Ensuring that your business is operating legally is one of the most important steps to take as a new business owner in Arkansas. After all, you want to make sure that once up and running, your business will thrive and not be bogged down in legal hurdles brought on from not getting it licensed properly from the jump.
Expenditures like licensing, permits and more are all part of the process of starting a business in Arkansas. This process can become a bit more confusing as there is no single statewide Arkansas business license. Instead, many businesses need a sales tax (seller’s) permit from the Arkansas Department of Finance and Administration (DFA), plus any local or industry licenses that apply.
In addition, businesses in many Arkansas cities and counties have to obtain a local license to operate legally. Thankfully, we have compiled a pathway through the process and answered some of your most pressing questions from the outset, such as how to know when you need one and how much it costs when starting a new business in the state.
Do you need a business license in Arkansas?
Arkansas doesn’t have a general state business license. Most businesses still need some type of license or permit, but the requirements vary significantly based on the business type and the city in which a business is operating.
Many Arkansas cities require a local business license, sometimes called a privilege license, and this can apply even to some nonprofits. Separately, if you form an LLC, corporation, or other business entity, you register it with the Arkansas Secretary of State. That registration creates your business, but it isn’t a business license.
Once you know your business location within the state of Arkansas, then you can contact the local government via their website to learn more about that specific city or county’s individual licensing requirements. These licensing requirements will vary greatly.
If you are operating an online business in Arkansas, it’s important to know that although the state itself doesn’t have a general state license for online businesses, you may still need to register with your city or county, and you’ll need a sales tax permit in order to sell taxable services or goods.
How much does a business license cost in Arkansas?
In general, your business license cost varies not just at the state level, but within counties and even industries. Since Arkansas does not have a state level business license requirement and each local license is based on city and county ordinances, the price range for a business license within the state is pretty vast. Costs can begin around $25 and move to more than $1,000.
If you sell taxable goods or services, the Arkansas sales tax permit costs $50. You apply with the DFA through the Arkansas Taxpayer Access Point (ATAP).
Arkansas LLCs and corporations also have to pay an annual franchise tax to the Arkansas Secretary of State ($150 a year for LLCs). It’s due by May 1 each year, starting the year after the business is formed.
The type of business you open and where your business is located will have a big impact on your overall license costs. In addition, in many instances, you will have to renew your licensing and that is an additional cost going forward.
Also, if your business operates in different cities within the state, the license cost can vary even between branches of your business.
Business formation costs in Arkansas
Forming a business entity isn’t the same as getting a license, but it’s often the first cost you’ll pay with the state. Here’s what the most common structures cost to set up:
LLC: This is probably the most common structure for small businesses in Arkansas and throughout the nation. Because LLCs are relatively easy to form, understanding how to start an LLC in Arkansas can help explain why this structure is such a popular choice. They require minimal maintenance and few corporate formalities, making them ideal for many owners. The Certificate of Organization costs $45 if filed online and $50 if filed by mail. Arkansas also requires LLCs to have a registered agent; you can serve as your own for free, or a professional service typically costs $50 to $300 per year. See the full breakdown of Arkansas LLC costs.
Corporation: A C corporation is a for-profit corporation and is a more formal structure. Corporations can issue stock, which makes them more appealing to investors. Corporations file Articles of Incorporation with the Arkansas Secretary of State; check the SOS forms and fees page for the current filing fee. Corporations also pay an annual franchise tax.
Nonprofit: Nonprofit corporations also file articles of incorporation with the Secretary of State (see the SOS fee schedule). To get federal tax-exempt status, most charities then file with the IRS, which costs $275 for Form 1023-EZ or $600 for the full Form 1023. Any local permits depend on what type of nonprofit is being operated.
Example of different industries and licensing in Arkansas as required by the state
The following are some common industries that require state licensing within Arkansas:
Contracting and Construction: When performing work of $50,000 or more on commercial projects, a license is required by the Arkansas Contractors Licensing Board. Residential and specialty trades like electrical work, plumbing and HVAC also have their own licensing requirements.
Home Inspectors: This industry is licensed through the Home Inspector Registration Board.
Engineers: These professionals, along with Professional Surveyors, are licensed through the State Board of Licensure for Professional Engineers and Professional Surveyors.
Specialty Trades: Some jobs may need a specialty or home improvement license depending on the size and type of project, including:
- Flooring
- Painting
- Handyman work
Hospitality and Food Service: The Arkansas Department of Health issues food establishment permits, and restaurants may also need food safety certifications for managers and staff. If you plan on selling alcohol, you need a permit from Arkansas Alcoholic Beverage Control, and selling cigarettes or tobacco requires a permit from Arkansas Tobacco Control.
Cosmetology: Any individuals who provide cosmetology services must be licensed by the state’s cosmetology licensing board.
Real Estate and Sales: The Real Estate Commission issues licenses for real estate professionals in Arkansas. Property management also falls under the scope of real estate practice and generally requires a real estate license.
Retail and Sales: When you sell or lease tangible property in the state of Arkansas, you are required to register with the Department of Finance and Administration (DFA). You have to obtain a $50 sales tax permit in order to collect sales and use tax. This rule applies to both brick and mortar stores as well as online shops.
Agriculture and Horticulture: This includes professional landscaping services and businesses like greenhouses and nurseries. Nurseries must have a Nursery Dealer License or Nurseryman Dealer License.
Child Care Services: Businesses that provide childcare services have to get a specific type of state licensing.
Professional Services: Accountants, teachers, therapists and counselors must have a license for that profession to operate in Arkansas.
Medical Professionals: Nurses and doctors, along with other healthcare workers must be licensed by the state board to work in Arkansas.
If you are unsure about what type of licensing your business needs, visit the Arkansas Department of Labor and Licensing for more specifics, along with checking with the local government.
Renewing your business license in Arkansas
Most business license renewals are handled by local governments and licensing boards. Therefore, check with your city, county, or board to determine what you need to renew your business license in Arkansas. In most cases, you will need to complete an application or renewal form and pay a renewal fee based on your business location, type and industry.
Be prepared to show proof of insurance, other business-related information, and tax documents at this time. Many local licenses renew every year. It’s also worth noting that there are often late penalties associated with failing to renew on time. The applicable fees will vary based on the license board and municipality under which you are operating.
Conclusion
Your business type as well as location within the state will greatly alter your licensing cost and the overall demands associated with the process. Arkansas does not have a general state business license but does have many local requirements, a $50 sales tax permit for sellers, and an annual franchise tax for LLCs and corporations. Your overall cost will greatly depend on the industry you are going into and any additional permits or licensing that might be required.
FAQ
Not from the state, but you will need a $50 sales tax permit if you plan on selling taxable services or goods, and your city or county may require a local license.
Register your business entity with the Arkansas Secretary of State if you are forming one, get an EIN from the IRS, apply for a sales and use tax permit through ATAP if you sell taxable goods or services, and then check with your city, county, and any industry licensing board for local or professional licenses.
It varies by license. Local licenses and permits can take anywhere from a same-day approval to several weeks. If you are also forming an LLC, the Secretary of State typically processes online filings in 2 to 4 business days and mailed filings in up to 2 weeks.
In the state of Arkansas, having an LLC does not require a general business license, statewide. However, you will likely still need a local license, a sales tax permit, or industry licensing in order to do business within the state. So, in most cases, yes, you need some type of license or permit.
No. A business license within the state of Arkansas is not the same as an LLC. An LLC is a legal business structure. A business permit or license allows you to conduct business within a jurisdiction, city, county or municipality within the state. Most LLCs need both.