How to start an LLC in Arkansas?

LLC in Arkansas

One of the best business structures you can form in Arkansas is a Limited Liability Company (LLC). One of the reasons entrepreneurs want to start an Arkansas LLC is the low formation costs. The state offers various benefits through business and entrepreneurial support programs, business growth initiatives, small business incentive programs, and more. You can form a single-member, multi-member, professional, or foreign Limited Liability Company in this state. To create this type of entity, you will need to hire and maintain an Arkansas LLC registered agent.

What is an Arkansas LLC?

Forming a limited liability company is always a popular choice due to tax advantages and liability protection. When you file an Arkansas LLC application, it means that you will be operating an entity that combines the characteristics of a sole proprietorship or partnership with those of a corporation. This is also why it is considered a hybrid entity. From a tax perspective, once you file an LLC in Arkansas, you can even opt for S Corporation tax status. It is a formal business arrangement that requires you to file various documents for registering the organization. The registration documents may require you to provide company information, such as the names and addresses of all LLC members, a statement of purpose, and other relevant details. The information required varies from one state to another.

Benefits of forming an LLC in Arkansas

Whether you opt for Arkansas LLC filing online or offline, there are several advantages of forming this type of entity. Some of the top benefits are:

• Pass-through taxation – One of the top reasons entrepreneurs prefer to file an LLC in Arkansas is the availability of pass-through taxation. This type of tax advantage ensures that a limited liability company doesn’t have to pay taxes at the business level. Instead, business income or loss is “passed-through” to the owners. Hence, owners have to file personal income tax returns.
• Management Flexibility – Filing an Arkansas LLC application means you will be able to enjoy higher flexibility in terms of management structure. This is because your company can be a manager-managed LLC or a member-managed entity. This is considered beneficial for startups and small businesses, as such entities can modify their management structure according to operational requirements.
• Limited Liability – This is a hallmark of any limited liability company. Each LLC formed in this state will enjoy limited liability protection. This means that members will not be responsible or liable for any debts and liabilities of the company.

Start an LLC in Arkansas

If you conduct an Arkansas LLC search related to new business formation, you will find that several processes must be followed and requirements must be complied with. Let’s examine the fundamental prerequisites and other requirements for establishing an LLC in this state.

1. Choose an Arkansas LLC name

Every business needs to fulfill specific mandatory Arkansas LLC filing requirements, such as reserving a name. You need to identify a company name for your LLC, as it cannot submit registration documents without one. You must also ensure compliance with the Arkansas Code of 1987 (2024) for a limited liability company. Let’s examine the key steps in this process.

• The name of your company must include a word, phrase, or abbreviation like “L.L.C.”, “LLC”, “L.C.”, or “LC”, “Ltd.”, “Co.”, “company”, or “Limited” under AR Code § 4-38-112 (2024).
• You need to ensure the name is distinguishable from any other name in the state database.
• The name of a domestic or foreign limited liability company should not contain the name of any person who is not a member of such a company.
• Once a name has been identified, you need to conduct an Arkansas LLC search, also known as a name availability search.
• If the chosen LLC name is available, then you can file an Application for Reservation of a Limited Liability Company Name (RN-06).
• You will need to submit this form along with a fee of $25 to reserve the chosen LLC name under AR Code § 4-38-113 (2024).

2. Choose an Arkansas LLC registered agent

Most states in the USA require a Limited Liability Company to hire a registered agent to handle service of process. According to AR Code § 4-38-115 (2024), you will need to hire and maintain an Arkansas LLC registered agent in this state. A registered agent, also known as a resident agent, plays a key role in various aspects of new business formation and helps a company to remain compliant with state annual requirements.

3. File Certificate of Organization with the Arkansas Secretary of State Business Services Division

Once you have reserved your company name, the next important step is to file an Arkansas LLC application for registration. The process and fees for domestic and foreign LLCs may differ. To register your Limited Liability Company, you will need to submit a Certificate of Organization pursuant to AR Code § 4-38-201 (2024). You will need to file this with the Arkansas Secretary of State’s Office, Business Services Division, along with a $50 fee. This form also contains a “Limited Liability Company Franchise Tax” page, and submitting this will ensure you can receive your annual franchise tax reporting form.

Form an Arkansas LLC Today!

4. Prepare an Arkansas LLC operating agreement

If you are thinking of forming a limited liability company in the state of Arkansas, then you will need to create an LLC operating agreement. It is not a part of the Arkansas LLC filing requirements, but it is necessary to have one pursuant to AR Code § 4-38-105 (2024). As the name suggests, it is a crucial document that governs the functioning and operations of a limited liability company. It is an essential legal document that governs and outlines the relationships among the members, as well as those between the members and the LLC.

• Statement of intent
• Relationship among the members
• Business purpose
• Term
• Admission and withdrawal of members
• Admission of new members
• Initial capital contributions
• Distribution of profits and losses
• Member meetings and voting
• Activities and affairs of the limited liability company
• Conduct of such activities and affairs
• Determining tax structure
• Conditions for amending the operating agreement
• Ownership transfers and dissolution

5. Obtain an EIN for an Arkansas LLC

Once the Arkansas LLC filing online is complete and the company is registered, the next step is to apply for an Employer Identification Number or EIN. Indeed, not all entity structures require an Employer Identification Number (EIN), but it is essential for an LLC. It is a unique nine-digit number that is issued by the Internal Revenue Service (IRS). This is also known as the Tax ID and helps simplify business tax filing. An Employer Identification Number (EIN) is required for filing tax returns. It is also necessary to open a business bank account.

6. Check local licenses and permits

Every new and existing business needs certain documents and certifications before it can become operational. You will need to apply for and obtain relevant business licenses and permits after you file an LLC in Arkansas. Licensing requirements can vary depending on the type of business activity and location. This refers to the fact that you may need multiple licenses or a single license. Several state agencies also oversee the licensing of regulated business activities and industries. The business licenses your LLC may need in Arkansas are categorized as follows:

• Sales Tax Permit – If you conduct an Arkansas LLC search for business activities, one of the top activities is sales. This is irrespective of the industry. If your LLC has a sales tax nexus in this state and sells services, goods, or property that is subject to sales tax, then you will need to apply for this permit. You will need to apply for it with the Arkansas Department of Finance and Administration.
• Licenses according to Profession or Occupation – State business laws dictate that business licenses are mandatory and an integral part of Arkansas LLC filing requirements. If your primary activity focuses on a specific profession or occupation, you will need to apply for the corresponding licenses. Different agencies issue this type of license. Let’s look at an example to understand how this works.

  Example: If you are starting a firm with accounting professionals or Certified Public Accountants (CPAs), you need to ensure that these individuals have the necessary licenses. This license will be issued by the Arkansas State Board of Public Accountancy (ASBPA).

• Licenses issued by City/County – This is a license that is issued by the city or county where your business is based or where you operate from. They are also known as city or county licenses and are issued by the business license department of a specific city or the county clerk’s office. Let’s examine an example to understand this concept better.

  Example: If your LLC is based in North Little Rock, the first thing you need to check is the zoning regulations. You will need to obtain a zoning certificate from the North Little Rock Planning Department first. Once you receive this certificate, you will need to file an Arkansas LLC application for a business or privilege license.

7. Open an Arkansas LLC bank account

As a first-time business owner, opening a business bank account can help simplify your finances. It will also enable more accurate and efficient bookkeeping while saving time on filing LLC taxes. Whether you choose to file your Arkansas LLC online or offline, the financial future of your company is essential. Maintaining a separate bank account for your company can help delineate financial responsibility, especially if your business faces financial risk or difficulties. A business bank account will establish credibility, giving your company a professional image and streamlining tax preparation.

8. Comply with taxes and other regulations

Once you file an LLC in Arkansas, you will be required to comply with the state’s annual maintenance requirements. One of the essential requirements is that of filing state and other business taxes. Foremost among taxes is the filing of the Arkansas LLC’s yearly franchise tax report. This must be filed annually with the Arkansas Secretary of State (SOS) and accompanied by a $150 fee. Since LLCs are considered to be “pass-through tax entities”, the members of the company have to file income and losses on their tax returns. You will have to register with the Arkansas Taxpayer Access Point (ATAP) to file taxes online.

9. File the Beneficial Ownership Information Report

The U.S. Department of the Treasury’s Financial Crimes Enforcement Network, also known as FinCEN, requires a suspicious activity report about individuals owning or controlling a company. Most businesses, including those formed as LLCs in the United States, will be required to submit this information. It is one of the critical Arkansas LLC filing requirements and requires the following details –

• Legal Name
• Trade Names or DBA (“Doing Business As”) Names
• Current Address
• The location where the LLC was formed
• Taxpayer Identification Number

Know more about starting an LLC in Arkansas!

An Arkansas LLC registered agent can help you to register a limited liability company in this state, but you may have different queries regarding LLC registration, the cost of formation, and other aspects. Hence, we have created a special section, “Frequently Asked Questions,” to address common questions.

Is Arkansas a good state to form an LLC?

Arkansas is ranked among the top 12 states in the nation for doing business. It is home to industry leaders and Fortune 500 companies like Walmart, Dillard’s, Murphy USA, Tyson Foods, and J.B. Hunt. If you conduct an Arkansas LLC search for advantages, then you will find many. Here are some reasons why entrepreneurs prefer Arkansas –

• The state offers new and existing LLCs several small business incentives, including the job creation incentive.
• The state has adopted a favorable regulatory environment.
• It is ranked #8 in terms of the overall cost of doing business.
• You can benefit from several tax credits and exemption programs, such as the investment tax credits.
• It has a strategic location that ensures access to domestic and international markets.
• A growing talent pool.
• Arkansas is working to create a strong STEM workforce by implementing initiatives such as the AR STEM Model Program.
• Northwest Arkansas is home to a thriving startup ecosystem, with initiatives such as the StartupNWA Hub.

How do I know if my Arkansas LLC name is available?

Once you identify or choose a business name, ensure it complies with the Arkansas Code of 1987 (2024) naming guidelines. This needs to be followed up by conducting an Arkansas LLC search, also known as a name availability search. If the chosen name is available, you can proceed to reserve it pursuant to AR Code § 4-38-113 (2024).

How much does an LLC cost in Arkansas?

To start a limited liability company in Arkansas, you must submit a Certificate of Organization for a Domestic Limited Liability Company. The cost to file an LLC in Arkansas is $50 if you are submitting a paper form and $45 for online registration. In addition to this, you will also need to submit the Application for Reservation of a Limited Liability Company Name, which incurs a filing fee of $25. The fee will be the same if you are filing a fictitious name or DBA. These are initial costs. Apart from these costs, additional expenses may be incurred depending on your specific requirements, such as a Certificate of Amendment to the Certificate of Organization and applications for business licenses and permits.

Do I need a business license for my Arkansas LLC?

Yes. A business license is required for making your LLC operational. Your company will be penalized if you conduct business without obtaining the proper licenses or permits.

Can I set up a single-member LLC in Arkansas?

Yes. You can establish a single-member limited liability company (SMLLC) in Arkansas. If you want to establish a small company with only one person, then consider a Single Member Limited Liability Company (SMLLC). You will need to maintain all legal formalities similar to those of a multi-member limited liability company (LLC), such as creating an operating agreement. You will also need to obtain the necessary permits and licenses to fulfill all Arkansas LLC filing requirements.

What taxes does an LLC pay in Arkansas?

Once you start an Arkansas LLC, you will be required to file taxes annually. Since it is a pass-through entity, you will need to file a personal income tax return for yourself. You may also be required to file other taxes applicable in the state, depending on your business activity, location, and the number of employees.

Can I register a foreign limited liability company (LLC) in Arkansas?

Yes. You can register and operate a foreign limited liability company (LLC) in Arkansas. The Arkansas LLC filing requirements for foreign LLCs are different from those of domestic entities. You will have to file Form FL-01 – Application for Certificate of Registration of Foreign Limited Liability Company pursuant to AR Code § 4-38-903 (2024). There is a filing fee of $300 for a paper form and $250 for filing online.

How do I dissolve my Arkansas limited liability company (LLC)?

When you file an Arkansas LLC application, your company will be registered in the state of Arkansas, so that you can dissolve the limited-liability company at any given point in time. In that case, you will be required to file a Statement of Dissolution for a Limited Liability Company. The filing fee is $50.

Ready to form an Arkansas LLC?

One of the most popular and preferred structures in the USA is that of a limited liability company. You can start an Arkansas LLC as a single-member or multi-member entity. You can also register a domestic or foreign entity in this state with ease. If you’re considering registering an LLC, IncParadise can assist you with the entire process. We are a reputable Arkansas LLC registered agent with expertise in forming new businesses.