How to start a business in Arkansas
If you are considering Arkansas as the location for your business, this article will provide you with the information to help you carry out your business plans.
We will show you how to realize your business idea in 16 steps, and you’ll learn what it takes to obtain all the necessary documentation for starting a business.
Additionally, we included links to the official government websites where you will find all the forms you need to fill out to get the necessary documents.
You will also find answers to some of the most important questions that everyone who’s starting a business needs answers to.
So, keep on reading and learn what it takes to start your Arkansas business.
Is Arkansas a good state to start a business? Key takeaways
In the past several years, Arkansas has experienced growth in several industries: steel, timber, food, beverage, electric vehicles, etc.
It was the main reason a lot of people moved to Arkansas. Among them, there are many highly qualified workers, which has also prompted an increase in salaries.
Apart from that, Arkansas has one of the lowest costs of doing business in the country. This is one of the reasons why its unemployment rate is below the national average.
The state of Arkansas has cut more than $500 million in taxes over the past several years. That is yet another reason why so many people find this state attractive for working and living.
In addition, Arkansas is among the states with the lowest property tax in the US. The property tax in Arkansas is below 2% (to compare, New Hampshire, the state with the highest property tax, has 5.57%).
Also, according to the World Population Review’s Cost of Living Index by State 2023, Arkansas is one of the states with the lowest cost of living.
Additionally, it seems that small businesses in Arkansas have found a way to successfully overcome the COVID-19 pandemic crisis.
According to the House of Representatives’ news release on Arkansas small businesses, Arkansas is the 2nd state with the most resilient small businesses.
Cost of living and tax score in Arkansas
The table below shows how Arkansas ranks when compared to other US states in terms of the cost of living.
|Arkansas’ Cost of living score and the US ranking*|
|Cost of living index||90.9||11th|
|*Scores above 100.0 indicate cost above the average|
Taking all of the above into account, Arkansas is definitely one of the states to consider for starting a business.
In the table below, you can see how Arkansas ranks in terms of taxation compared to other US states.
The maximum score is 10.0 — the lower the score, the higher the taxes, the worse the ranking.
|Arkansas’ tax score and the US ranking|
|Unemployment insurance taxes||5.14||20th|
How to start a business in Arkansas in 16 steps
If you’ve decided that the location of your business will be Arkansas, you’ll have to do a lot of preparation.
In this article, we will assist you with opening a business by giving you step-by-step guidelines.
We will also give you some advice to follow toward the final realization of your business idea.
Step #1: Develop your business idea in detail
The first step toward starting a company is developing the business idea. It’s a long road from idea to realization, and you have to play it smart.
When deciding on the type of business to start, you should take into consideration the following:
- Your personal interests,
- The skills you possess,
- The resources that you have or can obtain,
- The needs of your community,
- The competitors you will have, etc.
Don’t forget to account for the Arkansas business climate, as well.
For example, according to a 2021 report results published on the Arkansas Economic Development Commission website, Arkansas was ranked 3rd for food processing in the US.
The same article informs that Arkansas is home to a huge number of food and beverage companies (as of 2020, their number is 372).
As the article states, the reasons for such a high number of this type of companies are multiple.
Some of them are:
- High number of qualified workers,
- Appropriate infrastructure, and
- Support of the state and local governments.
All things considered, starting a food processing business in Arkansas could be a good idea.
Since agriculture is Arkansas’ largest industry, you would be able to buy raw materials at a lower price and thus make your production costs lower as well.
Afterward, you could decide whether to sell your products to Arkansas consumers or export them to other states.
Step #2: Research the business value potential of your idea
After coming up with an idea for your Arkansas business, you should investigate its potential.
By that, we mean that you should provide answers to the questions such as the following:
- Is your product/service in demand on the market?
- Who are your competitors?
- What can you do better than your competitors?
For instance, you’ve decided to try your luck with a food processing business.
First, you have to decide who your customers will be — direct consumers or other businesses like supermarkets, restaurants, etc.
You should also pay attention to your competitors — compare their prices, product quality, packaging, etc. This way, you will get some ideas about what you should do to successfully compete against them.
Step #3: Choose your legal business entity
Now is the time to decide on the business structure.
Business entities differ in various aspects, such as:
- Personal liability,
- Funding, etc.
The most popular business structures in Arkansas are:
- Sole proprietorships,
- Limited liability companies, and
Entity type #1: Sole proprietorship
If you are trying to avoid tons of paperwork that comes with starting a business, a sole proprietorship is the way to go.
This is a business entity where the owner is the only employee, and all the profit goes to them. On the other hand, the owner’s personal assets are not protected in case the business incurs debt or experiences losses.
If you want to use an assumed name for your sole proprietorship rather than your personal name, you will have to acquire a DBA (“Doing Business As”) name.
Before filing for a DBA name, you have to search the base of available DBA names to see if your desired name is free to use.
Obtaining a DBA name for a sole proprietorship in Arkansas is a bit different than in other states.
In Arkansas, you have to file an Assumed Name Certificate, but not with the Secretary of State.
You will have to contact your local county clerk to obtain an Assumed Name Certificate in Arkansas.
Entity type #2: Partnership
This is a business entity similar to a sole proprietorship, except that there are 2 or more owners of the business, i.e. partners.
A partnership is easy to form, and the paperwork it requires is minimal.
On the other hand, there is no personal asset protection, so the partners’ personal belongings are at stake if the business goes south.
However, bear in mind that this refers to a general partnership — the most common type of partnership in Arkansas.
Besides general partnerships, there are several other types of partnerships that differ based on partners’ liability protection and their roles in managing the partnership:
- Limited liability partnership (LLP) — this business entity offers some liability protection to partners, and all partners participate in managing the company. Such partnerships are usually formed by a group of professionals — doctors, architects, etc. This entity requires filing for the Statement of Qualification of LLP with the Arkansas Secretary of State. The fee for obtaining this document is $50, and you can do it only by regular mail (there is no option to apply online).
- Limited partnership (LP) — this form of partnership comprises general partners and limited partners. General partners manage the business and have no limited liability protection. On the other hand, limited partners, who are usually investors, are not responsible for managing the business, but they enjoy liability protection. To form a limited partnership in Arkansas, you need to get a Certificate of Limited Partnership from the Arkansas Secretary of State. The fee is $50, and you can apply only by mail.
- Limited liability limited partnership (LLLP) — this is an entity similar to a limited partnership, the only difference being the limited liability that the general partners have. This partnership is formed by filing for a Certificate Of Limited Liability Limited Partnership (using the same form as the one used to obtain a certificate of limited partnership). You can do it only by mail and send a $50 fee together with the form.
Entity type #3: Corporation
The corporation is a business entity where shareholders (its owners) are protected from personal liability.
There are 2 forms of a corporation:
- C-corporations — i.e. standard corporations, and
- S-corporations — i.e. corporations that offer some tax advantages but are more limited in terms of shares that they can issue.
Investors find corporations attractive because they follow strict formal regulations.
On the other hand, corporations are pretty complex and expensive to form. Therefore, if you want to enjoy the benefits of a corporation, be prepared to spend a lot.
For starting a domestic corporation in Arkansas, you will have to file for the Articles of Incorporation with the Secretary of State.
If you visit the Corporations Online Filing System page on the website of the Arkansas Secretary of State, you can apply online for various documents regarding both domestic and foreign corporations and LLCs.
When you file online for a document, the filing fee is lower. For instance, the filing fee for the Articles of Incorporation will be $45 if you file online. Otherwise, you will have to pay $50.
When it comes to registering a foreign corporation in Arkansas, you need to apply for a Certificate of Authority with the Arkansas Secretary of State.
This requires paying a fee of $300 — however, if you do it online, the fee is $270.
Entity type #4: Limited liability company (LLC)
Forming an LLC in Arkansas is a great way to start a business if you want to enjoy some of the advantages of a corporation but avoid complicated rules and regulations.
If you decide to start an LLC in Arkansas, your personal assets will be protected from business risks and debts.
To form a domestic LLC, you have to obtain a Certificate of Organization from the Arkansas Secretary of State.
The fee is $50 if you fill out the form and send it by mail, and if you apply online, the fee is $45.
To do business in Arkansas, foreign LLCs have to apply for the Certificate of Registration of Foreign Limited Liability Company.
The application fee by mail is $300. If you do it online, the fee is $270.
Entity type #5: Nonprofit
Nonprofits are created to promote a social cause. All the profit these organizations gain is put back into the organization instead of being divided among the shareholders.
If you want to form a nonprofit in Arkansas, you have to apply for Articles of Incorporation – Domestic Nonprofit with the Secretary of State first.
After that, you can apply for the tax exempt status 501(c) with the International Revenue Service (IRS).
Step #4: Name your business
After deciding on the business structure for your company, it’s time to consider the name for your business. Before you decide to use a particular name, you have to check if it’s free.
You can visit the Arkansas Secretary of State website to search a database of all company names in Arkansas.
If you’re not sure how to perform the search, you can check the Name Availability Guidelines and learn more.
If available, your business name also has to comply with the business naming rules that are part of Arkansas law.
Apart from sticking with the naming rules set by law, you should also follow these tips to make your business name resonate with your target audience:
- It should be short and memorable.
- It should be easy to pronounce and write, so as not to lead to confusion.
- It should make reference to your product/service to clearly indicate what you offer.
- It should not contain a location name as you may change your business location in the future.
Also, bear in mind that your business name should point to the business structure of your company.
Therefore, depending on the type of structure, this is what your business name should include:
- If your business is an LLC, it should contain the phrase “Limited Liability Company” or its abbreviated forms “LLC” or “L.L.C.” (e.g. Harmony, LLC).
- If your business is a corporation, it should contain the words “Corporation”, “Incorporated”, “Co.”, “Inc.” (e.g. Techware, Inc, RiseAhead Solutions Co.).
- If your business is a sole proprietorship or a partnership, its name should include the name(s) of the owner(s) — unless you choose to use a DBA name (e.g. Michael Stanley Barber, Adams J. and Andrew T. G. P.).
Step #5: Register your business name
Even if you find that your desired name hasn’t been taken, you still have to wait for the official confirmation after filing for that name.
If you receive the confirmation that your name is available, you have to reserve it by filling out the Reservation of Entity Name form and sending it by mail. You can also apply online using the filing system available on the Arkansas Secretary of State website.
To reserve your business name, you will have to pay a $25 fee if you do it by mail and $22.5 for an online reservation.
You can decide to use a business name that is different from your legal business name. In that case, you should apply for a fictitious name (that is, a DBA name) with the Arkansas Secretary of State.
If you do it by mail, the fee is $25. On the other hand, if you decide to do it online, the fee will be slightly lower — $22.5.
Bonus step: Consider the URL domain for your business
After registering your business name, you should secure an URL domain for your business. If you plan to do your business online, you need to have a website as soon as you register your business.
Otherwise, it is best to have a domain secured even if you are not planning on creating a website right away. If you prolong buying your domain with the desired name, someone else may occupy it in the meantime.
To register your domain, you can go to the websites of the providers like GoDaddy, Domain.com, Namecheap.com, etc.
Before buying a domain name, you should check the database of available names to check if the name you want is free to get.
Step #6: Make a clear business plan
Having a business plan is an important part of the process of starting your Arkansas business.
Among other things, it will help you secure funding. Every potential sponsor will wish to see your business plan before reaching any decision.
Substep #1: Pick an appropriate business plan format
When writing a business plan, you should observe it as a summary of your business ideas.
Although its length will vary depending on the type of business you are starting, it should not be too long and stuffy.
U.S. Small Business Administration mentions 2 categories of business plans:
- Traditional — this is a more detailed plan with the aim of attracting investors, and
- Lean startup — this plan is shorter, with only key details.
Also, you may use some ready-made business plan templates to save time.
Substep #2: Draft an executive summary
An executive summary is a preview of your business plan. In it, you highlight the key elements of your business plan.
You will expand on all the important points later, but here, you should only mention them briefly. Ideally, it should be 1 page long.
Still, make sure not to miss out on any of these key points. You should present them so that everyone can understand what your business is about even without having to read the rest of your business plan.
Busy investors might not have the time to read the entire plan, and they might only read the executive summary. That’s why this section should be concise — but, at the same time, convincing enough to show them your business idea is worth investing in.
For instance, you are starting a catering business in Arkansas. The reason for your decision is the passing of the Arkansas Food Freedom Act, which enables you to prepare more types of food at home without special licenses.
In your executive summary, you should mention the following:
- The goals of your business,
- The location of your business,
- What it is that makes your business stand out,
- The expected costs and financial resources that you’ll need to start your business, etc.
Substep #3: Describe your business
In this section, you should describe the points from the executive summary in more detail.
In the case of opening an Arkansas catering company, these are some of the points you should expand on:
- What your menu will include (meat, vegan food, gluten-free products, etc),
- What events you will focus on (weddings, cocktail parties, etc.),
- What your office hours will be (you may have regular office hours or work by appointment),
- How many employees you will have and what positions they will occupy (food preparation workers, delivery people, accountants, etc.),
- How you are planning to advertise your business (for instance, you can create a business page on social media and post photos of your delicious dishes), etc.
Substep #4: Describe your products and/or services
This is the space to describe the products/services you will offer in more detail.
If you’re starting a catering business, this is where you should talk about the type of food you will prepare and for what occasions. You may, for instance, decide to specialize in a particular type of food, like sweets.
You should talk about who your potential business partners will be. For instance, you can decide not to distribute the food yourself and instead cooperate with wedding planning companies that will do that for you.
Also, you should mention the expenses you will have, such as those for:
- Kitchen utensils,
- Raw materials,
- Licenses and permits, etc.
Finally, talk about your target market and how you plan to make these people your customers.
Substep #5: Make conclusions, based on market analysis
Don’t forget to do thorough research on your competitors. Try to discover what it is that they offer and what makes them stand out — for instance, whether they have some special dish that makes them popular.
When you analyze your competitors, you will get a better idea of what you can do to stand out and get a market share.
Apart from competitors, you should think about your future customers.
For instance, try to discover how often people at your potential business location organize parties and other events for which they usually hire a catering company.
This way, you will know if it’s worth starting your business at that particular location or if you should think of another one.
Substep #6: Outline your management and organization structure
This is where you should describe how your Arkansas business will be organized.
If you start a catering company, you may decide to do all the work on your own — that is, start a sole proprietorship.
On the other hand, you can decide to hire workers to help you, either with food preparation or with other tasks such as accounting, supply, etc.
If you opt for hiring workers, you should mention the roles and responsibilities of all your employees and describe how work will be divided within your company.
Substep #7: Carry out customer segmentation
This is the part of your business plan that you should dedicate to a further description of your customers.
Depending on your target market, you may have several groups of customers.
For instance, your customer groups can be other businesses. These are usually regular customers that order food for various events, such as meetings, company parties, receptions, etc.
On the other hand, another group of customers that you may decide to serve are individual people or households. They are usually not so regular in ordering food, and they need catering services for special occasions, such as weddings, birthday parties, baby showers, etc.
Whichever group of customers you decide to serve, you need to come up with a strategy about how to approach them and meet their specific needs.
Substep #8: Make a marketing plan
This is the part of your business plan where you should write about the following:
- The marketing strategy for promoting your business,
- How you plan to beat your competitors,
- What your marketing expenses will be, etc.
If you decide on catering, you have to plan in advance how much money you are prepared to spend on marketing efforts. It’s a great idea to create a detailed strategic marketing plan, which will help you effectively plan your resources.
Be aware that you’ll also have to pay for renting a kitchen unless you have your own.
Substep #9: Make a logistics and operations plan
Your business plan should also contain a description of how a product is delivered to its end users.
You should also discuss how you get raw materials and where you store goods before delivery.
As mentioned above, we can use an example of a catering company in Arkansas.
You can decide to take care of food delivery yourself and get a vehicle for that purpose. On the other hand, you can hire a delivery service to do that for you instead.
In this section, you should also mention who of your staff will be responsible for preparing food for delivery and who will handle orders, pack the food, etc.
If possible, you should consider giving an option to your customers to order and pay for food online.
Substep #10: Make a financial plan
In this segment of your business plan, you should talk about the following financial projections:
- Financial plans for the future,
- Startup costs,
- The profit you need to break even, etc.
According to the website Talent.com, the average catering salary in Arkansas in 2023 is $26,081 per year.
Step #7: Secure the necessary funding
The next step in the process of starting your business is financing, which can be more than a little challenging.
Here are the most common options for financing your Arkansas small business.
Funding option #1: Bootstrapping
Bootstrapping is a form of funding your business with the money coming from your current income and your savings. After starting a business this way, you reinvest your profit into the business to help it grow.
Probably the most famous bootstrapped Arkansas business is Walmart.
It gained global popularity, proving that starting your business with nothing but your own means is not an obstacle to success.
Funding option #2: Friends and family loans
Another way to fund your small business is by asking friends and family for help.
However, if you opt for such a loan, you should make an agreement in written form as well, to prevent potential issues.
Funding option #3: Small business grants
Applying for a small business grant is a good option.
A grant is the amount of money given to an individual or a company for a particular purpose. This is the money you don’t have to pay back.
Some of these grants are given by the government, while others come from private organizations.
However, you have to meet certain requirements to be eligible for a grant.
Here are some of the grants you should consider for your small business:
- Rural Business Development Grants — if your business choice is a small rural business in Arkansas, you can apply for these grants.
- US Small Business Administration Grants — these grants are intended for nonprofits and other specific types of businesses. If your business falls into some of the categories covered by these grants, you may want to apply.
Funding option #4: Small business loans
Another option to help you with your startup expenses is taking out a small business loan from a bank or another lending institution.
As opposed to small business grants, loans have to be paid back within a certain period.
In addition to bank loans, there are also some other institutions that can give you a loan for your small business in Arkansas.
For instance, the US Small Business Administration (SBA) can help you get an SBA-backed small business loan. Namely, this institution acts as a guarantor and helps small businesses find a lender.
Funding option #5: Angel investors
Angel investors are individuals who help small businesses start by investing money in them. In return, they receive a part of the profit the business makes.
If you think this is the right form of financing for your Arkansas small business, start searching for your angel investor and apply for funding.
Funding option #6: Venture capitalists
Venture capitalist groups are groups of investors that fund larger startups.
If venture capital is your choice for your small business financing, look up venture capitalists operating in Arkansas and get in touch with them.
Step #8: Register your business
Regardless of the business structure you choose for your Arkansas business, these are the requirements for its registration:
- The name for your business — we’ve described earlier in this guide the procedure for obtaining your business name. To sum up:
- After choosing a name you want and one that follows the Arkansas business naming rules, check its availability.
- If it’s free to use, you need to register it with the Arkansas Secretary of State.
- The basic information about your business — this refers to the information about the owner(s), your business address, etc., and
- Your registered agent — this is an individual or a business located in Arkansas that will accept legal documents and government notices for your business. Except for a sole proprietorship or a partnership, forming any other business entity requires appointing a registered agent. The cost of a registered agent in the US is somewhere between $100 and $300 a year. You can also be your own registered agent, but you need to have an address in Arkansas to be eligible for that function.
Apart from this, there are some special requirements for registering each business entity. Below is a brief description of what you need to have to register your business entity.
Registering for a sole proprietorship in Arkansas
This is the simplest business structure that doesn’t require filing any documents with the Arkansas Secretary of State.
The only thing that you have to do is record your business name with your Arkansas local county clerk.
Additionally, if you decide to give your business a fictitious (DBA) name instead of your personal name, you can apply for it with the Arkansas Secretary of State. You can find more information about how to do it in the step related to naming your business.
Depending on the type of business you do, you may need to obtain special licenses and permits. You will learn more about them later in this guide.
Registering for a partnership in Arkansas
Registering a partnership is similar to registering a sole proprietorship — it doesn’t require any filings for documents except registering a business name or a DBA name.
Although the agreement between partners can be oral, it is recommended that you create a written form of it as well.
However, this refers only to general partnerships. If you want to form other types of partnerships, you will need to obtain certain documents (as we mentioned earlier in this guide).
Also, if you want your partnership to operate under a fictitious name, you have to apply for it with the Arkansas Secretary of State.
Registering for an LLC in Arkansas
Registering a limited liability company in Arkansas doesn’t take much time and paperwork.
Here is what you need to do:
- Register your business name — decide on your business name following legal rules, check its availability, and register it with the Arkansas Secretary of State. For more information and links, see one of the previous sections of this guide about naming your business and registering the name.
- Obtain a Certificate of Organization — apply with the Arkansas Secretary of State to obtain this certificate and make your business official. For more information and links, see one of the previous sections of this guide about choosing your legal business entity.
- Appoint a registered agent — file a form to appoint a registered agent with the Arkansas Secretary of State. You need to fill in the form and send it by mail with a fee of $50.
- Create an operating agreement — this document helps you establish the basic business rules for your LLC. In it, you decide on the percentage of ownership of each owner, their share of profit, rights and responsibilities of each owner, etc. This is not an obligatory document, but you are advised to create it.
- Get your EIN (Employer Identification Number) — this is a unique number that the Internal Revenue Service assigns to business entities for identification. We will describe the process of obtaining this number later on in this guide.
Registering for a corporation in Arkansas
The procedure for registering a corporation is more complicated than it is for other business entities.
Some of the requirements are similar to those for other business entities, but there are some additional requirements as well.
This is what you need to do to register a corporation:
- Register your business name — the procedure for registering the name of your corporation is similar to that for other business entities.
- Choose initial directors of your corporation — you have to appoint 1 or more directors to be in charge of the corporation before you hold the first shareholder meeting.
- Get your Articles of Incorporation — apply with the Arkansas Secretary of State to obtain this document and make your business official. For more information and links, see the section of this guide about choosing your legal business entity.
- Get an EIN for your corporation — we will describe the process of obtaining this number later in this guide.
- Write bylaws — these are written rules and procedures that regulate how a corporation should operate. This is not an obligatory document to file with the state. However, Arkansas law states a corporation must have bylaws and that they should be adopted at the initial meeting of the board of directors.
- Hold the initial meeting of directors — this is the first meeting at which the corporate bylaws are adopted.
When you form a corporation, it is considered a C-corporation by default. To make it an S-corporation (that is, a corporation with a special tax status), you should file Form 2553 with the IRS.
Registering for a nonprofit in Arkansas
If you want to register a nonprofit, most of the steps you will have to take are the same as for other business entities.
However, this business entity gives you a chance to apply for tax exemption with the IRS.
Here is what you should do to register a nonprofit in Arkansas:
- Register a business name for your nonprofit,
- Appoint a registered agent,
- Elect your board members,
- Obtain your Articles of Incorporation,
- Get your EIN,
- Create your nonprofit bylaws (rules for governing your nonprofit),
- Adopt a conflict of interest policy (a document that describes the procedures in case of a conflict between the personal interests of a director and those of the organization),
- Apply for the 501(c) status (this is the tax-exempt status that you can apply for by filing form 1023 with the IRS online).
Step #9: Obtain federal and state tax IDs
To be able to pay taxes for your Arkansas business, you must secure an EIN (Employer Identification Number) for your business. This number enables you to do the following:
- Pay taxes,
- Open a business bank account, and
- Handle payroll.
Every business entity, except sole proprietorships, must obtain an EIN. If you are a sole proprietor, you can use your social security number instead of an EIN.
You can apply for an Employer Identification Number online on the IRS website, or you can fill out the form SS-4 and submit it via mail. Whichever way you choose to apply, there is no fee.
The small business taxes in Arkansas are:
- State, and
- Local taxes.
Each state has its own laws regarding taxation. To learn more about the taxes in Arkansas, take a look at the Educational Guide for Arkansas Taxpayers by the Arkansas Department of Finance and Administration.
Apart from the state in which you start your business, the taxes you will have to pay also depend on:
- The business entity you choose, and
- The type of business you do.
The most important federal and state taxes for small businesses in Arkansas
Here are the basic employment taxes business entities are required to pay on the federal and state level:
- Federal Income Tax — every business entity is required to pay this tax. However, the so-called “pass-through” entities (sole proprietorships, partnerships, LLCs, and S-corporations) don’t pay this tax directly. Instead, business income passes through to the owners who pay taxes on profit by way of their individual income tax return.
- Payroll Taxes — these are taxes that both employers and employees pay. They include Social Security and Medicare (also known as FICA) Taxes and Federal Unemployment Taxes.
- Self-Employment Taxes — business entities that don’t have employees still have to pay taxes. These individuals work for themselves and are obliged to pay Social Security and Medicare taxes.
- Franchise Tax — some entities that want to do business in Arkansas are required to pay the Franchise Tax.
- Excise Taxes — these are special taxes that some entities have to pay due to their specific type of business. For instance, if a company produces goods such as tobacco or alcohol, it will have to pay excise taxes.
- Sales Taxes — some businesses like retail stores are required to pay these taxes.
- Property Taxes — if a business owns property, like land or vehicles, it will have to pay this tax.
We’ve listed some of the most common types of taxes that Arkansas business entities are required to pay.
However, when you start your business, make sure to consult an accountant or other professional to get informed about what taxes you will have to pay.
Step #10: Open business banking and credit accounts
When opening a business, you need a bank account to keep your finances.
To protect your personal liabilities, you should open a separate bank account for your business.
Apart from protecting your personal assets, a business bank account will help you keep track of your business earnings and expenses.
Opening a business bank account is not a complicated process and is pretty similar to opening your personal account. You just have to choose a bank and decide which option suits you best.
For a business bank account, you’ll need your Employer Identification Number or Social Security Number (if you are a sole proprietorship). Additionally, you need to bring documents that prove that your business entity is legal and registered.
Getting a credit card for your Arkansas business is also a good idea.
At the very start of your business, you will have a lot of expenses to take care of. However, your earnings won’t be enough to cover all these expenses because making a profit takes time. In that case, you can use a credit card as a form of financing.
Moreover, some credit companies offer various perks and benefits (travel rewards, cash back, etc.) to business credit card users.
Also, creating your business credit history will ease your way into getting small business grants and loans.
Step #11: Get the necessary licenses and permits
You will need a number of licenses and permits for your Arkansas business.
The type of licenses you need depends on various factors, such as:
- The industry your business belongs to,
- The type of products you sell,
- The location of your business, etc.
There are 3 types of licenses that you may have to obtain, and they can be:
- State, and
Here is a brief description of the most common licenses that an Arkansas business may need to get:
Getting a business license in Arkansas
This license is also known as a privilege license or a business tax certificate.
There is no general business license for businesses operating in Arkansas. However, almost all cities require obtaining a business license if you want to do business in that city.
Depending on the city, the requirements for a business license may vary.
If your business operates in more than one city in Arkansas, you will have to obtain a business license for each city.
To get a business license, you will have to pay a fee that ranges from $50 to $1,000, depending on the city.
In most cases, you will have to renew your business license each year.
To learn more about this license and any other local licenses you may need, contact a local county clerk.
Getting a sales tax permit in Arkansas
This permit is also known as a seller’s permit, and it’s the only license required at the state level. It is issued by the state of Arkansas to businesses that sell products and services that are subject to sales tax when sold in retail stores.
This permit enables such businesses to collect sales tax on the products/services they sell.
This license is issued by the Arkansas Department of Finance and Administration, and it doesn’t need to be renewed. However, you have to pay a $50 fee to obtain it.
Getting professional and occupational licenses in Arkansas
If your business operates within some industries that are regulated on the federal level, you may need to obtain special licenses and permits. These industries include:
- Maritime transportation, etc.
Although these licenses are rare for small businesses, you should still check if you need any of them. Visit the US Small Business Administration website and get informed about whether you need to apply for federal licenses and permits.
In addition to federal licenses, the state of Arkansas requires obtaining some professional and occupational licenses for certain types of businesses. These businesses include:
- Tattoo artists,
- Food service,
- Health and safety, etc.
Check out a list of licensed occupations in Arkansas on the Arkansas Division of Workforce Services website to see if your business falls into some of these categories.
Getting a zoning permit in Arkansas
This is a license obtained at a local level.
It gives you permission to use a building in that location as your office or as an object where you do business.
Also, if you want to build a new object for business purposes, you will need to obtain a zoning permit first.
Step #12: Choose an appropriate location for your business
When searching for a location appropriate for your Arkansas business, you should consider the following factors:
- The costs you will have (utilities, rent, etc),
- Competitors nearby,
- Potential customers nearby, etc.
When you decide on the location for your business, you should check zoning regulations as well.
For instance, if you operate a business in a building that was previously used for commercial purposes, you probably won’t have any trouble with zoning regulations.
However, if you decide to use a building that was intended for purposes other than commercial, you may need to apply for a special document that allows you to use the premises for running a business.
Even if you’ve decided to start your business from home, you have to check the zoning laws for your type of business. This is due to the fact that, in some neighborhoods, you can’t operate a business from home, or you need a special permit for that.
As for the cities in Arkansas that you should consider for your business, one of them is certainly Little Rock, the capital of Arkansas. Being the largest city, it offers plenty of opportunities for all types of businesses.
Apart from large cities, you should also take into account some smaller ones — like Fayetteville, with its growing economy.
In an article on the best places to start a business in Arkansas, the magazine Money and Politics has listed a couple of places in Arkansas that are worth giving a try (such as Batesville, Conway, Fort Smith, etc.)
Step #13: Get the insurances you need
Conducting business is accompanied by various forms of risk.
To protect your business from potential risks (property damage, financial losses, fire, etc.), as well as from potential legal action, it’s a good idea to get insurance.
Depending on the type of business entity, some forms of insurance are obligatory while others are recommended — either on the federal or state level.
You should reach out to an insurance agent to get informed about what types of insurance you will have to buy.
Take a look at the ebook about license, permit, and tax requirements for Arkansas small businesses to learn more.
Required insurance in Arkansas
Here are the required forms of insurance that you have to get for your Arkansas business:
- Workers’ compensation insurance — this form of insurance is required in Arkansas for all businesses that have 3 or more employees. Also, if your type of business involves risk (for instance, if you own a construction company), you are required to get this insurance. It covers medical costs if an employee suffers an injury or illness in the workplace.
- Unemployment insurance — this form of insurance is obligatory for employers with 1 or more workers in Arkansas. It protects workers financially when they lose their job and are not personally responsible for it.
Recommended insurance in Arkansas
The following are the forms of insurance that are not obligatory in Arkansas, but are still recommended to get:
- General liability insurance — this insurance gives protection from various risks, such as legal fees, property damage, injuries that may happen to your customers in your business office, etc. It is not required by law but is highly recommended to have.
- Professional liability insurance — this type of insurance is recommended to companies that deal with providing some form of services, like a consulting firm, a law office, an accounting agency, etc. It protects these businesses from risks such as a claim of negligence that may result in serious financial losses, libel, slander, etc.
- Commercial property insurance — this insurance covers damage done to business property in situations like theft, fire, severe weather conditions, etc.
- Business interruption insurance — this insurance covers losses such as failure to earn money due to interruptions of work (for instance, earthquakes). In Arkansas, this form of insurance is highly recommended since tornadoes, as one of the possible forms of interruption of work, frequently occur in some parts of Arkansas.
- Disability insurance — this form of insurance is required in certain states (for example, in California), but it is optional in Arkansas. It provides certain benefits to those employees that suffer an injury or an illness that prevents them from working.
Step #14: Build an internet presence
Creating an internet presence for your Arkansas business is of great importance.
Displaying your business online will make it more visible to potential customers and enable information exchange easily and quickly.
Here are some of the possible ways to make your business discoverable.
Substep #1: Create a website
A website is like a biography for your business.
It informs your prospective customers about your products/services and provides information such as your address, phone number, email, etc.
If you’ve bought the domain name earlier, you don’t have to worry whether your desired name is occupied by someone else. If you haven’t, you should check the database of free domain names and get your domain from a web hosting company.
Having a website for your business is your chance to inform your customers about how professional you are and show them that your product/services are top-notch.
You may think that you will have to hire a professional designer or a developer to create a website for you — this is not necessary. There are various website builders that help you create a website yourself, such as WordPress, Wix, Squarespace, etc.
But, it’s not enough to just build a website — you have to make it visible to your clients. It means that you have to optimize your website so that it can rank better than your competitors.
Substep #2: Open a business profile on Google
To reach a wide audience and make it easier for your target audience to discover your business, you should open your Google Business Profile.
This way, anyone searching for your company can just google its name and get the relevant company information in a matter of seconds.
On your Google profile, you can add the link to your website, and enter your office hours, business address, phone number, etc.
Google profiles are also connected to Google Maps, which enables users to reach your location easily.
The Google business profile app enables people to rate a business and ask it various questions. You can reply to their reviews and questions and thus get a chance to interact with your regular and potential customers.
Substep #3: Create business accounts on social networks
Social media offers a chance to promote your business in various ways.
You can create posts where you can advertise your products and post photos.
Photos can be a good way to show visually what you offer, and it’s especially useful for particular businesses, such as food catering.
If you own a food catering business, you can attach photos to your Instagram or Facebook profiles showing big parties with the food you prepared on a buffet.
Social media also offers the possibility to use sponsored ads to get to the target audience you choose.
For example, your business is located in Little Rock, and you want to reach customers living there or nearby. Or, if you offer catering services for birthday parties, you may want your ad to appear only to those people whose birthday is, for instance, within a month.
💡 Plaky Pro Tip
Some businesses even plan their social media posts in advance. Here are some ideas to help you make a custom social media content calendar:
Step #15: Hire employees
Unless you are a sole proprietor, you will have to find employees for your Arkansas business.
Before you start looking for people to join your team, you should get informed about the job market in Arkansas.
According to the US Bureau of Labor Statistics, the unemployment rate in Arkansas in February 2023 was 3.2%, which was lower than the national average of 3.6%.
In the same month, the labor force participation rate in Arkansas was 57.2%.
As of March 23, 2023, as ZipRecruiter reports, an average yearly salary in Arkansas is $51,880 (that is — $25 an hour).
As for the salary in Arkansas cities, the highest salaries are in the largest cities. This is understandable, as the cost of living is higher in big cities. Therefore, the highest average monthly salary is in Victoria — $7,257 ($41.87 an hour).
When choosing your employees, bear in mind the information above. You should also inquire about federal and state employment laws that employers in Arkansas are required to obey. Visit the Arkansas Department of Labor and Licensing website to learn more about state-specific labor laws in Arkansas.
Every employer in Arkansas that hires workers must pay employee taxes.
Additionally, an employer in Arkansas is required to report every new worker to the Arkansas New Hire Reporting Center within 20 days of hiring.
Step #16: Get the necessary business software
When starting a new business, you have to find the best way to stay organized, as you’ll have tons of tasks to take care of.
So, you should find your perfect business software and make it your assistant in everyday work.
With the help of project management software for small businesses, you will boost your productivity, save time, and stay organized. Software companies usually offer various pricing plans, so you should choose the one that suits you best.
If you don’t want to spend much and still want to have all the necessary features, task management software Plaky may be the right solution as it doesn’t lock the essential features behind a paywall.
Good business software has a variety of features that will make your work more effective.
We’ll list some of the advantages of this type of software for your business.
Advantage #1: It helps you manage tasks in a simple way
A simple solution for keeping all your work in a single place is to get task management software. This way, you will be sure that you won’t miss out on anything important to do.
It helps you stay up to date with business activities and automates a variety of tasks. In addition, you can keep track of deadlines for each task.
This way, you will have an overview of how much time you have for completing a task so that you can prioritize.
Advantage #2: It offers plenty of templates to personalize your workflow
Busy entrepreneurs are always pressed for time, especially when they’ve just started their business.
However, the perfect solution comes in the form of workflow templates for various types of businesses that you can find as part of project management tools. This way, you can personalize your daily tasks and manage them the way it suits you best.
For example, you can use a contacts template to enter information about all your business contacts and access your contact base easily.
Advantage #3: It simplifies team collaboration
If you decide to hire workers, team collaboration software is the solution you need to simplify your team communication.
That way, you will keep everyone on the team updated about any changes that occur. Additionally, every team member will know what tasks they are working on, which will minimize misunderstandings among team members.
FAQ about starting a business in Arkansas
We’ll answer the most frequent question that people ask when deciding to start a small business in Arkansas.
Do I have to register to do business in Arkansas?
If you want to start a sole proprietorship or a general partnership in Arkansas, there is no special document you need to file for.
However, if you decide to use an assumed name (DBA), you will have to file for it. Additionally, if you plan to hire workers, you will have to apply for an EIN.
As for other business entities, you do have to file for an appropriate document with the Arkansas Secretary of State.
If you want to start an LLC, you need to file for a Certificate of Organization.
If you decide to start a corporation, you have to obtain Articles of Incorporation.
Registering for a nonprofit also requires obtaining Articles of Incorporation.
For more detailed information about registering a particular type of business entity visit the Arkansas Secretary of State website.
Do you need a business license to start a business in Arkansas?
In Arkansas, there is no general business license that all businesses are required to have.
However, on the local level, there are cities and counties where every business is required to have a general license. For instance, Little Rock, the capital of Arkansas, requires business licenses for all businesses operating in that city.
Still, there are some licenses that are required at the state level in Arkansas.
Those businesses that sell certain products and services have to obtain a sales tax permit, also known as a seller’s permit. This permit enables them to collect tax on the products/services they sell.
Apart from these licenses, there are other licenses that are required at the state, local, and federal levels, and they apply only to certain professions and industries.
At the state level, if you sell certain products (for instance, alcohol or tobacco), you need to have a special permit.
There are also some licenses and permits at the federal level that some Arkansas businesses need to obtain, but they are pretty rare. Such licenses refer to those businesses that belong to industries regulated by the federal government, for instance, agriculture, aviation, nuclear energy, etc.
How much does it cost to open a small business in Arkansas?
The cost of opening a small business in Arkansas depends on the type of business you want to open, but also on the city/county where you want to open it.
For instance, if you want to open an LLC, a corporation, or a nonprofit, you will have to register it and obtain appropriate documents and pay a certain fee.
On the website of the Arkansas Secretary of State, you can download a PDF version of the registration document you need to fill out and send by mail, and pay a $50 fee. The same website offers an option to apply for these documents online, and in that case, you will pay a slightly lower fee — $45.
Many businesses in Arkansas are required to have a seller’s permit ($50).
As for other licenses, you will have to pay up to $1,000 to obtain those you need, depending on the type of business you do.
Also, you may need to obtain certain local licenses and pay certain fees for them, as well.
Arkansas business resources for further reading
We’ve shortlisted the most important websites you should refer to when starting a small business in Arkansas. They offer the information you need along with guidelines and documents to help you start your business in accordance with legal procedures.
- Arkansas Secretary of State — this website offers online and printable forms you need to fill out to get various documents, including those you need for the registration of your business.
- Arkansas Department of Finance and Administration — this is an official Arkansas government website where you can find information about taxes and licenses. You can also apply for some licenses via this website and pay taxes.
- Arkansas Division of Workforce Services — find help with hiring the right employees for your business. You can also find information about what licenses you will need to obtain for your type of business.
- Arkansas Small Business and Technology Development Center — visit this website to find useful information for assisting entrepreneurs in starting and growing their business.
- Internal Revenue Service (IRS) — this is an official US government website that you should visit to apply for your EIN and find all kinds of information regarding taxation.
- US Small Business Administration (SBA) — this website contains all sorts of helpful information for those starting a small business. For instance, it informs you about how to write a business plan, how to hire employees and pay taxes, etc. Additionally, you can learn about SBA loans and see if you’re eligible to apply.
Starting a business in Arkansas — Conclusion\Disclaimer
Thank you for reading our guide!
We hope that the information it offers will come in handy when starting your small business. However, don’t forget that the content of this guide is for informative purposes only and is not meant to give any legal advice.
Apart from that, you should bear in mind that this guide was written in Q2 2023, so any requirement changes that occur after this period may not be included in it.
We strongly advise you to consult with the appropriate institutions before acting on any legal matters.
You should also be aware that this guide refers to the state of Arkansas and that the business requirements in other states may differ.
Plaky is not responsible for any losses or risks incurred, should this guide be used without further guidance from legal, tax, or other advisors.