1% as you get started.
You must also withhold state income taxes (which vary between 2% and 5.5%), depending on the employee’s income. Individuals who make over $79,300 will find themselves in the highest income tax bracket in Arkansas.
The State of Arkansas Department of Finance and Administration provides a helpful chart for employers to determine how much income should be withheld for employees based on regular income tax tables. You can use the percentage to determine what portion of their wages should be held back and provided to the appropriate taxing authorities. You can also review specific instructions about payroll withholding.
LLCs are required to file and pay a flat-rate franchise tax every year of $150.00. This tax is imposed annually and must be submitted with the Annual Franchise Tax Report.
You might assume that getting your LLC started is the hard part, and it might be, but you still have more work to do to maintain your LLC in Arkansas. Keeping up with maintenance requirements is vital because failing to keep up with various maintenance can lead to the administrative dissolution of your LLC if you are not careful.
This dissolution can threaten your status as a separate corporate entity, which undermines any asset protection goals you may have. Reinstating your LLC also requires filing some additional forms with the Arkansas Secretary of State, and there may be fees or fines you have to address as well.
Below is a quick description of various actions you might want to take right away after forming your new LLC.
Having a separate bank account for your business will help you keep a close eye on your finances. Income and expenses are easier to track when they are all going into and coming out of the same account.
Having a separate bank account for your business will also help you keep up with the legal requirements necessary to maintain your LLC as a separate legal entity. Taking this type of action will help maintain the limited personal liability that LLCs are often formed to create.
You need to have a good handle on whatever ongoing requirements you may have to maintain your LLC in Arkansas. You already know that you have to file your Annual Franchise Tax Report and pay your $150.00 fee, but your individual industry might also require that you take additional steps to comply with local and state laws.
Be sure that you fully understand whatever requirements there may be for your specific business type or industry.
Tracking your LLC’s finances is vitally important. It helps you keep up with reporting and tax obligations, and it gives you a better picture of whether your business as a whole is doing well—and making money.
It is a good idea to consult with a tax advisor, lawyer, or accountant (or perhaps all 3) to help you understand and maintain your LLC’s finances. They can also give you suggestions on tax savings and give you information on other rules and regulations you need to comply with as an Arkansas LLC.
Many Arkansas companies are required to get specific licenses and permits to be able to sell certain types of goods and services. For example, salons are required to have and maintain a license from the Department of Health to provide salon services. Those licenses must be renewed every 2 years.
Examples of other licenses required in Arkansas include those that apply to the following individuals or professions:
You should check licensing requirements long before you start your LLC. Some professional licenses require certain levels of training, education, or testing to obtain.
Local areas might also require that you have a business license to conduct any type of business in that area. These licenses will generally require a fee from $50 to over $1,000, depending on the type of business and where it is located. If you have more than one location, you might need multiple business licenses.
Permits are similar to licenses, but they often focus on a physical location. Examples of required permits include:
Local governments are more likely to require permits, so check with your local area about the required permits for your physical location and type of business.
The Arkansas Small Business and Technology Development Center is a good resource to research what licenses or permits may be required for your new business.
This portion of our website is for informational purposes only. Tailor Brands is not a law firm, and none of the information on this website constitutes or is intended to convey legal advice. All statements, opinions, recommendations, and conclusions are solely the expression of the author and provided on an as-is basis. Accordingly, Tailor Brands is not responsible for the information and/or its accuracy or completeness.