Starting a Corporation in Arkansas | What You Need to Know

Start a Corporation in Arkansas

In Arkansas, starting a corporation can benefit entrepreneurs looking to establish a separate legal entity for their business. Incorporating your business provides liability protection for its owners and offers potential tax benefits and a professional image. This comprehensive guide will walk you through Starting a Corporation in Arkansas, from choosing a corporate name to fulfilling ongoing compliance requirements. Some people consider starting a corporation since it has advantages and benefits rather than Starting an LLC in Arkansas.

Webinarcare Editorial Team will help you gain knowledge in starting a corporation with thorough research and market study. It would be best to cross-check all the factors in this article before forming a corporation.

What is a Corporation in Arkansas?

A corporation in Arkansas is a business organization recognized as a separate legal entity from its owners, also known as shareholders. When a corporation is formed, shareholders invest capital by purchasing shares of stock and, in return, become partial company owners. The corporation is managed by a board of directors elected by the shareholders to oversee the company’s operations and make important decisions. Corporations in Arkansas are required to have at least Three directors. One of the main advantages of a corporation in Arkansas is that it provides limited liability protection to its shareholders, meaning their assets are not at risk if the corporation incurs debt or is legally sued.

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Common Types of Corporations

Before you start with a corporation, you should know what type of corporation you will form. There are several different forms of corporations you can take into consideration, depending on your corporation’s objectives and ownership structure.

C-Corporation

C-Corporation is the most known type of incorporation. They have almost all corporate distinguishing characteristics. Profits are distributed to corporate owners who are taxed at an individual level. The corporation is taxed similarly to a business unit.

S-Corporation

S-Corporation in Arkansas is set up similarly to a C-corporation but has different tax implications and owner limits. An S-Corporation has no more than 100 stockholders and is not taxed separately. These business units must also file paperwork with the Internal Revenue Service (IRS) to obtain their status.

Nonprofit Corporation

Religious, educational, and charity institutions frequently use nonprofit businesses to run their operations without making a profit. Thus, a nonprofit corporation is exempt from paying taxes. The nonprofit organization’s gifts, contributions, or cash are reinvested in the company to fund its growth, future endeavors, or operations.

It is recommended to Start a Corporation in Arkansas if you would like to provide limited liability protection to your shareholders rather than Arkansas LLC. However, you may want to consult to LegalZoom’s Business Attorney before starting a business.

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How to Start a Corporation in Arkansas

To start a corporation in Arkansas, you must follow the below steps that, include choosing a corporate name, hiring a Registered Agent, appointing directors, filing for Articles of Incorporation, creating corporate bylaws, holding the initial board of directors, issuing stock, obtaining required licenses and permits, registering with state tax agencies, and annual reporting and ongoing compliance. All these steps are basic ones. It can be changed depending on the type of corporation you form and the nature of your business.

Step 1: Choosing a Corporate Name

The first step in starting a corporation is choosing an available name that complies with Arkansas naming rules. Most states require that the name of a corporation be distinguishable from other registered business names and include a corporate designator such as “Corporation,” “Incorporated,” “Company,” or an abbreviation thereof.

Here are some guidelines you must follow while naming your corporation in Arkansas-

  • Your business name must contain entity identifiers, such as “Incorporated,” “Limited,” “Corporation,” or “Company,” or an abbreviation, such as “Inc.,” “Co.,” or “Ltd.”
  • Exclude any words in your business name, such as “Trust,” “Bank,” “Credit Union,” or “Trustee,” or words related to a government agency, such as “FBI,” “State Department,” or “Treasury.”

To check the availability of your desired corporate name, you can search the Arkansas Secretary of State‘s business name database and Business Name Search in Arkansas. If the name is available, you may choose to reserve it for a specific period of 120 days by filing a name reservation application and paying the online name reservation fee of $22.50 and mail name reservation fee of $25. If your corporation plans to operate under a name other than its legal name, you may also need to register a fictitious or “doing business as” (DBA) name.

The DBA filing can be done by three methods, online, by mail, and in person filing., which costs around $22.50 for filing online, $25 for filing by mail or in-person. In addition, the DBA’s validity in Arkansas is Indefinite, which you can file in Arkansas Secretary of State.

You can check out How to File a DBA in Arkansas for clearer understanding.

Step 2: Hire a Registered Agent

Hiring a Registered Agent is essential in starting a corporation. Registered Agent is a person or company responsible for receiving important legal documents, tax notices, and other correspondence on behalf of your corporation. They ensure that your corporation remains compliant with state regulations and requirements. There are Arkansas Registered Agent Services to check in forming Arkansas Corporation. We reviewed some of the best-registered agent services and provided features as an add-on with their packages.

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Step 3: Appointing Directors

Corporations in Arkansas are required to have at least Three directors, though some states may require more. Directors are responsible for overseeing the corporation’s management and making major decisions on behalf of the company. In Arkansas, directors must be at least 18 years old and do not need to be state residents.

When appointing directors, it is essential to consider individuals who are knowledgeable, trustworthy, and capable of making sound business decisions. Maintaining a record of appointed directors, including their names, addresses, and terms of service, is also a good idea.

Step 4: Preparing and Filing Articles of Incorporation

After you appoint the initial board of directors in your Arkansas corporation, the next step is to write and file a Articles of Incorporation. In writing, the Arkansas Articles of Incorporation, the corporation name, principal place of business, the purpose of business, Registered Agent contact information, and the names and addresses of incorporators and initial board members, should be written.

To officially form your Arkansas corporation, you must prepare and file Articles of Incorporation with the Arkansas Secretary of State. The Articles of Incorporation is a legal document that outlines essential information about your corporation, such as its name, address, purpose, and details about its stock.

The specific requirements for Articles of Incorporation vary by state, but generally, the document must include the following:

  • The corporate name
  • The purpose of the corporation
  • The name and address of the registered agent
  • The names and addresses of the initial directors
  • The number of authorized shares and their par value
  • The name and address of the incorporator(s)

Once the Articles of Incorporation are complete, please submit them to the Arkansas Secretary of State’s office, along with the required filing fee. Fees vary by state, but in Arkansas, the Articles of Incorporation filing fee costs around $45 for filing in-person and by mail. It is crucial to provide accurate and complete information on this document, as errors or omissions may result in delays or rejection of your filing.

  • Online Filing: There’s no online filing available.
  • Offline filing: Send the form by mail or drop it in person to Arkansas Secretary of State, 1401 W. Capital Ave., Suite 250, Little Rock, AR 72201

Step 5: Creating Corporate Bylaws

Now you are done filing Articles of Incorporation in Arkansas, the next step is to draft corporate bylaws. While not always required by law, creating corporate bylaws is essential in establishing Arkansas corporation. Bylaws are the internal rules and regulations that govern the corporation’s operations and management. They outline the rights and responsibilities of directors, officers, and shareholders and provide guidelines for holding meetings and making decisions.

Key provisions to include in your corporate bylaws may include:

  • The corporation’s purpose and principal place of business
  • The roles and responsibilities of directors, officers, and shareholders
  • The process for appointing and removing directors and officers
  • The procedures for holding annual and special meetings
  • The methods for amending the bylaws and Articles of Incorporation
  • The procedures for issuing stock and maintaining shareholder records

Once the bylaws are drafted, they must be adopted by the corporation’s board of directors. Keeping a copy of the bylaws with your corporate records and updating them to reflect changes in the corporation or applicable laws is essential.

Step 6: Holding the Initial Board of Directors Meeting

The initial board of directors meeting is a crucial milestone for your Arkansas corporation. During this meeting, the directors will adopt the corporate bylaws, elect officers, and make other key decisions to set the foundation for the corporation’s operations.

The agenda for the initial board meeting may include the following:

  • Adopting the corporate bylaws
  • Ratifying any pre-incorporation actions taken by the incorporator(s)
  • Electing corporate officers (e.g., president, vice president, secretary, treasurer)
  • Designating a corporate bank account
  • Authorizing the issuance of stock
  • Approving necessary licenses, permits, and tax registrations

It is essential to keep detailed minutes of the initial board meeting, documenting the decisions made and actions taken. These minutes should be stored with your corporate records.

Step 7: Issuing Stock

Corporations in Arkansas are required to issue stock to their owners, also known as shareholders. When preparing to issue stock, you must determine the number of authorized shares and their par value, as outlined in your Articles of Incorporation. You may choose to issue different classes of stock, each with its rights and privileges, such as voting rights and dividend preferences.

The process for issuing stock typically involves the board of directors approving a stock issuance resolution, determining the price per share, and recording the issuance in the corporation’s stock ledger. Maintaining accurate and up-to-date records of all stock transactions, including transfers and cancellations, is crucial to ensure proper ownership tracking and compliance with securities laws.

Step 8: Obtaining Required Licenses and Permits

Depending on the nature of your corporation’s activities and location, you may need to obtain various licenses and permits to operate legally. These may include federal, state, and local requirements, such as:

  • A Federal Employer Identification Number (EIN) for tax reporting and employee withholding purposes.
  • State sales and use tax registration, if your corporation sells taxable goods or services
  • Professional or occupational licenses for specific industries (e.g., healthcare, construction, food service)
  • Arkansas Business Licenses, zoning permits, and health department approvals

Researching and obtaining all required Arkansas licenses and permits before commencing operations and maintaining compliance with any ongoing renewal or reporting requirements is essential.

Step 10: Registering with State Tax Agencies

In addition to obtaining licenses and permits, your Arkansas corporation may also need to register with various tax agencies. This may include registering for sales and use tax, obtaining an Employer Identification Number (EIN) in Arkansas for payroll tax purposes, and filing state income tax and franchise tax returns.

An EIN will serve as the tax ID for your Arkansas corporation. EIN can be obtained from the Internal Revenue Service (IRS). It is a 9-digit number similar to Social Security Number. EIN, however, is distinct from SSN. It is only used for business-related activities, particularly for submitting general taxes. The form must be completed and uploaded to the IRS website.

The application of an EIN in Arkansas can be through the following:

  • Apply Online- The online EIN application is the preferred method for customers to apply for and obtain an EIN.
  • Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that Form SS-4 contains all of the required information.
  • Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is four weeks.
  • Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

Each state has tax requirements, so consult a tax professional or Arkansas Department of Finance and Administration for guidance on your specific obligations.

Step 11: Annual Reporting and Ongoing Compliance

Once your Arkansas corporation is up and running, you must fulfill ongoing reporting and compliance requirements to maintain good standing. This may include filing Annual Report with the Arkansas Secretary of State, updating your corporate records to reflect changes in directors or officers, and staying current on any required licenses or permits.

In addition, it is essential to stay informed about changes in corporate laws and regulations that may impact your business and to seek professional advice when needed.

Paying Your Taxes in Arkansas

Even if you have established your corporation in Arkansas, pay your taxes and keep everything up to date so you won’t pay any penalty. Unlike an LLC, there is a corporate tax that every corporation in Arkansas has to pay. On the other hand, they must pay income taxes based on their business income. Some other types of taxes in Arkansas are sales tax, franchise tax (not applicable to all the states), and other state taxes.

Cost of Forming a Corporation in Arkansas

In forming a corporation in Arkansas, a filing and Annual fee must be paid. Without it, your corporation won’t operate. A corporation’s initial filing fee may vary from state to state. However, in Arkansas, it costs $45 for filing in-person and by mail. The corporation in Arkansas also has to file an Annual Report (though it might not be mandatory, it is recommended to file one). Ensure you comply with all the necessary fees and costs so your corporation will run successfully and smoothly.

FAQs

What are the requirements for starting a corporation in Arkansas?
You must file Articles of Incorporation with the Arkansas Secretary of State.
How much does it cost to start a corporation in Arkansas?
The filing fee for Articles of Incorporation is $50.
How many people are needed to start a corporation in Arkansas?
You can start a corporation in Arkansas with just one person.
Can out-of-state residents start a corporation in Arkansas?
Yes, out-of-state residents can start a corporation in Arkansas.
Can a corporation have only one shareholder in Arkansas?
Yes, a corporation in Arkansas can have only one shareholder or many.
What is the minimum age to incorporate a business in Arkansas?
You must be 18 years old to incorporate a business in Arkansas.
How long does it take to incorporate a business in Arkansas?
The processing time for incorporating a business in Arkansas varies but usually it takes 7-10 business days.
Is an attorney necessary to start a corporation in Arkansas?
No, an attorney is not necessary, but it is recommended as they can guide you through the process and provide legal advice.
Can I reserve a company name in Arkansas before filing for incorporation?
Yes, you can reserve a company name for up to 120 days before filing for incorporation.
Are annual reports required in Arkansas for corporations?
Yes, all corporations in Arkansas must file an annual report with the Arkansas Secretary of State.
How much is the annual report fee in Arkansas?
The annual report fee for corporations in Arkansas is $300.
What is the deadline for filing the annual report in Arkansas?
The annual report must be filed by May 1st of each year.
What is the purpose of an initial franchise tax report in Arkansas?
The initial franchise tax report is a tax on the privilege of doing business in the state of Arkansas.
When is the deadline for filing the initial franchise tax report in Arkansas?
The deadline for filing the initial franchise tax report in Arkansas is one month after incorporation.
What is the corporate income tax rate in Arkansas?
The corporate income tax rate in Arkansas is currently 6.5%.
Are there any incentives available for starting a corporation in Arkansas?
Yes, there are incentives available through the Arkansas Economic Development Commission.
Can corporations in Arkansas have more than one class of stock?
Yes, corporations in Arkansas can have more than one class of stock, allowing for different voting rights and dividend payments among shareholders.
What is required for a corporation to obtain a state business license in Arkansas?
Corporations in Arkansas require certain permits and licenses, depending on the nature of the business, including a sales tax permit, and a registration with the Department of Finance and Administration.
How does a corporation apply for a federal tax identification number in Arkansas?
Corporations can apply for a federal tax identification number, also known as an Employer Identification Number (EIN), online or by mailing Form SS-4 to the IRS.
What are the different types of corporations that can be formed in Arkansas?
The different types of corporations that can be formed in Arkansas include C-corporations, S-corporations, professional corporations, and close corporations.
Is there a residency requirement for members of the board of directors of an Arkansas corporation?
There is no residency requirement for members of the board of directors of an Arkansas corporation.
What is a registered agent in Arkansas?
A registered agent is an individual or company who is designated to receive legal documents and other correspondence on behalf of the corporation.
Can a corporation in Arkansas change its registered agent?
Yes, a corporation in Arkansas may change its registered agent by filing a Change of Registered Agent form with the Arkansas Secretary of State.
How frequently must a corporation file reports in Arkansas?
Corporations in Arkansas must file an Annual Report every year and file regularly with the Secretary of State.
Are there restrictions on the name of a corporation in Arkansas?
Yes, the name must be distinguishable from all other entities doing business in Arkansas, and special words or phrases may require additional documentation.
Is there a residency requirement for the registered agent in Arkansas?
The registered agent for a corporation in Arkansas must be a resident of Arkansas or a corporation authorized to do business in the state.
What is a Certificate of Good Standing in Arkansas?
The Secretary of State issues a Certificate of Good Standing to authorized Arkansas corporations only if certain requirements have been met.
What is the professional organization corporation act in Arkansas?
The professional organization corporation act in Arkansas allows licensed professionals, such as doctors and lawyers, to form corporations for their practices.
What can be included in the Articles of Incorporation for an Arkansas corporation?
Articles of Incorporation for an Arkansas corporation include the corporation name, the name and address of the registered agent, the purpose of the corporation, and the information of the founders.
What is the process of incorporating in Arkansas?
The first step is to register your corporation with the Arkansas Secretary of State by filing articles of incorporation and paying the required fee.
How much does it cost to incorporate in Arkansas?
The filing fee for articles of incorporation in Arkansas is $45.
What is the minimum number of people needed to start a corporation in Arkansas?
You only need one person to start a corporation in Arkansas.
How long does it take to incorporate in Arkansas?
The processing time for incorporating in Arkansas can take anywhere from 3 to 10 business days.
Do I need a registered agent in Arkansas to incorporate there?
Yes, you must have a registered agent in Arkansas who will be responsible for receiving legal documents on behalf of your corporation.
Can I be my own registered agent in Arkansas?
Yes, you can be your own registered agent as long as you have a physical address in Arkansas where legal documents can be served.
Do I need an attorney to incorporate in Arkansas?
You do not need an attorney to file articles of incorporation in Arkansas, but consulting with an attorney can help ensure you comply with all the legal requirements and protect your interests.
Does Arkansas require special permits to operate a business?
Certain types of businesses require licenses or permits to operate in Arkansas, including those in food service, healthcare, construction, and professional services.
Is there an income tax in Arkansas?
Yes, there is a state income tax in Arkansas. The rate varies based on your income bracket.
Can foreign corporations do business in Arkansas?
Yes, foreign corporations can do business in Arkansas as long as they register with the state and comply with all the applicable laws.
What is franchise tax in Arkansas?
Franchise tax is a fee that corporations in Arkansas must pay each year for the privilege of conducting business in the state.
Is there a minimum franchise tax fee in Arkansas?
Yes, the minimum franchise tax fee in Arkansas is $150.
Is Arkansas a good place to start a corporation?
Arkansas has a business-friendly environment and a lower cost of living compared to other states, making it an attractive place for entrepreneurs to start a corporation.
Can I incorporate in Arkansas if I don’t live there?
Yes, you can incorporate in Arkansas even if you don’t live there, but you must have a registered agent who has a physical address in the state.
How can I check if a corporation name is available in Arkansas?
You can check the availability of a corporation name in Arkansas online through the Secretary of State’s website.
What are the ongoing requirements for maintaining a corporation in Arkansas?
You must file an annual report and renew your franchise tax each year to maintain your corporation in good standing in Arkansas.
How can I dissolve my corporation in Arkansas?
To dissolve a corporation in Arkansas, you must file articles of dissolution with the Secretary of State and ensure all pending debts and obligations are paid.
Can I change the name of my corporation in Arkansas after it’s been established?
Yes, you can change the name of your corporation in Arkansas by filing an amendment to the articles of incorporation and paying the required fee.
What is an S Corporation in Arkansas?
An S Corporation is a type of corporation in Arkansas that qualifies for special tax treatment under federal law, which allows the corporation’s income to pass through to shareholders.
How can I convert my corporation to an S Corporation in Arkansas?
To convert your corporation to an S Corporation in Arkansas, you must file Form 2553 with the IRS and meet the eligibility requirements.
How many shares of stock should I authorize my corporation to issue in Arkansas?
The number of shares of stock you authorize your corporation to issue in Arkansas is up to you, but should be discussed with legal counsel.
Can I have a non-profit corporation in Arkansas?
Yes, you can form a non-profit corporation in Arkansas if your purpose meets the requirements of nonprofit status set forth by the state of Arkansas.
Can I change the corporate structure of my corporation in Arkansas after it’s been established?
Yes, you may convert your corporation to another type of entity by filing the appropriate documents with the Secretary of State and paying any required fees.
Is there a maximum number of directors allowed for a corporation in Arkansas?
There is no maximum number of directors a corporation may have in Arkansas, as long as it meets the requirements set forth in the corporate bylaws and articles of incorporation.
Can I incorporate my startup in Arkansas?
Yes, you can incorporate your startup in Arkansas as long as it meets all the eligibility requirements.
Can I file my articles of incorporation online in Arkansas?
Yes, you can file articles of incorporation and other documents online through the Arkansas Secretary of State’s website.
What is the difference between a C Corporation and an S Corporation in Arkansas?
A C Corporation is taxed as a separate entity from its owners while an S Corporation receives special tax treatment and is taxed like a partnership.
Can a corporation be formed for any type of business in Arkansas?
Some types of businesses require a special license in Arkansas, but in general, a corporation can be formed for any type of business, including for-profit and non-profit entities, as long as the requirements are met.
Can a corporation in Arkansas have multiple classes of stock?
Yes, a corporation in Arkansas can issue multiple classes of stock with different voting rights, dividend rates, or other characteristics.
Can I file my documents in person at the Secretary of State’s office in Arkansas?
Yes, documents can be filed in person at the Secretary of State’s office during operating hours.

Also Read

How to Save Money While Forming Your Arkansas Corporation

One of the first ways to save money while forming your Arkansas corporation is to do as much of the legwork yourself as possible. While it may be tempting to hire a lawyer or professional service to handle all of the paperwork and legalities, taking the time to research and understand the process can save you significant money in the long run. Many online resources provide step-by-step guides and templates that can help you navigate the formation process without breaking the bank.

Another way to save money is to carefully consider the type of entity you want to form. While a corporation may be the best choice for some businesses, others may benefit from opting for a limited liability company (LLC) or another business structure. Depending on your specific needs and goals, forming a different type of entity could save you money on taxes, fees, and ongoing maintenance requirements.

When it comes to filing fees and other costs associated with forming a corporation in Arkansas, it’s important to shop around and compare prices. While the process itself may not vary much from provider to provider, the fees can fluctuate significantly. By doing your homework and getting quotes from multiple sources, you can find the best deal for your budget.

Additionally, consider forming your corporation online. Many services offer online filing options that can save you time and money compared to traditional paper filings. By taking advantage of these online platforms, you can streamline the process and avoid costly mistakes that may result from navigating the paperwork on your own.

Once your Arkansas corporation is up and running, there are additional ways to save money and maximize your resources. For example, consider outsourcing tasks that are not in your expertise or hiring part-time employees instead of full-time staff. By being strategic about where you allocate your funds, you can stretch your budget further and avoid unnecessary expenses.

It’s also important to regularly review your expenses and financial statements to identify areas where you can cut costs. Look for opportunities to negotiate better rates with vendors, consolidate services, or find more affordable alternatives for necessary expenses. By being proactive about managing your finances, you can keep your business running smoothly without overspending.

In conclusion, forming a corporation in Arkansas doesn’t have to break the bank. By taking a do-it-yourself approach, exploring different entity structures, shopping around for the best prices, and being conscientious about your spending, you can save money while building a strong foundation for your business. With careful planning and a focus on cost-effective strategies, you can set your Arkansas corporation up for success without sacrificing your financial health.

Conclusion

Starting a corporation in Arkansas involves several critical steps, from choosing a corporate name to fulfilling ongoing compliance requirements. Following the steps outlined in this guide and seeking professional advice when needed, you can successfully establish your Arkansas corporation and enjoy the benefits of limited liability, potential tax savings, and a professional business image.

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