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Entrepreneur’s Guide to Setting Up an Arkansas LLC

Entrepreneur’s Guide to Setting Up an Arkansas LLC

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Entrepreneur’s Guide to Setting Up an Arkansas LLC

Are you thinking of starting your own business in Arkansas? If so, one of your early decisions will be to select a business structure. If the Arkansas LLC is on your radar, our guide is here to help break down what the LLC is and how to set one up in Arkansas.

What is an LLC?

An Arkansas Limited Liability Company is a type of business structure (also called a business entity) that combines the benefits of a corporation with the simplicity and flexibility of partnerships or sole proprietorships. It’s a popular choice among entrepreneurs in Arkansas for several reasons.

First, an LLC in Arkansas offers personal asset protection. This means if your business faces debts or lawsuits, your personal assets, like your house or car, are usually safe. This protection is a big advantage over sole proprietorships and general partnerships, where personal and business assets can be at risk.

Second, an LLC is more flexible than a corporation when it comes to taxes. An LLC can choose how it wants to be taxed: like a sole proprietorship, partnership, or corporation. This flexibility allows business owners to pick the most favorable tax treatment for their situation.

The main difference between an LLC and a sole proprietorship or general partnership is liability protection. Sole proprietorships and general partnerships don’t offer personal asset protection, making LLCs a safer option for many.

On the other hand, compared to corporations, LLCs are simpler to set up and maintain, with less paperwork and lower startup costs. Corporations offer liability protection and can be a better choice when raising large amounts of capital, but they come with more regulatory requirements and formalities.

If you provide a licensed professional service, you will be required to form a Professional Limited Liability Company (PLLC) instead of filing an LLC. Professional services include occupations such as architects, attorneys, locksmiths, and more. The process of forming a Professional LLC is very similar to the LLC, except for including your state occupational license with the application.

The state fee to form an L.L.C. is between $45 depending on whether you file online or by mail.  Online approval takes about two weeks, while online filing typically takes 2 or 3 business days.

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Steps To Form An Arkansas LLC

Step 1: Choose an LLC Name

The first step in forming an Arkansas Limited Liability Company is to make sure the name you want is available, as there can’t be another LLC in Arkansas with the exact same name.  

Related: How to do an Arkansas LLC name search

Additionally, when coming up with the Company Name, one of the primary naming guidelines is to use the following words or abbreviations at the end of the L.L.C.’s name:

  • Limited Liability Company
  • Limited Liability Co.
  • Ltd. Liability Company
  • Ltd. Liability Co.
  • Limited Company
  • Limited Co.
  • Ltd. Company
  • Ltd. Co.
  • L.L.C.
  • L.C.
  • LLC
  • LC

Step 2: Select an Arkansas Registered Agent

In Arkansas, a registered agent must be selected to act as the primary point of contact to be the agent for service of process on behalf of the LLC. Service of process refers to when legal correspondence such as tax documents, summons, subpoenas, and other important legal documents are sent so the receiving party has sufficient time to respond.

The requirements to be an Arkansas registered agent include; being a full-time resident of Arkansas and being available during normal business hours at a physical street address (no P.O. Boxes are allowed). You, as the business owner, can act as your own agent in Arkansas, and you are not required to pay for a registered agent.

While many LLC owners opt to fulfill this role themselves, some owners choose to hire registered agent services like Northwest Registered Agent. Utilizing a registered agent service ensures that your LLC adheres to state requirements while offering an added layer of convenience and confidentiality since the owner’s personal address isn’t disclosed in public records.

Related: What is an Arkansas registered agent?

Step 3: File the Arkansas Certificate of Organization

Created under the Arkansas Filing Act 1003 of 1993, the paperwork to create an LLC in Arkansas is called a Certificate of Organization.

To get started, either download the Arkansas LLC Certificate of Organization Form LL-01 or file it online with the Arkansas Secretary of State.

If sending by mail, send to:
Arkansas Secretary of State
500 Woodlane Street, Suite 256
Little Rock, AR 72201

If you have questions, contact the Business and Commercial Services Division of the Arkansas Secretary of State.
Phone: 501-682-3409
Email Address: corprequest@sos.arkansas.gov

Turnaround time for approving the Certificate of Organization normally takes 2-3 business days to process online LLC filings to 2 weeks for mailed filings. Expedited processing is also available for an additional fee.

Related: How to fill out the Arkansas LLC Certificate of Organization?

Tips for Filling Out the Arkansas LLC Articles of Organization

When filing the Certificate of Organization, there are a few sections that you may not know how to fill out. Let’s go over a few of the ones that cause issues.

Managers statement: L.L.C.s can either be Manager-Managed or Member-Managed.

  • Member-Managed LLCs have an active involvement in the day-to-day operations of the business.
  • Manager-Managed LLCs are hired by the LLC members to run the business, similar to a CEO of a corporation.

If a manager will manage the L.L.C., a statement needs to be included in this section.

Most L.L.C.s are member-managed and would leave this section blank.

Officer’s section: One area that is a bit confusing is the title. Choices include:

  • Incorporator/Organizer:  An LLC Organizer is involved with the LLC formation of the Certificate of Organization.  The Organizer may or may not become a member, such as a mentor, attorney, or accountant.
  • Manager: If the LLC is Manager-Managed and the Manager Statement was filled out, this person would be listed here.
  • Member: The members will be listed here.  All of the initial members will also be saved as Incorporator/Organizers.
  • Managing Member: This will be used if the manager is also a member.

Effective date: By default, the L.L.C. is effective on the date submitted.  If you prefer to have the L.L.C. officially start at a later date (up to 90 days), enter that date in the field. Otherwise, leave the field blank.

If you are worried about making a mistake when forming your LLC, or just don't want to deal with filling out state paperwork, an LLC formation service will help guide you through the process. My top recommended services include:

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What To Do After Setting Up Your Arkansas LLC

Once your new LLC has been formed, there are a few additional steps to take care of. Below is a list of the most common tasks.

Prepare an Arkansas LLC Operating Agreement

An operating agreement is an internal document that governs the framework and operating procedures of an LLC.  This document covers items like ownership percentage, ownership rights, member responsibilities, how profits and losses are distributed, and more.

The state of Arkansas doesn’t require an LLC to have an operating agreement, but it is still worth considering. Without an operating agreement:

  • The LLC could be subject to generic state rules that may be detrimental in the event of a lawsuit.
  • Member’s personal liability protection may be diminished.
  • Members may not fully understand their roles and responsibilities, leading to costly disputes in the future.

Related: Arkansas operating agreement template

Obtain an EIN

If the LLC will hire employees or is owned by more than one member, an EIN is required. 

The EIN or Employer Identification Number (also referred to as a Federal Employer Identification Number, FEIN, or Federal Tax ID Number) is a unique 9-digit tax identification number assigned to a business by the Internal Revenue Service (IRS). Similar to a social security number for an individual, the EIN identifies business entities for tax purposes.

Related: How to get an Arkansas EIN

Open an LLC Bank Account

Opening a bank account for your LLC is important for liability protection as the account separates the business’s funds from the member’s personal funds.

Several documents will be needed to open a business bank account, such as:

  • A banking resolution is a document that authorizes the members to open a business bank account on behalf of the LLC.
  • Copies of the formation paperwork showing the official creation of the LLC.
  • Driver’s licenses of the members.
  • Depending on the LLC’s age, an Arkansas Certificate of Good Standing may be needed to prove the LLC is active and in good standing with the state.

Apply for Business Licenses and Permits

Depending on what your business does and where it is located, there will likely be various business licenses and permits to register for before starting. Some common registrations include:

  • Business license: There isn’t a general statewide business license in Arkansas, but some cities require businesses to obtain licensing before they can start.
  • Professional license: In Arkansas, certain types of businesses, such as barbershops, accountants, salons, and others, must be licensed.
  • Sales tax permit: To sell products and certain services in the state, a sales tax permit from the Arkansas Department of Finance and Administration will be necessary to collect sales taxes.

Related: What business licenses are needed in Arkansas?

File the Annual Franchise Tax Report

LLCs are required to file the annual Arkansas Secretary of State Franchise Tax Report.  The Annual Franchise Tax Report updates ownership information and other details.

Related: How to file the Arkansas Annual Report

File the Beneficial Owner Information Report

Beginning in 2024, any individual who owns at least 25% or has “substantial control” of an LLC or corporation in Arkansas or any other state must file the Beneficial Ownership Information (BOI) form with the Financial Crimes Enforcement Network (FinCEN). BOI reports are filed electronically through FinCEN’s website.

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Arkansas LLC FAQs

How much does an Arkansas LLC cost?

The cost to form an LLC in Arkansas is a Certificate of Organization filing fee of between $45, which is paid to the Arkansas Secretary of State.

Is there a yearly fee for an LLC in Arkansas?

Yes – To renew an Arkansas LLC each year, the $150 Annual Franchise Tax report will need to be filed with the Arkansas Security of State.

How long does it take to get an Arkansas LLC approved?

It normally takes 2-3 business days to process online LLC filings to 2 weeks for mailed filings in Arkansas. Expedited processing is also available for an additional fee.

What is an Arkansas Foreign Limited Liability Company?

An Arkansas foreign limited liability company is an LLC that was formed in another state, but wants to physically operate in Arkansas. Physically operating means having a presence such as having an office or hiring an employee.

Related: What is a foreign LLC?

Entrepreneur’s Guide to Setting Up an Arkansas LLC

Entrepreneur’s Guide to Setting Up an Arkansas LLC

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