Sole Proprietorship in Arkansas

Arkansas is home to over 280,000 (two hundred and eighty thousand) small businesses and over 450,000 SMB’s (Small to Medium-sized Businesses). There are different entity structures, including that of a sole proprietorship in Arkansas, which are considered to be highly vital to the state’s economy. The scalability and overall sustainability depend on several factors, including market trends, access to capital, the diversity of industries, and an effective marketing strategy.

What is a sole proprietorship in Arkansas?

If you are wondering how to start a sole proprietorship in Arkansas, it is essential first to understand the type of entity structure this is. It is also known as a sole trader business and is an individual-driven structure, unlike a corporation or partnership. An individual owns and operates this type of business, with no legal separation between the company and the owner. One of the distinct advantages of forming a sole proprietorship in Arkansas is that it will require less documentation and paperwork during its formation and operation stages. As the owner of such an entity, you will enjoy the profits earned but have to be responsible for any liabilities sustained by the company. This type of business will have a different tax structure compared to other legal entity forms, as it is known as a non-registered and unincorporated business.

Important features of sole proprietorship in Arkansas

If you want to start a sole proprietorship in Arkansas, it is essential to understand the various advantages this type of entity offers. Some of the top features are:

• This is a ‘Single Ownership’ entity, which is owned and operated by an individual or one person
• The owner is not answerable to anyone else when it comes to different aspects of the business, like marketing, finance, and management
• A sole proprietorship business does not have any separate legal existence from its owner
• The owner has complete control, but also has to bear all risks of the business
• The profit from the company goes to the owner, but so does the loss
• This type of company has a simple business structure and is easy to form
• This entity has few legal requirements and is easy to dissolve

Steps to Start a Sole Proprietorship in Arkansas

If you are wondering how to start a sole proprietorship in Arkansas, several key aspects of this type of business structure need to be considered. Apart from key areas such as operations, management, and finance, you will also need to focus on the requirements of state and local jurisdictions, including tax filing. Let’s look at the most important aspects of a sole proprietorship.

1. Prepare a business plan

If you want to file a sole proprietorship in Arkansas, then it comes with its unique set of advantages and challenges. The most critical of them is proper business and operations planning. It’s essential to find a solution that fits your business needs. It’s easier to get a solution if you craft a good business plan. Your business plan should include the following:

• Executive summary of the business
• Market research and analysis
• SWOT analysis (strengths, weaknesses, opportunities, and threats)
• Marketing and Sales Strategy
• Product or Service Line
• Organization and Management
• Operational Plan
• Financial Projections

2. Choose an Arkansas business name

The first point on your ‘How to Start a Sole Proprietorship in Arkansas’ checklist is choosing a company name. You cannot operate any business without a name. Of course, you cannot use just about any name; there are specific naming rules and guidelines to be followed. Here are some tips for choosing a name for your sole proprietorship:

• The first rule is always to keep the name easy to pronounce and remember
• Ensure the name is not confused with that of a competitor
• Follow Arkansas state naming guidelines
• You can consider your target audience or product while choosing a name
• Always check your chosen domain name for availability and website
• You can use online business name generators
• Most importantly, use the Arkansas SOS website to search for any existing business names
• The name should not be similar to that of a government agency

3. Obtain a DBA

When you start a sole proprietorship in Arkansas, your business must operate under a specific name. Two types of business names can be used, and they are:

• You can use your full legal name as the company name
• You can register a fictitious business name, wherein you will need to file an Arkansas DBA

Example: Your name is Emily Harper, and you want to file a sole proprietorship in AR as a therapy service. You can use your name, such as ‘Emily Harper Therapy Service.’ Alternatively, you can choose to use a business name, such as “Harper Therapy Service.” Here, Harper Therapy Service will be considered as a fictitious business name, and you will need to file an Arkansas DBA. You will need to conduct a name availability search for a fictitious name before registering.

Example: If you form a sole proprietorship in Arkansas and operate from Jefferson County, then you will need to register your DBA there. A DBA certificate can be filed and recorded in the office of the County Clerk. You will need to submit the “Doing Business under an Assumed Name Certificates” form. You will need to file an Arkansas DBA, which incurs a filing fee of $25 and an index fee of $1. If you want the County Clerk’s office to notarize this form, then there will be an additional charge of $5.

Do you want to start a sole proprietorship in Arkansas?

4. Get EIN

A sole proprietorship is one of the easiest business structures to form in Arkansas. When it comes to filing taxes, there is no distinction between the owner and the entity. Hence, you will be required to file a personal income tax return. Generally speaking, as the owner of a sole proprietorship, you can file individual income tax using your Social Security Number (SSN). However, if you opt for an Employer Identification Number (EIN), then it can be beneficial in the long term. According to the Internal Revenue Service (IRS), you can apply for an EIN if the following criteria are met:

• If your company hires employees
• When a sole proprietorship company plans to open a business bank account
• If you have invested in a Keogh plan
• If you need to file any form of excise tax returns
• When you convert or change the entity structure from a sole proprietorship to a partnership or LLC
• If you file Chapter 7 (liquidation) or Chapter 11 (reorganization) bankruptcy

5. Obtain necessary licenses and permits

If you plan to start a sole proprietorship in Arkansas, one of the important aspects to consider is obtaining the necessary business licenses and permits. Yes, every company formed in the state requires specific licenses to commence operations. If you operate without a license, your company may be penalized. You will need to search for a sole proprietorship in Arkansas for permits in the following categories:

• Sales Tax license or permit
• Professional licenses
• Occupational licenses
• Local licenses
• Regulated licenses
• Zoning permits
• Home occupation permit

6. Open a bank account for your Arkansas business

A sole proprietorship structure is a straightforward structure in terms of formation, operations, and finances. There is, therefore, no legal requirement for sole proprietorships to open a business bank account. Yet, having a separate bank account for business can be pretty advantageous. The most important thing is managing all your finances. If you operate a personal account and use it for receiving or making business payments, then it may become extremely complicated to separate personal from business earnings and expenses. This will create confusion and pose challenges during the tax season.

7. Report and pay taxes

Once you form a sole proprietorship in Arkansas, you must remain compliant with state laws and ensure that all annual requirements are met. One of the critical requirements is the filing of taxes. The Internal Revenue Service (IRS) sees this type of structure and the owner as the same, and hence, you will need to file personal income tax. The state of Arkansas has a graduated individual income tax rate, which varies from 2 percent to 3.9 percent depending on the net income bracket into which you fall.

Ready to Start a Sole Proprietorship Business in Arkansas

If you have decided to start a sole proprietorship in Arkansas, this is probably the safest and easiest structure to operate. It is also known as a sole trader entity and is not required to file any registration forms with the state department, unlike other entity structures. However, that being said, you may need to file an Arkansas DBA and ensure compliance with all annual requirements of the state. This will help you to enjoy a good standing with the state.

Business License in Arkansas

Most businesses in the USA require some form of licenses and permits to conduct their operations. Similarly, if you register a company in Arkansas, then you will need to apply for permits as specified by this state. You will need to conduct an Arkansas business license search to identify the type of licenses your company may require. It is essential to understand that the objective of business licenses is multifold.

Who needs an Arkansas business license?

The state of Arkansas has an ideal business climate and business regulations. This makes the state attractive to new businesses and to entrepreneurs who want to relocate their company to a more competitive location. One of the primary requirements for operating in this state is an Arkansas business license. Yes, almost all forms of entity structures, ranging from sole proprietorships to limited liability companies, partnerships, and corporations, require some form of licenses or permits to operate legally.

What business license is required in Arkansas?

If you have decided to register your company in the “Land of Opportunity,” then obtaining an Arkansas business license becomes necessary. In this state, there is no requirement to obtain a generic business license, especially at the state level. It is also not essential that every new company requires licenses and permits, but most businesses will. However, there is a type of statewide permit or business license that may apply to your company. This is known as the Arkansas sales tax permit. It is also known as a seller’s permit, and you will be required to register your company for Arkansas sales and use tax.

Professional and Occupational Licenses for Businesses and Individuals in Arkansas

You are planning to register your company or startup in the state of Arkansas. The most essential part of any business is the activity that the company specializes in, which could be selling a product or promoting a service. This is where professional and occupational licensing comes into the picture. Once you determine which profession or occupation is connected to your business activity, you can apply for the necessary license after conducting an Arkansas business license search.

For Example, If you start an old age center or a veterans home that requires certified nurse aides then such aides need to obtain the relevant occupational license. In this case, it will be a Certified Nurse Aide (CNA) license.

For Example, If your business requires you to hire a Certified Public Accountant (CPA) then such an individual should have proper certification otherwise, your company will not be able to obtain other necessary Arkansas business licenses and permits.

For Example, the State Board of Licensure for Professional Engineers and Professional Surveyors is responsible for issuing licenses for Engineer Intern (EI), Professional Engineer (PE), Surveyor Intern (SI), and Professional Surveyor (PS).

Other Arkansas Business Licenses

Whether you are establishing an LLC, a corporation, or a sole proprietorship, your company may also require additional forms of Arkansas business licenses and permits. If you want to know the exact permit or license requirements for your company, then an Arkansas business license search is highly recommended. Let’s take a brief look at the other licenses and permits that you may need to obtain.

Arkansas Sales Tax Permit

Every state in the USA where sales tax is applicable for businesses will require registration for a sales tax permit. A sales tax permit is a type of Arkansas business license document that provides authorization to a company to collect sales tax from its customers. It is known by various names, including sales tax license, retail license, seller’s permit, sales and use tax permit, and vendor’s license.

Local Zoning and Building Permits

One of the essential forms of Arkansas business licenses is the local license. The requirements and regulations for this type of license will vary depending on the city or county where your company is based. A critical aspect of these licenses is local zoning and building permits. Generally speaking, the need for this type of Arkansas business license and permits arises if a company plans new construction or makes additions, alterations, and renovations to an existing commercial space. This also takes into account any structural modifications that may be made.

• Submitting a site plan
• Submitting construction plans, if any
• Filing a permit application along with a fee
• Inspections of the premises
• Obtaining a Certificate of Occupancy, depending on the type of business
• Compliance with the Arkansas Building Code
• Permits from the fire and police departments

Example: Your company office is situated in the City of Fayetteville. You want to apply for “Building Construction Permits”. The process will involve visiting the Citizen Self-Service (CSS) portal to download information relevant to Arkansas business licenses and permits that may apply to your activity. You will require the following:

• Apply for a temporary closure
• Request an Inspection
• Apply for a Development Grading Permit
• Apply for a Miscellaneous Grading Permit
• Apply for Miscellaneous ROW Permit
• Apply for a Temporary Street Closure

Need any Assistance in Obtaining Your Arkansas Business License?

If you plan to start a new company or relocate your existing business to Arkansas, obtaining an Arkansas business license is essential. The type of licenses and permits will vary according to the jurisdiction of your company, as well as the activity or industry. The application fee, laws, and requirements for an Arkansas business license vary depending on the type of license.

Arkansas Business Entity Search

As a prospective or future business owner, you may have several creative ideas related to the operational aspect of your company, as well as a business name. You may have already chosen a company name. However, you will also need to consider the availability of your Arkansas business name. Yes, your chosen name may not be available for reservation or registration in this state. Hence, it is always recommended to follow these steps:

• Identify a business name compliant with state rules
• Conduct an Arkansas business name search
• If the name is available, then reserve the name with the state

What is an Arkansas business name search?

Once you have identified a company name, you cannot simply reserve it with the state. You will need to conduct an Arkansas business name search first. This is a process recommended by every state, including Arkansas. This process helps the business owner verify if their proposed name is already in use by another company or has already been registered in this state. The Arkansas Secretary of State’s website facilitates this type of entity search.

Example: You want to establish a new company in Arkansas that focuses on marketing. You want to name it “3 Rivers Marketing Group” as the name is catchy and unique. Once you have chosen this name, the next step is to verify its availability as an Arkansas business name. When you search the SOS database, it brings up a similar company name. This is a foreign limited liability company (LLC) based in Little Rock, AR, and maintains good standing with the state. This means you cannot use the same name. Now if you change the name to “2 Rivers marketing” and conduct an Arkansas business name search again, then it will show availability of the said name.

Naming your Arkansas LLC

If you have decided to form a limited liability company in Arkansas, the first step is to identify a name for the LLC. This will be considered the legal name of your LLC. This name will be mentioned in the certificate of organization as well as other critical business-related documents, including the annual report. The name would be used for filing taxes, opening a sales tax account, applying for business licenses, and opening a bank account. The chosen name should comply with Arkansas business name rules and guidelines. Now, let’s look at the two important aspects to consider when it comes to naming your limited liability company.

General LLC naming rules

Naming your LLC can be a challenging process, especially when there are numerous guidelines and Arkansas business name rules to follow. This is not all; you will also need to conduct an Arkansas LLC name search to ensure compliance with these rules. The naming of an LLC and reservation of such a name is governed by the Arkansas Code of 1987 (2024), Title 4 – Business and Commercial Law, Subtitle 3 – Corporations and Associations, Chapter 38 – Uniform Limited Liability Company Act, Subchapter 1 – General Provisions, Section 4-38-112 – Permitted names. The general rules for an LLC name are:

• The name should have words like Limited Liability Company or abbreviations like “L.L.C.”, “LLC”, “L.C.”, or “LC”.
• It may also contain words like “limited liability company”, “Limited”, or “limited company”.
• This name should be distinguishable from any other name in the database of the Secretary of State. This can be checked by conducting an Arkansas LLC name search.
• There are certain word restrictions also known as “Permitted Names” pursuant to AR Code § 4-38-112 (2024). Please verify this before finalizing a name.

Search LLC name availability on the Arkansas Secretary of State’s website

If you have successfully brainstormed a name for your LLC in accordance with the business name guidelines, then what is the next step? The next step is to conduct a business entity search in Arkansas. This is also known as a name availability search. The Arkansas Secretary of State’s website offers an online option for conducting this search. You can conduct your search using the following:

• Corporation Type (Company Type)
• Enter Either Name or Fictitious Name
• Registered Agent (RA)
• RA City
• RA State
• Filing #

Example: You want to start a marketing company. Now you can choose Domestic LLC and then use just a word like “Marketing” and enter a search. This type of generic Arkansas LLC name search will bring up records of 250 companies. This can be quite an exhaustive process. Instead, if you simply provide your chosen name or specify it as “Big Head Marketing LLC,” the records will show that this name already exists. This domestic LLC is based in Conway, AR, and maintains a good standing with the state. If you change your name to “Big Red Marketing LLC” and conduct an Arkansas business name availability search, then it reveals that your chosen name is available.

Do you want to form an LLC in Arkansas?

Naming your Arkansas Corporation

A business corporation is one of the best entity structures as it has several advantages. If you want to incorporate in the state of Arkansas, you will first need to come up with a name that aligns with your brand, product, or service. This will be followed by conducting a proper Arkansas Corporation name search. The relevance of this search lies in determining whether your chosen company name is available for reservation with the state. Let’s look at the various aspects to consider when naming your new company.

General Corporation naming rules

The business name rules vary by entity structure, and therefore, the naming rules for a C Corporation differ from those of an LLC. It is essential to follow Arkansas business name rules, as this will minimize the risk of your corporate name being rejected. The naming guidelines in this state are governed by the Arkansas Code of 1987 (2024), Title 4 – Business and Commercial Law, Subtitle 3 – Corporations and Associations, Chapter 27 – Business Corporation Act of 1987, Subchapter 4 – NAMES, Section 4-27-401 – Corporate name. The general rules for a corporate name are:

• When you form a C Corporation, the name should contain words like “corporation”, “incorporated”, “limited”, or “company” pursuant to AR Code § 4-27-401 (2024)
• The name can also contain abbreviations like “corp.”, “inc.”, “co.”, or “ltd.”
• The name should be unique and distinguishable from the name of any other company operating in the state, as this will help you with the Arkansas Corporation name search
• If your corporation’s name is not distinguishable, then you can apply to the Secretary of State for authorization to use such a name
• Unlawful names or names that violate the state laws can be cancelled through a court decree pursuant to AR Code § 4-27-405 (2024)
• If you don’t want to use your legal name or the owner’s name, then you choose to use a fictitious name pursuant to AR Code § 4-27-404 (2024)

Search the Corporation name availability on the Arkansas Secretary of State’s website

Once you have finalized a name for your corporation in compliance with the state laws, the next step will be to conduct an Arkansas Corporation name search. You can conduct this search on the Secretary of State’s website. They have an online database of all types of entities registered within the state, including foreign businesses. This enables Arkansas business name availability and reservation with the state. The entity search can be conducted by using a corporation type, name, fictitious name, registered agent, or filing number. The most common applicable options for a new business are to search using corporation type and name. Let’s examine an example to understand this process better.

Example: You want to start a computer services or consulting company. You chose the name “Computer Consultants Company”. You can conduct an Arkansas Corporation name search using this name and specifying if it is a domestic or foreign for-profit corporation. The search options will reveal that such a company exists in Forrest City, AR, and maintains a good standing with the state. This means your chosen name has already been registered, and hence you will need to identify a new name. If you change the name to “Computer Consultant Group” and conduct the Arkansas business entity search again, it will show that such a name is available.

Are you thinking of registering a Corporation in Arkansas?

Need any Assistance in an Arkansas Business Name Search?

Arkansas has several factors that contribute to creating a favorable business climate, including a low cost of doing business. Hence, if you decide to register your domestic or foreign entity in this state, then you will be in an advantageous position. However, you will need to first identify and reserve a proper business name after conducting an Arkansas business name search. This process may seem perplexing, and that’s where IncParadise can provide you with meaningful assistance.

Arkansas LLC Annual Filing Requirements

The annual requirements for limited-liability companies registered in Arkansas will be governed by the Arkansas Code of 1987 (2024), Title 4, Subtitle 3, Chapter 38 – Uniform Limited Liability Company Act. The Arkansas LLC annual requirements may differ from those of other entity structures, such as corporations, sole proprietorships, and partnerships. If you plan to form a limited liability company in this state, the essential annual requirements are categorized as follows.

Arkansas LLC Annual Franchise Tax Report

One of the critical annual filings for LLCs in Arkansas is the annual franchise tax report. The filing of this report is mandatory under the Arkansas Code of 1987 (2024), AR Code § 26-54-104 (2024). You will need to file this with the office of the Arkansas Secretary of State (SOS). Franchise tax in this state is considered a “privilege tax.” This simply means that it is being levied on your company for the privilege of doing business in this state. This is one of the most important annual requirements for an Arkansas LLC, and there is a flat-rate tax of $150 per year. The purpose of the franchise tax is to generate revenue for the state of Arkansas.

Arkansas LLC Taxes

After you start an Arkansas LLC, there are two main types of ongoing filings. The first is the annual franchise taxes, and the other is state or other taxes. When you file an Arkansas LLC annual report, you also file the franchise taxes. The question is, what other taxes do you need to file, or does your LLC need to file in Arkansas? Let’s look at the applicable taxes.

• Individual Income Tax Return – When you form a limited liability company, for tax purposes, it is considered a pass-through entity. This type of entity is also known as a flow-through entity. This simply means that an LLC will report its income on the individual income tax returns of its owners. The state has a graduated personal income tax rate, and this varies from 2 percent to 3.9 percent. This graduated tax rate applies to income ranging from $5,300 to $89,600. This type of tax is one of the critical annual requirements for an Arkansas LLC. It is also important to note that a multi-member LLC is taxed as a partnership by default, while a single-member LLC is taxed as a disregarded entity or sole proprietorship.
• Pass-through Entity Tax (PET) – The owners of an LLC can also elect the Pass-through Entity Tax. This type of tax will take effect for tax years beginning on or after January 1, 2022. If you have registered your limited-liability company in 2024, then you can elect Pass-through Entity Tax (PET) as a part of your LLC annual filing in Arkansas. When you elect to be a PET, you will be able to file a single income tax return on behalf of the company and also pay the income tax on behalf of all its owner-members. It is important to note that if a limited liability company has chosen to be taxed as a C corporation, then PET will not be applicable for such an entity.
• Withholding Tax – Taxes are an essential component of Arkansas LLC annual requirements, and one tax that may be applicable for your company is the withholding tax. If you have employees, you will need to withhold state income tax from their wages. The tax rate is 3.9 percent, and it has to be remitted to the Arkansas Department of Finance and Administration.
• Sales and Use Tax – If the primary business activity of your company involves selling or promoting taxable goods or services to customers within the state, then you will need to collect sales tax. The sales tax has to be filed with the Arkansas Department of Finance and Administration. You will also need to register your LLC with the Arkansas Taxpayer Access Point (ATAP) for a sales tax account. You will be required to file a $50 sales tax permit fee. All taxes as part of the Arkansas LLC annual requirements can be filed using the ATAP.

Arkansas Corporation Annual Filing Requirements

Once you have incorporated your company, there are specific annual requirements for Arkansas corporations that need to be fulfilled. This helps you maintain a good standing in this state. The yearly requirements are almost similar in most US states, including Arkansas. The annual requirements may be different for a domestic corporation and a foreign entity, as not every entity needs to submit an Arkansas corporation annual report. Let’s examine the key annual requirements in this state.

Arkansas Corporation Annual Report

Most US states require business entities, including corporations, to file an annual report. However, in this state, a corporation is required to file an Arkansas annual report, also referred to as the Annual franchise tax report. The Arkansas Code of 1987 (2024), AR Code § 4-27-1622 (2024), states that each domestic and foreign corporation in the state must file an annual franchise tax report with the Office of the Secretary of State. This Arkansas corporation’s annual report must be filed by May 1 each year, although submission can begin as early as January 1.

Arkansas Corporation Taxes

Arkansas is an excellent state for starting a new business thanks to a vibrant industrial landscape and pro-business climate. Therefore, if you plan to incorporate in this state, you must remain compliant with various state laws and requirements. One of the most important annual requirements for Arkansas corporations is filing state business and corporate taxes on time. Let’s examine some of the applicable taxes in the state for business corporations.

• Corporate Income Tax – Arkansas has a corporate income tax that applies to most C Corporations. A graduated tax rate is applied to the Arkansas Net Taxable Income (NTI), varying from 1 percent ($0- $3,000) to 4.3 percent for businesses with taxable income exceeding $11,001. Unlike an Arkansas corporation’s annual report, you can file this tax electronically using the Arkansas Taxpayer Access Point (ATAP) portal.
• Estimated corporation income tax – A corporation conducting its business in the state of Arkansas may be required to file an estimated corporation income tax. This will be filed by taxpayers who expect their estimated tax to exceed $1,000. It has to be filed with the Commissioner of Revenue, Department of Finance and Administration (DFA).
• Sales and Use Tax – This is one of the most common forms of taxes applicable to sellers in any state of the USA. The sales tax and the use tax may have different rates depending on the product or service and the location of the company. Arkansas Corporation annual requirements mandate that gross receipts (sales) tax will be imposed on any individual or retailer conducting business in this state. Of course, several items and transactions are not taxable under this category, like motor fuel and newspapers. Items sold for resale will also be exempt from tax. The Arkansas state sales and use tax rate is six percent of the actual sales price. However, food sales will be taxed at a rate of two percent.
• Miscellaneous Taxes – Apart from the franchise tax, also known as the Arkansas corporation annual report, your company may be required to file certain miscellaneous taxes in this state. Some of the Arkansas miscellaneous taxes that may be applicable, depending on the business activity, include alcoholic beverage taxes, real property transfer tax, casino gaming and sports wagering taxes, construction non-residential surcharge, cigarette paper taxes, and severance tax, among others.

Need any Assistance in Filing Arkansas LLC or INC Annual Reports?

The annual requirements of each state in the USA vary and are administered by state authorities and business laws. One of the most essential requirements is the submission of an Arkansas annual report, which is typically presented in the form of a franchise tax report. If you need detailed information about a corporation or LLC’s annual filing in Arkansas, including taxes or annual reports, then IncParadise can assist you with this.

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.

Arkansas Corporation

There are different types of businesses that you can form in Arkansas. One of the most popular entity types is a traditional corporation, also known as a C Corporation. This type of entity has several advantages compared to other types of entity structures. This is one of the primary reasons driving entrepreneurs to form a corporation in Arkansas. Once you have incorporated your company, you can elect S Corporation status, a special tax status that allows you to enjoy several tax benefits. There is a process in this state for incorporation, and it is governed by the Arkansas Code of 1987 (2024). You can choose to form a domestic or a foreign entity, and even register an Arkansas Corporation online or offline.

What is an Arkansas Corporation?

A C corporation (C corp) is a type of legal entity that is distinct from its owners, also known as shareholders. Such entities are typically subject to corporate income tax, although the tax rate varies from one state to another. If you register a corporation in Arkansas, it becomes a separate legal entity, allowing the corporation to own assets and enter into business contracts. Several aspects are mandatory in this type of entity, such as holding at least one annual meeting of directors and shareholders. There are also several benefits to incorporating in Arkansas, including access to grants and easier fundraising through equity financing. The most common forms of corporations that you can form in this state are:

• Business Corporations (C-Corp)
• S-Corporation
• Foreign Corporations
• Nonprofit Corporations
• Professional Corporations
• Benefit Corporation

What are the benefits of incorporating in Arkansas?

If you are an entrepreneur planning to incorporate in Arkansas, this type of business structure can provide you with advantages compared to other entity structures. Some of the top advantages are:

• Limited liability protection – A C Corporation is a separate legal entity, and hence, shareholders or owners enjoy limited liability protection. This is one of the biggest benefits of incorporating in Arkansas. This means that the owners or shareholders will not be personally liable for any debts or obligations of the corporation. This type of protection can prove highly beneficial in the event the company faces financial difficulties or lawsuits.
• Ability to offer shares – This type of legal entity can issue shares of stock. It can issue both common and preferred shares to raise capital and establish ownership stakes. These shares also represent ownership (shareholders) in a corporation. This is one of the reasons why forming a C-corp is always an attractive option.
• Perpetual Existence – One of the benefits of incorporating in Arkansas is that your company will enjoy perpetual existence. This means that a corporation can continue to operate indefinitely, even if its shareholders die or ownership changes hands. This type of entity will remain operational till it is formally dissolved.

Starting an Arkansas Corporation

If you plan to form a corporation in Arkansas, there are several essential steps to follow and state requirements to fulfill. Some of these requirements are one-time, while some are recurring. This will help your corporation operate smoothly.

1. Name an Arkansas Corporation

The first step in forming a corporation in Arkansas begins with reserving a business name. The corporate name must be chosen in accordance with the Arkansas Code of 1987 (2024) for Corporations and Associations. Let’s examine the key steps in this process.

• The name of your company must include a word, phrase, or abbreviation like “company,” “corporation,” “limited,” “incorporated,” “co.,” “corp.,” “ltd.,” or “inc.” pursuant to AR Code § 4-27-401 (2024).
• You must ensure that the corporate name is distinguishable in the records of the Secretary of State from any other corporate name, fictitious name adopted by a foreign corporation, and business names of not-for-profit corporations.
• The chosen business name should not contain any word or phrase that implies or indicates that the said corporation is connected with a government agency anywhere in the United States.
• You need to conduct a corporate name search, also known as a name availability search, with the Secretary of State’s office (SOS).
• If the chosen corporate name is available, then you can file an Application for Reservation of Entity Name (form RN-06).
• You will need to submit this form along with a fee of $25 to reserve the chosen name.

2. Appoint Directors

One of the important actions to take before or after registering a corporation in Arkansas is appointing directors. According to the Arkansas Code of 1987 (2024), AR Code § 4-33-801 (2024), each corporation operating in this state must appoint a board of directors. The term of such directors must be specified in the articles or bylaws of the corporation. Hence, appointing a board of directors is a key aspect of the incorporation process.

3. Appoint an Arkansas-registered agent

Every state has some general business laws and some specific laws for certain entity structures. If you want to incorporate in Arkansas, then the Arkansas Code of 1987 (2024) states that no corporation can operate in this state without a registered agent. A registered agent is considered a business or individual responsible for receiving legal documents and official communications on behalf of a corporation. They are also known as statutory agents, and their prime responsibility is to provide service of process.

4. File Articles of Incorporation with the Arkansas Secretary of State

This is the most important step in forming a corporation in Arkansas. Once you have reserved a corporate name, you will be able to apply for incorporation. You will be required to prepare and submit the Articles of Incorporation pursuant to AR Code § 4-27-202 (2024). This must be filed with the Arkansas Secretary of State, along with a filing fee of $50.

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5. Prepare bylaws for the Arkansas Corporation

Bylaws for an Arkansas Corporation are fundamental documents that provide a clear roadmap to the company. This document must be carefully thought out and created, taking into account both the current and future needs of the company. Although bylaws are as important to a corporation as its articles, this type of document is not required to be submitted to the Arkansas Secretary of State. You can prepare this document before or after you register an Arkansas Corporation online.

• Introduction and establishment
• Composition of the board of directors
• Key officers of the corporation
• Information pertaining to shareholder meetings
• Information on various stocks a corporation can issue
• Details of any committees, like the audit committee, etc.
• Conflict of interest
• Procedure for the amendment of the company bylaws
• Other miscellaneous provisions, including rules and procedures

6. Draft shareholder agreement and issue shares

One of the key areas to focus on after you register a corporation in Arkansas is a shareholders’ agreement. This type of agreement is also known as a stockholders’ agreement. It is considered an arrangement among shareholders and is quite similar to any other legally binding contract. This type of agreement sets out terms that essentially cover the following:

• How a corporation should be operated
• Shareholders’ rights and obligations
• Information on the management
• Privileges and protection of shareholders
• Capitalization tables
• Share Issuance and defining different classes of shares, if applicable
• Share transfers and exit strategies
• Decision-making and dispute resolution

• Deciding the amount of capital that a corporation needs to raise through shares
• The number of shares that you can issue may vary from one state to another
• You may be required to register with the Securities and Exchange Commission (SEC)
• Setting the value for each share being issued
• Choosing the type of stock to be issued

7. Get an EIN

When you incorporate in Arkansas, there are several state requirements to be fulfilled. One of the most important annual requirements is that of filing taxes. As a corporation, filing taxes will be possible only if you have obtained an Employer Identification Number (EIN). This is a unique nine-digit number assigned to a corporation by the Internal Revenue Service (IRS).

8. Get a business license and permits

Now that you know how to form a corporation in Arkansas, it is essential to understand what it takes to make your company operational. The foremost requirement is obtaining the necessary business licenses and permits. Your company may need a single license or multiple licenses and permits. The type and number of licenses required are determined by several factors, including the primary business activity, the company’s location, and the profession or occupation. The business licenses your company may need in this state are categorized as follows:

• • Sales tax permit – This is mandatory if you are selling services, goods, or property in this state.
  • Profession or Occupation License – Your company may require this according to the profession that the corporation specializes in, such as real estate or accounting.
  • Local licenses and permits – Each city or county in Arkansas has its local municipal codes or zoning codes. Licenses, permits, and their fee will vary according to the jurisdiction. They will be issued by the office of the County Clerk or the business license department of the city in which your company operates.

9. Open a bank account

Once you form a corporation in Arkansas, using a personal banking account for your business can be a disadvantage. This is particularly problematic as it will create confusion during tax time, as individual and business expenses and gains will be mixed. At the same time, corporations are required by law to operate a business bank account. Before opening such an account, it is essential to research what each bank or financial institution has to offer and how its services can benefit you. For example, if you have several retail outlets, then you need to check if your preferred bank enables a POS or “Point of Sale” transaction.

10. Comply with other tax and regulatory requirements

Once you register an Arkansas Corporation online, there are two very important annual requirements that every corporation in the state needs to fulfill. They are filing annual reports and taxes. A corporation must file an annual report with the Arkansas Secretary of State’s Business and Commercial Services Division (BCS). This must be filed annually by May 1, pursuant to AR Code § 4-27-1622. A corporation must also file a franchise tax, in addition to the annual report.

Know more about starting an Arkansas Corporation

You may have several queries regarding how to form a corporation in Arkansas and operate it successfully. This section has been created to answer several such queries and those related to forming an S Corporation, startup costs, dissolution, and foreign corporations among others.

How do I form a “C” corporation and an “S” corporation in Arkansas?

You can form a C Corporation in Arkansas by filing the Articles of Incorporation pursuant to AR Code § 4-27-202 (2024). Once you register a corporation in Arkansas, you can elect S Corporation status. An S Corp is basically a tax designation. According to the IRS, to elect S Corp designation, your company must have no more than 100 shareholders and only one class of stock. You will be required to submit a completed Form 2553 (Election by a Small Business Corporation). It is essential to note that you should file this form only after you have received your Employer Identification Number (EIN).

What is the cost to start a corporation in Arkansas?

If you want to register an Arkansas Corporation online, then you will be required to submit Articles of Incorporation for a domestic entity. The initial cost to incorporate is $50 for a paper submission and $45 for an online submission. You will also be required to file an Application for Reservation of a Corporate Name along with a fee of $25. Apart from this initial incorporation cost, there will be other costs related to the Certificate of Amendment, as well as applications for business licenses and permits, among others.

How do I look up a corporation in Arkansas?

If you plan to incorporate in Arkansas, you must first reserve your corporate name. Once you have identified a business name, you will need to conduct a business entity search or a name availability search. You need to ensure the name is compliant with the Arkansas Code of 1987 (as amended through 2024). A corporate name can be reserved for a period of 120 days. The name availability search will reveal whether your chosen name is available for reservation or not.

Do I need a business license for my Arkansas Corporation?

Yes. You may require single or multiple business licenses depending on the business activity, profession, regulated industries, and the location of your company.

Can I register a foreign corporation in Arkansas?

Yes. You will need to apply for the process to obtain a foreign qualification to operate your business in this state. You will need to submit an Application for Certificate of Authority pursuant to the provisions of the Act 958 of 1987 and Arkansas Code Annotated § 4-27-1503. There is a filing fee of $300. You will also be required to attach a Certificate of Existence from the home state.

How do I dissolve a corporation in Arkansas?

Suppose you want to dissolve your corporation at any given point in time. In that case, you will need to submit Articles of Dissolution (Form DN-10) pursuant to the Act 958 of 1987 & Arkansas Code Annotated § 4-27-140. The filing fee for a paper form is $50, while the cost for filing online is $45. Three types of dissolution can occur in this state: voluntary, administrative, and judicial dissolution.

Ready to Start an Arkansas Corporation?

There are different types of business structures that you can opt to register in this state. One of the most common structures is that of a corporation. This is because there are several benefits of incorporating in Arkansas. If you want to form a corporation in Arkansas, then IncParadise can assist you with the process of registering or moving your company to this state.