An S-corporation, or S-corp, is a common type of business structure that offers benefits to business owners such as tax advantages and liability protection. If you’re interested in starting one in Arkansas, you’ll need to understand the state’s requirements, file the necessary paperwork, and register your business name. Keep reading to learn more.
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What is an S-corp?
Before diving into the specifics of starting an S-corp in Arkansas, it’s important to have a general understanding of what one is and why it might be the right choice for your business.
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While all businesses are legally required to register with their respective states, the actual type of business structure you choose to operate under can influence a wide range of matters. This includes how your business is taxed, the level of paperwork you’ll be required to fill out, and your personal liability as a business owner.
An S-corp is similar to a traditional corporation, but with a few differences. The most important difference is that an S-corp is taxed like a partnership or an LLC, meaning the business itself is not taxed. Instead, profits and losses are tracked on your individual tax returns. This can result in potential tax benefits for small-business owners.
Other benefits of the S-corp structure include the ability to separate business assets from personal assets, easier access to outside financing like loans or investors, and potentially clearer lines of authority and responsibility among shareholders.
Steps for Starting an S-corp in Arkansas
Now that you understand the basics of what an S-corp is and why it might be a good option for your business, let’s walk through the steps that are required to create one in the state of Arkansas.
Step 1: Choose a business name
Before you can register your S-corp for tax purposes or obtain any necessary licenses or permits in Arkansas, you’ll need to choose a unique business name that reflects your company’s offerings. As you brainstorm potential names, remember to check that no other business in Arkansas is already using them.
You can conduct a free search of registered business names using the Arkansas Secretary of State website. If you find a name that’s available, consider reserving it for your exclusive use by filing a Name Reservation application with the Secretary of State’s Business and Commercial Filing Division.
Step 2: Draft and file articles of incorporation
Articles of incorporation are a legal document required for businesses seeking an S-corp status in Arkansas. Some important information that’s typically included in the document are:
- Your business name and address
- The purpose of your business
- Your business’s corporate lifespan
- The number of authorized shares that your business is authorized to issue
- Names and contact information for your business’s officers and/or directors
You will need to have your articles of incorporation signed by an authorized representative of your business. Once the document(s) is completed, they must be filed with the Secretary of State’s Business and Commercial Services Division.
Step 3: Acquire any necessary licenses and permits
Depending on the nature of your business, you may be required to apply for a state-issued license or permit before you can legally operate in Arkansas. Some example licenses or permits include:
- Sales tax permit: If you plan to sell goods or services in Arkansas, your business may need to obtain a sales tax permit from the Arkansas Department of Finance and Administration.
- Professional and occupational licenses: Some occupations or industries, such as contractors, plumbers, or tattoo artists - require mandatory licenses or permits through the Arkansas Department of Labor.
Step 4: Apply for EIN and file an Arkansas FG-407S election
Once you have completed all of the above steps to legally establish your EIN, you’ll need to obtain an EIN (Employer Identification Number) to run an S-corp entity and in Arkansas that means filling up Arkansas FG-407S form or by filing Form SS-4 with the IRS.
Failing to register with the state of Arkansas as an S-Corp could result in unnecessary extra taxes you are liable to pay as penalty when it is late. Remember, that both the IRS and corresponding state jurisdictions receive notice of your election status.
Conclusion
While starting an S-corp might seem daunting at first, the process can be simplified if you follow these steps: choose a business name, draft and file articles of incorporation, acquire control licenses, plus file an EIN.
Each step carries unique complexities specific to many states, and it’s essential that you understand the Arkansas state-specific requirements associated with each before moving forward. If all documents are properly filed on time you are likely ready to begin running your business entities. Good luck as you begin your new journey as a business owner!
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