Arkansas is one of the best states to form business. The state is known for its great infrastructure and transport.
Additionally, the overall business environment is supported by a range of grants and incentive programs.
Some of the benefits of incorporating a large or small business in Arkansas include limited liability, selecting an S corporation status, and long life. The following step-by-step guide will show you how to start a corporation in Arkansas.
1. Select a name for your corporation
Deciding on a name for your Arkansas Corporation is one of the initial steps in the process of incorporating a new business in the state. However, the state does have its own naming rules that must be adhered to.
General corporate name guidelines
Checking the availability of the proposed corporation name is also highly recommended. To ensure that another business entity in the state does not take the proposed name, conduct a name search on the Arkansas Secretary of State website.
You may also choose to reserve a corporate name for approximately 120 days by submitting the relevant Name Reservation Form to the state’s office.
Your Arkansas corporation name must meet the following requirements:
- It must be significantly different from other business entities named in the state
- It must include the words incorporated, corporation, company, or an abbreviation of these words
Trademarking a business name ensures that customers are never confused about who they are actually doing business with. Additionally, it can protect the intellectual property of your business name and brand.
The first step in trademarking your corporation name in Arkansas is conducting a name availability search. Once you determine that the name hasn’t been trademarked by any other business entity in the state, you may go ahead and trademark your business name with the Secretary of State.
Your Arkansas business entity name is its legal name. This is a name the state uses to identify with your business, and it’s also the name that must be included in all of your company’s legal or formation documents.
DBA (Doing-business-as) name
A DBA name is also known as a “doing business as” name. This is suggested or recommended if you are going to be conducting business under any other name aside from your company’s entity name.
Arkansas State Secretary of State
Business Services Division
1401 W. Capitol Avenue, Suite 250
Little Rock, AR 72201
2. Nominate a registered agent
In order to legally form your Arkansas corporation, you need to choose a registered agent for your business. The registered agent must be identified and act as a central point of contact with the state.
The primary role of registered agents is to receive tax notices, summons, legal documents, service of process, subpoenas, etc., on your business’s behalf. The registered agent that you choose has to be a resident of Arkansas
You may act as your own registered agent in the state of Arkansas; however, please note that you need to maintain availability during normal business hours. PO Box addresses are also not allowed, so you must have a physical street address in the state.
Additionally, registered agents’ names and addresses do become public records, and the loss of privacy comes with it. Therefore, it’s advisable that you designate another individual as your corporation’s registered agent if you value your privacy.
3. Appoint initial directors at the organizational meeting
During the organization’s first board meeting, a few tasks will need to be completed. However, the essential one is nominating the initial directors. Thereafter, the board of directors or initial directors will elect the corporate officers.
The officers need to fulfill the president, vice president, treasurer, and secretary roles. Additionally, during this meeting, the corporate bylaws will need to be reviewed and approved, a bank account will need to be chosen, the corporation status will need to be decided on, and shares of stock will need to be issued.
Additionally, it’s absolutely important that meeting minutes are recorded as it is necessary to protect the shareholders from court actions and lawsuits. Therefore, the purpose of the meeting minutes is to provide a record of all decisions and actions taken during the board’s first meeting.
Although they do not need to be filed with the state, they still need to be stored as part of your company’s corporate records.
4. File Articles of Incorporation
Filing the Articles of Incorporation with the Arkansas Secretary of State is the next step in officially creating your corporation. The Articles of Incorporation, also known as the Certificate of Incorporation, need to contain some pertinent information regarding your corporation, such as:
- A description of the business’s purpose
- The titles and names of initial directors and officers
- Names and addresses of the corporation’s incorporator
- The physical business address and the name of the corporation’s registered agent
- Information on the shares of the company. This includes the number of authorized shares, class of shares, and series of shares, as well as a par value of those shares
- The corporation name must include or contain the word Corporation, Inc., Limited or Company or an abbreviation of any of these words
Arkansas Secretary of State
1401 W. Capitol, Suite 250
Little Rock, AR 72201
5. Create and approve bylaws
Every Arkansas corporation will need to create and approve bylaws. The bylaws are basically a governing policy that determines how your organization is going to be operated.
The bylaws are basically a Constitution for your business. Therefore, it makes the rules clear to everyone involved in the business.
The bylaws need to include some pertinent information like:
- The process of negotiating contracts
- The date of the annual shareholder meeting
- The process of adding or amending bylaws in future
- The process of handling company disputes
- How records will be stored and managed
- The process of holding annual meetings, voting procedures as well as electing directors and officers
- The process of running the organization, including the tasks and responsibilities of officers and directors
The bylaws do not need to be filed with the state of Arkansas; however, they are important governing policies that need to be stored in a safe place for reference as and when needed.
6. Select a share structure
Your Arkansas corporation can exchange shares of stock in exchange for money or services. In other words, your corporation may issue stock. However, the number of shares of stock issued to stock owners cannot be more than the number of authorized shares that you’ve listed in your company’s Articles of Incorporation. Additionally, your company’s bylaws can include the shares of stock details.
7. Obtain an EIN
An Employer Identification Number is also known as a Federal Employer Identification Number. It is a unique nine-digit number that serves tax identification purposes. This unique nine-digit code is assigned to all types of businesses by the Internal Revenue Service.
Additionally, the IRS uses an EIN to identify business entities in any state. You can think of this as a Social Security number for your company. The EIN is useful in several instances, such as hiring employees, opening a bank account for your corporation, tax purposes like submitting tax returns, and registering for business licenses and permits.
There is no cost for obtaining an EIN when you register through the Internal Revenue Service. Simply go on to the IRS website and use the EIN Online Assistant to get your EIN immediately. Additionally, you may download the IRS Form SS-4, complete it, and mail it to the following address:
Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999
8. File Arkansas state taxes
When it comes to corporate taxes, Arkansas corporations need to pay both franchise tax as well as the graduated corporate income tax.
- Corporation franchise tax: Franchise tax is applicable to the standard types of stock corporations as well as LLCs. The tax rate is 0.3% of the company’s outstanding stock value with a minimum tax of $150.
- Graduated corporate income tax: Additionally, you may be liable for corporate income tax, which is a graduated tax on net income. The higher the income, the higher the tax rate.
- Sales tax: If you plan on selling physical products or offering certain types of services, then you need to collect sales tax. The sales tax then needs to be paid to the Arkansas Department of Revenue. The sales tax is normally collected at the time of sale.
- Income tax: If you’re a corporation owner and receive an income from your company, you need to pay income tax. This is especially so if the income flows through your personal tax return.
9. Arkansas business licenses and permits
You need to register for certain licenses and permits depending on the purpose of your business as well as its location. Some of the most common business licenses and permits include:
- Professional or occupational license: While the occupational licenses vary in the state of Arkansas, some of the occupations that will need to obtain a professional license include barbers, salons, childcare providers as well as athletic trainers, and so on.
- Environmental license: The state of Arkansas does also have some environmental permits that your business will need to apply for if it produces waste or pollutants. For more information on this, refer to the Arkansas Department of Environmental Quality.
- Sellers permit: You also need to obtain a sales tax permit or seller’s permit if you plan on selling products and offering certain services in the state.
Refer to the Arkansas Professional Licensing page for detailed information on licenses and permits to make your business compliant.
10. Annual report requirements in Arkansas
All business entities in the state of Arkansas must submit an annual report. Annual reports are required by the 1st of May each year. Submit the annual report on the due date online to the Arkansas Secretary of State.
11. Costs of starting a corporation in Arkansas
The filing fees below apply to all Arkansas corporations:
- DBA name: $15 – $25
- Articles of Incorporation: $45
- Annual report: $150 – $300
- Arkansas Certificate of Good Standing: $25 + $3 processing fee for online applications
Next steps after forming a corporation
You’ve recently started your corporation. However, it is only the beginning, and now you’ve got to maintain your corporate status to remain in good standing.
Here are some helpful tips to follow throughout the year.
Open a business bank account
One of the first things you’ll want to do after forming your Arkansas corporation is set up a business bank account. Your corporation needs its own bank account as well as its own name. Additionally, unless you separate your personal funds from your business funds and expenses, you will never fully gain the benefits of incorporation. Separating business and personal expenses also protects you from personal liability and make your business a separate legal entity.
Pay for your shares
Each shareholder must pay for their shares by making deposits into the business bank account once the account is set up. The shareholders normally pay a nominal amount that is listed in the minute book documents for the new corporation.
In order to start an Arkansas corporation with no money, you should start with what you have. It’s also important that you take into account who you know and only invest what you can afford to lose. Ultimately, the best way to start a business with no money is to experiment and adapt.
An LLC or limited liability company is a separate business entity created under state law. It offers a lot of flexibility for business owners, including liability protection or protection of personal assets. A sole proprietorship is an unincorporated business that only has one owner. Ultimately, it is the simplest and easiest type of business to form.
A professional corporation is classified as a personal service corporation. The main advantage of professional corporations is that they include transferability of ownership and various tax benefits.
Stock certificates are basically paper documents issued to shareholders by companies as proof that they own shares of stock. The stock certificate includes pertinent information such as the date of purchase, stock owner’s name, the type of stock owned, the number of shares owned, and the signature of the representative that is authorized to issue the certificate.
The biggest difference between C and S corporations is Taxes. This is because the C corporation is the default corporation structure under Internal Revenue Service rules, while, the S corporation has elected the special tax status or S corporation status with the IRS. Therefore, the S corporation does enjoy more tax advantages than the C corp.