Starting your own small business entails a bit of risk, but you can form an LLC to protect your personal assets from being involved with your business risks. With an LLC, you’re able to keep creditors and damage seekers from suing you to get at your personal bank account (and even your house) to cover your business liabilities. If you’re based in Arkansas, it only makes sense to register your LLC with the Arkansas state government. You can find a detailed breakup of costs to set up an LLC in Arkansas here.
If you are setting up an LLC for the first time in your life, the most sensible step to take here is to get some professional assistance with a reputable formation service. It doesn’t cost a lot, and you get the assistance you need to make sure your LLC application gets approved in the quickest time. In almost all cases of delays and outright rejection of an LLC application, it’s because the applicant made a mistake because they decided on doing things themselves without professional help.
Forming the Arkansas LLC
Here’s a quick overview of the steps involved if you’re forming an LLC in Arkansas:
Step1.Start with the Name
This isn’t as trivial as you might think. Your brand name will have far-reaching consequences regarding your overall success.
Choosing a name starts with complying with Arkansas business naming requirements. You can check out the Arkansas Code of Regulations to make sure you’re not violating any of the naming rules involved. However, here are some of the basic guidelines:
- Obviously, you can’t use offensive words.
- You can’t use any word or phrase that might cause people to mistake your LLC with a government agency. For example, just because your name is Frank Bernard Ironside doesn’t mean you can use your “FBI” initials as part of your LLC name.
- Other words such as “university”, “attorney” or “bank” cannot be used, unless your LLC actually is officially part of those particular fields. If that’s the case, then extra paperwork may be involved. In addition, your LLC membership may require the addition of a properly licensed person (such as an actual licensed attorney).
- The name you choose must be available in Arkansas. You can use the name search tool in the State of Arkansas to check that the name you choose is not yet used in the state. It may even be a good idea to check all state databases to confirm that your brand name isn’t used anywhere in the US, although this is not a strict Arkansas LLC requirement.
- The name you choose should also be available as a web domain. Again, this isn’t a requirement, but it’s a sensible step nonetheless. You need a website to promote your business, and very few people these days trust a business that doesn’t have a website. Even if—for some strange reason—you’re not planning on setting up a website for your LLC, you should still buy the URL to keep others from using it.
- Your name must include the phrase “limited liability company” as part of the name, although the words “limited”, “LLC”, or “Company” will also work (as well as the shortened forms of “limited” and “company”).
You can always go online and find an LLC name generator, if you’re having trouble coming up with your LLC name. While you’re at it, you may as well think about getting a unique logo for your business. You may find more details about naming your business in Arkansas in our detailed guide here.
Step 2. Pick Your Registered Agent
Every state requires that an LLC and corporation must have a registered agent. This registered agent can also be called the Agent for Service of Process, although the responsibilities are the same.
The job of the registered agent is to receive crucial documents on your behalf. These can include official government correspondence, notices of lawsuits, various legal documents, and crucial tax forms.
While you’re technically allowed to appoint any adult (or even yourself) as long as you have an official Arkansas address, this job is too important. It’s required for the registered agent to always be there at that official address, to receive the documents during business hours. If you are your own registered agent, that means you can’t leave your office during official business hours.
This is another service that you can obtain along with your LLC formation service. It doesn’t cost much, either. A professional registered agent has a physical location in Arkansas, maintaining a separate address to help you keep the privacy of your own address. They can then also send you the copies of the documents they receive through email, or via online storage.
Step 3. File Your LLC Certificate of Formation
This is the official document you file that lists crucial information that the state of Arkansas requires from LLCs. The document will include the following:
- The LLC name
- The business address of the LLC, which is a physical location. It can’t be a P.O. Box.
- The name and address of your Agent for Service of Process
- The type of governing authority. Basically, you have to decide if the members will run the LLC themselves, or if you’ll appoint a manager to run the LLC.
Basically, you can submit your Arkansas Certificate of Formation form online through the Arkansas Secretary of State Corporation Online Filing System. If for some reason, you wish to submit the form by mail or in person, then you can print out the form, complete it, and then mail it or drop it off at the address:
Arkansas Secretary of State
1401 W. Capitol Ave.
Little Rock, AR 72201
The filing cost of the Certificate of Formation in the State of Arkansas is $50 for any of the submission methods.
It will take about 2 days to process your application if you submit it online, meanwhile, if you submit through either by mail or in person, it may take up to a week for your application to be processed by the State of Arkansas.
Once the Articles of Organization have been processed and approved, you’re theoretically done. You now have an official LLC.
However, in practical terms, you’ve just begun the process. You still have other steps to take, to actually get your LLC up and running.
The Additional Crucial Steps for Your Arkansas LLC
Step 4. File the Initial Statement of Information
In most states, LLCs are required to fill out and file the Initial Statement of Information with the Secretary of State. However, this is not the case in Arkansas.
Step 5. Come Up with Your Arkansas LLC Operating Agreement
This is not a strict requirement. But you need to do this, especially if you’re part of a multi-member LLC. In addition, many other states do require it, and you may as well have one in place if you happen to decide to register your LLC in another state as a foreign LLC.
This is the official document that details the ownership information and operating procedures by which your LLC will be run. This makes sure that everyone knows the rules, so that conflicts can be reduced in the future. Everyone’s on the same page.
It names the members, and also lists the responsibilities and rights of each member. It clarifies as to how much money or which of the assets will go to which owner. It describes the voting procedures for choosing managers, and it also explains the buy-out procedures in case some owners want out.
Step 6. Obtain Your EIN
The EIN is the Employer Identification Number. It has other names, however, as it may also be called the Federal Employer Identification Number (FEIN) or Federal Tax Identification Number (FTIN).
Whatever name you call it, it’s still that 9-digit number that basically acts as your LLC’s Social Security number. You have to obtain it from the IRS to identify and distinguish your LLC for tax purposes.
You need the EIN to operate your LLC, as without it, you cannot do the following:
- Open a business account for your LLC
- File and manage the LLC’s federal and state taxes
- Hire employees to work for your LLC
It is also an IRS requirement to have an EIN, if your LLC has more than 1 member.
It doesn’t matter if you already have an EIN for your sole proprietorship. If you’re converting that sole proprietorship into an LLC, you will need a new EIN for that LLC.
You don’t need a Social Security number to obtain the EIN for your LLC. When you fill out the required form, simply leave the relevant section 9 section 7b) blank. You can then call the IRS at 267-941-1099 to finish your EIN application.
- Internal Revenue Service
- Attn: EIN Operation
- Cincinnati, OH 45999
It’s actually even possible to fax the form to this number: (855) 641-6935.
Regardless of the method you use to obtain the EIN, it’s a free process. There’s no fee involved.
Step 7. Separating Your Business Assets from Your Personal Assets
This is another important step. Don’t forget, the main reason that people (like you) who form an LLC instead of running a sole proprietorship is to protect your personal assets from covering your business liabilities. You still have other things to do to make sure you achieve this particular goal.
Open a Business Checking Account
You can’t run your business using your own bank account. That will just confuse matters, and some of your creditors may assume that your personal bank account and your LLC bank account are one and the same. It also confuses your accounting and tax filing.
By opening a separate checking account for your LLC, you formalize the separation of the LLC cash assets from your personal bank account. It also makes accounting and tax filing a lot easier.
Obtain a Business Credit Card for Your LLC
If you’re buying equipment for your LLC, then this is a convenient way to do it. Again, you shouldn’t use your own personal credit card. A separate credit card for the LLC also clearly separates your business expenses from your personal expenses.
In addition, the use of the LLC credit card helps to establish the credit history of the LLC. If you’re able to establish an excellent credit history, you can leverage that to obtain loans for your small business. Creditors aren’t as willing to lend money to organizations without an adequate credit history.
Hire an Accountant
You don’t have to hire one as a full-time employee. You can just consult with an accountant, at least at first. But an accountant is extremely helpful for a business, especially if it’s your first time to run your own small business.
A professional accountant can make sure you pay the exact amount of taxes you actually owe. You don’t pay less than you have to, as that would invariably result in penalties and fines. But you don’t have to overpay, either.
You’re also able to focus more on running the rest of the business, by looking for more ways to boost business. The accountant can reduce the time you spend on bookkeeping and figuring out the payroll. In fact, the accountant can even discover profits or losses you may have overlooked in your records.
Step 8. Obtain Business Insurance
In today’s world, you can hardly move or operate anything without risk. That makes business insurance a worthwhile investment, because it reduces that risk greatly. In fact, the majority of small businesses today don’t run without obtaining some sort of liability insurance.
The most common types of business insurance you should consider include:
- General liability insurance. This is the most popular type of liability insurance for small businesses. It’s a broad insurance policy that generally protects the business from lawsuits.
- Professional liability insurance. This is if you’re running a professional LLC. It covers many types of business mistakes for which you can be sued, including malpractice claims.
- Workers’ compensation insurance. This covers the things that may happen to your employees, for which you may be held liable. It can cover the deaths, injuries, illnesses of workers, if these are related to their jobs.
Step 9. Start Your Website (Optional)
As we’ve mentioned, hardly any business these days operates without a website. In fact, many businesses today are mainly online—there’s no physical shop for customers to visit or buy from.
The website is an efficient platform for marketing and advertising, without the excessive costs of overhead associated with shops and commercial shops.
With your website, you can display the wares you’re selling, and the products don’t have to occupy physical space. You can then use as many words and pictures as you wish to describe your products. The same goes if you’re offering services. You can describe your services, and even show videos.
Your website also allows you to run a blog and post helpful articles and guides. These blog posts may answer questions posted by potential customers on Google, and their Google search can then lead them to your website and your business.
The website also offers you the opportunity to display rave reviews from your previous customers as well.
In many cases, potential customers check your online presence to make sure that you’re running a legitimate business. If they don’t see a website with your LLC name on it, they may not be totally convinced that your business is legit. A website, on the other hand, is reassuring. It proves your credibility and professionalism.
You may think that a Facebook page or a page on LinkedIn is enough, but those options are insufficient. You’re still at the mercy of the people running those platforms. You need a website that you can control, absolutely.
It’s not even all that difficult to build and run your own website. There are plenty of website builder tools available online. These tools make it super-easy to build your own website without actually knowing anything about web design and development. In most cases, you’d be done in 3 hours or less.
Aside from your own website, you can also use various advertising methods to publicize the existence of your LLC. Sure, you can use Facebook and LinkedIn. You can use various online methods, like posting on YouTube.
You can even use old-school techniques such as putting up posters around town if you’re offering a local service. It may also be possible to send out a press release as well.
Step 10. Compliance Maintenance
Once you have your LLC running, you may have to deal with the required paperwork and red tape. These can include:
Obtaining the Needed Licenses
These can include professional licenses, building permits, health permits (such as for restaurants), and even permits for signage. For Arkansas businesses, start with the Professional Licensing webpage of the State of Arkansas for information regarding permits. Don’t forget that your city or town may also have local ordinances concerning business permits.
Tax Filing Requirements
Arkansas may also have state taxes that pertain to your LLC business. You need to check whether your LLC is required to register for these types of taxes.
This will apply if you’re selling a physical product. In general, you’ll need a seller’s permit which you can get from the website of the state of Arkansas. With this permit, you’re able to collect sales tax on pertinent sales.
This applies to your LLC if you have employees. You will have to register for the Arkansas Employer taxes. This is a set of taxes that includes the Withholding Tax, the Unemployment Insurance Tax, and the Disability Insurance.
Federal LLC Tax Filing Requirements
You will need to report your income to the IRS every year, using the right form.
- You’ll need Form 1040 Schedule C if you’re the sole owner of the LLC.
- Use the Form 1065 Partnership Return if you’re part of a multi-member LLC.
Arkansas Annual Report or Annual Franchise Tax Report
Each year, every LLC in the State of Arkansas must submit information about their business to the State. This piece of information is the Annual Report, also known as the Annual Franchise Tax Report. You can file online or file through the mail with the Arkansas Department of Finance and Administration. You wouldn’t have to pay any filing fee, however, you may be required to pay a late submission fee of $25 if you’re submitting late. You can find detailed steps here.
You really should get the help of a professional LLC formation service, to make sure you’re doing everything right. They can help not just in forming your LLC< but in maintaining your business in good standing. They can help make sure you comply with all the pertinent requirements, so that you can focus on building and growing your small business.