Starting a Business In Arkansas- A Comprehensive Guide

Photo of pinned Little Rock on a map of USA. May be used as illustration for starting a business in ArkansasHow to Start a Business in Arkansas

A business journey in Arkansas can be exciting but requires proper preparation and strategy. This guide is intended to serve as a comprehensive resource for entrepreneurs, whether you’re just beginning to cultivate a business idea or ready to start immediately. The details in this article will help you move beyond thinking about your products and services into forming your business entity and operating properly in Arkansas.

What Small Business Owners Say About Starting a Business in Arkansas

Top two advantages of starting a business in Arkansas:

  1. Favorable business climate: Arkansas has a reputation for being business-friendly, with competitive tax rates, a skilled labor force, and supportive local government initiatives aimed at helping small businesses thrive.
  2. Strategic geographic location: Situated in the heart of the United States, Arkansas provides easy access to multiple major markets, presenting a significant advantage for businesses in industries like manufacturing, distribution, and logistics.

Top two challenges of starting a business in Arkansas:

  1. Rural economy: Much of Arkansas is rural, which can create challenges related to accessibility, infrastructure, and customer base, especially for businesses dependent on a large volume of foot traffic.
  2. Limited skilled workforce: While Arkansas does have a skilled labor force, there can be competition for these workers, especially in high-tech and specialized fields.

Throughout this guide, we will delve deeper into each of these aspects, offering detailed insights and relevant information tailored to the specific business environment in Arkansas.

Regulatory Factors and Taxes in Arkansas

Arkansas has a regulatory framework to safeguard its diverse ecosystems, ensure public safety, and protect consumer interests. However, the state is also committed to creating a balanced environment conducive to the growth of businesses.

Understanding the landscape of corporate income tax is essential for any business’s financial planning. In Arkansas, corporate income tax rates are graded based on a corporation’s net taxable income, ranging from 1% to 5.30%.

Arkansas enforces a statewide sales tax, which currently stands at 6.5%. However, municipalities have the authority to impose additional local sales taxes, which can result in a combined rate between 6.5% and 9.46%.

Besides corporate and sales taxes, businesses operating in Arkansas may need to consider property taxes and any industry-specific taxes or fees. Hence, a thorough understanding of Arkansas’s tax structure is crucial for effective budgeting and compliance with all state and local tax laws.

Choosing a Business Structure

There are five primary types of businesses. Each type of business entity is described below.

Sole Proprietorship

A business owned and operated by one individual with no legal distinction between the business and the owner. The owner is personally responsible for all debts and liabilities of the business. Most small business owners in Arkansas use this business type.

Limited Liability Company (LLC)

A flexible business organization that combines the liability protection of a corporation with the tax benefits and simplicity of a partnership. Owners of an LLC are called members, and their assets are typically protected from the debts and liabilities of the business. You have the flexibility to define many aspects of

how your business will work in your Articles of Organization

S-Corporation

A type of corporation allows for pass-through taxation, meaning that profits and losses are passed through to the shareholders and reported on their tax returns. S-Corporations are limited to 100 shareholders and must meet specific eligibility requirements. An S-corp can be particularly advantageous if the founders or investors have other income. If the business doesn’t generate a profit in any year, the shareholders can use the losses from a tax perspective.

C-Corporation

A separate legal entity from its owners (shareholders) means that the corporation can enter into contracts, own assets, and sue or be sued. C-Corporations are subject to double taxation, meaning that the corporation and the shareholders are taxed on profits.

A Note About S-Corps and C-Corps

For both S-Corporations and C-Corporations, your business formation documents will include Articles of Incorporation, sometimes called a Corporate Charter. The specific requirements and format of Articles of Incorporation can vary by jurisdiction. It is advisable to consult with a business attorney or online legal service such as Legal Zoom to ensure compliance with local laws and regulations when drafting and filing these documents.

Limited Liability Partnership (LLP)

A partnership that limits the personal liability of its partners. LLPs are typically used by professional service providers such as lawyers, accountants, and architects. Each partner is protected from the other partners’ wrongful acts, omissions, and negligence, but they may still be personally liable for their own actions.

Distribution of Businesses

Business Type Percent of Businesses in Arkansas
Sole Proprietorship 60-65%
Limited Liability Company (LLC) 20-25%
S-Corporation 7-10%
C-Corporation 3-5%
Limited Liability Partnership (LLP) 10%

It’s important to note that the exact breakdown of business structures in Arkansas can fluctuate over time due to new business formations and closures, changes in tax laws, and other factors. The specific industry and location may also impact these numbers. The information may also include companies registered in other states operating in Arkansas.

What Is an Employer Identification Number – EIN?

Definition of an EIN or Employer Identification Number

An Employer Identification Number (EIN) is a nine-digit number assigned to businesses by the Internal Revenue Service (IRS) in the United States. This unique identifier is critical for various business tax matters and is known as the Federal Tax Identification Number (TIN) or Federal Employer Identification Number (FEIN).

Do I Need One to Start a Business in Arkansas?

An EIN is essential in Arkansas to establish a corporation or partnership, hire employees, apply for business licenses, or open a business bank account. This key identifier is also crucial for efficiently managing your company’s tax obligations.

How Do I Get One?

Acquiring an EIN is a simple process. You can apply directly on the IRS website or mail or fax Form SS-4 to the IRS. The online application process is the fastest, providing your EIN immediately upon completion.

For further information or assistance, you can directly contact the IRS:

Phone: 1-800-829-4933 (businesses)

Website: https://www.irs.gov/businesses/small-businesses-self-employed/employer-id-numbers

How to Start a Business in Arkansas – Important Registrations

Registering My Business Name

In Arkansas, you must contact the Secretary of State, Business and Commercial Services division, to register your business name. Contact them at (501) 682-3409 or visit their website: https://www.sos.arkansas.gov/business-commercial-services-bcs.

Registering a DBA (Doing Business As) If Relevant

If your business operates under a name different from its legal name, you must register a fictitious or DBA name. This can be done through the Arkansas Secretary of State’s Business and Commercial Services division. Arkansas has 75 counties, each with a county government providing local services.

The Association of Arkansas Counties provides a directory of all counties and their contact information, which should benefit businesses looking to understand local regulations or requirements: http://www.arcounties.org/counties/.

Registering for Payroll State Payroll Taxes, Unemployment Insurance

To register for state payroll taxes and unemployment insurance in Arkansas, you must create an account with the Arkansas Department of Workforce Services. Visit their website at https://www.dws.arkansas.gov/ or contact them at (501) 682-2121.

Registering for Worker’s Compensation Insurance

In Arkansas, businesses must contact a licensed insurance provider that provides workers’ compensation coverage to register for workers’ compensation insurance. Your payroll service should also help with workers’ comp. If you use a payroll service, they should also be able to provide worker’s comp.

Registering for Collecting Sales Tax

Arkansas imposes a statewide sales tax. To register to collect sales tax, businesses should contact the Arkansas Department of Finance and Administration. You can reach them at (501) 682-7104 or visit their website: https://www.dfa.arkansas.gov/.

Registering for Income Tax

Businesses operating in Arkansas should register to pay state tax on income through the Arkansas Department of Finance and Administration. Their contact is (501) 682-7104, or you can visit their website: https://www.dfa.arkansas.gov/.

Registering to Pay Property Tax

For property tax registration in Arkansas, you should contact your local county tax assessor’s office. These offices are found on the Arkansas Assessment Coordination Division’s website: http://www.arkansas.gov/acd/.

Permits for Starting a Business in Arkansas

Do I Need a Business Permit to Operate a Business in Arkansas?

At the State Level: If you operate in specific sectors in Arkansas, you will need state-level permits or licenses. The Department of Finance and Administration for the State of Arkansas website provides crucial information. Visit https://www.dfa.arkansas.gov/ to determine if your business requires any state permits or licenses.

Check With Your City: Contact your city’s local government or business licensing office to verify if city-specific permits are needed for your business operations. Each city might have different rules based on local laws.

Check With Your Country: To run your business in your country, following specific regulations and obtaining the required licenses is essential. You can contact the clerk’s office in your county to get this information.

Check With Your County: Arkansas, having a structured county system, may have extra rules and licensing requirements. Contact your local county office for more details about regional rules and business permit prerequisites.

The requirements can significantly vary based on your business’s nature and location. Hence, checking with the respective authorities before starting your business operations is highly recommended.

How do I learn about any special permits I need for my business?

When starting a business in Arkansas, it is essential to determine if any special permits or licenses are required for your industry. These requirements can vary depending on location, business type, and size. Conducting detailed research to avoid any legal issues or potential fines is important.

One of the primary resources for obtaining this information is the Arkansas Department of Finance and Administration. They assist businesses with licensing and permit needs and offer specific rules and guidance on their website. You can also schedule a meeting with their team for further assistance.

Additionally, getting support from your local chamber of commerce or small business development center can help manage regulatory compliance. These organizations specialize in guiding small business owners through complex rules and regulations.

Where Can I Find a Mentor to Help Me Succeed?

Becoming an entrepreneur in Arkansas can be both thrilling and challenging. To overcome these challenges, seeking guidance from experienced professionals such as lawyers, local business groups, and organizations like the Service Corps of Retired Executives (SCORE) is wise. Moreover, connecting with other entrepreneurs and finding a mentor can provide valuable advice and assistance as you establish and expand your business in Arkansas.

Fortunately, Arkansas has various resources and groups that offer tailored assistance and guidance to local business owners. Here are some important ones to remember:

  1. The Venture Center: Located in Little Rock, helps entrepreneurs turn their ideas into successful businesses through educational programs, networking events, and mentorship opportunities.Little Rock, Arkansas, USA skyline on the river at twilight.
    Contact Info:
    Phone: (501) 404-9875
    Website: https://www.venturecenter.co/
  2. Arkansas Small Business and Technology Development Center: This center provides many services for small businesses, from crafting a business plan to figuring out finances and marketing strategies.
    Contact Info:
    Phone: (800) 862-2040
    Website: https://asbtdc.org/
  3. Northwest Arkansas SCORE: SCORE is a national organization offering free business mentoring, budget-friendly workshops, and templates and tools to help you start or expand your business.
    Contact Info:
    Phone: (800) 862-2040
    Website: https://northwestarkansas.score.org/

These resources offer a strong base for new businesses or those seeking extra help to get essential info, grow their network, and drive their business forward.

The Economy of Arkansas

If you’re planning to start a business in Arkansas, it’s crucial to understand the economic landscape. This knowledge can help you grasp financial trends, consumer habits, and potential growth chances. A thriving economy creates a suitable environment for new businesses to flourish.

Economic Overview

Average Household Income

In Arkansas, the median household income is $52,213, a little lower than the national average of $70,784 in the United States. This still gives businesses a substantial customer base to tap into.

Average Level of Education

According to education rankings, Arkansas ranks 47th overall and 27th in education quality. One contributing factor is the low percentage of people with college experience or a degree, ranking at 48 out of 51. Similarly, Arkansas ranks 48th in the percentage of residents with a bachelor’s degree.

About 88.7% of Arkansans aged 25 and over have at least a high school diploma, and around 25.3% have a bachelor’s degree or higher. This means a large part of the population has formal education, which could lead to a skilled workforce beneficial for businesses.

Consumer Spending per Capita

Per capita personal consumption expenditures (PCE) in Arkansas are about $34,479. This shows considerable consumer spending, indicating a lively market for various goods and services. In addition, the steady growth of PCE suggests a growing market and better chances for business revenue.

Top Industries in Arkansas

Arkansas, known for its diverse economy, is rich in various booming industries. According to data from the University of Arkansas, agriculture is a major sector, contributing about $16 billion annually to the state’s economy. The state stands tall as the top U.S. producer of rice, contributing more than 40% of the nation’s supply. Additionally, Arkansas ranks third nationally in poultry and egg production, solidifying the state’s vital role in the nation’s food supply chain.

Manufacturing is another significant contributor to Arkansas’s economy. According to the National Association of Manufacturers, manufacturing made up about 13% of the state’s total output, equating to $24.45 billion. In addition, it employs nearly 12% of the state’s workforce, showcasing the industry’s vital role in the job market. The state’s manufacturing highlights include transportation equipment, food, and fabricated metal production.

In the retail sector, the presence of Walmart, headquartered in Bentonville, adds substantial weight to Arkansas’s economy. As of 2022, Walmart employed over 1.5 million people in the U.S., with a considerable number in Arkansas, making it a significant job creator. Its influence has also helped foster the growth of the logistics and transportation industry in the state, building a well-rounded retail and transportation sector.

Arkansas’s healthcare industry is also of critical importance. According to Arkansas Hospital Association data, in 2021, the healthcare industry directly provided more than 180,000 jobs, accounting for around 14% of the state’s employment. Moreover, as the demand for healthcare services grows with the aging population, this industry is set for steady growth in the coming years.

Looking towards the future, technology and renewable energy are emerging as key sectors in Arkansas. According to CompTIA, the state’s tech sector grew by 30% between 2017 and 2022, indicating a thriving environment for tech startups. Meanwhile, according to the Solar Energy Industries Association, Arkansas is gaining momentum in renewable energy, with over 300 megawatts of solar power installed. These promising sectors are expected to add diversity and resilience to the Arkansas economy in the future.

  1. Identify Complementary Businesses: Identifying complementary businesses is an important strategy for growth and success. For example, in Arkansas, the thriving agricultural sector presents numerous opportunities. Companies that provide farming equipment, irrigation systems, seed suppliers, or pest control services can prosper alongside the state’s robust agriculture industry. Companies offering industrial maintenance, equipment repair, and safety training services in manufacturing can find a profitable market. Complementary businesses can also arise from the retail sector. With Walmart’s massive footprint, companies providing retail technology solutions, logistics, or marketing services have significant growth potential.
  2. Leverage Workforce Talent: In Arkansas, leveraging workforce talent is key to gaining a competitive edge. The state’s workforce is already skilled in various sectors like agriculture, manufacturing, and retail. In addition, with a booming tech industry, there’s a growing pool of IT professionals and software engineers. Moreover, the healthcare industry employs many professionals, providing opportunities for businesses requiring such expertise. For instance, biotech firms, telehealth services, and health tech startups could leverage the rich healthcare talent pool in the state.
  3. Collaborate with Industry Leaders: Collaborating with industry leaders can lead to substantial benefits. For example, in the retail sector, companies could partner with Walmart for joint marketing campaigns or product distribution. In the manufacturing sector, collaboration could be technology sharing or joint product development. The rising tech sector presents partnership opportunities in software development, cybersecurity, and data analysis. Partnering with leaders in the renewable energy sector, such as solar panel manufacturers or wind turbine companies, could drive innovation and expansion in this burgeoning field. Collaboration opens new opportunities and provides businesses with an excellent learning and growth platform.

Workforce and Talent

When considering hiring and recruiting strategies, understanding the type and quality of workforce and talent available in Arkansas is crucial for businesses.

Unemployment Rate

Arkansas has a thriving economy with various industries, and the latest available data shows an unemployment rate of 2.8%. This rate indicates the job market’s health and the potential workers available to businesses.

Minimum Wage

The current minimum wage in Arkansas is $11.00 per hour. This number is essential for businesses to know when planning their budgets and deciding on employee wages.

Average Age and Demographics

The median age in Arkansas is about 38.3 years, slightly higher than the national average. Additionally, the population distribution is 48.7% male and 51.3% female. These demographics can help businesses adjust their products and services to meet different age groups and genders’ unique needs.

Breakdown of People with Various Levels of Education


In Arkansas, the distribution of education among people aged 25 years and older are as follows:

  1. 25.3% hold a bachelor’s degree or higher.
  2. 88.7% have a high school diploma or equivalent.
  3. 15.2% have no high school diploma.

These education level statistics help businesses understand the potential talent pool and hire employees who meet their needs.

Top Areas of Skilled Workers for Residents of Arkansas

With its diversified economy, Arkansas offers abundant opportunities for skilled workers across multiple sectors. One of the areas that offers many options is the healthcare industry. With hospitals and healthcare facilities across the state, there is a strong demand for professionals like doctors, nurses, pharmacists, and allied health professionals. For example, the University of Arkansas for Medical Sciences is a major employer and contributor to the state’s healthcare sector.Little Rock, Arkansas, USA at the state capitol.

The manufacturing industry is another top area where Arkansas residents can find numerous opportunities. The state is home to various manufacturing companies, from food processing to auto parts production, creating jobs for machinists, production supervisors, quality assurance specialists, and maintenance technicians. The manufacturing sector is also known for offering jobs that provide on-the-job training, making it a good option for those looking to upskill and progress in their career.

Agriculture also remains a key sector in Arkansas, known as the country’s leading producer of rice, broilers, and turkeys. Skilled workers in this sector include farm managers, agricultural scientists, and equipment operators. It’s also an area where innovations are happening, such as using technology in farming, thus offering opportunities for tech-savvy individuals interested in applying their skills in a new context.

The retail sector is another area that provides a broad range of opportunities. Arkansas is home to Walmart, one of the world’s largest retailers. Jobs in this sector range from customer service roles and store management to logistics and supply chain roles supporting the distribution of goods to stores across the region.

Lastly, the tech industry in Arkansas is growing, creating opportunities for software developers, IT specialists, and cybersecurity experts. In addition, the state is becoming a hub for tech startups, with initiatives like the Arkansas Innovation Hub and the Venture Center supporting entrepreneurs and tech talents. As these businesses grow, they’ll continue to generate new jobs and drive demand for skilled tech workers. Therefore, Arkansas’s emerging tech sector could provide promising prospects for those with tech skills or those considering retraining.

Overall, Arkansas’s diverse economy means opportunities for a broad range of skilled workers. The key is to match individual skills and interests with the right sector and role, and with the state’s vibrant economy, there’s something to suit almost everyone.

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