How to Form an LLC in Arkansas [Step-by-Step]
An Arkansas LLC will give you limited liability protection that is like that of a corporation. You will also benefit from flow-through taxation, which ensures that there is no double taxation.
Here is a quick step-by-step overview of how to start your own Arkansas LLC:
- Pick an appropriate Business Name for your LLC;
- Nominate a Registered Agent;
- File the Articles of Organization with the Secretary of State;
- As an option you can make an Operating Agreement;
- Get an EIN ID from the IRS;
- Remember to send annual reports with a $150 fee.
Choose a Name for your LLC
Your Arkansas LLC will be more profitable if its name makes it easy for customers to find you. However, marketing is not the only consideration and by law, your LLC's name cannot be like that of another company.
For example, Gerry's Ice Cream LLC and Gerrys Ice Cream Limited are regarded as the same company because punctuation and the identifier that is used in each name will not make a difference.
If the Secretary of State thinks that your proposed name is too close to that of an existing company, they will not approve your filing.
Arkansas Business Name Search
You can do an Arkansas LLC name search on the Secretary of State's website to see if your name is unique and whether it is available for registration.
You should also avoid using words like bank or attorney since these are restricted. Ensure that you include LLC or another term, like limited liability company, in your name, to indicate the structure of your business.
Nominate a Registered Agent
You must nominate an individual or business to act as your registered agent. Your Arkansas LLC must have a registered agent by law.
This is so that if you are sued, they can receive legal papers on your behalf. In addition to the notice of lawsuits, they will receive correspondence from the Secretary of State, tax documents, and other official government mail related to your LLC.
Your registered agent must be a resident of Arkansas or have their principal place of business in the state.
You may elect any individual you choose, who is willing to sign a document stating that they will act in that capacity.
You can act as your registered agent and any other member of the LLC can also send and receive documents in this way once they are officially appointed.
File the Articles of Organization
Your Arkansas LLC will be officially formed when you file your Articles of Organization. You can file online by completing form LL-01 - Articles of Organization on the Secretary of State's website. You can also mail in your Articles of Organization or apply in person.
You will need to provide information such as the name of your LLC, the name of your registered agent and whether a member or an external manager will manage your company.
If you will be the one managing your company, you will need to indicate that your LLC will be owner-managed.
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When filing the Articles of Organization you will have to pay a $50 fee which is non-refundable and must be paid to the Secretary of State of Arkansas.
Consider Making an Operating Agreement
Your Arkansas LLC can benefit significantly when you create an operating agreement. While this is not a requirement under the law, it serves as a guide for you and all other members of your LLC.
It tells every stakeholder how your company will be run and what the rights of each member are. Your operating agreement describes the responsibilities that each member has, so when disputes arise because a member does not understand their role, you can refer to the operating agreement.
The operating agreement clearly states who the owners of the LLC are and what the share allocation is among the members. It also tells you when members may sell or transfer their shares.
This document also has another important role because by showing that the company operates as a separate entity, it reinforces the fact that it is an LLC in name and in the way it functions daily.
Every member must sign your operating agreement and they should all understand it fully before they sign.
Apply for an Employer Identification Number (EIN)
If you have several members in your LLC or plan to hire employees, you will require an EIN. Your EIN or Employer Identification Number is obtained from the IRS.
You can get it via the IRS website and there will not be any fees.
Your EIN is like an SSN, but it applies to businesses. It helps the IRS to keep track of the tax payments that you make, such as Social Security. If you pay business taxes in the state, your EIN will also be used for this purpose.
Your EIN is needed when you apply for a business bank account.
Business bank accounts offer certain protections and help you to ensure that your business assets and personal assets are kept separate.
Annual Franchise Tax Reports
You will not have to file the annual report that LLCs in some states must file each year. However, your Arkansas LLC must file annual franchise tax reports.
Each LLC in Arkansas must pay a fee of $150 every year to be able to do business in the state. You must file your tax report every year, regardless of whether you have done any business or made an income. Filing your tax report keeps your LLC in good standing with the state.
You are required to give the address of your LLC as a part of the process. You will also have to share the names and addresses of all the members of your LLC.
All the personal information that you share when you are filing this report should be kept confidential. This tax is known as a privilege tax, so you pay it to be able to do business in the state.
It is due by May 1 of each year but should ideally be filed one year after the date on which your Arkansas LLC was formed.