Steps to Forming an LLC
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How to Form an Arkansas LLC
Forming an LLC in Arkansas will help protect your personal assets from lawsuits and judgments against your business. An LLC is a legal structure that separates your business and personal assets. By not having your business in a separate legal structure, you can be held personally liable for certain debts and lawsuits incurred by the company. Forming an Arkansas Limited Liability Company does not require an attorney and you can save a lot of money if you do it yourself with the six simple steps below.
Before getting into the six steps here are a few things to know about Arkansas LLCs.
Arkansas requires most businesses to obtain a license and pay a fee if operating in the state. Please check with the state to make sure your business is complying with the license requirements for your particular profession.
How Much Does It Cost to Get an LLC In Arkansas?
Arkansas has one of the lowest state filing fees of any state (tied with Kentucky) for $50 and can be paid by credit card or check.
Arkansas Annual Report and Annual Fees
Arkansas requires the filing of the Franchise Tax Report which is an annual report from domestic or foreign LLC in addition to paying the annual franchise tax with the Arkansas Department of Finance and Administration. This is an annual cost of $150.
- Minimum Number – one or more
- Members/Managers- at least one is required to be listed in the Articles of Organization
- Residence Requirements – none specified
- Age Requirements – over the age of 18
In addition to forming your Arkansas LLC, you will need to check for business licenses and permits.
Steps to Forming an Arkansas LLC
Step 1. Naming Requirements
Arkansas LLC Name Search
Before settling on a name, you want to be sure nobody else is using it as each LLC must have a unique name. Here’s how to search available LLC names in Arkansas with the Secretary of State. You can also visit our page with links to each state office to do a free Arkansas LLC name search.
The Arkansas Secretary of State also has a telephone number to call and check to see if your name is available. Their number is 888-233-0325
Your company name must end with the words Limited Liability Company or an abbreviation of these words (“LLC,” “L.L.C.,” “Limited,” “LTD.,” “LTD”.). Check out our article on naming your LLC for all of the requirements that you must follow when naming an LLC in Arkansas.
Companies which perform Professional Service MUST additionally contain the words “Professional Limited Liability Company,” “Professional Limited Company,” or the abbreviations “P.L.L.C.,” “P.L.C.,” “PLLC,” or “PLC” and may not contain the name of a person who is not a member except that of a deceased member. The word “Limited” may be abbreviated as “Ltd.” and the word “Company” may be abbreviated as “Co.”
Arkansas allows the reservation of an LLC name for a filing fee of $25.00.
Also, there are some words that aren’t allowed to be used in the state, like those that could refer to a state agency or that require licensing from the state.
Step 2. Choosing a Registered Agent
What is a Registered Agent?
A registered agent is the central point of contact for the LLC, that can be either an individual or business entity, that receives important legal documents, tax notices or communications with the state.
Registered Agent Requirements
The Arkansas registered agent must have a physical presence in Arkansas and have a mailing address and be available during normal business hours to accept delivery of documents. A Post Office Box or personal mailbox is not acceptable. If the registered office includes a suite number, it must be included in the registered office mailing address.
Who can be a Registered Agent in Arkansas?
A registered agent in Arkansas can either be a resident of the state or a corporation authorized to do business in the state.
Provided you as the business owner have a physical presence in Arkansas, you can be the registered agent however, a registered agent in Arkansas must be available during normal business hours between 9am and 5pm to accept legal correspondence. If your LLC is served and the state is unsuccessful in reaching your agent, the LLC may be involuntary dissolved.
Check out our article on LLC Registered Agents for more details.
Step 3. Filing the Articles of Organization
The Articles of Organization is the paperwork used to form a Limited Liability Company with the Arkansas Secretary of State. This is the most important step and many people believe that you need an attorney to file.
While we don’t discourage having an attorney, filing for an LLC can be done by most people, but you can save considerable money over an attorney and make sure everything is filed correctly by using a formation service such as ZenBusiness.
Step 4. Creating an Operating Agreement
An operating agreement is not required in Arkansas but is typically a good idea to have one, especially for an LLC owned by multiple people. The primary function of the operating agreement is to govern the relationship between the owners of the business, but also outlines who makes what decisions, how profits or losses are distributed and the operating procedures of the LLC.
Read more about the operating agreement.
Step 5. Getting an EIN
What is an EIN?
The Employer Identification Number (EIN), or Federal Employer Identification Number (FEIN), is used to identify a business entity. It is essentially a social security number for the company.
In addition to the EIN being an identifying number for the LLC it serves a few other purposes such as:
- Opening a business bank account
- Federal and State tax purposes
- The business account to pay payroll taxes for employees paid by the company
How to register an EIN for an Arkansas Limited Liability Company
To file an EIN for your LLC, visit the Internal Revenue Service (IRS) or obtain the SS-4 form. They show the steps on how to apply, but here is a video on how to apply for an EIN for more details. In about five minutes, you will have your number free of charge. Be sure to wait until your LLC is approved before applying for your EIN as the name that is registered for the LLC must be the same as the EIN.
Step 6. Selecting the Tax Status of the LLC
One of the advantages of an LLC is the flexibility in taxation as there are four ways an LLC can be taxed, compared with two ways for a corporation.
- Single Member LLC – An LLC with one member automatically becomes a single-member LLC with the IRS. The owner simply files their Schedule C with their 1040 at the end of the year. Filing as a single-member LLC means the entity does not pay sales tax and goes to the owner which is called pass-through taxation. The owner pays self-employment taxes on the net profit of the LLC, which while simpler to handle taxes, may be more costly.
- Partnership LLC – An LLC with two or more members is automatically considered a Partnership with the IRS and will file Form 1065. Like the sole-proprietorship as a pass-through entity, the LLC taxed as a Partnership pays no income tax and profit and losses flow to each member’s Form 1040s via Schedule K-1 of Form 1065.
- C Corporation LLC – An LLC can elect to be taxed as a C Corporation by filing IRS Form 8832. The major difference as an LLC that is taxed as a C corporation is that now the LLC pays tax on the profits and losses and are not directly passed down to the members. Most, but not all will find filing as a C Corporation will cost more in taxes as now the LLC has double taxation where there is a tax on the profits and dividends.
- S Corporation LLC – To get S Corporation status, you will file Form 2553 with the IRS. What makes the S Corporation attractive unlike the sole proprietorship or partnership is that you can potentially shield some of the profits from being subject to self-employment taxes. Dividends aren’t typically subject to self-employment taxes which is a large potential savings. There will be more work in accounting an LLC that elected S Corporation status.
Each of the four ways for an LLC to be taxed in Arkansas can have a major impact on the taxes that are charged depending on the business and the member’s personal finances. It’s a very good idea to work with an accounting professional to see which one is most efficient for the business and members.
Don't want to go it alone but don't want the expense of an attorney? Another alternative is to use an LLC formation service that will do the formation at a low cost.
ZenBusiness has a special offer right now to form an LLC for $49 plus the cost of the state fees.
Step 7. Open a bank account for your business
Opening a separate LLC bank account is important as it establishes a clear division between your personal and business finances. Should the LLC be sued and you are using a personal bank account for your LLC’s finances, that would be considered a commingling of funds, which may make it difficult to maintain the liability protection of the LLC.
To open a bank account for your LLC, you will need to bring the following with you to the bank:
- Form of identification for each member, such as a driver’s license
- Copy of the Certificate of Formation
- LLC operating agreement
- Employer Identification Number – If you are a single-member LLC with no employees, you can simply use your Social Security Number
A bank resolution may be needed depending on the bank and the tax election of the LLC. A banking resolution is a formal document that provides authorization for who has access to the LLC bank account.
Learn more about opening a bank account for an LLC
Step 8. Obtain a sales tax permit (optional)
If your business sells a taxable product or service you will also need to apply for Arkansas Sales Tax Permit. This can be obtained through the Arkansas Department of Finance and Administration.
Arkansas Secretary of State Contact Information
To contact the Secretary of State, you can visit their website https://www.sos.arkansas.gov/, call 50-682-3409 or by mail at:
Arkansas Secretary of State
State Capitol, Suite 256
500 Woodlane Street
Little Rock, AR 72201