Arkansas LLC (6-Step Guide) – How to Form an LLC in Arkansas

Start an Arkansas LLC With The Help of Professionals

Starting a business or changing your existing business structure can be complex, and there are many things to consider. Two of the largest questions you may have to consider are what your business structure will be and where you will start your business. An Arkansas LLC may just be the best answer to both of these questions.

An Arkansas LLC offers protection for your personal assets, potentially lower taxes, and the state holds well below-average costs of doing business. An Arkansas LLC has a lot to offer, so let’s take a closer look at this structure and then see how you can form an Arkansas LLC in only 6 easy steps.

Why Would You Want an LLC in Arkansas?

As we said, this structure has a lot to offer, and here are some of the biggest reasons why you would want an Arkansas LLC.

  • Liability Protection: Having an LLC will generally protect your personal assets from being taken to satisfy any business debts. This is true in cases of business failure as well as lawsuits.
  • Fewer Taxes: An LLC will give your business protection from liability without the double taxation that comes with forming a corporation. Corporations pay taxes at the entity level, and then when shareholders receive dividends, they pay taxes on the profits as well. So, the money is being taxed twice. With an LLC, profits are only taxed once on the members’ individual tax returns.
  • Simple Maintenance: With an Arkansas LLC, you will not be required to have meetings, take minutes, or form a board of directors. Generally, the largest chore you will have to do is file an Annual Report with the state.
  • You live in Arkansas. It always makes sense to form an LLC in that state in which you are currently living.

Quick Arkansas LLC Pros & Cons

Now that we have seen why you might want an Arkansas LLC, it is important to consider the pros and cons of such a big decision. Since, like any entrepreneur, you are likely in a hurry, we will make this quick and consider the most significant.

Pros

The biggest pros of an Arkansas LLC include:

  • The Arkansas LLC Act: The Arkansas LLC act was established to allow LLCs a lot of freedom in their contracts and to allow a lot of enforceability of operating agreements. This Act also allows the members of an LLC the freedom to establish both voting and non-voting classes of membership. Additionally, members can customize capital contributions and shares of profits and losses.
  • Privacy: The Arkansas LLC Act does not make members include their names when filing; however, members’ names are required on annual reports. But, these remain confidential. In Arkansas, a person forming an LLC can have another person, a legal entity, or most any type of business file their Certificate of Organization since the definition of person in the LLC Act is not confined to a natural person.
  • Avoiding Unwanted Business Partners: The Arkansas LLC Act gives members of LLCs a lot of ability to keep control of their LLC. Members can specify in their LLC agreement that no members are permitted to assign their membership interests. Although, even if they do not choose to do this when a member assigns their rights, the LLC is not dissolved, and the assignee does not become a member or have the right to participate in management. They only receive the distributions the member would have received. To become a member, the non-assigning members would all need to agree to the assignee becoming a member.
  • Creditors Receive Only Passive Rights: According to the Arkansas LLC Act, a judgment creditor that gets a charging order against the membership interest of a member will receive the rights of an assignee. This means the creditor will get the distributions the member would have received. The creditor will not have the right to participate in management.

Additionally, unless specified otherwise in an LLC agreement or agreed upon in writing by all LLC members, a person will no longer be a member of an LLC if they willingly make an assignment for creditors, file for bankruptcy or are judged insolvent or bankrupt, or chooses not to contest the appointment of certain categories of individuals over their property.

  • Registered Agent: The Act states that all LLCs in Arkansas must have a registered agent. LLCs may use a commercial registered agent service for their registered agent.
  • Foreign LLCs: The Arkansas LLC Act assigns penalties if a foreign LLC fails to register with the state before doing business. A foreign LLC is an LLC that was formed in a state other than Arkansas.

In Arkansas, a foreign LLC may defend itself in state court even if it is not registered to do business in Arkansas. However, a foreign LLC that is not registered with the state may not be the plaintiff in a case in an Arkansas state court. Additionally, if a foreign LLC starts to do business before registering with the state, once the LLC does register with the state, it will have to pay any taxes or fees that it would have paid had it registered before beginning to do business. Arkansas also charges $5000 per year as a civil penalty for each year the foreign LLC did business in Arkansas without being registered to do so.

Cons

Like with any major decision, there are some cons to consider, which include:

  • Above Average Crime: Crime in Arkansas is above the national average, and though this may be an opportunity for some businesses, it is certainly a disadvantage for most.
  • Rural Population: Arkansas is a heavily rural state. This most definitely is not a disadvantage to some businesses, but it may be to others and is definitely something to consider.

How to Form Your Arkansas LLC in Six Easy Steps

Now that we have covered the reasons you may want an Arkansas LLC, as well as the cons, let’s get down to the nitty-gritty. How can you form an Arkansas LLC? Luckily it is pretty easy, and you can do it in only six steps, so let’s get started!

Step 1. Choose a Name for your LLC

Choose-a-Right-Business-Name

The first thing you need to do when forming your LLC is to choose a name. You’ll want to choose a name that is catchy to attract attention but also gives people an idea of what your business does. A good name can help your business attract more customers, which can help you to make more money.

Before you decide on a name, though, there are certain rules that Arkansas has for business names, such as:

  • The name of your business must include a designator letting people know that it is a limited liability company, such as “Limited Liability Company,” “L.L.C.,” or “LLC.”
  • The name you choose cannot contain words, such as incorporated, corporation,  or other types of designators that might confuse people as to what type of business you have.
  • You cannot use words in your business name such as lawyer, university, or bank that would require you to have certain licenses or registrations and to be approved.
  • Your business name can also not be so similar to another business that people might confuse your business with that business.

Since Arkansas requires that a business’s name be unique, you will need to do a search to make sure your chosen name isn’t already taken. You can do your search on the Arkansas Business Entity Name Search. If the name you have chosen appears not to be taken, it should be safe to use. However, this is not guaranteed. You will not know for sure until you have filed your Certificate of Organization and it has been approved.

If the name you want appears not to be taken, and you are not ready to file yet, you may want to reserve the name until you are ready to file. You can do this by filling out an Application for Reservation of LLC Name. You can do this online at the Arkansas Secretary of State website, which will cost $22.50.

You can also file by mail by filling out Form RN-06 and sending it to:

Arkansas Secretary of State
1401 W. Capitol Ave.
Suite 250
Little Rock, AR 72201

You will need to include a check or money order for $25.

Before making a final decision on your business name, you may want to make sure that the name of your business is available as the URL. You will probably want to start a website, and it is good if you can get a URL that is the same as your business name.  You should also check and see if a good social media handle is available for the business name you want. If you can’t find these things, you may want to consider a different name for your business.

You can also file for a doing business as (DBA) name on the Arkansas Secretary of State website. A DBA is a fictitious name you can use for your business instead of your legal business name. This is also known as a trade name and can be useful for LLCs that wish to use a name other than their legal name. If you choose to file online, this will cost $22.50.

You can also file by mail by filling out Form DN-18b and mailing it to:

Arkansas Secretary of State
1401 W. Capitol Ave.
Suite 250
Little Rock, AR 72201

It will cost $25 to file.


Step 2. Choose a Registered Agent

Appoint-Registered-Agent

Arkansas requires all LLCs to have a registered agent to accept service of process and other important documents from the state. You can choose to be your own registered agent or pick a relative or friend. You can also choose to hire a registered agent service. There are certain requirements for the registered agent you choose, such as:

  • The registered agent must have a physical street address in Arkansas. A post office box is not acceptable.
  • The registered agent must be available during all regular business hours.
  • You must list your registered agent on your Certificate of Organization when you file it.

Should I Hire a Registered Agent Service?

It’s common for business owners to consider whether they should hire a registered agent service or be their own registered agent. It can be tempting to save money by being your own registered agent, but there are a number of advantages to hiring a registered agent service.

  • Privacy: If you choose to be your own registered agent, your name and address will become part of the public record. This could easily result in a number of unwanted sales calls as well as a lot of junk mail. But if you choose a registered agent service, the address of the registered agent service will be on the public record, thus keeping your address private.
  • Business Hours: If you choose to be your own registered agent, you need to be at the listed address during all regular business hours. This may not be a problem for some businesses; however, a number of businesses do not operate during regular business hours, such as a number of bars or restaurants. So, if your business does not operate during regular business hours, this could make it difficult for you to be available during normal business hours. But with a registered agent service, they will be available during all regular business hours, so you don’t have to be.
  • Business Expansion: If you are thinking of expanding your business outside of the state at some point, you will need to have a registered agent in each state your business is located in. You won’t be able to be available in more than one state, but many registered agent services have an office in every state. So it could be easier to hire a registered agent service now rather than having to change your registered agent at a later date.

Step 3. File Your Arkansas LLC’s Certificate of Organization

Certificate-of-Organization-1

Your next step will be to file the Certificate of Organization for your LLC. This is the step that will actually form your Arkansas LLC. You will file these documents with the Arkansas Secretary of State. Filing these documents will cost $50.

You can file your Certificate of Organization online or by mail. However, the quickest and easiest way to file these documents is online. You can do this at the Arkansas Secretary of State’s website. Just choose the option for a domestic LLC.

If you would prefer to file by mail, fill out Form LL-01, which is a Certificate of Organization for Limited Liability Company. You can then mail this form to:

Arkansas Secretary of State
1401 W. Capital Ave.
Suite 250
Little Rock, AR 72201

Be sure to include a check or money order for $50.


4. Draft Your Operating Agreement

Operating-Agreement-02

Arkansas does not require your LLC to have an operating agreement unless you are applying for an Arkansas Sales Tax License, in which case you will need to include the operating agreement with your application. However, every LLC should have one. An operating agreement is a legal document that details your business’s structure along with the rights and responsibilities of its members. Having one can help avoid arguments between members.

Although there are no specific rules for what must be included in an operating agreement, there are some items that are typically included in an operating agreement that we will discuss.

  • Percentage of Ownership: It is a good idea to list all of the members of the LLC and the percentage of ownership each member has. The percentage of ownership is usually based on what share of the initial investment in the company the member contributed. However, this is not required. If the members agree to use another basis for determining the percentage of ownership, they can do this. However, it is important to include the method being used in the operating agreement.
  • Management: You should include what form of management your LLC will have in your operating agreement. Your LLC could be member-managed or manager-managed. Most LLCs are member-managed. In this form of management, all of the members of the LLC manage the day-to-day business of the LLC and make the decisions for the LLC. You could also choose to have a manager-managed LLC. This form of management is more common in larger LLCs than smaller LLCs. With this form of management, the members of the LLC choose a manager or managers to manage the business for them. This manager will handle the daily business of the LLC and make decisions for the LLC. However, the members of the LLC can reserve some decisions for themselves in the operating agreement.
  • Profits and Losses: It is a good idea to include how profits and losses will be distributed in the operating agreement to avoid arguments. Profits and losses are usually allocated on the basis of a member’s percentage of ownership. However, members can choose to use a different method. If a different method is chosen, it is important to include this in the operating agreement. 
  • Voting: Another important item to include in your operating agreement is how voting will be handled for your LLC. This is especially important for LLCs with several members. Typically, votes are distributed on the basis of the percentage of ownership. But the members of your LLC can choose a different method. Just be sure to include this method in your operating agreement.
  • Changes in Membership: You may find some time that one of the members of your LLC wants to withdraw. Therefore, it is best to prepare for this ahead of time. You should include in your operating agreement whether or not the member will be required to offer to sell their shares of the LLC to other members before attempting to sell them to any outsiders. You could also place restrictions on whom they can sell their shares to.
  • Dissolution: You may eventually decide to dissolve your LLC. So, it’s best to include in your operating agreement what will happen if you do decide to end your LLC. You should include how any assets that are left over after your LLC’s debts are paid will be distributed. It’s also best to include whether any of the members of the LLC will be able to continue the business on their own after the LLC is ended.

Step 5. Obtain an EIN (Employer Identification Number) for Your Arkansas LLC

Filing-for-an-EIN-1

Once you form your LLC and draft your operating agreement, it’s time to get an Employer Identification Number (EIN). This number is a nine-digit number, a lot like a Social Security Number. It is often known as a Federal Tax Identification Number, and the IRS will use this number to identify your business for tax purposes.

You are required to obtain one of these numbers if your LLC has two or more members or if you intend to hire employees. There are other good reasons to get one of these numbers as well. It will help to establish your LLC as its own separate entity, and many banks require an EIN for opening a business bank account.

It is easy to get an EIN, and it’s free. You can do this online at the I.R.S. website. You can also file by mail or by fax by completing Form SS-4 and sending it to:

Internal Revenue Service
Attn:  E.I.N. Operation
Cincinnati, OH 45999

You could also fax the form to (855) 641-6935.

Additionally, international applicants have the option of filing for an E.I.N. by phone. They can call 267-941-1099 from 6 am to 11 pm Eastern Time.


Step 6: Open a Business Bank Account

Open-a-Business-Bank-Account

After you’re finished forming your LLC and you obtain an EIN, it’s a good time to open a business bank account. You’re not required to do this, but it’s still an important part of setting up your business. There are a number of reasons for this, and we will discuss some of these.

  • Separating Your Business and Personal Finances:  A business bank account can help you keep your business and personal finances separate, which is essential for establishing your LLC as its own separate entity. If you do mix your personal and business finances and get sued, it’s possible a court could decide to remove your business’s limited liability, which would put your personal assets at risk.
  • Forming a Relationship With a Bank: Opening up a business bank account can give you a chance to form a relationship with a bank. This could be helpful if you ever want to obtain a loan or a line of credit for your LLC.
  • Professional Appearance: If you use your personal bank account for your business, you not only risk losing your limited liability, it can make your business appear less professional. Having your customers write their checks out to your business bank account will appear a lot more professional than having them write out their checks to you. It will also likely help to increase your supplier’s trust in your business when you write out your checks to them from your business bank account rather than your personal bank account.
  • Accept Credit Cards: If you start a business bank account, you should be able to accept credit cards. This can help the amount of business you get since many people today use credit cards instead of checks or cash. In fact, not accepting credit cards could limit your business.

Required Documents

Opening a business bank account will take a few documents. Although which documents it will take can vary from bank to bank. These documents are likely to be ones that you will have on hand, so it should not be difficult to gather them. We will list a few of the documents you may need below.

  • Identification: You are going to need some form of identification to prove to the bank you are whom you say you are before being allowed to open a business bank account. The required identification is likely to be some sort of government ID such as a driver’s license, state ID, or passport. Remember, you will probably need to be either a member or a manager of the LLC in order to be allowed to open a business bank account for the LLC.
  • Employer Identification Number (EIN):  You will probably need an Employer Identification Number to open a business bank account. If you have a single-member LLC, the bank may accept a Social Security Number, but this is not always the case. So, to be safe, it is best to have an Employer Identification Number.
  • Business License: The bank will likely want a copy of your business license if your area requires one. This will show the bank that you are legally allowed to operate in your area. Therefore before trying to open a business bank account, you may want to check if you are required to have a business permit to operate.
  • Doing Business As (DBA) Certificate:  If your business operates under a DBA or doing business as name, the bank will likely want to see this certificate showing that you are allowed to operate under this name.
  • Certificate of Organization: These documents will show the bank that you are legally allowed to operate in this state, who the owners of the LLC are, along with a number of other details about your business.

Growing & Maintaining Your Arkansas LLC

Now you are done forming your Arkansas LLC, so let’s take a look at how you can get ahead on growing and maintaining your new business.

1. Create a Business Website

Start-a-Business-Website

Most businesses today will want a business website. Many people today search online before they even start shopping, and you want to make sure potential customers are able to find you. After all, if they don’t find your business, they will find another one.

You shouldn’t have any trouble creating a business website. There are many tools available online to help you to do this that are quite easy to use. You should be able to get your website up and running in no time.


2. Business Licenses and Permits in Arkansas

Obtain-the-Necessary-Licenses-and-Permits

One thing you want to do after you form your LLC but before you actually start operating your business is to make sure you have all the necessary licenses and permits to operate in Arkansas.

One permit many businesses will need to operate is the Arkansas State Tax Permit. You will need this permit if you offer taxable services or sell any personal property. You can apply for this permit on the Arkansas Secretary of State’s website.

You may need a variety of state, city, or county permits to operate your business. You should be able to find the information you need on the websites of the state, city, or county. However, if necessary, you can make some calls. You will want to make sure you have any of these permits or licenses you need to avoid any fines or penalties.


3. Business Insurance

Get-Business-Insurance

It’s important to make sure that your LLC has the business insurance it needs. You should make sure your business has any required insurance, but you should also be sure to obtain insurance to help protect your business. The insurance you need will vary depending on the industry you’re in, but we will discuss a few of the common types of business insurance policies.

  • General Liability Insurance: This insurance will help protect your business should you ever get sued. Your personal assets are generally protected when you have an LLC. However, having general liability insurance can protect your business assets. This is important since you never know if someone is going to fall or get hurt on your business’s premises. Also, if you are renting an office or warehouse space, you may be required to obtain this type of insurance.
  • Workers’ Compensation Insurance: Arkansas will require you to have this insurance if you hire any employees. This insurance will protect these employees in cases of injury or illness on the job.
  • Professional Liability Insurance: This insurance is for those who are offering professional services, such as a doctor, lawyer, architect, or similar services, which typically will require a license. It will protect these businesses in cases of negligence or wrongdoing.

Form an Arkansas LLC With Professional Help Today

We know you’re busy so if you need some help forming your Arkansas LLC, here are some of the best businesses that can help you make it easy.

#1 – Start an LLC in Arkansas With ZenBusiness

ZenBusiness is an excellent LLC formation service that has very reasonable prices. They also get good customer reviews indicating that most people are quite happy with their service. ZenBusiness offers 25% off of their registered agent service with any of their packages. In addition to this, they include a free operating agreement, which can be quite useful since all LLCs should have an operating agreement. They will also file your annual report for you, which can save you time and help you stay in good standing with the state.

$49

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#2 – Start an LLC in Arkansas With Incfile

Incfile is an experienced LLC formation service that is particularly good for those who are trying to form an LLC on a tight budget. Unlike most LLC formation services, Incfile offers a free option. All you have to do is pay the state fee. They also have some good features with their packages, including their free package. Incfile includes a year of free registered agent service with all of their packages. They also provide lifetime company compliance alerts which will inform you of any upcoming state filing deadlines. This service will help you stay in good standing with the state.

$0+State Fees

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Final Thoughts

An Arkansas LLC is a great way to give your business a head start. With reduced taxes and a good economic climate, you are in great shape for your business to thrive. Plus, if things don’t turn out as expected, your personal property is protected. So, there is no reason not to get started forming your Arkansas LLC.


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About the Author
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Founder & author

Ian Broderick is an avid author and owner of LLCGuys.com. He's been involved with the LLC formation field for over 4 years. On top of that, he has worked in several well-known LLC formation service providers. Now he decided to share his knowledge and advice with everybody. Since there are a lot of questions and concerns surrounding this field - his aim is to make LLCGuys a top-notch information provider in regards to LLC creation, service reviews and etc..

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