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You’ll be in good company if you choose to start a business in Arkansas—Tyson Foods, Walmart, and Windstream all call the appropriately named “land of opportunity” home. The state boasts an overall business-friendly climate, with an array of government incentives and startup grant programs, and relatively low taxes.
How to start an LLC in Arkansas
- Name your Arkansas LLC
- Create a business plan
- Get an employer identification number (EIN)
- Choose an Arkansas registered agent
- File your Arkansas Articles of Organization
- Obtain business licenses and permits
- Understand Arkansas state tax requirements
- Prepare an Arkansas LLC operating agreement
- Examine business insurance options in Arkansas
- Understand financial considerations
- Market your LLC
What is an LLC?
A limited liability company (LLC) is a common business entity for small businesses throughout the US. One or multiple owners can form an LLC. LLCs with more than one owner are called “multi-member” LLCs, and LLCs with one owner are called “single-member” LLCs. The benefit of opting for the LLC business structure is that members are protected from business liabilities and debts, meaning they won’t be held personally responsible for legal and crediting claims against the LLC.
Federal tax treatment of LLCs can also be favorable. The federal government classifies LLCs as “pass-through” entities, much like sole proprietorships or partnerships. That means any income generated by the LLC is taxed only once, at members’ individual tax rates. This contrasts with corporations, which must first pay federal taxes on the company’s profits. Then, profits distributed to shareholders are taxed again at shareholders’ personal income tax rates.
Is an LLC the right business structure for you?
There are a variety of types of business structures to choose from for your Arkansas entity. Whether you choose an LLC or something else will depend largely on your business needs and goals. An LLC might be a good fit for you if:
- You want to limit personal liability. LLC owners usually aren’t held liable for debts and legal claims against the business.
- You want to limit tax obligations. LLCs avoid taxation on corporate income; profits are only taxed once, at members’ personal income levels.
- You don’t need to fundraise by issuing shares. LLCs can’t issue stock or have shareholders, unlike C corporations. While this might limit a business’s ability to raise money from investors, it can also simplify your LLC’s regulatory position.
1. Name your Arkansas LLC
Selecting a name for your business is a basic yet decisive point on your journey to running an LLC in Arkansas. The two Arkansas LLC naming guidelines are:
- Your name must be unique. Your LLC’s name must be different from any other business entity in the State of Arkansas. You can check to see if your preferred name is available by running a search through the Secretary of State’s office.
- Your name must include the entity type. All LLCs in Arkansas must have the words “Limited Liability Company,” or an abbreviation thereof (“LLC, “L.L.C.,” “LC,” or “L.C.”), in it. “Limited” may be abbreviated to “Ltd.,” and “Company” may be abbreviated to “Co.”
2. Create a business plan
Every successful business depends on its basis in a solid business plan. LLCs in Arkansas are no exception. A good business plan will include your LLC’s name along with a concise description of its purpose. The plan should also offer a thorough market analysis, delineate the organizational structure, describe products or services, identify one or more target customer profiles, and articulate plans for marketing, logistics, and finance.
3. Get an employer identification number (EIN)
To pay federal and state taxes, your Arkansas LLC must have a federal employer identification number, or EIN. You can apply for this number, which identifies your company to both state and federal tax authorities, by applying through the US Internal Revenue Service (IRS) at no charge.
4. Choose an Arkansas registered agent
Every LLC in Arkansas must have a registered agent for service in the state. A registered agent can be an individual or a service. If you opt for the latter, you can use one of many registered agent services in the state that are authorized to accept legal papers on an LLC’s behalf. A qualified Arkansas registered agent must reside in the state, if an individual, or be a company registered with the Arkansas Secretary of State’s office.
5. File your Arkansas Articles of Organization
To establish your LLC as an authorized business in the state of Arkansas, you must file Articles of Organization (also known as a Form LL-91) with the Secretary of State’s office. Your articles must include:
- The LLC’s name and address
- The name and address of the LLC’s registered agent
- A statement as to whether the LLC will be run by a manager hired by the members or the members themselves
- The signature of someone authorized to file the articles on the LLC’s behalf (a manager or its members)
There is a filing fee of $45 if done online, or $50 if done through mail or in person.
6. Obtain business licenses and permits
Arkansas does not require every business to obtain a general business license at the state level. The only statewide license required of a large share of businesses is the sales tax permit, sometimes known as a seller’s permit, which applies to businesses that sell or lease products or services that would ordinarily be subject to sales tax if sold at retail.
The Arkansas Department of Workforce Services provides additional information on what permits may be required of your LLC if it engages in the sale of certain goods (like alcohol or tobacco), or if it operates out of a certain county or municipality with its own licensing rules.
7. Understand Arkansas state tax requirements
Arkansas LLCs do not pay taxes on corporate income at the federal or state level. Members pay personal taxes on whatever income they derive from the business, and employees of the LLC pay income taxes on whatever wages they earn. The annual $150 Arkansas franchise tax on LLCs is imposed for the privilege of doing business in the state, however.
If your LLC has employees, you’ll have to file withholding taxes on their wages on a monthly basis and register to pay state unemployment taxes. You can do so through the Department of Workforce Services website.
Finally, if your LLC sells goods to customers in Arkansas, you must collect and pay sales tax. The sales tax in Arkansas is presently at 6.5%.
8. Prepare an Arkansas LLC operating agreement
An operating agreement outlines your LLC's ownership shares and business structure, as well as its standard operating procedures. LLCs in Arkansas are not required to prepare or file operating agreements with any state agency, but for administrative purposes and goal-setting, writing one is always a good idea. A workable operating agreement includes:
- How ownership rights are distributed between LLC members
- Members’ roles and responsibilities within the business
- Procedures for when a member wants to exit the LLC, or for if/when the LLC winds down
9. Examine business insurance options in Arkansas
Purchasing small business insurance for your Arkansas LLC is crucial to managing risk and can free up your mind to focus on more pressing matters, like growing the business. Standard insurance plans for businesses in Arkansas include:
- Workers’ compensation insurance. Workers’ comp is an insurance policy that covers injuries and illnesses employees may incur on the job (even death). Most employers with three or more employees are required by law to have workers’ comp coverage.
- General liability insurance. General liability insurance is a policy that protects your LLC more broadly from legal costs and judgments, some financial losses resulting from property damage, and injuries on the job (a customer slip-and-fall on your property, for example). You’re not obligated to buy it under Arkansas law, but if you want to rent an office or storefront, many commercial leases require you to.
10. Understand financial considerations
Aside from insurance, you will have to make other investments in your Arkansas LLC to get it off the ground. These might include rent toward a lease on 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 the business, like lawyers and accountants. Resources are available to help entrepreneurs raise startup funding to defray some of these costs.
11. Market your LLC
Launching your Arkansas LLC, although no easy task, is only phase one—now it’s time to market your business to stand out from the competition. A solid marketing plan for your Arkansas LLC should include:
- Market research. Get to know your target customer(s) via research, conversations, and surveys before you devise how to best market your LLC.
- Advertising. Promote your LLC by producing print, online, or even TV advertising. You can also hire an advertising agency to handle it for you.
- Social media. Having a social media presence is now a must for any business. Your Arkansas LLC needs to have an active presence on an array of platforms, including Facebook, Instagram, and YouTube, in order to reach as many customers as possible.
Forming an Arkansas LLC FAQ
How much does starting and maintaining an LLC in Arkansas cost?
It costs, at minimum, $45, to start your LLC in Arkansas. This accounts for the online filing fee to file your articles of organization—it costs $50 to file by mail or in person. Additionally, you’ll owe $150 a year in annual franchise tax to the state to continue to operate your LLC, and be subject to a variety of other taxes depending on the type of business you’re engaged in, and whether you have employees on staff and how many.
Do you need a registered agent in Arkansas?
Yes, your Arkansas LLC must appoint a registered agent to receive legal correspondence. Your agent, if a person, must reside in the State of Arkansas; if it’s a professional registered agent service, the company must be authorized to do business in the state and maintain an office address there.
How do state taxes work in Arkansas?
State income tax is levied on members that draw income from the LLC. They are taxed through their personal income tax returns. Sellers of retail goods and services also pay a sales tax of 6.5%. And every LLC in Arkansas with W2 employees must withhold taxes from the wages of those employees.