Every new business owner faces challenges throughout the first years of their business. These hiccups are usually referred to as “growing pains” for a reason- they're a pain! And one of those pains just happens to be the amount of time it takes to form an LLC. There are a lot of factors that play into that, some of which are under your control, and some of which aren't. Here's everything you need to know about how long it takes to get an LLC in Arkansas.
Discovering Arkansas
Arkansas is home to a lot of diverse geography, ranging from forests and farms to rivers, as well as plateaus and mountains. It also has a lot of natural resources, like natural gas, petroleum, and coal. It's also the nation's biggest producer of bauxite (important in aluminum production) and bromine (used in water purification, pesticides, flame retardants and certain medications). Here is what you need to know about the economy of Arkansas.
Economic Overview of Arkansas
Arkansas has a GSP (Gross State Product) that totals $122 billion, and it has a growth rate of 1.4% from 2017-2022. Their yearly employment growth rate during the same time period is 1.0%, and the unemployment rate in the state in 2022 was 3.5%, which is on par with the national average.
There are 639 industries reported in Arkansas, and some of the biggest ones in the state are Meat, Beef and Poultry Processing, Hospitals, Petroleum Refining, Warehouse Clubs and Supercenters and New Car Dealers. The companies that employ the most people in Arkansas are the State of Arkansas, Walmart Inc., Baptist Health, Tyson Foods, Inc., and Mercy Inc. So, lots of representation from the retail industry, as well as processing and refinery.
Business Environment in Arkansas
CNBC has rated Arkansas as the 35th best state to do business in. The came in 10th for the lowest cost of doing business, scored 8th-place for the lowest cost of living, were named the 41st best workforce, came in 29th for the best economic climate, 41st for the best educated workforce as well as the best infrastructure, and were ranked in 32nd place for the friendliest regulatory environment. It's actually moved up 12 whole spots on the list since 2011.
The Arkansas state government has been putting in the work to make it easier to start a business in Arkansas. One of the new systems they've instituted is a “single point of contact” system. This means that the Business Development team becomes an intermediary between businesses, stakeholders and the community and they make sure that the site selection and development process goes smoothly.
Arkansas passed a law this year that reduces the corporate income tax rate to 4.8%, and personal income tax rates to 4.7-4.4%, which is pretty low. And they're attempting to create a pro-business government by not only providing incentives for business, but also by updating the infrastructure so that it's easier for businesses to expand and relocate.
State-Specific Regulations and Incentives for Forming an LLC in Arkansas
Arkansas provides a number of incentives for businesses. Here are some of the regulations and incentives that Arkansas offers for starting a business in the state.
- Advantage Arkansas: This is a state income tax credit that’s provided as an incentive for job creation and is based on the payroll of new, permanent employees.
- Create Rebate: This is an annual cash rebate provided for companies who hire new permanent employees. It’s based on the company’s annual payroll.
- Tax Back: This is an investment incentive that provides a refund on sales and use taxes on purchases of machinery and equipment, as well as building and other materials for qualifying businesses that meet the investment eligibility requirements.
- Company Childcare Facilities: Arkansas offers benefits for companies that offer employee childcare. You can get a tax credit of 3.9% of the annual payroll of the employees that work at the childcare facility, or a one-time issuance of a $5,000 state income tax credit during the first year that the business offers childcare.
- Recycling Equipment: There’s an income tax credit to purchase equipment to help your company reduce, reuse or recycle solid waste material.
- Replacement and Repair of Manufacturing Machinery and Equipment: There’s a sales and use tax refund that can be applied to the replacement and repair of manufacturing machinery and equipment if the purchases qualify.
- Electricity, Natural Gas and Coal: If any energy is used for the manufacturing process, then it gets a sales tax exemption.
- Tuition Reimbursement: Arkansas provides a 30% tax credit for qualifying businesses for approved educational expenses for employees that complete courses at accredited postsecondary educational institutions in Arkansas.
- Equity investment Incentive Program: This is an incentive for technology-based businesses which pay more than the state or county average wages. The income tax credits for this program are around 33 ⅓% of the amount the investor has invested in the business.
- Arkansas Digital Product Motion Picture Incentive: This is a discretionary incentive for film and production in the state.
For more information about business incentives in Arkansas, visit the Business Incentives page of the Arkansas Economic Development Council.
Pros and Cons of Establishing an LLC in Arkansas
One of the benefits to forming a Limited Liability Company in Arkansas is the low tax rates. Both corporate and personal income tax rates are low. And the state government in Arkansas is quite business-friendly, creating lots of incentives for businesses and working on the infrastructure to make it easier to expand or relocate to Arkansas.
There are a few drawbacks to forming an LLC in Arkansas. According to CNBC's ranking of the state's economy, they came in 41st in terms of the best workforce, best educated workforce and best infrastructure. That indicates that most of the workforce isn't well-educated and ready to take on skilled jobs. It also means that there might be a reason that Arkansas' state government is making a point of updating the infrastructure if it scored so poorly.
Procedure of Establishing an LLC in Arkansas
Before we get into how long it takes to get an LLC in Arkansas, let's cover how to form an LLC. Here are the steps you need to take to form a Limited Liability Company.
- Get Your Certificate of Organization: The first step to forming an LLC is obtaining a copy of the Certificate of Organization form. This is the primary form associated with LLC formation in Arkansas. In other places, it's called an “Articles of Organization” form, but it's basically the same thing. It will ask for information like your LLC's name, address, and details about LLC members. You can get one from the Secretary of State.
- Pick a Good LLC Name: A suitable business name isn't just catchy, it's one that no other business in the state is using, and it's not too similar to other business names in accordance with state law. To make sure your business name isn't taken, you can perform a business name search on the Secretary of State's website.
- Assign a Registered Agent: One of the legal requirements of your new LLC is a registered agent, which is someone who will receive official mail and service of process for your company during business hours. You can choose to designate anyone that meets the legal requirements for a registered agent in your state, or hire a registered agent service.
- Choose your Address: Your business address will be listed on public record, so unless you want everyone to have access to your home address, you should probably choose one you're more comfortable listing. You can avoid your personal information being made public by utilizing a service like a virtual address. However, PO boxes generally aren't legally permitted.
- Sign and Send in Your Documents: Once you've checked that all of the information on your Certificate of Organization is accurate, you can sign it and submit it. But wait, before you do that, you should know that if you sign it yourself then your information will be listed on the public record. So, to ensure privacy you could consider using an LLC formation service.
After your Certificate is filed with the Secretary of State, you'll be contacted as soon as your documents have been processed. But there are a number of other things you need to take care of so that your business starts off on the right foot. If you want to learn more about the other LLC activities you need to complete, read How to Start an LLC in Arkansas.
Necessary Documentation for Filing an LLC in Arkansas
One way to save time when you're forming an LLC is to get the documents you need before you file. Some of the paperwork you'll need is your EIN (Employer Identification Number), Certificate of Organization, business name reservation form, LLC Operating Agreement (usually not a legal requirement, but it's often recommended when forming a Limited Liability Company), initial report/franchise tax forms, and all of the documents you need to register your company with different agencies for tax purposes, like the Department of Revenue.
Legal Requirements for Starting an LLC in Arkansas
In Arkansas, LLCs are required to pay a Franchise Tax. You can get late penalties, or have your LLC fall out of good standing if you fail to pay it, so it's pretty important. It's $150 for LLCs, and if you pay it online there's an additional $5 fee.
You'll be required to designate a registered agent, too.
Time Frame for Establishing an LLC in Arkansas
Now that we've covered the complicated process of forming an LLC, we can tackle the issue of time frames for forming an LLC. Here's how long you can expect LLC formation to take in Arkansas.
How Long Does the Initial Paperwork Take in Arkansas?
Arkansas doesn't offer expedited filing, so you're stuck with either mail or online filing. Approval times for LLCs can take between 4-5 weeks for mail filings, and around 3-7 days for online filings.
Processing Times in the State of Arkansas
It's important that you know processing times are different from approval times. Processing times refer to the time it takes the government to process and enter your filing into the computer system. Approval times refer to the total amount of time it takes to get your LLC approved, and it includes processing times.
In Arkansas, processing times for mail filings are 2-3 weeks, and they're 3-7 business days for online filings.
Common Delays in the LLC Formation Process in Arkansas
Choosing the wrong filing option could delay your formation. So, maybe steer clear of the mail option because it can take weeks.
Make sure that all of the information on your formation documents is correct, too, because if it isn't, it could cause your formation documents to be rejected, or it could take longer.
Choosing a complicated business structure with lots of LLC members could also cause formation delays.
Expedited Processing for LLC Formation in Arkansas
In some places, expedited processing can speed up the formation process considerably. Here's all the information on expedited processing in Arkansas.
What are the Expedited Options Available?
Unfortunately, there aren't any expedited filing options in Arkansas. But this is likely because they have relatively fast online approval times.
Comparing LLC Formation Time Frame in Arkansas with Other States
Even if you live in Arkansas and plan to form your LLC in the same state, it's a good idea to find out how it compares to other states. Here's how Arkansas stacks up against other states.
Brief Comparison with Key States
Arkansas has approval times of between 4-5 weeks for mail filings, 3-7 business days for online filings, and no expedited processing options.
There are many states that offer expedited filing, which would allow for faster approval times. In fact, Delaware, Michigan, Montana, Nevada and West Virginia all have 1-hour expedited options. There are a handful of states that process online filings immediately. And when it comes to mail approval times, Ohio and Kentucky have 1-day processing times.
But there are slower states, too. Maryland processes online filings in 2 weeks, while Texas and Arizona take 13-15 days and 14-16 days. And New York has an approval time for mail filings of 8 months! Maryland and Washington are also slower for standard mail approval times coming in at 5-8 weeks and 5-6 weeks, respectively.
Why is Arkansas a Favorable Place for Forming an LLC?
It's rather inexpensive to run a business in Arkansas, compared with other states. They also have low corporate and personal income taxes. And the state government is actively trying to provide incentives for business owners to start and move their business to the state, as well as upgrading properties and infrastructures to make it easier for businesses to stay or relocate to the state.
There are a lot of problems that entrepreneurs face while trying to get their businesses established. One of them is waiting for LLC approval. Approval times in Arkansas range from 4-5 weeks for mail filings, and 3-7 days for online filings. That means if you choose the online option you can receive a response about your filing within a matter of days.
