Arkansas Startup

You've made the decision to form an Arkansas startup business—but which type of business is best for your specific needs?

On this Arkansas Startup page, we'll briefly explain the business types commonly formed in the state and the main characteristics of each. Some provide important tax benefits; others give owners limited liability protection; others are simple and easy to set up. Remember that while it's important to educate yourself as to the different types of businesses in Arkansas, it's a good idea to consult with a lawyer, accountant, or tax advisor to ensure that you've made the best choice for your situation.

Arkansas Sole Proprietorship

A sole proprietorship is a type of DBA (or "doing business as") that, not surprisingly, consists of a single person: the sole proprietor. This is the simplest type of business structure; it has an expiration date (but can be renewed), and it offers no liability protection for the owner.

A sole proprietorship has some limitations. It cannot deduct benefits; profits—and losses—must be claimed on the individual owners' tax return; it is limited to doing business in the county in which it is located and must register with the County Clerk's Office.

Arkansas Partnership

There are a few different types of available business partnerships in Arizona: a partnership DBA, a limited partnership, and a limited liability partnership.

Partnership DBA

A partnership DBA in Arkansas is similar to a sole proprietorship DBA: it will register with the County Clerk's office, and owners have no limited liability protection from debts or losses of the business. It will need to be renewed periodically if it continues to exist.

Limited Partnership

A limited partnership, as with a corporation or LLC, registers with the Secretary of State's office and is able to conduct business statewide. It is also more stringently regulated than a partnership DBA, and it is made up of two classes of partners: general partners and limited partners. The general partner or partners are responsible for actually managing the business; these partners do not have any liability protection against debts or losses of the partnership. The limited partners do not typically manage affairs of the business; they are more typically investors in the business, and they do have some liability protection.

Limited Liability Partnership

A limited liability partnership is similar to a limited liability company; the main difference is that the partners manage the business, while the members enjoy some amount of limited liability protection against the partners' actions. This type of partnership in Arkansas is also formed by registering with the Secretary of State's office.

Incorporate in Arkansas

When a for-profit business incorporates in Arkansas, it will choose one of two tax classifications: C corporation, or S corporation.

C Corporation

A C corporation is the default type of for-profit corporation in Arkansas. It has very flexible ownership requirements: there is no limit on the amount of shareholders, and no restrictions on the citizenship of those shareholders. Additionally, a C corp. can issue multiple classes of stock. But in exchange for this flexibility, a C corporation pays what is known as "double taxation"—the C corporation must pay a corporate income tax on its profits, and then shareholders pay taxes on personal income when those profits are distributed to them.

S Corporation

Upon filing, a corporation can elect to be classified at the federal level as an S corporation. This type of tax classification makes an S corporation a "pass-through entity"; unlike with a C corporation, business profits, rather than being taxed at the corporate level, are "passed through" to the shareholders intact as profit and taxed as individual income.

However, in return for this beneficial tax structure, an S corporation in Arizona also has certain restrictions: the Arizona Secretary of State's website specifies that an S corp. can have no more than 75 shareholders, all of which must be US citizens or resident aliens; it can issue no more than one class of stock; it is restricted from acting as a member of a corporation.

Arkansas Foreign Corporation

A corporation registered in a different state, in order to do business in Arkansas, must register as a foreign corporation by submitting an Application for Certificate of Authority. In addition to this application, that corporation must submit a Certificate of Existence, which can be obtained from the state of original registration, as well as a corporate franchise tax form.

Arkansas LLC

An LLC, or limited liability company, is a type of business that offers an IRS tax classification of partnership, but, like a corporation, it provides limited liability protection to the individual owners of the LLC. Additionally, the business can elect to be taxed as a corporation rather than a partnership if it elects to do so.

Arkansas Nonprofit Corporation

A nonprofit corporation is formed by submitting a nonprofit version of the Articles of Incorporation (for a reduced filing fee). Unlike a for-profit corporation, a nonprofit corporation does not have shares or shareholders; it does not operate for the benefit of the owners of the corporation. They are formed to benefit the public, to mutually benefit the members, or for religious purposes.

Specific types of nonprofit corporations, such as those formed for scientific, religious, or literary purposes (among others), can enjoy certain tax benefits under IRS Code 501c3: tax exemption, reduced postage, and other benefits.