Starting an LLC in Arkansas can seem like a big task to first-time business owners. Fortunately, the right information and guidance will make it easier.
After reading this article, you’ll know:
- The steps for starting an LLC in Arkansas
- Essential tasks to handle after registering an LLC
- How much it costs to form an Arkansas LLC and how long it takes
If you want to learn more about forming an Arkansas LLC, keep reading!
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Step 1: Name your Arkansas LLC
The first step in order to start an LLC in Arkansas is to choose a good business name. But you can't just choose any name. Arkansas has some basic rules for what is and isn't allowed when naming a business. Some words are mandatory, while others are forbidden.
We have listed more details about these limited liability name requirements below.
Words You Have to Use
Arkansas Code Section 4-38-112 says that LLC names must contain one of the following:
- “limited liability company”
- “limited company”
The law also allows you to shorten the word “limited” to “ltd.” and “company” to “co.”
Words You Can’t Use
Your LLC name can’t make it seem like it is a different type of business entity, such as a corporation. You also can’t include words or terms that might lead someone to think that your LLC is part of the government.
In addition, your company's name should not imply that you offer illegal services. For instance, if you aren’t licensed to provide a service, the name of your company can't suggest that you are.
The big rule is this: if you need a license to do your job, double-check with the Secretary of State to make sure your company name complies with the law.
Section 4-38-112 also requires your LLC name to be “distinguishable” from other names that have been registered with the Arkansas Secretary of State. The rule exists because people may get confused if two businesses have the same name.
Research the LLC Name You Want
Once you’ve chosen a name for your LLC, you can use the Arkansas Secretary of State’s Business Entity Search tool to confirm that it’s available.
If someone else has already claimed the business name, you can still use it if you get a court order establishing your right to do so. You can also use the name if the other party consents in writing and agrees to change its name.
You can file your name reservation online, or you can mail it with a check to the following address:
Secretary of State’s Business and Commercial Services Division
1401 W. Capitol, Suite 250
Little Rock, Arkansas 72201
The filing fee is $22.50 if you file online and $25 if you mail in a form.
Get a Matching Domain
Once you settle on an LLC name, we recommend you get a matching domain, even if you don’t have immediate plans for a website.
Competitors can buy your perfect domain and its variations to block you from using them.
Domain squatters sift through public records of newly registered LLCs and will buy their matching URLs, only to relist them with huge markups.
A domain name from GoDaddy.com or a similar registrar will cost you between $20 and $50 per year, with regular specials and sales where you can get large discounts.
It pays to check now.
Once you have your domain name, you can also create a branded email address through GoDaddy.
Arkansas DBA: Using a Fictitious Name
A “Doing Business As” or “DBA” name is an alternate name that you can use in the day-to-day operation of your LLC.
Using a DBA is a smart move that many business owners choose to make. With a DBA, you can use a name that is different (and often more memorable) than your company's real name for your marketing.
If your LLC’s real name is “Ben’s Bakery, LLC,” you could use a DBA of “Ben’s Bakery.”
But say that you start offering lunch and dinner options as well as baked goods. In that case, you could use a new DBA of “Ben’s Diner.”
You can apply online with a $22.50 filing fee or by mail with a $25 fee.
Step 2: Appoint a Registered Agent for your LLC
A registered agent is a person or company that accepts legal documents on behalf of an LLC.
Arkansas Code Section 4-38-115 says that every LLC must have a registered agent with a place of business in the state. Your agent must be able to receive service of process during regular business hours.
Receiving service of process is a legal term that means accepting the legal papers that are sent during lawsuits. This means that if your LLC gets sued, your Arkansas registered agent will get the documents.
In Arkansas, you can choose to use a commercial or non-commercial registered agent. The main difference between the two is that commercial agents must be “in the business” of serving as registered agents.
Many people who create LLCs for the first time think it makes sense to be the registered agent for their company. There are some clear benefits to this choice:
- It’s cheap: You’re not paying someone else to do it for you.
- It’s easy: The only address and contact information you have to keep current is your own.
- It’s reliable: You will receive all important documents personally.
Unfortunately, these business owners often learn the hard way that serving as their LLC’s registered agent can create problems.
Some potential issues that may arise can include:
- No privacy: Your name and address will be published on the Secretary of State’s website. This means that anyone with an internet connection can find your personal information.
- Junk mail/spam: You will get a ton of junk mail in addition to a small amount of real mail and any service of process.
- No breaks: You also must be available at all times during regular business hours to receive documents. This means no vacations, sick days, or leaving the office for lunch.
- Business interruptions: Client meetings can be interrupted by people serving process. That could be embarrassing or hurt your reputation.
- It’s your fault if you miss something: You always have to make sure your address is correct and up to date. If you make a mistake or miss something, you are held responsible.
If you don’t want to deal with any of the problems listed above, you should consider hiring a professional registered agent service. A professional agent will notify you as soon as you receive any documents, and they only cost about $100 per year.
If you are looking for a professional registered agent service, take a look at our Best Registered Agent ranking for some of our recommendations.
If you plan to do business in other states, we suggest finding a national registered agent service. This is because to expand outside Arkansas, you’ll need to register as a foreign limited liability company and find a registered agent in each state where you want to do business.
With a national service provider, you’ll only need to hire one business to serve as your registered agent in multiple states where you are registered as a foreign LLC.
Step 3: File Your Arkansas LLC Certificate of Organization
A certificate of organization is a document that lists basic details about your LLC. You must file it with the Arkansas Secretary of State to create your LLC.
If you would like to avoid the hassle of handling your LLC filing yourself, you can also use a professional LLC formation service. Check out our Best LLC formation services article for some of our suggestions.
What to include in my Arkansas Certificate of Organization?
Arkansas Code Section 4-38-201 says your certificate of organization must include:
- The LLC’s name.
- The name and address of the registered agent.
- The street and mailing address of the principal office.
If you have a commercial registered agent, you only need to provide their name. But if you go with a non-commercial registered agent, you must also list their address.
Arkansas LLC Filing Fee
According to the Arkansas Secretary of State’s LLC Filing Fee Schedule, the filing fee is $45 if you file online and $50 if you submit a paper form.
Arkansas LLC Processing Time
Most filings are processed within two business days of receipt.
Step 4: Draft your Arkansas LLC Operating Agreement
Operating agreements are contracts used by LLC owners. They document how the company will be managed and define each member's rights and duties.
Arkansas law does not require you to make an operating agreement for your LLC. However, writing one can help members set expectations ahead of time and avoid disagreements between the LLC members in the future.
For instance, let's say one LLC owner wants to sell their share of the company. An operating agreement can explain how this LLC member can sell their interest and who takes over their duties when they leave.
Some other benefits of an LLC operating agreement include:
- They determine the rights and duties of LLC members. If one LLC member is responsible for running the business or managing the books, the LLC operating agreement should say so.
- They say what the manager has the right to do. Managers also have special duties to the company and the members. The LLC operating agreement should state these.
- They outline what the LLC is legally able to do. The operating agreement should also set down how the company is allowed to conduct its business from day to day.
- They say how new members can join the company. They also have rules about how exiting members can leave.
- They set down how and when profits are paid to members. They can also create different types of membership and payment schemes.
- They say whether members or managers are in charge. They also say how to hire and fire managers.
- They say how and under what circumstances the LLC should end. You might not want to dissolve your business entity now, but you might in the future. It’s best to think about it and plan before it becomes an issue.
- They say how to change the rules. You may need to amend your operating agreement in the future. The operating agreement should set down the rules for making changes.
All LLC members should be involved in drafting the operating agreement. This will ensure that everyone agrees and is on the same page about how the business will run.
To review Arkansas’ rules about operating agreements, see Arkansas Code Section 4-38-105.
Step 5: Get an EIN (Employer Identification Number) for Your Arkansas LLC
An EIN (Employer Identification Number) is like an SSN for a business. It is a 9-digit number assigned by the IRS that can be used to identify your LLC.
Here are the most common times when you need an EIN:
- Does your LLC have more than one member?
- Does your LLC have any employees?
- Is your LLC taxed as a C corporation or S corporation?
If the answer to any of these questions is yes, your LLC must obtain an EIN.
You can file taxes for a single-member LLC using an SSN. But, an EIN is necessary if you want a business bank account. Having an EIN can also help prevent fraud and make certain administrative tasks easier.
First Tasks After Registering your Arkansas LLC
After you get your Arkansas LLC registered, there are some more steps you should take before officially opening. This will ensure you get your business started on the right foot.
Open a Business Bank Account
While not legally required, it’s always a good idea to open a bank account for your LLC. This will make sure that your company’s assets stay separate from your personal assets and funds.
Some other benefits of using an LLC bank account include:
- Convenience: Keeping things separate makes your LLC’s bookkeeping much simpler.
- More business opportunities: Your LLC can only receive credit card payments through a business account. You can also do business with people who won’t take personal payments.
- Personal asset protection: Mixing your personal and business funds could cause you to be held responsible for the LLC’s debts.
Of these, asset protection is the most vital.
LLCs can provide personal asset protection because they are considered separate legal entities from their owners. This legal concept, known as the “corporate veil,” means that the LLC’s creditors cannot hold the LLC members liable for business debt.
However, if you mix business and personal funds or use company assets for your own purposes, the corporate veil might be “pierced” if your LLC is sued. This means that the business debt could become your personal liability.
Opening an LLC bank account can help protect your personal assets from liability. If the business gets sued, the creditors will only be able to get at the company's assets and not yours.
Get Business Insurance For Your Arkansas LLC
You should also consider getting business insurance for your Arkansas LLC. You can tailor your coverage to cover the specific risks you face in your industry.
Some standard business insurance policies include:
- General liability insurance: You’ll need this if there’s an injury on your property. It pays for damages and a lawyer if you need one.
- Commercial automobile insurance: This works like your own car insurance. It covers drivers and vehicles for your business.
- Workers’ compensation insurance: Arkansas law requires employers with three or more employees to have workers' compensation insurance. You can decide to buy a policy from a private insurance company or get approved by a court to self-insure.
- Commercial property insurance: This protects your property in the event of damage. Keep in mind that flood insurance is often a separate policy.
- Professional liability insurance: Lawyers, doctors, architects, and other professionals need this insurance. It provides coverage and legal defense in the event of a malpractice case.
- Business income insurance: If you have to close for some time, business income insurance can pay back the loss of income. Policies vary, though. Make sure that you know exactly what kinds of losses will be covered.
Keep Your Arkansas Company Compliant
Once you start a business, you need to follow state regulations. For instance, if your LLC operates in certain industries, you may be required to get a business license or pay taxes.
It's important to stay up-to-date with relevant legislation in your area. This way, you can be aware of any changes and comply with legal requirements.
Arkansas Business Permits and Licenses
The industry you work in may require a certain permit or business license. You can check out the Arkansas Department of Labor and Licensing website to find more information.
Arkansas Tax Requirements
Arkansas requires all LLCs to pay an annual franchise tax of $150. You can learn more on the Secretary of State’s Franchise Tax page.
Federal LLC Tax Filing Requirements
LLCs are “pass-through” business entities, meaning profits pass through the business without being taxed. Instead of the LLC paying taxes, you must report any profits or losses on Schedule C of your personal income taxes.
You must also pay Social Security and Medicare taxes, even if you do not have employees. Withholding payroll taxes from salaries is also required if you employ workers.
Annual Report and other Filing Requirements
Arkansas Code Section 4-38-212 says LLC owners must file an annual report with the Secretary of State. You can submit your report online or by mail. You’ll need to pay your $150 franchise tax as part of the filing process.
Arkansas Business Formation Quick Links
- Internal Revenue Service — apply for an EIN online
- IRS information regarding the federal tax treatment of LLCs
- Business Entity Search (SOS)
- Corporations Online Filing System (SOS)
- LLC Filing Fee Schedule (SOS)
- Franchise Tax / Annual Report Filing System (SOS)
- Doing Business in Arkansas (SOS)
- Name Requirements: Arkansas Code Section 4-38-112
- Name Reservation: Arkansas Code Section 4-38-113
- Fictitious Name: Arkansas Code Section 4-38-122
- Registered Agent: Arkansas Code Section 4-38-115
- Certificate of Organization: Arkansas Code Section 4-38-201
- Operating Agreement: Arkansas Code Section 4-38-105
- Arkansas Code Section 4-38-212
Arkansas LLC FAQs
How much does it cost to start an Arkansas LLC?
According to the Secretary of State’s LLC Filing Fee Schedule, the filing fee is $45 if you file online and $50 if you submit a paper form.
What is the processing time to form my Arkansas LLC?
Most filings are processed within two business days of receipt.
What are the benefits of an Arkansas LLC?
Unlike sole proprietorships, LLCs provide liability protection from personal liability. An LLC can also have tax advantages over an Arkansas corporation.
Where do I check if my Arkansas LLC name is available?
Once you’ve selected a name for your LLC, you can use the Secretary of State’s Business Entity Search tool to confirm if it is available.