If you plan to start a limited liability company (LLC) in Arkansas, it’s important to know how much it will cost. But identifying the expenses you need to budget for can be confusing, particularly when you don’t know where to look.
This article lays out your potential costs when forming an Arkansas limited liability company.
Keep reading, and you’ll find out:
- The expenses associated with starting an Arkansas LLC
- Additional costs you may want to consider
- How to choose the right formation method for your needs
After you have finished this article, you will be able to make a budget for your Arkansas LLC formation expenses.
Total Arkansas LLC Cost – Starting at $45
According to the Arkansas Secretary of State’s LLC Filing Fee Schedule, the bare minimum cost to start an LLC in Arkansas is $45.
This only includes one item:
- Arkansas Certificate of Organization filing fee: $45 (online filing only)
Some LLCs will also need a sales tax permit from the Arkansas Department of Finance and Administration, which costs $50. Your business may also be required to get professional and local business licenses, the costs of which vary.
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Arkansas LLCs – the Basic Costs
The total cost of forming an LLC in Arkansas will vary. However, the lowest possible cost is $45. In the sections below, we’ve outlined the possible mandatory expenses.
Certificate of Organization Filing Fee — $45 to $50
A Certificate of Organization is a legal document that officially starts a new LLC. To form an Arkansas LLC, you must submit a certificate of organization to the Secretary of State. Although it sounds complicated, you really just need to list some fundamental info about your company.
The state filing fee for an Arkansas certificate of organization is $45 if you file online or $50 if you submit a paper form.
Sales Tax Permit Fee — $50
Arkansas requires LLCs that sell tangible personal property and taxable services to register for sales tax permits. You must register online, and there is a $50 fee.
Professional Licenses and Business Permits — Variable
If your LLC operates in a regulated industry, you must get a state license or permit. Check out the Arkansas Department of Labor’s Licensing page to learn more.
Additionally, you may need to obtain a local permit or business license. For instance, the city of Fayetteville requires all LLCs to get business licenses.
Arkansas LLCs – Optional Costs to Consider
In addition to your mandatory costs, you should also explore spending a bit more on some optional expenses. While they aren’t required, these expenditures can help you operate your LLC.
Expedited LLC Filing Fees — N/A
Arkansas does not offer expedited service. However, most LLC filings are processed within two business days of receipt. So, we recommend that you file online to speed up the process.
Registered Agent Fee — about $100 per year
Arkansas law says that all LLCs must have a registered agent to accept paperwork for the business. You will list your registered agent’s information on your certificate of organization, and there is no fee if you ever want to change your agent.
New business owners sometimes think it makes the most sense to name themselves as their LLC’s registered agent. But they often don’t know that registered agents must always be available during standard business hours to receive documents. Plus, their addresses are made public online, so they often deal with junk mail and other privacy issues.
Luckily, you can avoid these problems by hiring a professional registered agent service. It only costs about $100 each year, and they handle every aspect of your LLC’s registered agent duties.
Check out our Best Registered Agent Services article for some of our recommendations.
Operating Agreement — Variable
An Arkansas LLC operating agreement is a legal contract that LLC members use to establish how the business will be run. They lay out essential details like the rights and duties of each member and how to enter or leave the business.
Arkansas does not mandate that LLCs have operating agreements. Still, we strongly suggest making one. While you can draft your own operating agreement, it’s not the best route to take if you don’t have legal experience.
One option is to hire an attorney to make an operating agreement for your LLC. Although this can be pricey, you will walk away with a customized contract for your business. But if you need to save some cash, you can pay an LLC formation service to make you one for as little as $39.
DBA Fee — $22.50 to $25
Many LLC owners use a “doing business as” or “DBA” name for their company. A DBA is a business name that a company “goes by” that is not its full legal LLC name. For instance, it’s common to drop the “LLC” from a business name to make it more approachable.
In Arkansas, DBAs are called “fictitious names.” If you want to use a DBA for your LLC, you must file an Application for Fictitious Name with the Secretary of State. There is a $22.50 fee if you file online and a $25 fee if you use a paper form.
Name Reservation Fee — $22.50 to $25
If you have decided on the name you want to use for your LLC but aren’t ready to start it, Arkansas allows you to reserve a name for 120 days. Doing so will prevent other people from registering your reserved name.
To reserve an LLC name, you must submit an Application for Reservation of Entity Name to the Secretary of State. There is a $22.50 state fee if you file online and a $25 state fee if you use a paper form.
Domain Name — about $20 per year
In today’s economy, a business website is an important marketing strategy. But before you can make a website for your LLC, you must buy a domain name. Fortunately, domains are affordable and easy to obtain.
We suggest that you purchase your domain name ASAP. If you wait too long, someone might get it before you. And watch out for “domain squatters,” who buy domain names they think a new LLC will want and resell them at a higher price.
You can get a domain from GoDaddy.com or a comparable company for about $20 to $50 per year. Plus, these websites often run sales, so you can typically spend even less.
Getting an Employer Identification Number (“EIN”) — Free
An EIN is a 9-digit tax identification number that the Internal Revenue Service assigns out to businesses. You can think of your LLC’s EIN as its social security number. The IRS requires some LLCs have EINs, but others aren’t legally obligated to get one.
Either way, we recommend that all LLCs apply for an EIN. This is because most banks will demand an EIN for you to be permitted to open a business bank account. An EIN also lets you avoid giving out your SSN, which can help prevent identity theft.
You can obtain an EIN online or mail Form SS-4 to the IRS. Both methods are free, so you should never pay anyone to get an EIN. You can handle it on your own at no cost.
Read More: How to Get an Employer Identification Number in Arkansas
Foreign LLC Qualification Fees — about $100 per extra state
If you want to grow your business into other states, make sure to plan for some extra expenses. While you don’t have to form a new LLC in every state where you plan to operate, you will need to register as a foreign limited liability company.
Foreign LLC filing fees vary, but most are around $100.
Writing Formation Costs Off
You can typically deduct your LLC formation expenses as business startup costs on your federal income taxes. The IRS provides significant guidance on this issue, so we suggest that you review the IRS website to learn more.
By default, LLCs are “pass-through” entities. This tax status lets LLC owners deduct up to $5,000 of startup expenses from their federal taxes in the year they start their business.
Queenie decides to start a single-member LLC and open a knitting shop in Fayetteville, Arkansas. Her formation expenses are as follows:
- Arkansas LLC Certificate of Organization (online filing): $45
- Sales Tax Permit Fee: $50
- Fayetteville Business License Initial Fee: $52
- Operating Agreement: $35
- Arkansas Registered Agent Service Fees: $100
- DBA Fee (online filing): $22.50
- Name Reservation Fee (online filing): $22.50
- Web Domain Costs: $25
As a pass-through entity, the LLC won’t be subject to income taxes. Instead, Queenie will report her profits from the LLC and any deductions on her personal state and federal income taxes.
Queenie's total formation costs were $352. Before deductions, her total taxable income was $46,000. But by deducting her costs, Queenie reduces her taxable income to $45,648. This will drop her 2023 federal income taxes from $5,869 to $5,791.
Even though this is not a substantial decrease, business owners who regularly deduct their expenses will see their tax savings increase over time.
Cheapest Way to Start an LLC in Arkansas
When choosing an LLC formation method, it’s important to remember the distinct needs of your business. We’ve laid out some of the most popular formation approaches in the sections below.
Formation Service – $39 + state fees
A common choice is to use an LLC formation service. While you won’t get the legal expertise of a lawyer, these businesses specialize in forming LLCs and other business entities.
Using an LLC formation service is a reliable approach for many LLCs. The benefits include:
- They’re easy. In most cases, a formation service will have helped hundreds of people through the exact process you are struggling with now. They have all the documents, information, and expertise you need right on hand.
- They don’t cost much. Because formation services have such a large volume of business, they don’t have to charge their clients that much money.
- They’re reliable. All of the formation services’ products and procedures have been tested hundreds of times over in the real world. That kind of experience should give you peace of mind and confidence going forward.
- They’re fast. Formation services have seen almost every business formation situation already. Chances are, they have many solutions for you that are ready right now before you even know you need them.
But business formation services aren’t best for everyone. The negative aspects of this approach include:
- They’re not the best solution for complex LLCs. If you are forming a complicated company or one in a heavily regulated industry, you will have concerns that probably need more focused expertise in that area of business.
- Even if a formation service is a good fit, you can expect upselling. Formation services have to make money too, and some of them may pressure you to buy formation products or business services you don’t need. Even when you are using a formation service, you need to be a smart and informed consumer.
Using a professional LLC formation service can be a great way to set up a business. Check out our Best LLC formation services article for some of our suggestions.
Another option is to hire a lawyer to start your LLC. This method entrusts your company to a business formation expert. But attorneys don’t come cheap. They often charge several hundred dollars per hour.
The costs aside, there are noteworthy benefits to retaining an attorney:
- Lawyers help you manage risk. If you are starting a business with complicated legal issues, hiring a lawyer would be the best choice.
- Lawyers offer more customization when you need it. Do you need specific things put in an operating agreement? Is your company going to have a unique ownership structure? You may need an attorney to make sure these issues are handled properly.
However, the disadvantages of this approach usually outweigh the advantages:
- Lawyers cost more than any other option. The price tag alone should convince you that if you don’t need a lawyer, it’s not worth hiring one.
- Finding a lawyer takes a long time. Getting a lawyer who specializes in what you need, costs what you’re willing to pay, and can work with you well is a tall order.
- Lawyers also take longer to form a business than a formation service. Because lawyers are also very careful people, they will generally take much longer to form your company than non-lawyers would. Fortunately, most people don’t need a lawyer. In 90% of cases, a formation service will do just fine.
Do it Yourself
Of course, you can also choose to form an LLC on your own. Just don’t forget to account for the value of your time when considering this route. The time you commit to LLC formation paperwork will take you away from actually running your company.
The benefits of a DIY formation method include:
- Personal knowledge. A DIY business owner will learn a lot about the process while forming their own business, and they probably will retain that knowledge for years to come.
- It costs less upfront. If you don’t account for the value of your time, a DIY solution is the cheapest option.
But you should also keep the drawbacks in mind:
- You’re losing money when you consider how much time it takes to DIY. If you figure out that your time is worth $30 per hour, and you take 20 hours to complete your business formation, you have essentially spent $600 on business formation.
- There’s the risk of making a mistake. DIY business owners can easily make a mistake with all the paperwork that can cost them even more time and money.
- It’s a headache. State workers are very helpful, capable people. But they will also tell you that the laws and rules governing business formation are not easy, and they follow those rules for a living. It’s going to be even harder for you.
Annual Arkansas LLC Fees: How Much Will it Cost to Maintain your LLC?
Arkansas LLC owners must submit an annual report to the Secretary of State. You can submit your annual report online or file a paper form. You must pay a $150 franchise tax with your report.
You might also be required to periodically renew your LLC’s business licenses and permits.
Further, some of your optional costs will be due annually. Some of your continuing expenses may include:
- Registered agent service fee: approximately $100
- Domain name registration: $20 to $60
How Much are LLC Taxes in Arkansas
Since they are “pass-through” entities, LLCs do not have to pay income taxes. Rather, you will report the LLC’s income on your personal income taxes.
As discussed above, Arkansas also requires LLCs to pay an annual franchise tax of $150. Check out the Secretary of State’s Franchise Tax page to learn more.
Arkansas LLC Formation Costs Quick Links
- Arkansas Online Filing
- Arkansas Taxpayer Access Point
- Arkansas LLC Filing Fee Schedule
- Arkansas Secretary of State
- Arkansas Department of Finance and Administration
- IRS — apply for an EIN online
- IRS information regarding the federal tax treatment of LLCs
Arkansas LLC Formation Costs FAQs
How much does it cost to start an LLC in Arkansas?
The lowest possible cost is $45. But, it can be more expensive depending on your LLC’s industry and location.
What is the cheapest way to start an LLC in Arkansas?
A do-it-yourself method is the lowest cost in terms of cash spent. But when you consider the value of your time, the most cost-effective approach is often an affordable LLC formation service.
Do I need to hire an attorney to form an LLC in Arkansas?
No. You won’t need a lawyer to start an average LLC. A DIY method or an LLC formation service will typically suffice.
Can I pay to form an LLC more quickly in Arkansas?
No. Arkansas does not offer expedited processing. However, most filings are processed within two business days of receipt, so you should file online if you want faster service.