How to Form an LLC in Arkansas: Steps For New Business Owners

When you decide to start a new LLC in Arkansas there will be a set list of guidelines you will need to follow to make sure you are setting up your LLC correctly and in good standing. It is helpful for new business owners to have a checklist of these requirements so there are no missed steps during the process of creating a new LLC. For Arkansas LLCs, this checklist will include:

1. Choosing a business name - Your business name will be required to be unique and distinguishable from other active businesses in the state. Also, you will need to include a designator in the name such as "LLC" or "Limited Liability Company".

2. Appoint a registered agent - All LLCs in Arkansas will be required to have an active registered agent for their business to receive service of process and any important notices sent to the business by the state.

3. Submit your Certificate of Organization - This document will officially form your LLC with the state of Arkansas and will include your business information, registered agent information, and ownership information.

4. Draft an operating agreement - Operating agreements will detail the roles and responsibilities of business owners and members, as well as outlining processes for how the business will run and operate.

5. Obtain an EIN - Your EIN will be issued to you by the IRS and will act as a social security number for your business. It will be used for filing taxes, hiring employees, and opening a business bank account.

6. Open a business bank account - A dedicated business bank account will be used to create a clear separation between personal and business finances as well as strengthening the liability protection enjoyed by LLC owners in Arkansas.

7. Maintain ongoing good standing - Keeping your business in good standing by filing submitting franchise tax reports and acquiring business licenses will be necessary to continue to legally operate in the state of Arkansas.

This guide will cover these steps and give new business owners the tips and information they need to complete them correctly. You can choose to either complete this on your own or you can hire a service like Firstep to do this for you. Regardless of what you choose, it will be helpful to use this guide to make sure all the requirements are met that have been set by the state of Arkansas.

Step 1: Choosing a Business Name

The first step of forming a new LLC in Arkansas will be to choose a business name. Your business name will need to be unique and distinguishable from other active businesses in the state, and also include a designator such as "LLC" or "Limited Liability Company". It can be very helpful while brainstorming business names to use the business entity search tool to see what names are available and what names are already taken. For Arkansas businesses, if they are administratively dissolved the name will be held until it is placed into a forfeited status which typically takes around 5 years.

Your business name is so important because it will be the first thing potential customers see when they interact with your business, and it helps to have a name that is related to your product or service offerings. This will help for customers to remember your business easier and be more likely to become repeat customers. A catchy name that is related to your offerings can make a big difference rather than having a generic name that is easy for customers to forget about.

You can file a name reservation in Arkansas for $25 that will reserve your chosen business name for up to 120 days if you need some more time before submitting your Certificate of Organization. This does not register your business, as you will still need to file the Certificate of Organization and officially form your LLC.

Step 2: Appoint a Registered Agent

All LLCs that are formed in Arkansas will be required to have an active registered agent for their business. A registered agent will be responsible for receiving any service of process or important notices that are sent to your business. This essentially means anything like a notice of a lawsuit or updated filing requirements set by the Secretary of State will be sent to your registered agent and they are responsible for receiving these notices and getting them to you in a timely manner. You can appoint anyone as your registered agent as long as they meet the following requirements:

• Be at least 18 years old

• Have an active physical address in the state of Arkansas (PO boxes do not count)

• Be available during regular business hours (Monday-Friday 9am-5pm)

If a person is able to meet these requirements then you can have them as your registered agent. Your agent can be yourself, a trusted friend or family member, or you can hire a registered agent service to handle this role for your business. If you do choose to hire a service it can be helpful especially if you are a mobile business owner or have multiple locations as this will make it very difficult to be at your listed address during regular business hours. In order to keep your business in good standing, you will need to maintain active and updated registered agent information. If there are any changes to this information you will need to file a notice of change of registered agent for your LLC to avoid any penalties to your business.

Step 3: Submit Your Certificate of Organization

Now that you have chosen your business name and have your registered agent in place, you are now ready to submit the Certificate of Organization to officially form your LLC in Arkansas. This form can be found by going to the Arkansas Secretary of State website and choosing to file a domestic LLC Certificate of Organization. This form will require the following information:

• Enter your chosen business name

• Provide the principal information including the first and last name, address, phone number, and email

• Enter the registered agent information

• Enter the organizer information

• Submit the information for who is submitting the Certificate of Organization

• Annual report contact information

• Choose the effective date of the LLC and provide a signature to authorize the filing

Once you have completed this form you will be taken to the payment page, where you will have to pay the $45 filing fee to submit your Certificate of Organization. The Secretary of State will take time to review your filing, typically around 7 business days. You are able to complete this process on your own, or you can have Firstep do this for you and send you the Certificate of Organization once it is approved.

Step 4: Draft an Operating Agreement

With your Certificate of Organization approved a highly suggested next step will be to draft an operating agreement. This document will outline the roles and responsibilities of the owners of your LLC, as well as detailing the processes for assigning voting rights, ownership percentages, and processes for how to handle major decision making within the LLC. These processes will include things like how members join or leave the business, how they contribute to the business, while also strengthening the liability protection that is granted to owners of an LLC.

Since this document is not filed with any state or government agency, it will mainly be used for internal operations. Although, it is important to save the operating agreement in a safe place to ensure you are able to access this whenever needed such as when you are opening a business bank account or dealing with outside vendors. Also, an operating agreement is not required for LLCs in Arkansas to be considered in good standing. However, this can help strengthen your liability protections and make dealing with internal disputes about the business much easier to manage when you have the processes for handling them in writing before any issues arise.

Step 5: Obtain an EIN

Along with drafting an operating agreement, you will need to get an EIN for your business as this will be used for many things relating to your new LLC. This will be issued to your business by the IRS and will act as a social security number for business. Your EIN will be used when filing taxes, hiring employees, and opening a business bank account. A good thing about an EIN will be that you do not need to renew this number, and it will not expire. Once you obtain an EIN, this number will be the same throughout the whole business's lifespan. However, if you do forget this number or lose the documentation for it, you will need to retrieve your EIN from the IRS which can sometimes be a lengthy process depending on how busy the IRS is at the time.

You can either choose to obtain your EIN on your own or you can have Firstep do this for you during the formation process. Either way, you will want to wait until your Certificate of Organization is approved to ensure that all the information you are entering into the IRS form is exactly as it appears on your formation documents. This will make sure that the EIN you are requesting will go to the correct business and there are no mistakes.

Once again, if you forget your EIN you can obtain this number from the IRS by submitting specific documents and going through the retrieval process. Similar to obtaining your initial EIN, you can either do this process on your own or you can have Firstep complete this for you. Regardless of what you choose to do, be aware that this will typically take much longer than getting your initial EIN. It is a smart choice to start this process early so you are able to get this back before tax season comes around or you need to start hiring employees.

Step 6: Opening a Business Bank Account

With your Certificate of Organization approved and all required documents obtained, you can now open a business bank account for your LLC. A dedicated business account will ensure you are maintaining a clear separation of personal and business finances, which is required to continue your liability protection that is offered to LLC owners. This liability protection, commonly referred to as the corporate veil, will provide a shield for your personal assets in case your LLC incurs any significant debts or faces any lawsuits. In this instance, debt collectors and courts will only be able to go after your business finances and not be able to touch your personal assets such as your home, savings, car, or home.

One of the major factors that goes into continuing the protection of the corporate veil will be keeping a clear separation between your business and personal assets and finances. Especially if you are using your personal account for both personal and business activities, it can become difficult to know exactly what each transaction is for. Having a dedicated bank account will allow you to easily track your business funds and know what you have available or if an outside vendor or partner has paid you. Avoiding this confusion and having a specific account only used for business purposes ensures you are keeping these protections in place and not putting your own personal assets at risk. The separation of personal and business assets, as well as making sure your LLC is not engaging in any illegal activities will continue the protections of the corporate veil and keep your assets safe.

A business bank account is also able to give your business added credibility as this will make it possible for vendors, partners, or customers to make payments out to your actual business instead of making them out to your personal account. This can be a factor when dealing with larger transactions and more professional managed businesses or sponsors that want to ensure they are dealing with a legitimate business.

Whether it is due to having a clear separation of your personal and business assets, the increased protections of your personal assets, easily being able to track your business funds, or the added credibility, all these factors are important benefits for setting up a dedicated business bank account. Making a business bank account is something that all new LLCs should try to do, especially as your business grows and starts to deal with larger amounts of money that might make it more difficult to track, or make taxes more difficult to file when these funds are mixed into your personal account.

Step 7: Maintain Ongoing Good Standing

After you have officially formed your LLC in Arkansas, you will need to keep your business in good standing to continue to operate legally in the state. This ongoing good standing will include the payment of the annual franchise tax as well as registering for any required business licenses.

Annual Franchise Tax Report

The filing for the annual franchise tax report will be due for Arkansas LLCs each year by May 1st. To file these reports, you will need basic business information such as the business file number, business name, federal tax identification number (EIN), principal office address, the tax contact, and primary business activities. You will be able to submit the annual franchise tax reports by going to the Arkansas Secretary of State website and selecting the option to file franchise taxes online. The total fee for the report each year will be $150, with a $26 late fee and $5 online processing fee. You can choose to either file these reports on your own or you can have Firstep take care of these each year to ensure you do not miss any reports and maintain your LLCs good standing.

Business Licenses

Depending on the industry your LLC is operating in, you may be required to register for specific business licenses to maintain your good standing. If you plan to sell goods or services you will need to register for a sales tax permit, and if your LLC is in an industry such as law, healthcare, insurance, or other similar specialized service industries you will need to register for local city or county licenses.

FAQs on Arkansas LLCs

Where do I go to file the Certificate of Organization for my LLC in Arkansas

You will need to go to the Arkansas Secretary of State website and choose to file the form titled Certificate of Organization for a domestic Limited Liability Company. You can file this online for a fee of $45 or a mail in paper version for a fee a $50.

Do Arkansas LLCs need to file annual reports

No, Arkansas LLCs are not required to file the traditional annual reports as most states require. However, they will need to submit annual franchise tax reports each year to remain in good standing. These can be filed through the Arkansas Secretary of State website and will cost $150 if filed on time.

Can I form an LLC in Arkansas if I don't live in the state

Yes, you can still form an Arkansas LLC even if you don't live in the state. However, you will need to maintain an active registered agent with a current physical address in Arkansas to be able to get your Certificate of Organization approved.

Are operating agreements a legal requirement for Arkansas LLCs

No, operating agreements are not legally required for LLCs in Arkansas. But, these documents are highly recommended as they can be very helpful to business owners by outlining the roles and responsibilities of owners and members to avoid confusion and internal disputes.