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Arkansas is nicknamed the “Land of Opportunity”—a fitting title, given that the state consistently ranks among the best places in America to start a business.
It’s also home to the headquarters of large corporations, like Walmart and Tyson Foods, plus thousands of Shopify merchants. From its capital of Little Rock to its numerous small towns, Arkansas is a great place to launch and run your small business. Follow these eight steps to make it happen.
Start a Business in Arkansas
1. Choose a business idea
Step one for any small business owner in Arkansas is to single out a business idea. A solid concept forms the bedrock of your new venture. Will you sell a product or a service? Perhaps a range of both? Regardless, here are two key questions to ask yourself before pursuing your idea:
- Who is your customer? Profile your target market: survey prospective customers, analyze the marketplace, and research industry trends. Who are you selling to? What do they do? And what might they be looking to buy? Determine whether you’re best to sell directly to consumers (B2C), or business to business (B2B)? Will you sell online, through a traditional storefront, or both? Establishing your customer should be your priority.
- What is your projected profitability? Business success is ultimately measured by profitability. You need to make more than you spend on business costs—certainly in the long run. Consider pricing, distribution, and overheads when building your profit strategy. How much do you need to sell to break even, and how long will it take you to reach a healthy profit margin?
2. Name your business
Once you’ve settled on an idea, you then need to choose a business name. Pick a name that’s simple, memorable, and immediately conveys what you do—and keep certain state-level rules in mind. Here are a few guidelines for choosing a business name in Arkansas:
- Be original. The name of your Arkansas business must be different from any other business entity registered in the state. Check if your desired name is available by running a search of existing business entities through the Arkansas Secretary of State's office.
- Include certain words. Depending on your legal business entity structure, you may need to include certain words in your business name. LLCs, for example, must contain the word “Limited Liability Company,” “Limited Company,” or the abbreviations “L.L.C.” or ”LLC.” Corporations should contain the word “Corporation,” “Incorporated,” “Company,” or “Limited,” or an abbreviation thereof.
- Exclude certain words. Your Arkansas business name cannot contain words that might confuse it with a government agency, like the FBI, Treasury, or Arkansas State Police.
- Reserve your name. You can reserve your business name online or by mail, by filing an Application for a Reservation of Entity Name form with the Secretary of State's office. The fee is $25 for applications by mail, and $22.50 for online applications.
- Adopt a DBA. If you want to operate your Arkansas business under a different name than the one you registered with the state, file for a DBA, or “doing business as”—sometimes referred to as an assumed name. Your DBA must comply with the same naming rules as regular Arkansas business names. File for your DBA online or by mail. The filing fee is $25 for mail-in and $22.50 for online applications.
- Secure a domain name and social media handles. Businesses need an online presence to compete in today’s market. Purchase a domain name (URL) and choose social media handles that align with your business name or DBA so customers can easily find you.
3. Create a business plan
Every business needs a solid business plan. A successful business plan articulates your business’s function, and includes thorough market research, your organizational structure, product and service descriptions, target customer and market profiles, and marketing, logistics, and finance strategies. Your business plan should reflect your overall goals, and give an indication of how you intend it to run in the near and long term.
You can draft your business plan from scratch, use an example, or customize a template according to your needs. You can opt for a traditional plan, a lean plan (which only includes information management needs to know), or a plan tailored to a certain business type, like a nonprofit.
4. Choose a business structure and get started
There are a number of business structures to pick from when forming your Arkansas small business. Each offers different outcomes for personal liability, ownership, taxation, and funding, and certain types are better suited for different company structures. Here are the three main structures:
- Sole proprietorship. Sole proprietorships are the default designation when engaging in business as an individual in the US. All earnings are taxed through the proprietor’s personal tax returns, allowing owners to avoid “double taxation” (taxes on business income and personal income derived from the business). One downside to operating a sole proprietorship is that you’re personally liable for most debts or legal damages incurred by the business. This is because the business is not considered a separate legal entity from business ownership. There are no fees or registration requirements to set up a sole proprietorship in Arkansas.
- LLC. A limited liability company, or LLC, differs from a sole proprietorship in that it can have multiple owners, called “members.” Like sole proprietors, members are taxed at their personal income levels. A major difference with LLCs, however, is that members enjoy personal asset protection related to business debts and damages. Only business assets are reachable by creditors and litigants. The downside is the administrative costs; forming an LLC in Arkansas means you must pay an annual flat franchise tax of $150 (which you can do by mail or online).
- Corporation. The main benefit of forming an Arkansas corporation is the fundraising opportunities; corporations can issue stocks to shareholders for an ownership stake in the business. Corporations enjoy the same personal liability protection as Arkansas LLCs. To operate a corporation in Arkansas you must pay an annual flat franchise tax of $300, by mail or online, and fulfill annual reporting requirements.
Getting a federal employer identification number (EIN)
Once you’ve settled on a business structure, apply for a federal employer identification number, or EIN. EINs are issued by the US Internal Revenue Service (IRS). They are used to identify business entities and assess state and federal taxes. Apply for an EIN online through the IRS website. There’s no fee to apply.
Incorporating in Arkansas
Registering your business with state authorities in Arkansas differs slightly depending on your business structure. Sole proprietorships don’t require any special registration procedures, but LLCs and corporations must file the following documents:
- LLCs. To register your LLC in Arkansas, file a Certificate of Organization for a Domestic LLC, or an LL-01 form, and pay the $45 fee to file online, or $50 to file by mail.
- Corporations. To register your corporation in Arkansas, file Articles of Incorporation, or a DN-01 form, and pay the $45 fee to file online or $50 to file by mail.
5. Obtain business licenses and permits
Arkansas does not require businesses to obtain a general business license. The only statewide license required of some Arkansas businesses is the sales tax permit—known in many other states as a “seller’s permit.” The sales tax permit applies to businesses that sell or lease products or services that would ordinarily be subject to sales tax if sold at retail. For more information on industry-specific licenses, such as for the sale of restricted goods like alcohol or tobacco, visit the Arkansas Department of Workforce Services website.
6. Examine business insurance options
Purchasing business insurance for your Arkansas company can help you manage risk and free up your mind to focus on growing your company. Common insurance plans for Arkansas businesses include:
- Workers’ compensation insurance. Workers’ comp is an insurance policy that covers injuries and illnesses employees may suffer on the job. Employers with three or more employees are required by state law to obtain workers’ comp coverage.
- General liability insurance. General liability insurance provides broad protection from legal fees and judgments, some financial losses (like those resulting from no-fault property damage), and injuries on the job (a customer slip-and-fall on your property). You’re not required to purchase this policy under Arkansas law, but if you want to rent an office or storefront, your lease may require it.
- Business interruption insurance. Business interruption insurance covers lost earnings due to severe property damage that interrupts operations—like tornadoes, which are common in certain parts of Arkansas.
7. Understand financial considerations
You will likely need to make other investments in your Arkansas business to get it up and running. These expenditures might include renting a brick-and-mortar storefront, paying for a professionally designed website and social media management, purchasing equipment, or licensing software. In addition to paying employees, you also may need to hire contractors and other professionals to support your endeavors, like lawyers or accountants. Resources are available to cover some of these startup costs. Consider also setting up a business bank account to handle costs and cash flow.
8. Market your business
Devising a marketing strategy is a crucial next phase for your business. Word of mouth is great in marketing, but to grow substantially, you’ll want to put a detailed marketing plan in place. This might include:
- Paid advertising and promotion. Paid advertising is a traditional and trusted marketing method. Ads can be print or digital, and you can either buy these yourself or hire an agency to craft them on your behalf.
- Social media. Use social channels like Instagram, Facebook, YouTube, and TikTok to promote your products and services, and to make it easier for customers to find out more about your brand.
- Public relations. Reach out to local and national media outlets to broaden your reach. Cultivate relationships with journalists and publications to increase your brand visibility.
- New business and customer retention. Work to build relationships with your customers. This will keep them coming back and—even better—spreading the word to friends and family.
Starting a business in Arkansas FAQ
Is a business license required in Arkansas?
There is no general statewide Arkansas business license. Retailers in Arkansas need to have a seller’s permit, however, and businesses operating in certain trades—like the sale of alcohol or tobacco—must obtain special licenses.
How much does it cost to register an LLC in Arkansas?
Registering an LLC in Arkansas costs either $45 (online) or $50 (by mail).
How much is a seller’s permit in Arkansas?
Obtaining a seller’s permit in Arkansas costs $50.
Do I need a business license to operate an online store in Arkansas?
Yes, all retailers must obtain a seller’s permit to legally operate in Arkansas.