Do you own a limited liability company (LLC) created in a state other than Arkansas, but you want to expand your business to the The Natural State? If so, you’ll need to qualify your foreign LLC in order to transact business in Arkansas.
What is a foreign qualification and how do foreign LLCs function within the state of Arkansas? In this guide, we’ll answer these questions and more.
Rocket Tip: If you’d rather hire an online service to handle this process for you, many of the best LLC services can handle it for you.
What Is a Foreign Qualification?
A foreign qualification enables your limited liability company to do business in the state of Arkansas. It doesn’t matter which state you originally formed your business in ― or in other words, the state your domestic LLC is located in ― as the qualification process to register a foreign LLC in Arkansas is the same regardless of where your domestic LLC is based.
The confusion surrounding foreign qualification usually centers on what it means to “do business” in a state outside of your primary state. This gets especially problematic considering some states don’t strictly define what it means to transact business in that state. Like most states, Arkansas does not clearly define “doing business,” however it has adopted the Revised Model Act provision that outlines certain activities that do not qualify.
What Qualifies as ‘Doing Business’ in Arkansas
According to the Arkansas Secretary of State, “Any foreign corporation proposing to do intrastate business in Arkansas, or permitted to continue to do intrastate business, shall file with the Arkansas Secretary of State” to obtain a Certificate of Authority. Any commercial transaction not outlined in the Revised Model Act (listed below) is considered to be “doing business.”
What Does NOT Qualify as ‘Doing Business’ in Arkansas
Like many other states, Arkansas has adopted the Revised Model Act of 1984 provision. The following activities do not necessitate foreign qualification in the state of Arkansas:
How to Get Foreign Qualification in Arkansas
If your business was established outside of Arkansas and you wish to register as a foreign LLC, you must file the Application for Certificate of Authority with the Arkansas Secretary of State. The information required in this form includes:
Filing Fee: $300 by mail or $270 online, with checks made payable to the “Arkansas Secretary of State.”
What Is the Penalty for Not Getting Foreign Qualification in Arkansas?
A foreign entity that attempts to conduct business transactions without first obtaining foreign qualification will face multiple penalties. An unregistered foreign entity cannot bring forward a lawsuit in Arkansas courts, though it can still defend itself against lawsuits. In addition, you can be held liable for any fees that would have otherwise been paid as part of your foreign registration, as well as a civil penalty of up to $5,000 per year.
Should I Hire a Business Service Provider to File My Arkansas Foreign Qualification?
If you don’t want to handle your foreign qualification on your own, you have options. Some entrepreneurs choose to hire a lawyer to prepare and file their Certificate of Authority, which can be a good option if you’re concerned about getting the job done right. However, attorney’s fees can be quite expensive.
The other option is to hire a business service provider like Incfile or ZenBusiness to register your foreign LLC with the state of Arkansas.
These companies can typically get your foreign qualification done for a fraction of the price of an attorney. This is our preferred route if you don’t want to go with the DIY option.
The process for getting a foreign qualification in Arkansas is easy, though not as cheap as some other states. It does not require much paperwork and the entire process can be completed in a matter of weeks. Despite the smooth process, this isn’t a step that should be taken lightly, because the penalties for not qualifying a foreign LLC in Arkansas can be severe ― both in terms of financial obligations and the inability to bring lawsuits against a third party.
We hope this article managed to answer your questions about obtaining an Arkansas foreign qualification, and we wish you a prosperous business future!