If Arkansas is where you want to start a limited liability company (LLC), this post outlines the steps to follow.
Arkansas may not be a bucket list vacation spot, but it’s an attractive hot spot for small business owners. The state has a pro-business tax system, a robust transportation network, and a host of larger corporations to contract with. Forming an LLC involves several procedures such as submitting company formation documents to the Arkansas Secretary of State, permits and business license registration, and completing other administrative formalities.
We discuss all of them in-depth.
Steps to open an LLC in Arkansas
- Step 1: Choose a business name for your Arkansas LLC
- Step 2: Select a registered agent
- Step 3: File the Arkansas LLC Articles of Organization
- Step 4: Get a Certificate of LLC formation
- Step 5: Create an LLC operating agreement
- Step 6: Get an Employer Identification Number (EIN) from the IRS
- Costs to set up an LLC in Arkansas
- Last steps
Step 1: Choose a name for your LLC
The first thing you must do when you decide to start an Arkansas LLC is to select a legal name.
Your LLC's name must be distinguishable from other active business entities on file with the Arkansas Secretary of State. Also, the usage of specific words like “bank,” “engineer,” “medicine,” or “insurance” in your business name requires approval from the appropriate Arkansas authorities.
You’ll also need to include “Limited Liability Company” or one of the abbreviations of LLC, Ltd, LC. in the name. You can use the Arkansas Secretary of State’s name availability tool to check if a business name is available.
Making a name reservation
You can reserve a specific business name for 120 days if you're not ready to launch your business right away. You’ll have to file Form RN-06 and pay the state filing fee of $22.50 if you file online and $25 for mailed submissions.
Some business owners also choose to register a second company name, different from the LLC's legal name. It’s called a trade name, fictitious name, or DBA (doing business as) name.
That’s a common option if you want a generic LLC name, but several more brandable options to better market different types of products.
If your LLC's legal name is Lisa's Enterprises and you run a marketing business, using a name like “Lisa's Ad Agency” describes your business better than the legal name. LLC members can have an unlimited number of DBAs associated with their business structure. To register a fictitious name in Arkansas, you need to file Form DN-18 with the Arkansas Secretary of State and pay the $25 filing fee if mailing the application. For online submissions, the fee is $22.50.
Step 2: Select a registered agent
An appointment of a registered agent is one of the requirements for starting an LLC in Arkansas.
A registered agent is an individual or professional service provider who receives mail and legal documents on behalf of your LLC. Your registered agent serves as a direct point of contact between your company and the Secretary of State, tax authorities, and process servers. You can be your own registered agent as long as you're aged above 18 and have a physical street address in Arkansas. P.O. boxes can’t be listed as a registered agent's address.
You’ll also have to be available during business hours in case of service of process. It can be an inconvenience. Therefore, many business owners hire a professional service provider to be available as needed.
A commercial registered agent service costs about $50-$100 per year. You must also update the Secretary of State if your registered agent details change.
Step 3: File the Arkansas LLC Articles of Organization
To officially start an LLC in Arkansas, you have to file a Certificate of Organization for a domestic LLC.
The Certificate of Organization (also called Articles of Organization in other states) specifies the business name, principal address, and LLC owner(s) information. The filing fee is $50.
Foreign LLCs — companies incorporated in other states that wish to do business in Arkansas — must submit another document, called the Application for Certificate of Registration of a Foreign Limited Liability Company.
This filing fee is $270 for online applications and $300 for mailed applications.
Step 4: Get a Certificate of LLC formation
After the Arkansas Secretary of State approves your LLC's formation, get a certified copy of the approval. You'll want to keep a copy with your records. And you may need to provide a copy when opening a business bank account or securing a business loan.
Certified document copies from the Arkansas Secretary of State cost $0.50 per page plus a $5 certification fee. The $5 fee is the total, not a per-page fee.
Step 5: Create an LLC operating agreement
An operating agreement is recommended for multi-member LLCs.
This legal document covers several important matters:
- LLC management structure
- Operating principles
- Profit and losses distribution among members
- Internal administrative processes
- Members’ voting rights
A clear-cut operating agreement establishes the rights and responsibilities of all LLC members. It also minimizes the grounds for disputes.
You can customize an online LLC operating agreement template. Or hire a corporate lawyer to draft a custom document for you.
Step 6: Get an EIN (Employer Identification Number) from the IRS
An Employer Identification Number (EIN) is a federal tax ID issued by the Internal Revenue Service (IRS).
The IRS uses it to track your LLC's employment and federal tax activity.
It’s a unique 9-digit number for businesses similar to a social security number for individuals. You can obtain an EIN from the IRS website, by mail, or by fax.
If you apply online, your number gets issued immediately. Mailed-in registrations can take up to 3 weeks for processing.
Arkansas will also use your EIN for state tax withholding purposes.
Costs to set up an LLC in Arkansas
The costs to form your LLC in Arkansas will vary depending on how much professional outside help you use and your LLC's complexity. Here is a brief summary of the expenses you may incur to set up your LLC in Arkansas.
- Name reservation: $25
- DBA/trade name registration: $25
- Professional registered agent: $50 – $100 / annually
- Certificate of Organization: $50
- Foreign LLC Registration: $300
- Certified copies of documents: $5 – $10
- Operating agreement draft: $0 – $2,000
- GRAND TOTAL: $155 – $2,460
You're almost done with getting your Arkansas business up and running. But don't forget to take care of these final bits.
Register with the Arkansas Department of Finance and Administration
All Arkansas LLCs are subject to a minimal annual franchise tax of $150.
However, you may also be liable for other state business taxes like sales taxes or employment taxes.
If that’s the case, you’ll need to register with the Arkansas Department of Finance and Administration for a state tax ID. The Arkansas Secretary of State has combined business tax registration into a single form called AR-1R. You need to get a sales tax permit if your business entity:
- Makes sales from a physical retail location or inventory storage,
- Performs a taxable service, or
- Leases or rents tangible property
The cost of a sales tax permit in Arkansas is $50.
Open an Arkansas business bank account
LLC members need to keep business and personal finances separate. It’s crucial for maintaining LLC protections such as limited personal liability and personal asset protection. You can open a small business bank account in Arkansas for less than $100. Some banks offer a free business bank account if you deposit a certain threshold.
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