How to Form a Professional Corporation in Arkansas (2024 Guide)

If you would like to start and learn how to form a corporation in Arkansas, there are a few things that you should do now. However, in a professional corporation, professionals must create a special organizational structure to establish a professional or service corporation. Among the appropriate professions to organize a professional corporation in Arkansas are accountants, physicians, engineers, architects, and attorneys.

Forming a professional corporation in Arkansas or any business organization needs a certain number of steps. In this article, Webinarcare Editorial Team is going to share those steps. Keep in mind that these are general procedures. Depending on local law, it may be modified. For instance, your professional corporation may be subject to city or county-based rules.

Form a Professional Corporation in Arkansas

On this page, you’ll learn about the following:

What is a Professional Corporation in Arkansas?
How to Form a Professional Corporation in Arkansas
Main Characteristics of a Professional Corporation
FAQs

What is a Professional Corporation in Arkansas?

A professional service corporation (PSC), often known as a professional corporation (abbreviated as PC), is a particular type of organization that is permitted by state law to allow owners of specifically licensed professions to practice in the Arkansas. A professional corporation’s owner is answerable for their own negligence or wrongdoing but is not held personally liable for the actions of other owners. The abbreviation PC or P.C. is frequently used to denote professional corporations.

This structure allows professionals to enjoy some of the benefits and protections of a traditional corporation while maintaining their professional status and abiding by the regulations of their respective licensing boards.

LegalZoom is the recommended corporation formation if you are thinking of forming a professional corporation from scratch. However, you can always start an LLC in Arkansas, if you changed your mind.
– WEBINARCARE EDITORIAL TEAM

How to Form a Professional Corporation in Arkansas

To form a Professional Corporation in Arkansas for the professional service you provide, you must follow a few steps that include verifying if you are qualified for a PC, naming your business, hiring a Registered Agent, filing the Articles of Incorporation, outlining an operating agreement, requesting for an EIN, opening a bank account, getting a business license, and filing for an Annual report and taxes.

Step 1: Verify If You Are Qualified for a Professional Corporation

In forming a professional corporation in Arkansas, you should know if you are qualified. There are specific professions that are allowed to form a professional service corporation, including-

Doctors
Architects
Accountants
Lawyers and others

To provide your service, you must be qualified and have a license. In most cases, you can now form a professional corporation after finishing your studies, passing the exam, and receiving your license. If you work in an industry that does not provide a license or professional certification, you should consider starting an LLC or corporation.

Step 2: Name your Professional Corporation in Arkansas

After you have decided to form a professional corporation in Arkansas, you must choose a name for your corporation. Here are some pointers to consider when naming your professional corporation.

The business name should have the word PC, frequently followed by the name of the principal owner in place of Inc or LLC. (Example. John Doe, MD, PC)
Limit of restricted words that need a license.
A unique name is needed with no match
No confusion with a government entity name.

In Arkansas, if you do not wish to file your professional corporation right away but want to hold the name that you have decided on, then you can reserve your corporation name for 120 days. You must file a name reservation application in the Arkansas Secretary of State to keep the name.

If not already present, a professional corporation, professional association, service corporation, or professional service corporation must be included in the name. You may register your business under a different legal name if your preferred legal name is unavailable. Once you’ve decided on a name, you can apply for Arkansas DBA (doing business as). This way, you can run a clinic or law firm under your name.

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Step 3: Choose the Arkansas Registered Agent

The next step in forming a professional corporation is hiring a Registered Agent, who accepts legal paperwork for your business. This person or business will receive important tax forms, legal documents, all notices of lawsuits, and other official government correspondence in Arkansas. Forming a professional corporation for your service will be easier if you have Registered Agent in Arkansas.

Alternatively, you can serve as your own Registered Agent if you have the time. Usually, in Arkansas, a Registered Agent costs is ranging from $50 – $150. To make it easier, you can hire Arkansas Registered Agent Services for your professional corporation.

Webinarcare Editorial Team reviewed some of the Best Registered Agent Services available and provided features with their formation packages as an add-on.

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Step 4: File the Articles of Incorporation in Arkansas

After you hire a Registered Agent to form a professional corporation, the next step is to file the Arkansas Articles of Incorporation. In writing the Articles of Incorporation, the business name, owner’s contact information, corporation address, and Registered Agent contact information, should be written. Include the names of all co-owners as well. All owners must demonstrate that they have the necessary licenses to practice the profession in question.

Filing the Articles of Incorporation in Arkansas may be done with two ways, in-person and by mail. The Articles of Incorporation fee may vary from different state. However, in Arkansas, it costs $45 for filing in-person and by mail. There’s no online filing available.. For 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: Write an Operating Agreement in Arkansas

An operating agreement in Arkansas is a document that contains all of your company’s organizational details. It is optional to draft an operating agreement in most states. Yet, having one as an internal document is strongly advised. The operating agreement includes information like-

About Business
Members and management
Capital contribution
Profit Distribution
Change of membership
Dissolution

Step 6: Designate the PC Board of Directors in Arkansas

The next step is to form the first board of directors for your PC in Arkansas. All of the initial directors must provide the owner with their contact information. The owner must keep records and submit them by the Arkansas Secretary of State. As a shareholder and owner, you must ensure that a provision for appointing a new director is included in the By-laws. In Arkansas, you must have Three directors in forming your Professional Corporation.

Step 7: Write the Corporate Bylaws

Now that you are done forming the team of the board of directors, the next step is to draft corporate bylaws. Corporate bylaws are the basic rules that control a corporation. It includes the organization’s structure, processes, laws, and rules. As a result, all personnel, managers, and corporation members must obey the firm’s rules.

Creating comprehensive corporate bylaws requires specific knowledge about the company, its structure, and operations. However, I can provide you with a general outline of what corporate bylaws usually include. It is crucial to consult with Arkansas Business Attorney or a legal expert to ensure that your bylaws comply with the laws and regulations governing your jurisdiction and industry.

Name and Purpose of the Corporation
Registered Office and Agent
Shareholders
Board of Directors
Officers
Committees
Indemnification and Insurance
Conflict of Interest
Records and Reports
Amendments
Miscellaneous

Step 8: Hold the First Board of Directors’ Meeting

Gather the board of directors for the first meeting after drafting the corporate bylaws. This meeting will conclude with the appointment of directors to manage the company’s daily operations, approval of the bylaws, selection of the corporation’s financial reporting year, and approval of the stock issue. Minutes should be taken at all board meetings and kept with the company’s records.

Step 9: Request an EIN in Arkansas.

After the operating agreement’s documentation, you should get or request an Employer Identification Number (EIN) in Arkansas. The tax ID for your professional corporation will be an EIN. The Internal Revenue Service can provide an EIN (IRS). It has nine digits and is comparable to a social security number. Nevertheless, EIN is different from SSN. Only business-related tasks, primarily filing general taxes, are performed using it. The form needs to be filled out and submitted online to the IRS.

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 the 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.

After you have your EIN number, you can benefit in several ways. It will give your professional corporation the absolute advantage necessary to operate at full capacity without encountering legal or judicial issues.

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Step 10: Open a Bank Account and Prepare for Taxes.

You should open a business bank account as soon as you have applied for and received your Employer Identity Number because you will use this account for yourself, your clients, and your staff. Check out the Best Banks in Arkansas for you to decide on which bank you are going to open an account.

Due to your organization’s increased legality and liquidity, having a US business bank account may make conducting business in Arkansas easier. Most banks require an EIN for businesses other than sole proprietorships to open a business bank account. Also, keeping your accounts separate will prevent you from merging your personal and business finances. Also, filing taxes is simpler when you have an EIN. You can expect to pay employee and corporate taxes when you form a professional corporation.

Step 11: Get a Business License in Arkansas

Before your professional corporation operates in Arkansas, you must have Arkansas Business License first. A business license is a formal document issued by a state government agency that allows you to conduct business in the geographic area governed by that agency. The cost of business licenses and permits in Arkansas ranges from $50 – $300. You must check with the local authorities to see if any special licenses or permits are required.

Step 12: File Your Taxes in Arkansas

Finally, you’ve arrived at the final process. Remember to file your taxes when you have obtained a business license and are ready to begin operations. To avoid a large tax bill, you should begin paying taxes quarterly as soon as possible. Each state has different tax requirements. Start examining the Arkansas tax classification for the taxes that an LLC in Arkansas must pay.

Main Characteristics of a Professional Corporation

In forming a Professional Corporation, the main characteristics must be distinguished before forming it. These are the general characteristics of forming a Professional Corporation in Arkansas.

Limited Liability Protection: A professional corporation provides its owners, shareholders, or members limited liability protection like a regular corporation. This means the shareholders’ personal assets are generally protected from business debts, obligations, and lawsuits, except in malpractice or professional negligence cases.
Arkansas Licensing Requirements: All shareholders must typically be licensed professionals in the same field in a professional corporation. The corporation must also comply with specific state regulations and licensing requirements that govern the profession.
Governance and Management: A professional corporation is governed by a board of directors, who the shareholders elect. The board appoints officers to manage the day-to-day operations of the corporation. All directors and officers must be licensed professionals in the same field as the corporation.
Taxation: Professional corporations are taxed as C corporations, where the corporation pays taxes on its income, and shareholders pay taxes on dividends received from the corporation. However, some professional corporations may be eligible for S corporation status, allowing pass-through taxation. Income, losses, deductions, and credits flow to the shareholders, who report this information on their income tax returns.
Restrictions on Ownership and Transfer of Shares: Professional corporations often restrict the ownership and transfer of shares to ensure that only licensed professionals in the same field can become shareholders. This helps maintain the professional nature of the corporation and adheres to state licensing requirements.
Malpractice Liability: While a professional corporation provides limited liability protection for general business debts and obligations, it does not shield shareholders from liability for their own malpractice or professional negligence. Shareholders can still be personally liable for their actions in providing professional services.

In summary, a professional corporation is a specialized corporate structure designed for licensed professionals, offering limited liability protection and a formal governance structure while adhering to state licensing requirements and regulations.

Maintain Professional and Business License in Arkansas

You must maintain or renew your professional license regularly now that you have established your professional corporation. Even if your company is well-established, it is only meaningful if you have a valid operating license. And it makes no difference if your professional license is still valid for a year or two, but your business license has already expired.

Make time at least once a year to check the status of your licenses. You won’t miss anything important this way. You can address any issues that arise.

Filing Annual Report in Arkansas

In Arkansas, you must submit a report. The owners’ and Registered Agent’s names and contact details are listed in the Annual Report. Also, it should include all of your yearly financial activity. You must submit the report every 1 year (1st May of every year) in the Arkansas Secretary of State.

FAQs

What is a professional corporation in Arkansas?

A professional corporation in Arkansas is a company formed by licensed professionals such as doctors, lawyers, and accountants to provide professional services to clients while limiting personal liability.

How do I form a professional corporation in Arkansas?

To form a professional corporation in Arkansas, you must file Articles of Incorporation with the Arkansas Secretary of State’s office and meet other state requirements.

Do I need to have my professional license before forming a professional corporation in Arkansas?

Yes, to form a professional corporation in Arkansas, you must hold a valid professional license from the appropriate state agency.

Who can own a professional corporation in Arkansas?

Only licensed professionals can own a professional corporation in Arkansas.

Can a professional corporation in Arkansas have shareholders?

Yes, a professional corporation in Arkansas can have shareholders if those shareholders are licensed professionals.

Do all of the owners of a professional corporation in Arkansas need to be from the same profession?

No, owners of a professional corporation in Arkansas can be from different professions and still form a corporation together.

Is there a minimum number of owners required to form a professional corporation in Arkansas?

In Arkansas, a professional corporation can have as few as one owner.

How is a professional corporation in Arkansas taxed?

A professional corporation in Arkansas is taxed as a C-corporation, and is subject to federal and state taxes on its income.

Are there any special tax considerations for a professional corporation in Arkansas?

There are no special tax considerations for a professional corporation in Arkansas beyond the usual rules governing C-corporations.

Is a professional corporation in Arkansas required to carry professional liability insurance?

While Arkansas law does not require professional corporations to carry liability insurance, many professionals choose to do so to protect their personal assets.

What happens if a licensed professional in a professional corporation in Arkansas loses their license?

The professional corporation in Arkansas must restructure its ownership or dissolve in the event that any of its owners lose their professional license.

Can a professional corporation in Arkansas provide services in other states?

A professional corporation in Arkansas can provide services in other states so long as it qualifies to do business in those states.

Does an Arkansas professional corporation need to register with any specific agencies?

In addition to being registered with the Arkansas Secretary of State’s office, most professionals working in Arkansas must be registered with their respective state agencies.

Are there any ongoing reporting requirements for a professional corporation in Arkansas?

Yes, professional corporations in Arkansas must file annual reports with the Secretary of State’s office and maintain current licenses with the appropriate regulatory agencies.

What happens if an owner of a professional corporation in Arkansas passes away?

When a licensed owner of a professional corporation in Arkansas passes away, the ownership of the corporation must be restructured or dissolved.

Can I elect S-corporation taxation for my professional corporation in Arkansas?

Arkansas law does not allow professional corporations to elect S-corporation taxation.

Can a professional corporation in Arkansas list both licensed and non-licensed owners on its registration documents?

No, any owners listed on a professional corporation registration in Arkansas must be licensed professionals.

Do I need to have a physical office location to form a professional corporation in Arkansas?

Yes, a professional corporation in Arkansas must have a physical office located within the state.

Is there a limit to the number of people who can own a professional corporation in Arkansas?

No, there is no limit to the number of owners that can be in a professional corporation in Arkansas.

How long does it take to form a professional corporation in Arkansas?

Filing the Articles of Incorporation and meeting all the requirements can take several weeks.

Can a professional corporation in Arkansas have employees who are not licensed professionals?

Yes, a professional corporation in Arkansas can have employees who are not licensed professionals as long as the employees are not engaging in the rendering of professional services.

Are there any transaction fees associated with forming a professional corporation in Arkansas?

Yes, there is a $50 fee to file Articles of Incorporation with the Arkansas Secretary of State’s office.

Can I have someone else file the Articles of Incorporation on my behalf?

Yes, you can have a lawyer or another authorized person file the Articles of Incorporation on your behalf.

Does the name of my professional corporation in Arkansas need to reflect the services I provide?

The name of your professional corporation in Arkansas must either include the name of a professional or the nature of the professional services being offered.

Can a professional corporation in Arkansas have more than one office location?

Yes, a professional corporation in Arkansas can have multiple office locations within the state.

What happens if I fail to maintain current licenses for my Arkansas professional corporation?

Failure to maintain current licenses for your Arkansas professional corporation can result in administrative penalties or even the dissolution of your corporation.

Can a professional corporation in Arkansas be sold or merged with another company?

Yes, with proper approvals, a professional corporation in Arkansas can be sold or merged with another company.

Are there any restrictions on advertising for a professional corporation in Arkansas?

Arkansas has strict guidelines regarding advertising done by professional corporations, so it is always best to consult an attorney regarding any advertising.

Which types of professionals can form a professional corporation in Arkansas?

In Arkansas, licensed professionals such as doctors, dentists, lawyers, and architects can form a professional corporation.

What specific guidelines or rules do I need to follow to form a professional corporation in Arkansas?

In Arkansas, there are specific guidelines and rules that professional corporations must follow, including naming and credential requirements for shareholders and officers.

Do I need to register with the Arkansas State Board for Professional Corporations before forming a professional corporation?

Yes, you’ll need to register with the Arkansas State Board for Professional Corporations before you form your professional corporation.

What’s the cost of forming a professional corporation in Arkansas?

The costs of forming a professional corporation in Arkansas can also vary depending on the size of the corporation and the type of licensing requirements, ranging anywhere from a few hundred dollars to thousands.

Can I have a single shareholder in my Arkansas professional corporation?

Yes, you can have a single shareholder in your professional corporation in Arkansas.

Are there any residency requirements for shareholders in Arkansas professional corporations?

In Arkansas, there aren’t any residency requirements for shareholders in professional corporations.

What liabilities do professional corporations assume in Arkansas?

Professional corporations in Arkansas can assume a variety of liabilities, limited or otherwise, depending on their structure and the professional license held.

What’s the difference between a professional corporation and a regular corporation in Arkansas?

The main difference between a professional corporation and a regular corporation in Arkansas is who owns it – a professional corporation is designed to be owned by licensed professionals working within regulated fields; regular corporations can be owned by anyone.

Does a professional corporation in Arkansas need to have a board of directors or officers?

Yes, all professional corporations in Arkansas are required to have a board of directors and officers.

Can I convert my existing corporation to a professional corporation in Arkansas?

Yes, it may be possible to convert your existing corporation to a professional corporation in Arkansas.

What about taxes – are there any differences between a professional corporation and a regular corporation in Arkansas?

There may be differences in taxes and tax filing requirements between professional corporations and regular corporations in Arkansas, so it’s best to speak with a tax professional for more information.

What happens if a shareholder or officer of a professional corporation in Arkansas loses their professional license?

If a shareholder or officer of a professional corporation in Arkansas loses their professional license, their shares or officer positions may be revoked.

Can Arkansas professional corporations do business out of state?

Yes, Arkansas professional corporations can do business out of state if they adhere to legal compliance with those out of state offices.

Do Arkansas professional corporations have to file an annual report with the Arkansas Secretary of State?

Yes, Arkansas professional corporations are required to file an annual report with the Arkansas Secretary of State.

Can a professional corporation in Arkansas represent clients outside of their state?

It depends on the professional license regulations, as well as any applicable federal, state, or local laws and regulations.

What steps do I need to follow to dissolve an Arkansas professional corporation?

To dissolve an Arkansas professional corporation, you’ll need to follow a specific process outlined by the state, including notifying the Arkansas Secretary of State, settling any debts or obligations, and filing dissolution paperwork.

What happens if I don’t renew my professional corporation in Arkansas on time?

If you don’t renew your professional corporation in Arkansas on time, you may face fines, penalties, or other legal consequences, and in some cases, administratively dissolve.

How often do I need to renew my Arkansas professional corporation?

In Arkansas, professional corporations need to be renewed annually with the Secretary of State.

Can a professional corporation in Arkansas change its registered agent?

Yes, professional corporations in Arkansas can change their registered agent by filing a form with the state’s Secretary of State.

Are there any continuing education requirements for shareholders or officers of professional corporations in Arkansas?

Yes, for those holding a specific professional license or regulated industry, Arkansas has certain Continuing Education (CE) requirements that must be completed each year.

Do I need to obtain an Employer Identification Number (EIN) for my Arkansas professional corporation?

Yes, Arkansas professional corporations must have an Employer Identification Number, which can be obtained through the Internal Revenue Service (IRS).

Can an Arkansas professional corporation have non-professional employees?

Yes, Arkansas professional corporations are allowed to have non-professional employees, but they cannot hold shareholder or officer positions that require professional licensing.

What happens if my Arkansas professional corporation is sued?

If an Arkansas professional corporation is sued, they may face a variety of legal consequences depending on the specifics and circumstances of the case.

Is it necessary to hire a lawyer to form an Arkansas professional corporation?

It for sure isn’t necessary. You can file paperwork without a lawyer. However, for more complicated counseling and obligations with the profession, it would be advisable to head for an attorney’s guidance.

Can I change a professional corporation’s name in Arkansas?

Yes, you can change your Professional Corporation’s name in Arkansas with the Secretary of State.

How to Save Money While Forming Arkansas Professional Corporation

First and foremost, it is important to do thorough research on the requirements and regulations that govern professional corporations in Arkansas. Understanding the legal framework and procedures involved in forming a professional corporation can help individuals avoid costly mistakes and unnecessary expenses. By investing time in learning about the specific requirements and steps involved, individuals can ensure that they are following the right protocol and are not spending money on unnecessary services.

One of the key ways to save money while forming a professional corporation in Arkansas is to handle as much of the process as possible independently. While seeking professional assistance can be beneficial in certain areas, such as legal and financial advice, there are many tasks that individuals can successfully complete on their own. By taking on responsibilities such as filing paperwork, drafting bylaws, and managing administrative tasks, individuals can reduce the amount of money that they spend on professional services.

Additionally, individuals should explore different business structures and determine which one is most cost-effective for their needs. In Arkansas, professional corporations offer certain benefits, such as limited liability protection and potential tax advantages. However, there may be other business structures, such as sole proprietorships or partnerships, that can also meet the needs of certain professionals at a lower cost. By weighing the pros and cons of each option and selecting the most suitable structure, individuals can save money on formation and ongoing expenses.

When it comes to hiring professional services, individuals should shop around and compare quotes from multiple providers. Whether seeking legal advice, accounting services, or assistance with filing paperwork, it is important to obtain estimates from several professionals and choose the most cost-effective option. By negotiating fees and exploring different service packages, individuals can secure high-quality assistance without overspending.

In addition to comparing costs, individuals should also consider forming partnerships or collaborations with other professionals. By sharing resources, such as office space, equipment, or administrative support, individuals can reduce their individual expenses and benefit from shared expertise. Collaborating with others can also lead to cost savings through joint marketing efforts, bulk purchasing discounts, and shared business development opportunities.

Overall, saving money while forming a professional corporation in Arkansas requires careful planning, research, and resourcefulness. By taking a strategic approach to the formation process, individuals can optimize their finances and set themselves up for long-term success. From handling tasks independently to exploring different business structures and seeking cost-effective services, there are many ways to reduce expenses and maximize the value of the resources invested in the formation of a professional corporation.

Conclusion

In conclusion, forming a professional corporation in Arkansas is a strategic decision for licensed professionals who seek to combine their expertise and services under a single corporate entity. This business structure offers limited liability protection, a formal governance structure, and compliance with state licensing requirements. However, it also comes with certain restrictions on ownership, transfer of shares, and personal liability for professional malpractice. By carefully considering the advantages and disadvantages of a professional corporation, professionals can determine whether this structure aligns with their business goals, regulatory requirements, and risk management needs, ultimately contributing to a more organized, secure, and compliant professional practice.