Arkansas LLC: Comprehensive Guide to Formation, Benefits, and Costs

If you’re thinking about forming an LLC, states like Arkansas can be a good option. There are a variety of benefits for both entrepreneurs and small business owners when starting an LLC in Arkansas, both from an operational and tax standpoint. This article will explore how to start an LLC in Arkansas, including Arkansas LLC benefits, applying for an LLC online in Arkansas, navigating the steps for setting up an LLC in Arkansas, and Arkansas LLC requirements.

We'll also talk about how Wise Business can help your business make convenient, secure, low-cost transfers.

Send and receive global payments?

Try Wise Business >>

Wise Trustpilot Score:
No minimum balance requirement and no monthly fees
Integrates with QuickBooks, Xero, Sage, and more

Why Choose Arkansas for Your LLC?

Starting an LLC, offering a host of advantages for businesses aiming to expand. The state's pro-business policies, competitive tax rates, and tailored incentives are specifically designed to foster the growth of startups and expanding businesses.¹

Arkansas is set up to support businesses with its policies. The state offers a variety of incentives that can significantly benefit LLCs across different industries. These include job creation incentives, investment tax credits, sales and use tax exemptions, and exemptions/reductions tailored to help new and expanding businesses grow.

Arkansas is also home to a diverse array of industries, such as manufacturing and distribution, and has a well-developed transportation infrastructure to support supply chain operations. It is also geographically well-located to access both domestic and international markets, making it a great option for small to large businesses looking to scale operations.

Benefits of Forming an LLC in Arkansas

Forming an LLC in Arkansas brings several economic and operational advantages, making it particularly beneficial for small businesses and entrepreneurs. LLCs in Arkansas offer robust protection, including safeguarding personal assets like homes, cars, and savings from business-related lawsuits or debts.³

LLCs in Arkansas benefit from pass-through taxation, which is when business income is passed through to the member's personal tax returns. This setup avoids the double taxation often associated with corporations, where earnings are taxed at both the corporate and the personal levels. Pass-through taxation simplifies the tax process while providing tax savings.⁴

LLCs are also beneficial because they offer more flexibility in managing and operating compared to corporations. While corporations involve a board of directors, regular meetings, and annual reports, LLCs don’t have the same formalities, making them easier to manage. Setting up an LLC in Arkansas is also a relatively straightforward process, as there’s minimal paperwork and reasonable filing fees.

Where does Wise Business fit in your business? Send Fast and Secure Business Payments

---

Costs Associated with an Arkansas LLC

When considering the financial aspects of forming an LLC in Arkansas, it's important to understand the two types of costs involved: formation costs and annual costs.

Formation Costs

The primary cost of forming an LLC in Arkansas is the filing fee for the Articles of Organization. Currently, this fee is $45 when filed online and $50 by mail. Articles of Organization are crucial as they signify the official formation of your LLC and include vital details such as your LLC's name, its purpose, the registered agent, and the office address.⁵

Arkansas law requires LLCs to have a registered agent who can receive legal documents on behalf of the company. Business owners can act as their registered agents or hire a professional service. The cost for professional registered agent services can vary depending on the provider.⁶

Annual Costs

The annual costs associated with the LLC are another consideration when determining the cost of starting an LLC in Arkansas.

LLCs in Arkansas are required to pay an annual franchise tax, which is $150. This fee is paid alongside filing the Annual Franchise Tax Report, which helps keep the LLC’s information updated with the state.⁷

Depending on the type of business and its location, various local and state licenses and permits may be required. The costs for these can vary widely based on the type of business and industry.

Step-by-Step Guide to Forming an Arkansas LLC

Forming an LLC in Arkansas involves a series of key steps. Here’s a comprehensive guide to help you navigate the process.

Step 1: Choose a Name for Your LLC

Choosing the right name for your LLC is a crucial first step in establishing your brand and LLC. Your LLC name should be unique and distinguishable from existing businesses to avoid confusion. The name must include the phrase “Limited Liability Company” or one of its abbreviations (LLC or L.L.C.). Avoid any restricted words as set forward by the Arkansas Secretary of State.

Step 2: Appoint a Registered Agent

The next step in starting an LLC in Arkansas is appointing a registered agent. The registered agent is your business's official contact for any legal documents, including tax forms, legal summons, and government correspondence.

The registered agent must either be a resident of Arkansas or a corporation authorized to conduct business in Arkansas, with a physical address in the state.³

Your registered agent can be an individual within the company, including yourself, or an external professional service. Once you’ve selected your registered agent, you must consist of their information in your LLC’s Articles of Organization.

Step 3: File Certificate of Organization

Once you’ve selected a name for your LLC and appointed a registered agent, it’s time to file its Certificate of Organization. This document formally registers your LLC with the Arkansas Secretary of State and outlines key details about your business.

You’ll need to include your LLC’s name, its address, and the name and address of your registered agent. You’ll also need to include a statement of whether the LLC will be member-managed or manager-managed and the name(s) and address(es) of the organizer(s).

You can apply for your LLC online or via mail with the filing fee. Once your Certificate of Organization is filed and approved, you will receive a confirmation from the Secretary of State. This confirmation serves as your official proof of LLC status.

Step 4: Create an Operating Agreement (Optional)

While an Operating Agreement isn’t a requirement for setting up an LLC in Arkansas, having one in place is recommended. This internal document outlines how your LLC is structured and shares operational protocols with members.

Step 5: Obtain an EIN (Employer Identification Number)

Once your LLC is legally established, the next step is to obtain an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). An EIN is a Social Security number for your business and is needed to open bank accounts, hire employees, and file taxes.

You can apply for EIN online or via mail. You will need to provide details of your LLC, including its legal name, address, the name and Social Security Number (SSN) of the principal officer or LLC member, the type of business, and the purpose for applying.⁸

Step 6: File Annual Franchise Tax Report

Once your LLC is approved and established, you must file an Annual Franchise Tax Report. This report is a requirement to ensure the state is aware of LLCs and collects necessary taxes. The Annual Franchise Tax Report is due by May 1st every year. It’s essential to file the report on time to avoid late fees and potential penalties, including the dissolution of your LLC if neglected.

Comparison Table of Key Benefits and Costs

Expense	Cost
Filing Certificate of Organization	$45 online, $50 by mail
Annual Franchise Tax Fee	$150
Registered Agent Fee	N/A - dependent on the registered agent chosen
EIN Application	Free

---

Open a Wise Business Account: Manage Your US Business Finances With Ease

Once you have established your business with an LLC in Wyoming, you’ll need a business account to manage your US finances. A Wise Business account is easy to open online and comes with no monthly fees. You can convert funds from your home currency to USD with low, transparent fees.

Wise is not a bank, but a Money Services Business (MSB) provider and a smart alternative to banks. The Wise Business account is designed with international business in mind, and makes it easy to send, hold, and manage business funds in currencies. You can get major currency account details for a one-off fee to receive overseas payments like a local. You can also send money to countries.

Some key features of Wise Business include:

Major local account details to receive international payments with ease No monthly account fees just a simple one-off fee for account details Receive payments from e-commerce platforms such as Amazon or via Stripe. Create invoices using the Wise invoice generator or invoice templates. Accounting integrations, including a QuickBooks Bill Pay connection. Bill payments will be synced, matched, and categorized in QuickBooks for simple reconciliation. Batch payment options. Fast payment of up to 1,000 people.

Open a Wise Business account online

Tax Considerations for Arkansas LLCs

When determining the cost of starting an LLC in Arkansas, it's important to factor in the type of taxes your business will be liable to pay. Arkansas LLCs are liable to pay both state and federal taxes.

State Taxes

As part of Arkansas state tax requirements, LLCs must pay an annual franchise tax of $150 due by May 1st each year. This tax is paid alongside the Annual Franchise Tax Report, which keeps your LLC in good standing with the state.

If your LLC sells goods to customers in Arkansas, you must collect and remit sales tax to the Arkansas Department of Finance and Administration. The standard state sales tax rate is 6.5%, but additional local sales taxes may apply depending on the location of your business.⁹

Arkansas LLCs are treated as pass-through entities by default, meaning the LLC does not pay income taxes. Instead, profits and losses are passed through to the owners’ personal tax returns, and they pay state income tax on their share of the LLC’s income. Arkansas state income tax rates vary from 2% to 6.6%, depending on the income level.ⁱ¹

Federal Taxes

Like state taxes, the federal government treats LLCs as pass-through entities unless you are taxed differently. Profits or losses from the LLC are reported on the owners' personal tax returns and are subject to federal income tax.

Members working in an LLC are considered self-employed and must pay self-employment taxes covering Social Security and Medicare taxes. LLCs that hire employees are also responsible for paying employment taxes, which include withholding federal income tax and Social Security and Medicare taxes from employees' wages. You’ll also need to pay the employer's share of Social Security and Medicare taxes.

Privacy and Anonymity for Arkansas LLCs

Privacy and anonymity are significant considerations for many business owners when forming an LLC. When filing the Certificate of Organization in Arkansas, certain information must be made public, including the name of the LLC, the principal address, and the name and address of the registered agent. However, Arkansas does not require the names of the LLC’s members to be listed on this document, which can provide a degree of anonymity.

If privacy is a concern, using a third-party registered agent service can help as then their address.

It will be used as the official business address. This mainly benefits home-based businesses or individuals wishing to keep their home addresses private.

Conclusion

Forming an LLC in Arkansas offers many benefits for business owners, and the state provides a wide range of policies, as well as economic benefits and incentives to encourage business growth. The steps involved in forming an LLC in Arkansas are designed to be straightforward to navigate. While it may seem complex initially, having a step-by-step guide to starting an LLC in Arkansas can help make the process easier and prepare you for what’s needed so you have everything you need to get started.

---

Sources:

1. Business Incentives - Arkansas Economic Development Commission
2. Arkansas Delivers When It Comes to Supply Chain Management | Trade and Industry Development
3. The Strategic Advantages of Starting an LLC in Arkansas - Space Coast Daily
4. Pass-through Entity Tax – Arkansas Department of Finance and Administration.
5. Domestic Limited Liability Company (LLC) Forms / Fees / Records Requests
6. Arkansas Secretary of State: Business Services FAQ
7. Franchise Tax / Annual Report Forms
8. How to Apply for an EIN | Internal Revenue Service
9. Sales and Use Taxes in Arkansas - AEDC.
10. Arkansas Tax Rates & Rankings
11. Understanding employment taxes | Internal Revenue Service