In order to form an Arkansas LLC, you must adhere to certain guidelines. You’ll find everything you need to get started, including necessary documents, registration deadlines, fee, operating agreement and franchise tax details, and more.
Arkansas LLC is inexpensive and simple to form. Arkansas, like other nations, has its own set of provisions for LLC.
For several businesses starting in Arkansas, the LLC is a common business structure. The Arkansas LLC protects your assets while also potentially saving you money on franchise taxes.
Forming an LLC in Arkansas without hiring an attorney with a little study is possible. The Arkansas LLC is a different legal arrangement that protects the company owner’s personal properties, unlike a sole proprietorship or corporation, where the small business owner may be held legally responsible for litigation against the business.
What is an LLC?
Limited Liability Company is an acronym for LLC. An LLC, like a corporation, is a distinct legal entity from its shareholders. An LLC, unlike a company, is a “pass-through” tax body, meaning it does not have to pay its own taxes.
The business’s gains and expenses flow through to the owners, who record them on their personal tax returns in the same way they would if they owned a company or sole proprietorship. In comparison to a company, forming and operating an LLC is less complicated and needs less paperwork.
Filing the Arkansas LLC Articles of Organization
Learn more regarding each necessity of the Articles of Organization in the sections below. Please keep in mind that the details you provide will become part of the public record indefinitely.
“Limited Company,” or an abbreviation like “LLC” must be used. Professional LLCs must include the term “professional” or use an abbreviation like “PLLC.” If you’re a licenced specialist like a dentist or lawyer, chances are your organisation isn’t a professional LLC.If your company is a PLLC, however, you cannot include the name of a non-member individual in the company name, unless the member has died.
Principal Place of Business
In other words, they’re asking you for your desired mailing address for non-legal papers. This address will be made public. If you recruit us, you can list our address instead of your own.
Registered Agent & Address
To accept legal notices for your Arkansas LLC, your Arkansas registered agent must be available during business hours. You can appoint yourself, someone else, a corporation, or employ a registered agent service like Northwest. The registered agent’s physical street address must also be given. When you recruit us, our address will appear here.
You don’t need to do something extra if your Arkansas LLC is run by its founders. If your LLC is run by managers, however, you must mention this in your papers.
There is a section on the online form for listing “officers.” (If you’re filing by mail, you should skip this because there’s no such room on the print form.) LLCs don’t need officers; all they need is the organizer’s name and address, as well as the names and addresses of at least one member or manager.
The organiser is the person or company who signs and submits the papers (like Northwest when you hire us). You don’t need to use a personal address for the member or manager’s address; a business address (like ours) will suffice.
Submitter Contact Info
Just pay attention to this if you’re filing electronically. The organisation or individual mentioned here will receive your papers. It’s necessary to have a mailing address, phone number, and email address. If you employ us to form your Arkansas LLC, our address, phone number, and email address will be used instead of yours.
The online form allows you to choose a potential effective date of up to 90 days. Why wouldn’t you want to get your company up and running right away? Maybe you’re writing papers in December but don’t want to deal with paying taxes for the current year for just a few weeks’ worth of work. If you file by mail, you can only enter today’s date on the form.
The LLC’s organizer(s) must sign the papers. (On the paper form, there is space for three signatures; online, there is only room for one signature.) Most people interpret this to mean that one of the representatives or managers must sign—a fair assumption given that the print form demands the signature of the person “forming the company”—but in fact, it is only the person who submits the document who must sign.
Franchise Tax/Annual Report Contact Info
Arkansas needs to be certain that they can give you their franchise tax form. (This information is demanded as “Franchise Tax Contact” on the print form and as “Annual Report Contact” on the online form.) You must provide your address and phone number (and optional email). If you value your privacy, the phone number requirement is especially inconvenient.
Requirements for Formation
A registrant must first file their Articles of Organization with the corporation commission in order for an Arkansas LLC formation.
All applications must include a $50 filing fee as well as the following documents: a cover sheet, a member/manager-structure insert, and the Statutory Agent Acceptance form. It is strongly recommended that an Arkansas LLC with more than one member have an LLC operating agreement among its members.
This operating agreement includes the terms agreed to by the LLC’s members and regulates important items such as each member’s positions, voting rights, who manages the LLC, how members are admitted or excluded, dissolution of the LLC, and procedures for amending the LLC operating agreement itself.
Please keep in mind that LLC delivering a particular professional service is required by state law to contact the relevant licensing boards.
The Benefits of Forming an Arkansas LLC
The policy of the Arkansas LLC Act is to “give full impact to the concept of contract equality and the enforceability of operating agreements.” It also allows members to establish voting and non-voting membership groups, as well as configure their capital investments and profit and loss shares.
The ability to divide membership into voting and non-voting groups simplify everything from multimillion-dollar business transactions to family business succession planning and estate planning by non-voting preference gifts.
The right to designate in an Arkansas LLC agreement a formula for allocating gains and losses that is greater or less than a member’s share of capital investments allows members contractual flexibility to tailor their income and risk of loss to further their long-term asset management goals.
Members’ names are not needed to be filed at the time of incorporation, but they are required for annual reports (and are kept confidential). An Arkansas LLC may be formed by submitting articles of organisation to the Arkansas Secretary of State. The term “human” encompasses almost every type of business or legal entity, not just natural people.
As a result, an Arkansas LLC’s members may have an individual or person who is not a member file the LLC’s articles of organisation on their behalf.
Preventing Unwanted Business Partners
The Arkansas LLC Act gives participants the ability to defend their ownership in an LLC. Members may not be able to delegate their membership preferences under the terms of an LLC agreement. An assignment, however, does not abolish the Arkansas LLC or entitle the assignee to engage in management or become a member if the Arkansas LLC agreement does not preclude it.
Instead, the assignee will only obtain the distributions to which the assignor would have been entitled, and the non-assigning members must agree unanimously to the assignee’s membership.
Creditors Only Get Passive Rights, Not Control Rights
If a judgement creditor of a member obtains a charging order against the member’s membership interest, the judgement creditor has only the privileges of an assignee, according to Section 4-32-705. That is, the judgement creditor has no right to engage in management and only has the right to collect dividends that would otherwise be paid to the member.
Furthermore, unless an LLC agreement provides otherwise or all members offer unanimous written consent, a person ceases to be a member of an LLC when the person makes an assignment for the benefit of creditors, becomes a debtor in bankruptcy, is adjudicated bankrupt or insolvent, or is adjudicated bankrupt or insolvent.
Unless an LLC agreement provides otherwise or all members give unanimous written consent, or refuses to challenge the appointment of a trustee, receiver, or liquidator over his or her land. These incidents are referred to as “dissociation events.”
How to Set Up an LLC in Arkansas in 2021?
A limited liability company (LLC) is a type of legal entity used to form a corporation. It blends a corporation’s limited liability with a partnership or sole proprietorship’s independence and lack of formalities. An Arkansas LLC should be considered by any business owner who wants to restrict his or her personal responsibility for business debts and litigation.
The steps to form an Arkansas LLC in Arkansas are outlined below.
Choose a Name for Your LLC
The terms “Limited Liability Company,” “Limited Company,” or the abbreviation “L.L.C.,” “L.C.,” “LLC,” or “LC” must appear on an LLC under Arkansas law. The words “Limited” and “Company” can be abbreviated as “Ltd.” and “Co.” respectively.
Companies that provide professional services must use the abbreviations “P.L.L.C.,” “P.L.C.,” “PLLC,” or “PLC,” or the terms “Professional Limited Liability Company,” “Professional Limited Company,” or the abbreviations “P.L.L.C.,” “PLLC,” or “PLC.”
Except for the name of a deceased member, the LLC name cannot include the name of someone who is not a member. The words “Limited” and “Company” can be abbreviated as “Ltd.” and “Co.” respectively.
The name of your LLC must be distinct from the names of other businesses registered with the Arkansas Secretary of State. The Arkansas Secretary of State’s business name database can be searched to see if a name is available.
Designate a Registered Agent
In Arkansas, every LLC must appoint a registered agent, who is the person or company that receives government correspondence on your behalf and forwards it to you.
According to the State’s secretary, an individual or a domestic or foreign entity can become a commercial registered agent by filing a commercial registered agent listing statement with the State’s secretary, which must be signed by or on behalf of the person and include the following information: (1) the individual’s name or the entity’s name, sort, and jurisdiction of organisation; (2) that the individual is in the business of serving as a commercial registered agent in this state; and (3) the address of a place of business in this state where service of process and other notice and documents may be sent to entities served by it.
You risk losing your good standing with the state of Arkansas if you don’t have a licenced agent, and the state also has the authority to dissolve your state of Arkansas LLC if they so choose. In the worst-case scenario, the state could fail to notify you of a complaint filed against your company, resulting in a judgement against your company because you failed to protect yourself.
File Formation Documents with State
Fill out the articles of organization when you’re ready to start your Arkansas LLC. This is the document that the state will use to record your LLC. On the form, double-check that all of the following information is correct:
- Your chosen business name
- Name and address of your registered agent
- Management style (member-managed or manager-managed)
- Name(s) and address(es) of the LLC’s manager
- Name and address of the LLC’s organizer
- Signature of organizer and registered agent
- Effective date
If you want to send a hard copy, you can write a $50 check to the Arkansas Secretary of State and drop off your paperwork at the following address:
1401 West Capitol Avenue
Little Rock, AR 72201
Or send it to their mailing address:
500 Woodlane Street
Little Rock, AR 72201
Create an Operating Agreement
Build a concise plan that describes how you will operate and handle your new business after you file an LLC in Arkansas. Even if you don’t have to file it with the department, make one and keep it for your records. If you want to open a bank account, you may be asked to have this document.
You should also bear in mind that any potential business partners or managing members may want to see your Operating Agreement before joining your company. After all, this paper is simply the overall performance strategy.
An attorney will help you draft your Operating Agreement, or you can use a free online template. You can learn more about Operating Agreements here, but the following is some basic information you’ll need:
- Individual members’ ownership percentages
- Rights and responsibilities
- Voting powers and meeting guidelines
- Allocation of profits and losses
- Management rules for the LLC
- Provisions for buying a member owner out, or transferring their shares in the case of illness or death
Handle Taxation Requirements
Federal Requirements. A federal tax ID number, or employer identification number, is required for the vast majority of LLCs. An EIN is a company equivalent of a social security number that is used for a number of significant LLC functions.
If you want to recruit staff, for example, you’ll need an employer identification number, and many banks will need them to open business bank accounts as well. You’ll need one for tax purposes, which is why it’s called a federal tax ID number. The IRS will provide you with a free EIN for your LLC.
State Requirements Arkansas imposes a number of various forms of taxes at the state level. To begin, each LLC is required to pay income taxes in one of three ways. Sole proprietorship LLCs are taxed as such, and the Arkansas LLC’s income taxes are paid each year as part of the owner’s personal income taxes.
Partnership LLCs must file an Arkansas Partnership Income Tax Return to pay income taxes.The partnership income tax form and guidance are available online. The Arkansas Corporate Income Tax would be paid by LLCs that operate as companies.
Each year, Arkansas companies must pay a Franchise Tax to the State’s Secretary. The fee is determined by the classification of your franchise. The Franchise Tax is $150 a year for LLCs, and it can be paid online or by mail. Any Arkansas LLC with employees is required to deduct income taxes from employees who work in the state.
To learn more about how to register and withhold, go to the Arkansas Department of Finance and Administration’s withholdings page. Arkansas also has an unemployment tax in place to help pay for its unemployment insurance programme. More information on the state’s unemployment programmes can be found here.
Arkansas LLC must register for Arkansas Vendor Services if they sell products or provide services that are subject to sales and use taxes. A one-time $50 fee is needed. More details can be found here.
If your company sells such products or services, you will have to pay extra annual franchise tax in addition to the state’s 6.5 percent sales tax. Mixed alcoholic drinks, rental cars, and short-term lodging and accommodations are only a couple of them.
Local Requirements. You may also be required to pay local taxes depending on where your company is located. Fortunately, it makes it simple to figure out which annual franchise tax applies to your region.
Obtain Business Licenses and Permits
Aside from applying for sales and use tax, the state of Arkansas does not require each LLC to obtain a general business licence in order to conduct business. Arkansas, on the other hand, adheres to all federally controlled industry’s licencing standards.
Check here to see if a federal agency requires your company to be approved.In addition to what is governed by the federal government, Arkansas needs state licensure for some industries. Contractors, specialist athletic trainers, dieticians, court reporters, and others are among these sectors. We suggest that any LLC owner check Arkansas.gov’s technical licencing boards to see what industry licences they’ll need.
What to do After Creating an Arkansas LLC
Open a business bank account
We strongly advise you to open a separate business banking account to keep your business and personal finances fully separate. This is important because it protects your personal assets while still making tax filing much easier. If you’ve received your EIN from the IRS, you’ll be able to open an account with your preferred bank or credit union.
Get Business Insurance
Worker’s compensation insurance is required in Arkansas for businesses with three or more workers (with a few exceptions). In the case of a work-related injury, this insurance will help to cover your workers. The Arkansas Workers’ Compensation Commission has more information on these conditions.
While Commercial Liability Insurance is not needed in Arkansas, it is a good idea to get general liability insurance. Arkansas is a changed comparative fault state, which means that an injured party can only be compensated if the other party bears more than half of the blame.
General liability insurance will help you and your company stay safe. You may also find it useful to obtain policies unique to your industry. It’s probably a good idea to get general liability insurance as well as some industry-specific policies after you get these legally needed policies.
Understand income reporting
Income reporting is just what it sounds like: it’s a way of documenting the money you earned from your company. It’s important to remember that if you made or lost money during the year, you must file this form. Income reporting is just what it sounds like: it’s a way of documenting the money you earned from your company.
Understand annual reporting
Arkansas allows each LLC to file an annual report as part of the Franchise Tax process. Here is where you can search, download, and file your article. Please notice that filing by mail incurs an extra $15 charge. This report informs the state of your company’s current status, including any significant changes such as a change in your registered agent.
Find an accountant
We do not advise you to handle your company finances without the assistance of a specialist. There is far too much space for error, and a professional will save you time and money by advising you about how to handle the company’s finances effectively.
At the very least, hire a specialist to set you up with software and instructions for keeping track of your finances on a regular basis.Then, at least a couple of times per year – particularly around tax time – check in with your accountant to make sure you’re keeping track of everything correctly.
Frequently Asked Questions
How do I know if my LLC name is available?
It’s crucial to make sure your LLC’s name stands out from the names of other companies registered with the Arkansas State’s Secretary. To make sure your proposed name is available, you can use the SOS website to perform a free name search.
How much does it cost to start an LLC in Arkansas?
The Arkansas Secretary of State charges $45 for filing Articles of Organization online and $50 for filing them by mail. You can reserve your LLC name for $25 if you file by mail or $22.50 if you file electronically with the Arkansas State’s Secretary. Arkansas LLC must now pay the state a minimum annual franchise fee of $150 per year.
While filing on your own is often the most cost-effective choice, completing all of the forms and filing them on your own can be difficult.
Another choice is to hire a lawyer, but this would usually cost you hundreds, if not thousands, of dollars. With packages starting at $49.00, Nolo’s Online LLC creation service will handle all of the paperwork and filings for you.
Do I need an operating agreement for my Arkansas LLC?
An operating agreement is not required in Arkansas for LLC, but it is strongly recommended. An operating agreement will help protect your limited liability’s status, avoid financial and managerial misunderstandings, and ensure that you, not state law, determine the rules that regulate your company. Operating agreement is important indeed.
Can a foreign LLC do business in Arkansas?
To do business in Arkansas, all LLCs established outside of Arkansas must register with the Secretary of State. For service of process, foreign LLCs must appoint a registered agent who is physically located in Arkansas. Fill out an Application for Certificate of Registration of Foreign LLC to become a member.
The application can be completed and submitted either online or by mail. Scan the Arkansas Secretary of State’s business name database to see if the LLC’s name is accessible before filing.
If the name is not accessible, the foreign LLC will conduct business in Arkansas under a specified name. To do so, it must send a copy of the resolution of its members, certified by its secretary of state, adopting a specified name to the Arkansas State’s Secretary for filing.
Can I form a single-member LLC in Arkansas?
A single-member LLC in Arkansas is treated the same as a multi-member LLC for most purposes. In Arkansas, the steps to form a single-member LLC are the same as those outlined above. When it comes to filing a tax return, single-member LLCs have more options.
Can I form a professional LLC in Arkansas?
If you wish to form an LLC and provide a licenced professional service, you must first form a professional LLC(PLLC). Architects, lawyers, dentists, certified public accountants, and other professionals provide professional services.
In general, if you offer a service that allows you to obtain a state licence in Arkansas before you can practise, you are providing a professional service. LLCs may be created to provide professional services under Arkansas law.
However, the LLC may only provide one type of service, and all Arkansas LLC owners must be licenced or registered to provide the professional service for which the LLC was established.
Which licenses and insurance are required for an Arkansas LLC?
Certain occupations and businesses in Arkansas need licences and/or permits in order to provide services. Since requirements differ by city and county, start by contacting your local government to find out if your LLC requires a licence to legally operate in that state.
You’ll have to look at what federal, state, local, and industry-specific licences and permits your Arkansas LLC may require.
When it comes to business insurance, the type of coverage you need will be determined by the specific circumstances; for example, if your company owns cars, commercial vehicle insurance will be required.
In the course of doing business, unexpected costs will arise, so it’s a good idea to consider your options. Having insurance covers you, your workers, and your company. Consult an insurance agent to determine the best option for your LLC.
Starting a new business can be very exciting, but before you can concentrate on the day-to-day operations of your company, you must first choose a business structure. An LLC can be a good option for small companies because it offers liability insurance as well as tax advantages.
It is also relatively simple to shape and maintain an LLC in Arizona if you follow the steps outlined above.
Starting a business correctly doesn’t have to be difficult. With over 15 years of experience consulting new businesses and start ups, Matthew is probably the best person to help you set a strong foundation for your business.