Your business is growing, and you’re planning an expansion to other states. It’s a good problem to have!
But it’s not quite as simple as choosing another location. Because each state has different rules and requirements for business operations, you may need a “foreign qualification” in each state where you plan to do business.
It’s a common misconception that foreign qualification is only for businesses operating outside the U.S. But in this case, “foreign” refers to any business operating in a state that isn’t the state where the LLC was originally formed.
For example, if your LLC is registered in Washington and you are looking to open a second location in Arkansas, you may need to complete a foreign qualification in Arkansas before you can expand there.
Important Note: If you’d like to save time and have the foreign qualification paperwork taken care of for you, many of the best LLC services can handle this task for you.
Foreign qualifying is essentially asking permission to do business in the state of Arkansas. And the notion that “it’s easier to ask forgiveness than permission” doesn’t apply here. Failing to foreign qualify before starting a business in Arkansas yields consequences that are far costlier than registering in the first place. If you fail to foreign qualify, your business:
Let’s add up those penalties. Say you’ve been doing business in Arkansas for three years without foreign qualifying. The maximum civil penalty is $5,000, plus you’d have the annual franchise tax of $150 per year, not to mention your $270 Application for Certificate of Registration fee. It could end up costing you $5,720. It’s simply not worth the risk.
For more information on these penalties, take a look at A.C.A. 4-27-1501.
We’ve established why you shouldn’t do business without a foreign qualification. But what exactly does it mean to “do business” in Arkansas? You are considered to be “doing business” in Arkansas and required to foreign qualify if:
Then there are those pesky taxes. As mentioned in the section above, Arkansas requires a “franchise tax.” All LLCs, domestic or foreign, are required to pay this annual tax of $150. Foreign qualifying in Arkansas lets the state know that you’ll be paying a franchise tax each year. It’s important to always stay on top of your LLC’s taxation requirements to avoid any unwelcome surprises.
If you’re unsure whether or not you need to file for a foreign qualification in Arkansas, we suggest seeking legal counsel.
The foreign qualification, however, isn’t a hard and fast rule for all LLCs performing any kind of action in Arkansas. Certain actions do not qualify as “doing business” and therefore don’t require a foreign qualification. Some examples are:
For more detail on these exemptions, refer back to A.C.A. 4-27-1501. If you find your LLC’s only actions in Arkansas on this list, it’s likely that you won’t need to foreign qualify. But when in doubt, it’s best to seek legal counsel instead of risking the steep penalties.
Foreign qualification in Arkansas is simple if you know where to find and send your forms. If you or your legal counsel has decided to foreign qualify your LLC in Arkansas, go to the S.O.S. Business and Commercial Services “Forms/Fees” webpage. The form you need is FL-01, the “Application for Certificate of Registration of Foreign LLC,” which you can file online or by mail. For either option, you’ll need to gather the following information:
If you have all this, you’re ready to foreign qualify! The most efficient way is to file online.
But if you’re so inclined, you’re also welcome to download the form, fill it out, and mail it to:
Office of the Secretary of State
1401 W. Capitol, Suite 250
Little Rock, AR 72201
Or, if you live nearby, feel free to deliver your document and payment in person to the same address.
Of course, this application isn’t free. You’ll need to pay a $300 fee if filing by mail or in person, and a $270 fee to file online. Pay with a credit card online and with a personal check by mail or in person.
After your form is in and your fee is paid, sit back, take a deep breath, and pat yourself on the back. Your LLC is foreign qualified and you’re embarking on another chapter in the life of your business.
It’s important to remember Arkansas’ LLC naming requirements, as they still apply to foreign companies. When foreign qualifying, your business name must:
You can also reserve your Arkansas business name if you’re not quite ready to foreign qualify your LLC.
We think you should foreign qualify your LLC before you begin conducting business in a new state. If you don’t, your business could be subject to a broad range of fines and penalties for operating an LLC in a state where you don’t have permission to do so.
You’ll typically need to wait roughly two business days for Arkansas to process your foreign qualification documents. The state also typically offers to process walk-in orders as you wait, but at the time of this writing, these were backed up to the point where they also had a two-day turnaround.
Chances are, you’ll require at least one license or permit to operate your LLC in compliance with Arkansas state law. Unfortunately, the state provides no official online resources to provide more info about business licensing. However, we did find some helpful info in the Arkansas Small Business and Technology Development Center’s “License, Permit, & Tax Requirements for Arkansas Small Businesses” document.
The overall costs of operating an Arkansas LLC can vary considerably based on the specifics of your business. However, we created a helpful guide to help you identify and plan for every expense your LLC will face in this state.
The answer to this question lies in your personal preferences, but we can give some general pointers. An attorney will cost the most by a mile, but also provides expertise you won’t find with the other options. The DIY route is free of charge but can require quite a bit of legwork and provides no peace of mind that the process is being completed correctly.
Using an LLC service means your business will be foreign qualified by professionals who know what they’re doing, while also costing significantly less than a lawyer. This “best of both worlds” attribute is what makes LLC services our preferred option.
Using an online LLC service removes much of the hassle from the foreign qualification process. With these services, all you need to do is provide them with the name, location, and industry your business operates in, along with some info about yourself and your Arkansas registered agent.
The service then registers your Application for Certificate of Registration with the state to qualify your LLC to do business in Arkansas.
Disclaimer: The content on this page is for informational purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
Arkansas Business Resources
Foreign Qualification by State
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