How much does it cost to form an Arkansas LLC or Corporation?

Arkansas LLC or Corporation

Arkansas has just the right business climate for starting a new business. The formation cost for Arkansas Corporation, LLC, or other entities, along with competitive business incentives, is two important factors attracting investors and entrepreneurs alike. The state continues to uphold its reputation as one of the nation’s most financially stable states. It is said that your dollar will go further in Arkansas than in any other state.

Which business entity should I choose for the Arkansas business?

Several factors must be considered when selecting a business structure. You need to consider aspects such as the cost of forming an Arkansas Corporation or LLC, tax implications, liability protection, short-term and long-term goals, scalability, and administrative requirements. A Limited Liability Company (LLC) offers liability protection but lacks the simplicity of a sole proprietorship.

• Liability Protection – One of the most important aspects to consider is liability protection. This is because a structure offering such protection will ensure that the personal assets of the owner, including their home, remain shielded from creditors.
• Tax Treatment – Taxes are an essential component, as some form of taxes is levied on each type of entity. Some business structures enjoy pass-through taxation, where the company’s profits and losses are reported on the owners’ personal income tax returns. Some business structures are subject to double taxation, where both the owners and the entity are required to file federal and state taxes. Taxes play a decisive role in the annual maintenance cost of an Arkansas Corporation or LLC.
• Administrative requirements – Each type of entity structure has its own novel administrative requirements. This exists both at the initial start-up phase and on a regular basis. If you examine the administrative requirements of a sole proprietorship, they are almost negligible, as there are no registration or record-keeping requirements.
• Startup costs – The formation and operational costs can vary according to the type of entity structure. For example, the formation cost for an Arkansas Corporation may not be the same as that of an LLC or a general partnership. There are several components of operational expenses, including the cost of licenses and permits, hiring employees, and branding, among others.

Pros and Cons of forming an LLC or Corporation in Arkansas

The type of structure you choose to register in Arkansas will play a definitive role in influencing the overall operations of such an entity, including annual requirements in this state. The two most popular structures are the Limited Liability Company and the C Corporation. If you conduct an LLC versus corporation comparison in Arkansas, you will be able to identify the advantages and disadvantages of each type of structure. Let’s briefly review the pros and cons of these structures, including the cost of forming an Arkansas LLC or Corporation.

Pros of an LLC or Corporation

• If you compare LLC vs Corporation in Arkansas, then a corporation enjoys perpetual existence, or exists even if the owner or shareholder dies or leaves
• Members in an LLC have the flexibility to choose how they can be taxed
• A limited liability company enjoys higher operational flexibility as compared to a C Corporation
• A Corporation can issue shares, and such shares can be freely sold
• An LLC, as well as a corporation, offers its owners limited liability protection
• A limited liability company enjoys pass-through taxation, and hence, the company itself is not taxed
• The overall cost to form an Arkansas LLC and operate it is lower than that of a corporation
• It is easier for corporations to attract investors or seek funding from venture capitalists
• The formation as well as annual maintenance costs are typically lower for LLCs
• If you form a limited liability company, then it improves its legitimacy as compared to sole proprietorships or partnerships

Cons of an LLC or Corporation

• When considering LLC vs. Corporation in Arkansas, it is worth noting that corporations undergo double taxation, requiring taxes to be filed twice on the same income.
• If you have formed a limited liability company, then it can be quite challenging to transfer ownership
• An LLC, unlike a corporation, has a limited life. Once an owner leaves the company, the LLC will no longer exist
• The bigger the corporation is, the tougher the ethical challenges, especially those related to company operations
• The cost to form an Arkansas Corporation is normally quite high compared to other entity structures
• Unless an LLC chooses to be taxed as a corporation, such an entity may be subject to self-employment taxes
• A C Corporation has an extremely complex setup and management, and may require you to adhere to different legal and regulatory frameworks

Arkansas LLC Cost

First-time business owners find it easier to form and operate a Limited Liability Company as compared to any other form of legal entity. There are several advantages of this type of entity, and the cost to form an Arkansas LLC is also lower. You may be wondering about the initial and recurring costs associated with operating an LLC. Let’s quickly review the various costs involved.

Cost for forming an Arkansas LLC

The annual cost of an Arkansas LLC includes both one-time and recurring costs. These are:

• The most important process is registering a limited liability company, but before applying, you need to reserve a name. You will need to choose a name and then file the Application for Reservation of a Limited Liability Company Name. There is a fee of $25.00 for submitting a paper form, while the cost for online submission is $22.50.
• According to state laws, you are required to hire and maintain a registered agent for the service of process. The cost or fee will vary according to the RA service you choose.
• The cost to form an Arkansas LLC will depend on whether you are forming a domestic entity or a foreign LLC. If you want to form a domestic entity, then you will need to submit a Certificate of Organization. The fee will be $50 if you submit a paper form and $45 if you submit it online.
• If you file a Certificate of Amendment, a maximum additional fee of $25 will apply.

Annual maintenance cost for Arkansas LLC

Once you have registered your limited liability company in the state of Arkansas, it is essential to ensure compliance with all the state’s annual requirements. The Arkansas LLC cost per year for annual maintenance includes:

• Annual Report – Most states in the USA require a limited liability company to submit an annual report. Filing an annual report in Arkansas is mandatory pursuant to AR Code § 4-38-212. Although it is not a component of the initial cost to form an Arkansas LLC, it is a recurring cost. It must be filed online with the Arkansas Secretary of State’s Business and Commercial Services Division (BCS). The fee for filing an annual report is $150 plus $5 for online filing. It is essential to note that a franchise tax report must be filed in conjunction with the annual report.
• Taxes – Once you register an LLC in Arkansas, you will need to file some form of state taxes. They must be filed annually and, therefore, are an essential component of the annual Arkansas LLC cost. The amount of tax or rate will vary according to the type of taxes applicable to your company.
• Business Licenses – You cannot operate your LLC in Arkansas without a valid license or permit. The actual cost will vary according to the type of licenses required by your company at the state and local levels. Most forms of licenses require renewal each year, and therefore, they are considered a recurring annual cost for an Arkansas LLC.

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Arkansas Corporation Cost

A traditional corporation, or a C Corporation, is often favored by entrepreneurs due to its ability to raise capital through stock offerings or by attracting investors. If you want to incorporate in Arkansas, then there will be two types of costs involved. There will be costs associated with forming an Arkansas Corporation and annual maintenance expenses. Let’s examine the various cost components for an Arkansas Corporation.

Cost of forming a Corporation in Arkansas

The cost to incorporate in Arkansas is driven by several factors, including whether you want to register a domestic entity or a foreign company. The important cost components related to incorporation in this state are:

• Before incorporating your company, you will need to choose and reserve a corporate name. You will need to file the Application for Reservation of a Corporate Name. If you submit this form in person, the fee is $25.00; however, if you file online, the cost is $22.50.
• You will also need to hire and maintain a registered agent for service of process. The cost or fee will vary according to the service you choose.
• Lastly, you will need to register your company with the state. You will need to file the Articles of Incorporation. The cost to form an Arkansas Corporation will be $50 if you are filing a paper form and $45 for filing online.

Annual maintenance cost for an Arkansas Corporation

There is a cost to form an Arkansas Corporation, and then there are the costs related to annual maintenance of your company. This is a variable and recurring cost. If you remain compliant with these processes, then it will help you to maintain a good standing in this state. The costs involved are as follows:

• Annual Report – Most states in the United States require corporations to file a yearly report. Some states may require a biennial report, while Arkansas requires you to file an annual report along with a franchise tax report. This is an important component of the annual maintenance cost of an Arkansas Corporation. If your company has issued stock, then the annual report fee will be a minimum of $150. If your company has not issued any stock, the fee would be $300, plus an additional $5 filing fee for online submissions.
• Taxes – Another important component of the annual maintenance cost of an Arkansas Corporation is that of taxes. Your company will be subjected to Corporation Income Tax, where a graduated rate is applied depending on the taxable income. Apart from this, there may be several other forms of taxes also applicable, like sales and use tax.
• Business Licenses – Once you incorporate, you will need to apply for relevant business licenses and permits to operate your company. This is not part of the formation cost for an Arkansas Corporation, as permits must be renewed annually or according to the time specified by cities and counties. The fee for licenses and permits will vary according to the business activity, industry, and local jurisdiction.

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Need any Assistance in Forming Your Arkansas LLC or Corporation

As a new business owner, the formation costs will vary greatly depending on the type of entity structure you choose. The cost will also vary depending on whether it is a domestic or foreign entity. Of course, the most opted for structures are those of a limited liability company and a C Corporation. Apart from the initial cost to form an Arkansas LLC or Corporation, there will be additional costs, also known as annual maintenance fees.