How to Start a Business in Arkansas (Updated 2024)

If you're trying to start a business in Arkansas, you'll need to be aware of the state's business laws and requirements. Follow the steps below to get your business up and running, including registering your business with the state, applying for licenses and permits, and filing taxes.

1. Choose a Business Idea

Your first task in the business startup process is coming up with an idea for your business. When thinking of an idea, consider what areas you have experience in. For example, suppose you want to start a hair salon. In that case, experience working as a hairstylist could give you a leg up. If you've already been employed as a hairstylist, you probably have a better idea of how often you need to buy supplies, what days are busiest for hair appointments, and what kind of space you need to rent.

You should also think about your current resources and the amount of time you can commit to your new venture now and in the future. Besides what you know about yourself, consider the interests of your community. You can start evaluating your new business's likelihood of success based on your community's interests, and whether your business idea will meet an unmet need.

After you select an idea, write a business plan to get a better picture of:

• the startup costs
• your competition, and
• strategies for making money.

Your business plan should help you weigh your funding options. Be prepared to apply for a business loan, pitch to investors, or reach out to family members. In general, investors like to see a business plan before promising money. (For financial tips, read our article about starting a business with little or no money.)

2. Decide on a Business Legal Structure

Once you've landed on an idea and written a business plan, you must decide on a business structure. You'll need to consider each entity's costs, legal and tax requirements, and liability protections to make the right choice for your business. The most common legal structures for a small business are:

• sole proprietorships
• partnerships
• limited liability companies (LLCs), and
• corporations.

Typically, sole proprietorships and general partnerships don't require any paperwork to create. These types of ownership structures have few legalities and associated costs. However, as a sole proprietor or general partner, you'll be responsible for any debts or obligations your business takes on.

LLCs and corporations offer great protection. While you'll have to register your LLC or corporation with the state and probably pay startup and maintenance fees, these business structures give their owners limited liability protection. In other words, as an LLC member or corporate shareholder, you won't be liable for your business's debts, liabilities, and obligations.

You might have other options for your business structure: States have specific business ownership structures they recognize.

Other types of partnerships: In Arkansas, you can form a limited partnership, limited liability partnership (LLP), or limited liability limited partnership (LLLP), which are types of partnerships where some partners have limited liability.

Professional corporations and LLCs: If you provide a professional service, you have the option of forming a professional corporation or professional LLC in Arkansas. In general, a "professional service" is a service that requires a license or other legal authorization.

Depending on which business structure you choose, you might be able to elect to become an S corporation, a tax entity. Different types of businesses, such as LLCs and corporations, can elect to be taxed as S corporations but legally remain corporations or LLCs. If you have specific questions, you should speak with a tax attorney or other tax professional.

3. Choose a Name for Your Arkansas Business

Next, you can put a name to your business. Your business name should be unique and marketable. The name will appear on store signs, advertisements, and business listings. So make sure you can legally claim the name and that it matches where you want to go with your business.

Under Arkansas's laws, you must choose a business name that's distinguishable (different enough) from any other name that's registered or reserved with the Arkansas Secretary of State (SOS). You can look for available names by doing a business name availability search on the SOS website.

Entity name designators: For most business entities, Arkansas law requires you to include certain words or abbreviations in your business name that identify your business's structure (such as "limited company" for LLCs or "inc." for corporations). See our articles on how to form an Arkansas LLC for more information.

Reserving your business name: You can reserve an available name for 120 days by filing an Application for Reservation of Entity Name with the SOS. You can submit this application by mail or file the form online via the SOS's Corporations Online Filing System. As of 2024, the filing fee to reserve a business name is $25 by mail and $22.50 online.

Filing for an assumed or fictitious name: If you're a sole proprietor or general partnership doing business under a name that doesn't include the owners' personal names, then you must file a certificate with the county clerk in the county where you conduct your business. The certificate must include your assumed name (also called a "DBA") and the owners' names and addresses. Similarly, if you have a registered business—like an LLC or corporation—and you do business under a name that's different from your business's registered legal name, then you must file an Application for Fictitious Name with the SOS. You must also file the application with your county clerk's office unless you're registered office is in Pulaski County.

If you do business online, you might want to register your business name as a domain name. In addition, to avoid trademark infringement issues, you should do a federal and state trademark search to make sure the name you want to use isn't the same as or too similar to a name already in use.

4. Register Your Business Entity With the Arkansas Secretary of State

You can register your business by filing formation documents by mail or online (for some business entities) on the SOS website. You can find the forms you need and links to online registration (if available) through the SOS's forms/fees/records request webpage.

Here's how to form each type of business in Arkansas:

• Sole proprietorship: To create a sole proprietorship in Arkansas, you don't need to file any organizational documents with the state.
• Partnership: To create a general partnership in Arkansas, you don't need to file any organizational documents with the state. But you should draft a partnership agreement to establish the rules for how your partnership will be managed and how the assets and liabilities will be divided among the partners.
• Limited partnership: You must file a Certificate of Limited Partnership (Form LP-01) with the SOS to form your limited partnership.
• Limited liability partnership (LLP): You can form an LLP by filing a Statement of Qualification of LLP with the SOS.
• Limited liability limited partnership (LLLP): To form an LLLP, you must file a Certificate of Limited Liability Limited Partnership (Form LLLP-02) with the SOS. Your name must include the proper entity designation.
• LLC: To create an LLC in Arkansas, you must file a Certificate of Organization for a Dom. Limited Liability Co. (Form LL-01) with the SOS. You should also prepare an operating agreement to establish the basic rules for your LLC's operations.
• Professional LLC: Licensed professionals can form a professional LLC in Arkansas by filing a Certificate of Organization for a Dom. Limited Liability Co. (Form LL-01) with the SOS. If you practice medicine or dentistry, you must obtain a certificate of registration from your regulatory board. Otherwise, you must obtain the proper authorization from the appropriate licensing authority to register your professional LLC. (Ark. Code § 4-38-1202 (2024).)
• Corporation: To create a corporation in Arkansas, you must file Articles of Incorporation (Form DN-01) with the SOS. You must also prepare and adopt bylaws for your corporation. Corporate bylaws, similar to an LLC's operating agreement, set out your corporation's internal operating rules. You don't need to file your bylaws with the state.
• Professional corporation: Licensed professionals can form an Arkansas professional corporation by filing Articles of Incorporation (Form DN-01) with the SOS. You must obtain a certificate of registration from your regulatory board to form a professional corporation.

For some of these business entities, you'll need to appoint a registered agent in Arkansas for service of process. A registered agent agrees to accept legal papers on the company's behalf.

After you form your corporation or other applicable business with the SOS, you can file IRS Form 2553, Election by a Small Business Corporation, with the IRS to elect S corporation tax status.

5. Apply for Arkansas Licenses and Permits

In most cases, you'll need to apply for at least one license, permit, or registration for your business. You can find more detailed information in our article on Arkansas business licenses.

Tax registration. If you sell taxable goods or services in Arkansas, you must register with the Arkansas Department of Finance and Administration (DFA) to report and collect sales tax. If your businesses will have employees, you must register with the DFA for employer withholding taxes. You can register for both types of tax, and other business taxes, online via the Arkansas Taxpayer Access Point (ATAP).

Employer identification number (EIN). If your business has employees or is taxed separately from you, you must obtain an EIN from the IRS. Even if you're not required to get an EIN, there are often business reasons for doing so. For instance, banks often require an EIN to open an account in the business's name and other companies you do business with could require an EIN to process payments. You can get an EIN by completing an online application on the IRS website. There's no filing fee.

Regulatory licenses and permits. You might need to apply for permits or licenses related to health and safety, the environment, building and construction, and specific industries or services. Different departments and agencies oversee various regulatory licensing. For more details, check out the guide License, Permit, & Tax Requirements for Arkansas Small Businesses published by the Arkansas Small Business and Technology Development Center (ASBTDC). For information about local licenses and permits, check the websites for any cities or counties where you'll do business.

Professional and occupational licenses. The Arkansas Department of Labor and Licensing oversees the licensing and regulation of a range of the state's licensed professions and occupations.

6. Pick a Business Location and Check Zoning

Another startup task is choosing a location for your business. Before you settle on a spot, you'll need to think about the costs, location and space, and local zoning:

• Choose an affordable space. If you buy a space, you'll need to pay your mortgage, utilities, and property taxes. If you lease, you'll be responsible for rent, a security deposit, utilities, and other potential shared or individual costs. Look back at your business plan to see whether you can afford your desired location, especially during your company's early months. If you lease a commercial space, negotiate terms that'll work for your business in the long term.
• Consider your space's geography and layout. When shopping for a place for your business, you'll need to think about the location and the space itself. First, consider your customer base and whether you need a spot that's central and walkable or accessible to cars. Second, think about the space you need to do business. Do you need storage space? How many offices will you need? How can the space be split up between public-facing and employees only?
• Check your location's zoning. You need to verify that your location is properly zoned for your type of business. You can usually find zoning regulations for your town or city by reviewing your local ordinances and contacting your town's zoning or planning department.

Do you need a physical location for your business? In general, you'll need some sort of mailing or office address for your business. Sometimes, an address is legally required. Usually, this address can be your home address, a P.O. box, or a coworking space, among other options. To learn more, you can read our article on whether you need a physical address for your small business.

Can you run your business out of your home? Depending on your business activities, you might be able to operate your business out of your home. If you decide to run a home-based business, check your local zoning laws. Residential zoning laws are often stricter than commercial zoning laws. You should also review your lease (if you rent your home) and homeowners association rules (if applicable), either of which might ban some or all home businesses.

7. Register and Report Business Taxes

Arkansas taxes every kind of business. Visit the income tax section of the DFA website for more information on the different types of business income tax. You can file and pay most taxes through ATAP.

Sole proprietorships. As a sole proprietor, you'll pay state taxes on business income as part of your personal state income tax returns.

Partnerships. Partners pay state taxes on partnership income on their personal tax returns. In addition, Arkansas partnerships also must file Form AR1050, Partnership Tax Return. In Arkansas, you can elect to pay the pass-through entity tax. This tax allows the partnership to pay taxes on each partner's behalf. You must also file an annual report for limited partnerships, LLPs, and LLLPs.

LLCs. By default, LLCs are considered "pass-through tax entities," meaning members pay state taxes on their share of LLC income on their personal tax returns. In addition, LLCs themselves have to file an additional state tax form—either a partnership return or a corporation return. However, in Arkansas, you can elect to have your LLC taxed at the entity level by electing to pay the pass-through entity tax. Alternatively, an Arkansas LLC can elect to be taxed as a corporation by filing Form 8832, Entity Classification Election with the IRS. Arkansas LLCs must also file an annual franchise tax report with the SOS. For more, read our article on LLC annual report and tax filing requirements in Arkansas.

Corporations. Shareholders must pay state taxes on their dividends from the corporation. A shareholder-employee with a salary also must pay state income tax on their personal state tax return. Arkansas corporations and corporations with Arkansas-based income must file a corporation income tax return and pay the state income tax on corporations. Finally, corporations, like LLCs, must file an annual franchise tax report with the SOS.

If you have employees, you must also deal with state employer taxes.

And, apart from Arkansas taxes, there are always federal income and employer taxes. Check IRS Publications 334, Tax Guide for Small Business, and 583, Taxpayers Starting a Business.

8. Obtain Insurance for Your Arkansas Business

Regardless of your industry or type of business, you should look into getting insurance coverage for your business. Business insurance can protect your business and your personal assets from unexpected events, such as personal injury lawsuits and natural catastrophes.

An insurance agent can help you explore the different coverage options for your business. You should consider getting general liability insurance to protect your business against claims related to bodily injury or property damage. Your business might also benefit from cyber liability insurance to cover litigation and settlement fees following a data security breach.

For further guidance, see our article on what types of insurance your small business needs.

9. Open a Business Bank Account

No matter the type of business you form, you should consider opening a separate business account to make it easier to track your income and expenses. For some business types, including LLCs and corporations, a separate bank account is necessary to maintain your liability protection.

Additional Help With Starting Your Arkansas Business

When starting your Arkansas business, you should visit the For New Businesses section of the SOS website. From that webpage, you can download the Doing Business in Arkansas booklet and find answers to frequently asked questions. The booklet has information about:

• choosing a business entity
• corporate names and requirements
• document filings and fees
• domestic vs. foreign entities, and
• trademarks and service marks.

You can also find great information and resources on the ASBTDC website.