If you’re here, you’ve likely made the decision to start an LLC in Arkansas, or you want more information about the process before you choose your business structure. Congratulations! Choosing to form an LLC (Limited Liability Company) is a momentous occasion that ranks right up there with buying your first home, and it’s something you’ll never forget.
In this article, I’ll tell you all of the steps you’ll need to complete to form your Arkansas LLC, the state filing fees you can expect, and what steps you’ll need to take after you form an LLC. But first I’ll go over some of the basics, like what exactly a Limited Liability Company (LLC) is and why so many small business owners choose Arkansas LLCs rather than other business structures.
(If you want to skip to the ‘how to form an LLC’ section, click here)
Table of Contents
What Is An Arkansas LLC?
An Arkansas LLC is a Limited Liability Company formed in the state of Arkansas that is governed by the laws, regulations, and statutes of the state of Arkansas.
Why choose An LLC?
You’ll find that your business will benefit from many advantages of forming an LLC. You probably won’t notice all of them at once, but with time you’ll definitely be able to make your own list of reasons to start an LLC. Here are some of the reasons that other small business owners choose a Limited Liability Company (LLC) rather than another form of business structure.
1. Limited Liability And Asset Protection
Many small business owners choose to form LLCs because of the limited liability and asset protection they are afforded as LLC owners. LLC owners cannot be held personally responsible for the debts or liabilities of their LLC. If your business is sued or goes bankrupt, the creditors of your Arkansas LLC can’t list your personal assets (like your home, car, funds in your personal bank account, or any other assets you’ve acquired) as a means of compensation for the debts owed to them by your LLC.
Americans have witnessed a number of calamities in the past couple of years. One of the primary things we’ve learned from these experiences is that even the best-prepared business can be ruined overnight by an unexpected event or natural disaster (like flooding, historic winter storms, tornados and hurricanes, wildfires, food shortages, and a worldwide pandemic).
Even when there aren’t nation or worldwide catastrophes, the business market is always volatile because of a turbulent economy and fickle consumers. But as the owner of an LLC, if your business should fail or meet a calamity, you can rest easy knowing that you can walk away from the experience with your personal assets intact. The peace of mind offered by forming an LLC in Arkansas is invaluable for many small business owners because they value all of the hard work they’ve put into building their businesses and amassing their personal assets.
The next reason that many business owners choose to form an LLC rather than choosing another business structure is the privacy and protection of their personal details. When you form your Arkansas LLC, you have the option to protect your information.
Ordinarily, when you form an LLC in Arkansas, you are required to list certain information (like your name and address) with the Arkansas Secretary of State Business and Commercial Services Division. When you list information with the Arkansas Secretary of State, it is then listed on the Secretary of State’s website, which is public record. Anyone can access the information you’ve listed simply by searching for your business name. Online criminals and hackers have become very skilled at what they do in recent years, and they can now steal your identity and rack up thousands of dollars of debt in your name so quickly you may not even notice until it’s too late. And they can do all of this with seemingly unimportant bits of information (like your name and address that’s listed on the Secretary of State’s website).
Fortunately, you can avoid putting your personal information online for criminals to access. You can use what is known as an LLC formation service to help you form your Arkansas LLC. They not only help you acquire and file all of the applications and forms you’re required to file to form an LLC (along with state filing fees), they also list their name and address with the Arkansas Secretary of State Business and Commercial Services office, rather than your own. Of course, you will remain the owner of your Arkansas LLC, but your personal information will remain secure so it’s highly beneficial to owners of LLCs to use an LLC formation service.
The third most common reason that business owners choose to form an LLC in Arkansas rather than another business entity is the tax benefits that LLCs enjoy.
If you were to choose a corporation business entity rather than an Arkansas LLC, all the profits of your business would be subject to “double taxation”.
The profits of a corporation are initially charged at corporate federal tax rates before being disbursed to shareholders as dividends, which are further taxed. In this way, a corporation’s profits are taxed twice before a shareholder even gets access to them. Thus, the term “double taxation”.
The profits of an Arkansas LLC are taxed at a company federal tax rate and are then given out to LLC members as personal income. Personal income is taxed, but it isn’t immediately taxed before a person even has access to their funds the way dividends are. So you can see that Arkansas LLCs aren’t taxed twice in the same way that corporations are.
Even though avoiding “double taxation” is a great advantage, LLCs get even more tax benefits.
With the institution of the 2017 Tax Cuts and Jobs Act came a new type of tax benefit called the Qualified Business Income Deduction (QBID). QBID is a 20% tax discount designed exclusively for LLCs nationwide (not just Arkansas LLCs). This is a great reason to form an LLC in Arkansas.
How To Start An LLC In Arkansas
Now that we’ve reviewed what an LLC is and discussed some key reasons that business owners choose an LLC as the structure for their businesses, we can move on to the five steps to forming your own Limited Liability Company (LLC). These steps are essential to making your business dreams take flight.
*IMPORTANT* If you need help getting through the vast amounts of form filing and numerous legal documents that you need to obtain and file to form an LLC in Arkansas, then there’s good news. Professional services, called LLC formation services, are available and they’ll help make LLC formation hassle-free.
Many charge fees as low as $0 plus state filing fees and they’ll assist you with filing all the necessary documents to get your LLC up and running. If you don’t know which service to use, I recommend going with ZenBusiness. They’ll provide you with all the assistance you need and only charge $49 plus state filing fees.
If you feel you need the privacy protection and assistance that using an LLC formation service can provide, then check out my guide to choosing the best LLC formation service here.
1. Obtain Articles Of Organization Form
The journey to forming your own LLC begins with the Articles of Organization. This is the primary form you’ll be filing and several of the following steps will refer back to your Articles of Organization. A PDF for the Arkansas Articles of Organization form can be obtained here.
Once you’ve obtained the Articles of Organization, be sure to include all of the following information:
- Your LLC’s business name,
- The LLC’s physical address in Arkansas,
- The address and name of the LLC’s registered agent,
- Whether or not your LLC will be operated by a manager, and
- The signature of your LLC’s organizer
Once you’ve gathered all of this information, you can proceed to file your LLC’s Articles of Organization with the Arkansas Secretary of State. You can file online or by mail, with the fees being $45 for online filing and $50 if you choose to file by mail.
2. Choose Your Business Name
The first thing you’ll be required to list on your Articles of Organization is the company name you’ve chosen for your LLC. There is more to this process than simply choosing the first name that comes to mind, unfortunately.
Under Arkansas state law, an LLC name must include the words “Limited Liability Company”, “Limited Company”, or the abbreviations “LLC”, “L.L.C.”, “LC” or “L.C.”. The words “Limited” and “Company” can be abbreviated as “Ltd.” and “Co.” You must also ensure that your LLC has a unique name that is distinguishable from other business entities already registered with the Arkansas Secretary of State.
Luckily you can search what names have been taken with the Arkansas Secretary of State business name database, which you can find online here. If you would like to save yourself a bit of hassle in choosing your LLC name, you can file an Application for Reservation of Limited Liability Company Name with the Arkansas Secretary of State. This form can be done online here for $22.50, or you can choose to file by mail for $25. Once filed, your chosen name will be reserved for a period of 120 days. If filing by mail, a copy of the form can be obtained online here.
If the LLC name you’ve had to register for your business isn’t what you originally wanted, (For instance, if you’ve had to add a suffix to it such as “Limited Company) you are able to register a trade name or a “Doing Business As” name with the Arkansas Secretary of State. To do so, file an Application for Fictitious Name form through online filing or via postal mail. A PDF for the mail-in form can be found online here, and the website for online filing here. The fee for filing online is $22.50 and the fee for filing by mail is $25.
3. Choose An Arkansas Registered Agent
The next thing you’ll be required to list on your Articles of Organization is your LLC’s registered agent. In Arkansas, registered agents are sometimes referred to as “agent for service of process”, but this is just an old-fashioned way of saying the same thing. Registered agents are businesses or individuals that are certified to receive legal documents such as Service of Process on behalf of your LLC, and any LLC in Arkansas is required to have one.
Your LLC can choose to appoint anyone who is a full-time resident of Arkansas as a registered agent or use a business entity registered with the Arkansas Secretary of State to provide registered agent services.
If you’re concerned about taking on that kind of responsibility yourself, consider using a professional registered agent service. These professional services will receive any legal documents or service of process on behalf of your Arkansas LLC, allowing you to relax and reduce the hassle of dealing with all that paperwork yourself. Some professional registered agent services can also provide assistance with forming an LLC. They can also help you keep your personal information off the public record and protect your privacy. Typically, Arkansas registered agent services can cost between $99-$299 per year.
If you choose to take on this role yourself, there are some risks in doing so. One such risk is that your personal information will be listed on the public record when forming an LLC in Arkansas. This happens because whichever name and address you list on your Articles of Organization form is registered with the Secretary of State. The Secretary of State then lists the information on the public record online. This may not seem important, but today’s cyber criminals and hackers can do a lot of damage with even the smallest bit of information; therefore, listing your information on the public record like this can leave you vulnerable to identity theft or other forms of cyber crime.
Another risk that you’re taking by acting as your LLC’s registered agent instead of using a professional service relates to service of process and important mail from Arkansas state government offices (Like the Secretary of State). If you were to miss one of these important legal documents it could mean disaster for your business, resulting in litigation or even termination of your business license if the Secretary of State decides that your business isn’t compliant with laws regarding LLCs and registered agents.
Because of those risk factors, I always recommend that new Arkansas LLCs use a professional registered agent service instead of taking that burden on themselves and risking legal trouble with the Secretary of State.
If you would like more information on how a registered agent service can assist you with keeping your information safe and your business successful, check out my guide to the best Arkansas registered agent service.
4. Choose Your LLC Address
Your Arkansas LLC must also have a physical street address within the state of Arkansas. This address must be listed on your Arkansas Articles of Organization and this information will be registered on the public record along with your LLC name. The address you list will also serve as your point of contact and will be the address where your business receives its mail, legal documents, and service of process.
If you’ve chosen to forego a professional registered agent service and your LLC does not have its own physical building or office address, you’ll be required to list your own home or office address on your Articles of Organization. This can leave you vulnerable to cyber crime and identity theft, as your information (such as your name and address) would be available on the public record for anyone to find.
If you have decided to use a professional registered agent service, then their information will be listed on the form instead. This allows you to keep your information safe and will help protect you against identity theft.
5. Sign And File Your Articles Of Organization
Once you’ve gathered all the information from the previously mentioned steps, the final part of the process is to sign and file your Arkansas Articles of Organization.
Be sure to review all of the information you’ve gathered and listed on the form. Your Articles will need to include things like your LLC’s name and address, the name and address of your registered agent, and a statement of your LLC’s managerial structure. Failure to include this information means that you’ll have to resubmit the form, along with another filing fee.
Once you’ve verified that all your information is accurate you can sign and file your Arkansas LLC’s Articles of Organization. You can sign your own name when you file, but this will list it on the public record which can leave you more susceptible to identity theft. If you’ve chosen to hire an LLC formation service, they’ll list their name and sign for you, leaving your name clear of the public record and your information protected. You’ll also retain ownership of your LLC, so this is really a win-win scenario.
Once everything has been signed you have two options for filing. You can file online with the Arkansas Secretary of State via this link (with a $22.50 filing fee for filing online). If you’re filing online, you can pay the filing fee with a credit card or debit card. A PDF copy of the form can be obtained here. If you choose to file by mail, you’ll need to send your Articles of Organization, along with a $25 state filing fee, to the following address:
Arkansas Secretary of State
1401 W. Capitol, Suite 250
Little Rock, AR 72201
Once your Articles of Organization have been filed, the Arkansas Secretary of State will contact you either through email or postal mail once your documents have finished processing. This can take up to 48 hours from when the documents are received and, unfortunately, Arkansas does not have options available for expedited processing.
Other LLC Activities
After filing your Articles of Organization for your Arkansas LLC there are still a few more hoops to jump through to ensure your LLC starts on the right foot. Keeping your LLC in good standing from the beginning means you’ll need to take a few more steps, all of which are important.
First, you’ll need to ensure you keep records for filing the Arkansas annual franchise tax report. This franchise tax or business tax is due every year by May 1st and can be filed online or by mail. The annual franchise tax is an Arkansas state franchise tax applied to most LLCs, this is a minimum of $150 and can be paid with a credit card when filing your annual franchise tax report. For filing your annual franchise tax online, click here.
If your business in Arkansas will have employees or be collecting sales tax on goods, you’ll also be required to register with the Arkansas Department of Finance and Registration, which can be done online here or by mail.
If you’re operating outside the state of Arkansas, you’ll have to follow the process for establishing Foreign LLCs. Foreign LLCs follow a similar formation process to domestic LLCs, the only difference is that you’ll be required to file an Application for Certificate of Registration of Foreign Limited Liability Company. This can be filed online here or you can download a PDF for mail-in filing here. The filing fee associated with this application is $270 for online filings, or $300 if filing by mail.
Depending on what kind of business your LLC will be conducting and where in Arkansas it’s located, you’ll also be required to obtain the relevant local and/or state business licenses. For local licenses, check with the city or county government of your LLC’s location. For state license requirements, you can check with the Arkansas Department of Workforce Services here.
If this seems like a lot of filing to do on top of filing your Articles of Organization, it’s because it is. However, professional services are available to assist you with things like your annual franchise tax report. An Arkansas PEO service can assist you with filing the forms and other online legal services can help minimize the workload of operating your business.
Arkansas LLC Fee Summary
How much does it cost to go through the process of forming an LLC in Arkansas? Even if you use an Arkansas LLC formation service, there’s no way you’ll be able to form your Arkansas LLC without paying at least one state filing fee or franchise tax. Here’s a filing fee breakdown to let you know what sort of fees and taxes you can expect when you form an LLC in Arkansas.
Articles of Organization filing fee: $45 online, $50 by mail
Name Reservation filing fee: $22.50 online, $25 by mail
Registered Agent Fee: $99-$299
Annual Franchise Tax Report filing fee: $150
State Personal Income Tax: 2%-5.9%
State Corporate Income Tax: 1%-3%
After Starting Your Arkansas LLC
Congratulations! You’ve taken the first big step in establishing your Arkansas LLC. This is a major victory on your business adventure and as such, feel free to celebrate. Take a weekend trip with your friends or business partners, have a night out on the town, or celebrate with a nice dinner at that fancy restaurant you’ve always wanted to go to. But don’t relax for too long, because there’s still a lot to do when it comes to ensuring your Arkansas LLC has the right foundation to succeed.
The following three steps are essential to keeping your LLC in good standing and giving it the foundation it needs to thrive:
Step 1. Create An Operating Agreement
An Operating Agreement isn’t a legal requirement for your LLC in Arkansas, but it’s still in your best interest to draft one. An LLC Operating Agreement serves as the rulebook for how your business will operate and should contain all the details on exactly how you want your Arkansas LLC to operate. If you don’t draft an Operating Agreement for your LLC in Arkansas, your business will be governed according to state law, which may not fit your desired business model.
To further emphasize how important an LLC Operating Agreement is, think of an LLC as a computer. The LLC itself would be analogous to the computer’s case, protecting the vital components of the machine, and the Operating Agreement would be like the computer’s operating system. Without an operating system, the parts of the computer are only able to perform the most basic functions, like turn on or off, because the operating system is what tells the hardware what to do and how to react to input. Your LLC’s Operating Agreement serves the same function, telling your LLC members and employees what to do and how to respond to certain situations.
*IMPORTANT* Before drafting the Operating Agreement for your LLC, it’s important that you decide if your LLC will be a single-member LLC, a multiple-member LLC, or a manager-managed LLC. In a single-member LLC system, one member will make all of the decisions for your business in Arkansas. A multiple-member system means that a handful of members will vote on each decision for your business, rather than one member.
Operating Agreements work double duties to function as both a contract between LLC members and a set of rules and guidelines on how to operate your business daily . Therefore, your Operating Agreement should begin by listing each LLC member and then go on to list all of the structural, managerial, financial, and operational business aspects.
Usually, business owners design their Operating Agreements to list each member and then explain which members (or one member if it’s a single-member LLC) can make high-level decisions for the business, and detail the shares of profits and losses and the ownership percentages of each member. The Agreement should provide detailed descriptions about the roles of each LLC member, their superiors, which member or department they should work most closely with, and the functions and tasks assigned to each department. Designing your agreement this way should prevent confusion and bickering in the workplace.
Well-written Operating Agreements should include a section about member succession and what will happen if one member leaves. Many business owners forget or neglect this section. However, if you add this section the members of your LLC will have a set of explicit and logical instructions that will tell them what to do in case of a falling out between LLC members that results in someone leaving. These instructions are invaluable because sometimes it’s hard to know what to do in these highly emotional situations, and everyone reacts to them differently, so planning ahead and using logic rather than emotion is almost always the best business choice.
The LLC Operating Agreement is of paramount importance during the infancy of any LLC. It provides your business with instructions about how the business should run, what each LLC member should do, and how much LLC members should be paid. Of course, LLCs in Arkansas aren’t required to draft and file Operating Agreements, but if you do you should follow the instructions I’ve laid out here for a well-written Operating Agreement. I’ll explain what happens when you draft a poorly-written Operating Agreement.
If it isn’t apparent from the description I’ve given of Operating Agreements in this section, your business in Arkansas will be required to run based on the instructions you’ve created in your Operating Agreement, which means that a poorly written Operating Agreement could be very detrimental to your business. It’s easy to draft an Agreement and forget to leave room in it for things like innovation, growth, or change, which means that your business will really struggle to progress. But if you create a well-thought-out Operating Agreement, you should see that your business flourishes without being held back by the poorly-planned operational instructions laid out in a less-than-adequate Operating Agreement. A poorly designed Operating Agreement will do nothing for your business but hold it back and prevent it from growing.
If you’ve never written an Operating Agreement before or you don’t have much experience with Operating Agreements, there are options to help you.
The first is the free Operating Agreement template that Northwest Registered Agent provides on their website for LLCs. If you’d like someone to help you with the wording of the document to ensure that it’s all legal and sound, you should consider online legal services. And of course, most LLC formation services in Arkansas will create and file Operating Agreements for LLCs as part of their service offerings.
Step 2. Apply For An Employer Identification Number
Depending on the activities your business will take part in (such as opening a business bank account or hiring employees), you may need to apply for an EIN or Employer Identification Number for your business. An EIN will qualify your business for specific permits and licenses that it wouldn’t qualify for without it. However, you aren’t required to hire employees to obtain an EIN; an Employer Identification Number (EIN) is merely a business tax identification number.
An EIN works to identify businesses or LLCs in much the same way that Social Security Numbers work to identify individual people. It’s quite easy to apply for an EIN, and it can be done online through the Internal Revenue Service’s (IRS) website.
Many formation services in Arkansas will apply for an EIN on behalf of LLCs as part of their services. But you can file online for an EIN for your LLC in Arkansas or business by going to the IRS website Monday-Friday between the hours of 7 am-10 pm, filling out the application, and submitting it.
Step 3. Open A Business Bank Account
The last thing you’ll need to do to make sure that your LLC has good business foundations is to open a bank account dedicated to business transactions.
Many business owners skip this step, thinking that it’s unimportant and wrongly assume that running both business and personal transactions through their personal accounts somehow saves them time or trouble. However, business accounts are crucial to the success of LLCs. Here are two good reasons that you shouldn’t use your personal account for business transactions.
The first reason is that a business account will make tax filing simple. A lot of people assume that they’ll be able to look at the statements for their personal accounts and determine which transactions were for personal use and which were for business reasons when tax season rolls around. However, these transactions are often made months or even a whole year ago, and memory rarely gets sharper with the passage of time. Having a business bank account means that the items on statements from that account were only made for business purchases, which makes filing tax returns far easier.
Beyond simple tax filing, the second reason you shouldn’t conduct business transactions through your personal account is that it negates your Limited Liability and asset protection. When you make business purchases from your personal account, your personal information and the financial assets in that account are made vulnerable to cybercriminals and lawsuits.
So to protect your personal information and financial assets, as well as to make filing tax returns easier, open a business bank account for your LLC in Arkansas.
To open a bank account, an LLC must have what is known as a “bank kit”. A bank kit consists of certified copies of many formation documents, such as your Articles of Organization, Operating Agreement, EIN, and initial resolution. Of course, you have the option to gather all of these documents and form a bank kit on your own, but many formation services for LLCs in Arkansas will create bank kits.
When you made the decision to form an LLC in Arkansas, you made the decision to take control of the financial future of your business and took a huge step forward, so congratulations!
If you’ve made the decision to form your LLC on your own without using LLC formation services (which can charge fees as low as $0 plus state filing fees), here are the 5 steps you’ll need to take to form an LLC in Arkansas and start your LLC today:
- Obtain the Articles of Organization form
- Name your LLC
- Choose your Registered Agent
- Choose your LLC address
- Sign and file your Articles of Organization
It can be really overwhelming when you’re met with the mountain of paperwork, form filing, application submission, red tape, filing fees, laws regarding mail, and the legal jargon that you must learn when forming an LLC in Arkansas. But if you complete this Herculean task on your own without hiring any commercial services to assist you, you’ll be surprised by the feeling of success and elation you get. It’s well worth the trouble just to feel that rush and bask in your own business success story!
Congratulations again on your decision to form an LLC in Arkansas, and best of luck to you along the rest of your business adventure!