Follow our free guide to form an LLC in Arkansas:
- Pros and Cons of Forming an LLC in Arkansas
- Starting Your Arkansas LLC
- Maintaining Your Arkansas LLC
- Additional Arkansas Resources
To make the LLC filing process easier, check out our comprehensive guide about forming an LLC in Arkansas.
Pros and Cons of Forming an LLC in Arkansas
Arkansas’s economy has been steadily increasing as the state closed 2017 with a GDP at almost $125 billion. Six Fortune 500 corporations, including global magnate Wal-Mart, call Arkansas home. Additionally, the state is among the top 25 best states in the nation for business.
Low Cost of Living
The cost of living in Arkansas is well below the national average, by almost 20%. The median price for a home in Arkansas is only $120,000, compared to the national median price of $215,000.
Privacy for Owners
Arkansas does not require all of the names of members/manager of an LLC to be included in the Articles of Organization. In fact, an organizer (the party who prepares and files the paperwork) is able to submit the formation paperwork in place of the members.
High Poverty Rate
Arkansas currently has one of the highest poverty rates in the nation. With 17% of the state’s residents living below the poverty level, there is much less opportunity for businesses to gain new customers.
High Crime Rate
The crime rate in Arkansas is almost 50% higher than the national average, especially in areas of larceny and property crime. Little Rock is considered one of the more dangerous cities in the nation.
Cost of Doing Business
- $50 Filing Fee
- $150 Franchise Tax / Annual Report (Filed Together)
Starting Your Arkansas LLC
Forming a new LLC in Arkansas may seem like a difficult task, but the process is not as hard as you think, especially when you have the right kind of help.
Here are the steps needed to start your Arkansas LLC:
- Step 1: Name your LLC
- Step 2: Establish Ownership of your LLC
- Step 3: Select a Registered Agent
- Step 4: File the Articles of Organization
- Step 5: Create your Operating Agreement
- Step 6: Register for an EIN
Step 1: Name Your Arkansas LLC
Picking a business name is an important part of forming your Arkansas LLC. Before you settle on a specific company name, there are a few guidelines to keep in mind:
- The official name of your business must end with: Limited Liability Company, Limited Company, LLC, or L.L.C
- Your business name cannot be intentionally misleading to consumers
- The name of your new LLC must not be similar to another organization’s name/trademark
A few restrictions do exist regarding the name of your LLC, depending on the state where you are starting your business.
A few examples include:
- “Lottery” and “Bank” are ineligible for use (any state)
- Terms that represent educational or Veterans’ organizations are restricted
- Terms related to the Armed Forces or civil servants (police, EMT, fire)
In addition to choosing a name for your LLC, creating an online presence is equally important in the current culture. You can easily check domain name availability at a number of online web services sites.
Step 2: Establish Ownership
The owners of an LLC are not called owners — they are considered either members or managers. The difference depends on the management structure of the business.
LLCs generally have two management structures:
- Member-managed (ownership of business is divided among the members and all parties receive portions of the profits)
- Manager-managed (the appointed manager is the main operator and the members are passive investors who are not actively involved in the daily business operations)
After you have selected a name for your business, you then need to choose a management structure and designate the members of the LLC. The rules concerning LLC ownership in Arkansas include:
Required Number of Members
Arkansas LLCs must have at least one member or manager in order to form a business.
Member Disclosure Requirements
LLC members not disclosed in the filing paperwork. An organizer/authorized representative may sign and file the Articles of Organization in lieu of members.
LLC members in Arkansas may be of any age. An organizer must be at least 18 years old.
There are no residency restrictions imposed on LLC members in Arkansas.
Step 3: Find a Registered Agent in Arkansas
Arkansas LLCs are required to select and appoint a registered agent and submit the agent’s contact information (must be a physical address/not P.O. box) to the state. This person/office is required to operate during standard business hours and act as the state’s point of contact with the business.
What is a registered agent?
A registered agent is a person or business who is authorized to accept official government notices (including the Secretary of State) and service of process notices on behalf of the LLC.
Why do you need a registered agent?
Arkansas state law requires all businesses to have a registered agent so that the Secretary of State’s office has a consistent contact person for businesses. This position is definitely beneficial for LLCs that do not have a physical address.
Who can be a registered agent in Arkansas?
The requirements to be a registered agent are as follows:
- A resident with a physical address in Arkansas
- An LLC or corporation that is licensed to conduct business in Arkansas
Please Note: It is also possible for you to be your own registered agent as long as you use a physical address.
Why you may not want to be your own registered agent
Because the registered agent’s name and address are a matter of public record, LLC business owners who choose to be their own registered agent risk compromising their personal information.
Tip: Avoid the hassles and choose Swyft Filings to fill the registered agent needs for small businesses in Arkansas. Find more information here.
Step 4: File the Articles of Organization
Filing the Articles of Organization is the most important step in officially forming an LLC in Arkansas because it allows your business to be legally recognized by the Secretary of State.
This vital document includes the following:
- The name of the LLC
- The location of the business
- The name and location of the registered agent
- The name(s) of the party/organizer filing the paperwork
- The statement of purpose
- The chosen management structure
Additional Arkansas Filing Requirements—Professional Service Businesses
The state of Arkansas allows professional service businesses to form a specific type of LLC known as a Professional Limited Liability Company (PLLC).
The following professions generally form a PLLC:
- Physicians and Dentists
- Professional Counselors and Psychologists
- Architects and Engineers
Please Note: There are specific regulations for medical professionals seeking to form a PLLC.
A few points to consider:
- All members of the PLLC must be licensed in the profession of the business.
- The PLLC is only allowed to provide services for which the business was formed.
- The members are still subject to whichever licensing boards govern the PLLC’s profession.
Step 5: Create an LLC Operating Agreement
It is not a requirement to have an Operating Agreement for an Arkansas LLC; however, this document is considered absolutely necessary for any successful business because it adds structure to the company and projects professionalism.
What is an LLC Operating Agreement?
The LLC Operating Agreement is an in-house legal document that defines the rights and responsibilities of each person involved in the business and lays out the details involving how the business will operate.
Why do I need an LLC Operating Agreement?
The LLC Operating Agreement adds stability and structure to the business by stating the roles of the members and providing direction for daily operations. The agreement also reduces future disputes among the members.
What goes into an LLC Operating Agreement?
Every LLC Operating Agreement is different and is based on the business and its needs. However, most Operating Agreements will include the following the information:
- The list of the members/managers and their roles
- The initial capital contributions of the members
- The voting designations and percentages of the members
- The transfer/addition rules and restrictions for members
- The distribution of profits
Tip: Get a customized LLC Operating Agreement for your small business with Swyft Filings. Add structure to your LLC now.
Step 6: Obtain an EIN
Arkansas requires an EIN for any business that has/will have employees. Additionally, most banks and financial institutions require the EIN in order to open any accounts for the business.
What is an EIN?
The EIN (Employer Identification Number) is also known as a Federal Tax ID and is a nine-digit number that is assigned to your business by the Internal Revenue Service (IRS). The EIN identifies your business with the government much like a personal Social Security number.
What business entities need an EIN?
The types of business entities that need an EIN include:
- An LLC with employees (even if owned by one person)
- An LLC with more than one member
- A partnership (LLC or C-corp)
Please Note: A sole proprietorship is the only business entity that is not required to have an EIN.
Why is an EIN necessary?
The more common reasons you would need an EIN are:
- To hire employees
- To open a bank account in the U.S.
- To file your company’s taxes
- To pay independent contractors
Please Note: If you collect revenue of any kind through a business entity, you will need an EIN.
Swyft Filings offers EIN services for small businesses in Arkansas. Find more information here.
Maintaining Your Arkansas LLC
Once you are done with the initial phase of setting up your Arkansas LLC, it is time to move on to the next phase that involves getting your LLC ready for business. The next few steps are:
- Step 1: Register for Taxes in Arkansas
- Step 2: Apply for the Required Permits and Licenses
- Step 3: File the Annual Report for your LLC
- Step 4: Request a Certificate of Good Standing
Step 1: Register for Arkansas State Taxes
LLCs in Arkansas are required to pay an annual franchise tax that is also connected to the annual report - the total due each year is $150.
LLC members are also required to pay state and federal income tax on their earnings. Arkansas places a .9% tax on initial earnings of $4,299. The chart below shows the tax rate scale:
Step 2: Obtain Business Licenses and Permits
The business licenses and permits required in Arkansas vary on a number of variables:
- Location (city and county)
- Type of Business
Tip: If you would like to see more in-depth information on licenses and permits, please feel free to visit the content in our learning library that covers business licenses and permits.
Step 3: File an Annual Report
LLCs formed in Arkansas are required to file an annual report with the Department of State. The purpose of the annual report is to keep your business’s information and status updated with the state.
Please Note: The annual report for Arkansas is filed in conjunction with the franchise taxes.
Due Date: May 1st
Implications of Late Filings: $25 Late Fee
Swyft Filings helps you stay compliant by providing stress-free solutions. File your annual report with us today.
Step 4: Obtain a Certificate of Good Standing
After your Arkansas LLC has been formed and is ready for business, there is still one last step — getting a Certificate of Good Standing.
What is a Certificate of Good Standing?
The Certificate of Good Standing is an official notification from the government agency that confirms your entity has been properly filed and is still in compliance.
Why should I obtain a Certificate of Good Standing?
In the course of conducting business, you may need to prove that your business is properly filed and fully compliant with the state. Many banks and businesses will request a Certificate of Good Standing as part of the due diligence process.
For the most part, any time you need to prove your LLC’s positive standing with the Secretary of State, you will likely need to present a Certificate of Good Standing.
Swyft Filings can create a Certificate of Good Standing for your Arkansas LLC. Click here for more information.