So you’re considering starting an Arkansas Professional Limited Liability Company (PLLC) with other people in your profession, but you’re new to starting a business. Let’s begin with the basics: What is a PLLC in Arkansas?
A PLLC is a business entity that is owned and operated by members of the same profession and can only offer services related to that profession. It’s different from the more rigid professional corporation (PC), which is guided by shareholder votes and must default to C corp taxation status. A PLLC offers flexibility and individual accountability. The entity particularly appeals to:
Professional limited liability companies aren’t limited to these professions, though. They’re an option for any group of professionals who hold licenses to practice in Arkansas, such as engineers.
As you would probably expect, there are strict rules concerning the choice of business name. Every Arkansas PLLC name must include the words “Corporation,” “Incorporated,” ‘Company,” or a recognizable abbreviation, such as PLLC. The name also needs to be different and distinguishable from those of other businesses. The Arkansas Secretary of State may insist on alternate wording if the name too closely resembles another business entity registered in the state. You can check to see if your name is already in use here.
When you find the perfect name, ZenBusiness has a handy name reservation service. If you want to go a step further, you can search out a domain name for your PLLC website and use our domain registration service.
The agent’s role is to accept legal notices such as subpoenas for the PLLC on behalf of its members. It’s a legal requirement to have a registered agent in Arkansas. Complete and file Arkansas Articles of Organization. If you’re intending to form an Arkansas professional limited liability company, ZenBusiness and its partners can help by providing registered agent services.
When the Articles of Incorporation are accepted by the state, the company is legally formed.
A key decision you’ll need to make when forming a PLLC is who will manage the company. There are two options: member-managed and manager-managed. Member-managed is when the licensed professionals oversee the day-to-day operations as well as hold ownership interest and make decisions on the PLLCs behalf. Manager-managed is when the PLLC is managed by one or more managers with or without any stake in ownership.
An important factor in the final decision is the number of members who are forming the PLLC. If there are relatively few, member-managed is a popular choice because it enables members to be involved in the day-to-day tasks and decision-making.
Manager-managed becomes appealing when the PLLC has numerous members who collectively might slow down operations. Manager-managed can centralize authority, enabling one or more managers to direct daily operations while the members get on with their work.
The operating agreement is a legal document that clearly establishes the company’s rules, describes its internal structure, and explains how the PLLC will be managed. Although not a legal requirement in Arkansas, an operating agreement is a strong indicator of a fledgling company’s credibility. It also enables members to specify the company’s purpose, the capital contributions of each member, and the profit distribution.
To identify a business for tax purposes, the IRS assigns it an Employer Identification Number (EIN). A PLLC needs this to open a business bank account, file its federal taxes, and hire employees. ZenBusiness offers a useful service that helps companies apply for an EIN. You’ll also need to consider state and local tax requirements.
Arkansas companies who file their taxes by the calendar year must do so by April 15. Fiscal year filers must complete them on or by the 15th day of the fourth month after the close of the fiscal year. It is possible to request an extension by requesting form AR1055-PE before the filing date. In most cases, an Arkansas PLLC that’s registered with the secretary of state must pay a flat-rate $150 franchise tax. This tax isn’t linked to the company’s profits and must be filed and paid annually. This can be done online or by mail or fax.
Depending on where your Arkansas PLLC is located, you may have to pay local taxes. Some larger cities provide online guidance pages and documents, which can be accessed from the links below.
Sales tax is a tax that a PLLC must pay to do business in Arkansas. Essentially, your PLLC is collecting taxes on taxable goods and services for the state of Arkansas. You should collect these taxes at the point of sale because your PLLC will be liable for any shortfall. You might also suffer penalties and interest. In addition to the state sales tax, you may find that you have one or more local sales taxes to take into account.
Although Arkansas doesn’t require a general business license, it’s likely that a PLLC will need one or more licenses and permits. These can include permits for buildings, signage, alarms, and zoning. ZenBusiness can get you squared away with our business license report service. You can get more information on the DFA website.
Obviously, it’s vital that every member of the PLLC holds the correct state license for their profession and industry. For more information, take a look at a comprehensive list of licensed occupations in Arkansas, with contact details for each.
You should note that there is no central location available where you can check all of your licenses and permits. This is due to the varying federal, state, and local levels, and in some cases, industry-specific licensing.
Although the State of Arkansas doesn’t require businesses to have general insurance, it’s good practice for the organization. Adequate insurance can cover you against liability claims, such as visitors injured on your business premises.
As with general insurance, there’s no requirement for professional malpractice insurance in Arkansas, but it makes sense. If your PLLC is being formed by a team of professionals, each should have professional malpractice insurance. Their insurance should cover them against individual claims and allegations that may involve the PLLC in litigation.
By law, employers with three or more employees in Arkansas must have workers’ compensation insurance. It’s wise to check, even if your PLLC employs less than three people, because there are some exceptions. It will be your duty to purchase the insurance, and you can’t pass on the costs to your employees. Failure to purchase workers’ compensation insurance could result in penalties for the PLLC.
Although a PLLC offers some protection for the personal wealth of its members, it doesn’t if personal accounts are linked to its earnings. You’ll need to set up a business bank account to separate your personal and professional finances.
At ZenBusiness, we are proud to support small businesses through a variety of different tools and services. Whether you need a registered agent service, want to reserve a business name, or looking to register a domain, our goal is to help you stay on the road to success. Check out our services, and contact us today to see how we can help you grow your company.
Fees for submitting applications online are $45, while paper fees are $50.
It’s not a requirement, but the Arkansas Secretary of State recommends getting professional legal advice.
Professional corporations are on file with the Business Services Division of the Arkansas Secretary of State.
Arkansas law doesn’t define restrictions to professionals from different fields forming a PLLC together. However, standard practice in most states is that the PLLC is formed by members of one or two professions.
A PLLC that has S Corporation status is taxed as a pass-through entity, with its owners paying income tax on earnings of the PLLC. A C Corporation designation is taxed twice. First, the business is taxed on its net income. Second, the owners pay taxes on the profits they receive.
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