You’re about to embark on a long and exciting journey, one full of hard work and rewards: starting a new business.
With wide eyes and big dreams, you’re about to enter the world of business ownership.
But beyond the initial thrill of the startup decision, there’s a lot to consider. In fact, if you’ve never done it before, starting a business can seem like an intimidating mountain of work. Out of all your responsibilities and tasks, you might not even know where to start.
But have no fear. The good news is that once you have everything planned out and understand the process, the formation process is smooth sailing. And this is your go-to guide.
Everything you’ve been wondering about, everything you need to do, every question you have – it’s all right here. By the time you’re through these 16 steps, you’ll be a bonafide business owner who’s prepared for sustained success.
Arkansas Entrepreneur Hack
When you form a business through business formation services (Example: ZenBusiness and LegalZoom), they’ll register your business with the state and help you check off most of the startup-steps in this list. They assist you with everything from building a website to opening a business bank account.
If you’d like to cut through the clutter and compare the best LLC services, see our comparison of the top 7 deals.
1) Write a Business Plan
Jumping into this endeavor without goals, directives, or a sense of direction can lead to a scattered, unproductive business.
A business plan lays the groundwork for your future success. It helps you analyze key elements of your business and forge pathways to achieve your goals. Here are a few things you should consider including in your business plan:
- Executive Summary (a separate document that gives a complete overview of your business’ purpose, plans, goals, competition, opportunities, etc.)
- Company description
- Market Analysis (opportunities, competition, etc.)
- Managerial or organizational structure
- Products and/or services
- Marketing strategies
- Funding goals
- Financial projections
Business plans aren’t just great for internal operations, but they give your business legitimacy in front of potential investors, customers, partners, and more. Need help? Check out this guide from the U.S. Small Business Administration.
2) Decide on a Business Name
You might’ve come up with the perfect name right away. If so, consider yourself lucky. Sometimes, deciding on a business can be difficult, requiring brainstorming meetings and late-night rap sessions. That’s because your name is your business’ identity and reputation. It should be something that’s unique and memorable but also defines your business purpose.
The name you choose will have certain restrictions based on the type of business you’re forming. For example, limited liability companies must include the words “limited liability company,” “L.L.C.,” or “LLC.”
Additionally, it must be available, not registered or reserved by an existing business. Before you start printing business cards and promotional materials, perform a name search to see if your name is taken. If not, go ahead and claim it by filing a name reservation or using it on your Articles of Organization.
IMPORTANT: To properly brand your business, you’ll want to acquire the domain name so nobody else can use it. Search for and find the perfect one through GoDaddy.
3) Decide on a Legal Structure
There are only a few types of business structures, but each one dictates some important parts of how your business will run.
The most popular types are the sole proprietorship, general partnership, limited liability company (LLC), S corporation, and C corporation. Most small businesses go with the LLC because of its unique blend of flexibility and personal asset protection.
However, you shouldn’t make this decision without reading up on all of your options. We’ve done plenty of research on each business type and developed side-by-side comparisons. Check out our LLC vs. Corporation and LLC vs. Sole Proprietorship comparison guides for a closer look.
4) Choose a Registered Agent
The Secretary of State needs a point of contact for your business, someone who will be available at your registered office address during typical business hours – 9am to 5pm.
This person is called a registered agent, and they serve as an intermediary with the state, receiving all of your company’s important legal communications and relaying them on to you. The Arkansas registered agent ensures that no important state documents, deadlines, or payments fall through the cracks, so you’ll want to choose a person or company you trust.
There’s no shortage of registered agent options, and the state only puts a few broad restrictions on the appointment. Your agent must:
- Be an individual Arkansas resident or a business entity authorized to do business in the state.
- Have a physical address in Arkansas (not a P.O. box).
- Have a mailing address in Arkansas.
- Not be the LLC itself. An Arkansas LLC cannot serve as its own agent.
When selecting an individual as your agent, it’s often wise to go with someone who is either familiar with your specific business (like one of the owners), or knows the ins and outs of maintaining a business, like an attorney. However, family members and friends are also viable options. You can even appoint yourself if you’d like.
Or, you can choose a registered agent service instead. These companies take care of all your registered agent responsibilities, and some will even handle your business formation and annual reporting as well.
Important: You must continuously maintain a registered agent on file with the Secretary of State. If your agent resigns or you appoint a new one, you’ll need to notify them by filing the appropriate documents.
5) Register Your Business
This is the big one, the step that officially creates your business. No matter which business type you choose, you’ll need to register it with the Secretary of State.
LLCs: To get started as a limited liability company, you’ll need to file complete and submit an Articles of Organization to the Arkansas Secretary of State. You can do so either online for $45 or as a hard copy for $50. This will officially register your business and put its information on record with the state.
Corporations: The startup process itself for a corporation isn’t wildly different than starting an LLC. But rather than filing the Articles of Organization, you will submit an Articles of Incorporation form.
Sole Proprietorship/General Partnership: There are no official forms or fees to register as a sole proprietor or general partnership. Simply start doing business and that’s it! While this is obviously faster and easier, we recommend incorporating your business because of the personal asset protection LLCs and corporations provide.
Foreign Entities: Perhaps you’ve already started your business, it’s just in another state, and now you’re expanding to Arkansas. In this case, don’t worry about the Articles of Organization or Articles of Incorporation. You will need to foreign qualify your business instead. This process involves a different document, the Application for Certificate of Registration, filed either online or as a hard copy. There are separate digital and paper forms for corporations and LLCs.
6) Get an EIN
The Employer Identification Number (EIN) is your ticket to doing state and federal taxes. It’s a nine-digit number, much like a Social Security Number, that identifies your business on tax documents.
If you’re forming an LLC, it will be considered a “pass-through” entity, so the business itself won’t pay federal income taxes. Instead, you and the other members will report income and losses on your personal tax returns.
But this doesn’t mean you can go without an EIN. If your LLC pays any type of business taxes – like Sales, Use, or Unemployment Taxes – or hires employees, you’ll need to get one.
Unsure if you need one? The IRS provides a useful “Do I need an EIN?” link on this page, where you can also apply for an EIN. If you go through the online application process, you’ll receive your number immediately.
Otherwise, you can submit a Form SS-4 by fax to (855) 641-6935 or by mail to :
Internal Revenue Service Operation
Attn: EIN Operation
Cincinnati, OH 45999
7) Open a Business Bank Account
LLC and corporation owners are required to keep their personal and business finances completely separate, or they risk losing their personal asset protection. To do so, you’ll need a business bank account.
The good news is that opening a business bank account is pretty simple. Just pay a visit to your bank’s local branch and sit down with one of the bankers there. You will need to present your formation documents, an EIN number, and some personal information. Then, you can direct all of your business income and expenses to that account instead of a personal one.
It doesn’t really matter which bank you choose, whether it’s a national giant like Chase or Bank of America or a small, local bank. However, it’s usually easiest to go with the one where you have existing accounts.
8) Handle Any Tax Obligations
Ah, taxes. They’re always part of the picture, especially when you run a business.
Familiarizing yourself with your business’ tax requirements will help you establish a solid financial plan going forward. LLCs don’t need to file a corporate tax return and pay federal income taxes, so you’ll handle these taxes as part of your personal return.
Corporations, on the other hand, will need to file a Corporate Income Tax Return, while sole proprietorships/general partnerships will need to pay self-employment taxes.
There are a few other taxes your business may owe in Arkansas, depending on your circumstances:
Franchise Tax: This is a tax levied on all Arkansas businesses for the privilege of doing business in the state. You’ll need to pay it every year as part of your Annual Report filing. It’s $150 for LLCs and corporations ($300 for corporations without stock), and you can find all the necessary forms here. This tax payment is due either online or by mail before May 1 each year.
Sales and Use Tax: Any Arakansas business that sells merchandise is subject to a Sales and Use Tax. This tax can change from year to year, so make sure you keep up with any updates here.
Withholding and Unemployment Insurance Taxes: These are required if your business hires and maintains employees. The Withholding Tax is through the Department of Finance and Administration, and the Unemployment Insurance Tax is housed under the Division of Workforce Services.
To help you out, The Arkansas Department of Finance and Administration offers a guide for new business taxpayers. Look it over for more exhaustive instructions on paying business taxes in the state.
9) Find an Accountant
Sometimes it’s easier to hand off your financial responsibilities to a professional. Not only will an accountant ensures that your taxes are filed and paid correctly, but they might also find a few ways to save your business money.
Bookkeeping and tax procedures are time-consuming and require some specialized knowledge. Balance sheets, financial reports, cash flow, audits, and much more – an accountant can ensure that your company operates smoothly and streamlines its expenses.
This can be expensive depending on the complexity of your finances, but the benefits an accountant offers can be well worth it.
10) Create an Operating Agreement
An operating agreement constructs a framework of procedures and standards for your business. This is where you can lay out processes for member conduct, asset allocation, compensation policies, voting procedures, dissolution, and much more.
While operating agreements aren’t technically required in Arkansas, they are essential to your business’ stability and success. They provide a safety net in legal disputes and legitimacy in front of banks, courts, government agencies, and other businesses.
You can either draft one yourself using an online template, or you can hire an attorney or an incorporation service to take care of it for you.
Once you’ve drafted your agreement, it must be approved by each of your LLC’s members, then filed with the rest of your business documents. You do not need to submit it to the Secretary of State.
11) Acquire the Necessary Licenses
After filing your formation documents, your business is legitimate, but it might still need specific licenses before opening its doors in Arkansas. This depends entirely on your business type and purpose, but there are three main state licenses you should know:
Professional/Occupations Licenses: Not every entity needs a license to operate in Arkansas, but certain occupations and business purposes require them. For example, cosmetologists must obtain licensure through the Department of Health and electricians must get them from the Department of Labor. Use the search bar on Arkansas.gov to search for your occupation or business purpose to find any necessary licenses.
Local Licenses: Your specific city, county, or municipality might have its own licensure requirements. Take a look at your local government’s website to find out.
12) Consider Business Insurance
Even though it’s not pleasant to consider, there’s always a chance that unforeseen events might take a toll on your assets.
While forming an LLC or corporation offers some personal asset protection, additional business insurance can also protect your business assets in cases of lawsuits, damages, etc. You can acquire insurance for your business products, vehicles, specific occupations and much more.
If you hire employees, you’ll also need to get workers’ compensation insurance. SBA.gov has a useful guide for determining which forms of insurance your new business might need.
13) Build a Website
Your company’s digital presence is just as important as its physical one. Like it or not, most potential customers will find your business online, and if you don’t exist online, you’re missing out.
But don’t worry, you don’t need to be an HTML or web design expert to build a website. Sites like WordPress and Squarespace make it easy to construct an elegant and responsive website, no coding necessary. But if you’re not comfortable or confident doing it on your own, you can always hire a professional web designer to take care of it for you.
14) Launch Social Media Accounts
Making your mark on the digital landscape doesn’t start and end with your website. Most successful businesses also have a robust social media presence on multiple platforms. Facebook, Twitter, and Instagram are all great ways to connect organically with potential customers and develop your brand voice.
Just don’t forget to publish consistent social media content, or you’ll have trouble building a base of followers.
15) Understand Ongoing Arkansas Requirements
After you’ve launched your business, things will likely be moving at 100 miles per hour as you evolve and grow. But in all of the excitement, you can’t forget your state’s ongoing compliance requirements. Every state has its own annual or biennial business requirements.
Every year, your Arkansas business will need to file an Annual Report and pay a Franchise Tax to maintain its good standing with the state. Here’s the good news: they’re both part of the same form. It costs $150 for both LLCs and corporations ($300 for corporations without stock) and is due by May 1. Late filings will incur a $25 penalty plus interest for each day it’s overdue. You can find Annual Report/Franchise Tax forms for every business type here.
Make sure you keep up with your annual reports and franchise taxes, or your business will lose its good standing with the state!
16) Check Out Arkansas Small Business Resources
You’re not on this journey alone. There are plenty of free resources available to make starting and growing your business a smoother, easier process.
Organizations and programs across Arkansas help propel businesses forward with consulting, loans, financial advice, and more. They’re all outlined in this document from the SBA Arkansas district office. Equipped with the knowledge in this guide and the SBA.gov resources, your business is ready to take off and make waves in Arkansas.