If you want to start and run an Arkansas limited liability company (LLC), you'll need to prepare and file various documents with the state. This article covers the most important ongoing reporting and state tax filing requirements for Arkansas LLCs.
The State of Arkansas requires you to file an annual franchise tax report for your LLC. The report is associated with the state's franchise tax that applies to most LLCs. The tax, payable to the Secretary of State, is $150. You can file the annual franchise tax report online or download a report form from the SOS website. The franchise tax report, including the $150 tax payment, is due each year by May 1. There are penalties for late reports.
When it comes to income taxes, most LLCs are so-called pass-through tax entities. In other words, the responsibility for paying federal income taxes passes through the LLC itself and falls on the individual LLC members. By default, LLCs themselves do not pay federal income taxes, only their members do. However, as mentioned above, Arkansas imposes an annual $150 franchise tax on LLCs for the privilege of doing business in the state.
In some cases, the owners of an LLC choose to have their business treated like a corporation for tax purposes. This choice is made by filing IRS Form 2553 with the IRS. (See the IRS website for the form.) Unlike the default pass-through tax situation, when an LLC elects to be taxed as a corporation, the company itself must file a separate tax return. The State of Arkansas, like almost every other state, taxes corporation income. The state's corporation income tax is calculated on the basis of a small series of marginal rates applied to net income. The tax is payable to the state's Department of Finance and Administration (DFA). Use the state's corporation income tax return (typically Form AR1000-CT) to pay the tax.
Does your LLC have employees? If so, you'll need to pay employer taxes. Some of these taxes are paid to the federal government (the IRS) and are not covered here. (But note that federal employer tax obligations start with obtaining a federal employer identification number (EIN).) However, Arkansas employers also must pay taxes to the state.
First, you'll need to withhold and pay employee income taxes to the DFA. Begin by registering your business with the DFA either online or on paper (Form AR-1R, Combined Business Tax Registration Form). Once you've registered, you'll need to file withholding taxes on a monthly basis. You can use Form 941M for this purpose. You'll also need to use Form ARW-3 each year to reconcile your LLC's tax withholding. For more information, including regarding online filings, check the DFA website.
In addition, you'll probably need to register to pay state unemployment insurance (UI) taxes. These taxes are handled through Arkansas's Department of Workforce Services (DWS). You can register for these taxes online or by using Form DWS-ARK-201. Then, each quarter, use Forms DWS-ARK-209B and DWS-ARK-209C to report on wages and pay the UI taxes. For more information, including regarding online filings, check the DWS website.
If your LLC will sell goods to customers in Arkansas, you will need to collect and pay sales tax. This means you'll have to register for this purpose with Department of Finance and Administration and then make periodic sales tax payments for goods sold. You can register online or mail in Form AR-1R. After you've registered you'll be sent a sales tax permit. Then, on a periodic basis (for example monthly), you must submit sales tax returns to the DFA. The state prefers that you file online but you can request paper forms.
If you will be doing business in states other than Arkansas, you may need to register your LLC in some or all of those states. Whether you're required to register will depend on the specific states involved: each state has its own rules for what constitutes doing business and whether registration is necessary. Often activities such as having a physical presence (a business location) in a state, hiring employees in a state, or soliciting business in a state (such as by telephone, print ads, mail, or the Internet) will be considered doing business for registration purposes. Registration usually involves obtaining a certificate of authority or similar document.
For more information on requirements for forming and operating an LLC, see Nolo’s LLC section.