Wondering where to start with your business idea? Our guide to starting a business in Arkansas simplifies the process, from picking a business structure to getting the right permits, securing funds, and more.

Steps To Starting A Business In Arkansas

Step 1: Choose a Business Idea

The shocking first step in starting a business is, well, coming up with a business idea. All kidding aside, there are a ton of different business ideas, and if you’re still exploring business ideas, I have a few things that may help you narrow down your decision.

First, consider your skills and interests. What do you excel at? What do you enjoy doing? Do you have any special knowledge or experience that could be useful in starting a business? If so, use this as the foundation for your business idea.

Next, research the local market and industry trends in your local area. What types of businesses are popular? Are there any gaps or needs that could be filled by starting a new business? Understanding what’s already out there can help you come up with a profitable idea.

For more inspiration, check out our library of business ideas to get details on hundreds of different types of businesses.

Step 2: Write a Business Plan

After you settle on a great idea, it’s time to build a business plan. A business plan is commonly only thought of as something that’s needed when seeking funding, but the business plan helps to get the ideas out of your head and puts all the pieces of your vision together in one place. This process helps you see your idea more clearly, and acts as a guide to take you from idea to grand opening. Another important benefit of the business plan is the financial projections section, where you’ll calculate the startup costs and test your assumptions to see whether the idea is feasible.

Related: How to write a business plan

Step 3: Find Financing

After working through the business plan and getting a handle on how much it’s going to cost, our next stop is making sure the funding is available before taking on the remaining steps.

There are many different ways to finance a new business, but the right choice will vary depending on your needs and goals. From conventional bank loans to Small Business Administration (SBA) guarantees, investors, and grants, it can be difficult to wade through what is available and best for your business. To help you get started, here are some common funding options to consider:

Personal funds: This is a common funding option for entrepreneurs who use their personal savings, retirement accounts, or home equity loans to start or expand their businesses.

Grand funds: While there aren’t many grant opportunities for new businesses, a few do come up from time to time. Check out our list of Arkansas small business grants to see what is available.

Conventional bank loans: Banks and credit unions offer term loans, lines of credit, and equipment financing. To qualify for a small business loan, you’ll typically need a solid credit history, personal investment, and business plan.

SBA loan guarantees: The Small Business Administration (SBA) offers loan guarantee programs to help small businesses obtain financing. The most popular program is the 7(a) loan, which guarantees loans made by participating lenders.

Microloan programs: Microloans are small loans, often under $50,000, designed to help start-ups and smaller businesses with limited credit history, and often come with business training or mentorship opportunities. LiftFund and FORGE provide are two organizations that provide microloans in Arkansas.

Investors: There are various types of investors to consider, including:

Angel investors: These are affluent individuals who provide capital to start-ups in exchange for equity or debt. Angel investors can be found through local networking events or groups such as the Ark Angel Alliance and Startup Northwest Arkansas.
Venture capitalists: Venture capital firms invest in start-ups with high growth potential in exchange for equity. While venture capital can provide significant funding, it often requires giving up a considerable amount of control over your business.
Crowdfunding: Platforms like Kickstarter, Indiegogo, and GoFundMe allow you to raise small amounts of money from a large number of people, typically in exchange for a product, service, or equity. Crowdfunding can be a useful way to generate both funds and market interest for your business.

Step 4: Select a Business Structure

In the next step, we finally begin making the business official. Here, we will take care of the business structure (also called a business entity), which is how the business is organized to operate. There are several options when it comes to choosing a business structure, with the most common including the sole proprietorship, general partnership, corporation, and Limited Liability Company (LLC). Before choosing one, consider the benefits and drawbacks to find which one aligns best with your long-term goals and risk tolerance.

A sole proprietorship is essentially an individual deciding to go into business for themselves. This is the easiest and least expensive of the four entities to set up, as there is no state filing. In this structure, there is no legal distinction between the business owner and the business itself, so if the business is sued, the owner’s personal assets are potentially at risk.

Sole proprietorships (and partnerships, too) that operate under a business name that is different from the business owners will need to file the Arkansas Fictitious Name registration.

The general partnership is similar to the sole proprietorship but is where two or more individuals agree to share the management, profits, and losses of a business. In a general partnership, each partner is personally liable for the debts, obligations, and liabilities of the business, including those incurred by other partners on behalf of the partnership.

Related: What is a partnership?

A corporation is a type of business structure formed under Arkansas state law. It is a separate legal entity from its owners, known as shareholders, and offers them limited liability protection. This means the shareholders are generally not personally responsible for the corporation’s debts, obligations, or liabilities.

Corporations are more complex than sole proprietorships or partnerships and require more formalities, such as registering with the Arkansas Secretary of State, creating bylaws, and appointing a board of directors; however, in addition to liability protection, corporations can issue shares to raise investment funds.

The Limited Liability Company (LLC) is a popular type of business entity that also offers the liability protection of a corporation. It is a way for people to start and run a business without having to worry about being personally responsible for any debts or other obligations that the business might have, and without the administrative requirements of a corporation.

To form an Arkansas LLC, you need to file the Certificate of Organization paperwork with the Arkansas Secretary of State’s office and pay a filing fee.

Forming a corporation or LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.

Some popular formation services include:

IncFile - Great service and free registered agent the first year.

Northwest - Privacy-Focused: Free registered agent and private business address for 1 year!

ZenBusiness - Easy to use and free registered agent for 1 year!

Step 5: Register the Business

After setting up the business structure, the next phase is getting the business registered. The licenses and permits required for a business in Arkansas will depend on the type of business, its location, and the specific activities it engages in. Some of the common licenses and permits that businesses may need to obtain include:

Business licenses: There is no general state of Arkansas business license, however, many cities require a business license to operate.
Sales tax permit: Businesses selling products and certain services will need to register for a sales tax permit with the Arkansas Department of Finance and Administration.
Employer Identification Number: Certain business structures or businesses that have employees will need to register for an EIN from the Internal Revenue Service (IRS).
Professional licensing: Some services, such as barbers, landscape contractors, tattoo artists, septic tank cleaners, and home inspectors, require state licensing in Arkansas before offering their services.
Zoning permits: Many cities and/or counties require zoning approval before operating a business out of a location, and this even sometimes includes home-based businesses.

Step 6: Open a Business Bank Account

Once the business is set up and registered, a business bank account can be set up. The specific requirements for opening a business bank account in Arkansas can vary from institution to institution.

Generally, this includes providing personal information such as your name, address, and Social Security Number. You may also need to provide proof of your business’s formation documents and/or tax ID number. Additionally, you will likely be required to make an initial deposit into the account.

Step 7: Hire Employees

For many businesses, hiring employees will be the next step. New employers have a number of responsibilities to follow, starting with registration. Employers will need their EIN, in addition to a Withholding Tax Number from the Arkansas Department of Revenue and an Unemployment Insurance Tax Account Number from the Arkansas Department of Workforce Services.

Employers are also responsible for reporting new hires, verifying employees are eligible to work in the U.S., income tax withholding, obtaining workers’ compensation insurance, unemployment insurance, unemployment taxes, and payroll withholding taxes, which include Social Security and Medicare.

Step 8: Obtain Business Insurance

In the next step, a new business should take a look at whether business insurance will be needed. Business insurance is often optional, but it can provide protection against financial losses due to property damage, liability claims, and other unforeseen circumstances.

One type of business insurance that isn’t optional in Arkansas is worker’s compensation insurance for businesses with three or more employees or those businesses operating in certain industries such as construction.

Step 9: Set up a Bookkeeping System

The next step in starting a business is to get a bookkeeping system in place. Not staying on top of accounting for a small business can have serious implications. Without an accurate and comprehensive financial record, it can be difficult to know how much money is being earned and spent, as well as what the current financial status of the business is. This can lead to inaccurate forecasting or budgeting, in addition to improper filing of taxes.

Common Questions When Starting A Business In Arkansas

Is Arkansas a good place to start a business?

Arkansas is an attractive place to start a business due to its unique combination of low costs, business-friendly policies, a skilled workforce, and strategic location. A few of the top reasons include:

Low cost of living and business expenses: Arkansas consistently ranks among the states with the lowest cost of living in the U.S., which can translate into lower business expenses, such as rent and employee salaries.

Access to resources and support: Arkansas is home to numerous organizations and programs that offer support to entrepreneurs and startups.

Skilled workforce: Arkansas boasts a skilled and diverse workforce, with a strong focus on industries like agriculture, manufacturing, and technology. The state’s educational institutions, like the University of Arkansas, also contribute to the development of a talented labor pool for businesses to draw from.

Strategic location and infrastructure: Arkansas is centrally located in the United States, making it an ideal spot for businesses that require access to major markets or to minimize shipping costs. The state has a well-developed transportation infrastructure, including highways, railways, airports, and navigable waterways, which can facilitate the movement of goods and services.

What are the steps to starting an LLC in Arkansas?

There are three main steps to starting an LLC in Arkansas. These include:

1. Making sure the LLC name is available
2. Appointing an Arkansas Registered Agent
3. Filing the Certificate of Organization

To learn how to set up an LLC, check out our guide to starting an LLC in Arkansas.

How much does it cost to start an LLC in Arkansas?

The cost to file the Certificate of Organization with the Arkansas Secretary of State, which is the paperwork to start an LLC in Arkansas, is $45.

Does a sole proprietor need a business license in Arkansas?

Yes, in Arkansas, a sole proprietor may need a business license depending on the type of business they are running and where it’s located.

The state of Arkansas doesn’t issue a general business license, but your business might require specific licenses or permits based on the industry. For example, if you’re in food service, healthcare, or childcare, you’ll need specific licenses to operate legally.

Additionally, city or county governments might require a business license or permit to do business within their jurisdiction.

Arkansas Small Business Resources

There are 268,244 small businesses in Arkansas, which is 99.3% of all businesses in the state,¹ and almost 500,000 people are employed by these small businesses.² Because of the economic impact of small businesses on the state, there are a number of small business resources to help Arkansas businesses start and grow. From the Arkansas Small Business and Technology Development Center (ASBTDC), Woman’s Business Center, SCORE, and many others, there are a variety of free and low-cost services to help launch your business.

See the list of Arkansas business assistance programs