Are you looking to form a professional limited liability company (PLLC) in Arkansas, but you’re not sure how the formation process works? There are several important steps when it comes to creating an Arkansas PLLC that is compliant and able to do business in the state.
What is an Arkansas Professional LLC?
The professional limited liability company (PLLC) is a specialized type of LLC that is intended for licensed professionals to offer their unique services. A PLLC in Arkansas is an LLC formed for the purpose of performing a professional service that may only be legally performed in Arkansas pursuant to a license or other legally mandated personal authorization. Examples of professionals that may form PLLCs in Arkansas include certified public accountants, architects, engineers, dentists, doctors and attorneys at law.
The Arkansas PLLC is typically more popular than a professional corporation (PC) because it’s a more flexible business type, but it still includes the personal asset protection and professional qualifications that make the PSC valuable.
PLLCs in Arkansas have relatively simple formation and maintenance requirements, several options for how they want to be taxed, and flexible management. From one-person businesses to multi-member PLLCs with several owners, the PLLC is a popular choice for a reason.
An important detail of the PLLC that differs from a traditional LLC is that liability protection is not shared across all members of the company. For example, if you operate a PLLC for physicians, your business structure does not shield each individual member from malpractice suits. Instead, each member is liable for their own malpractice insurance, and no member is liable for another member’s malpractice.
Forming a PLLC in Arkansas (in 6 Steps)
Step One) Choose a PLLC Name
Your PLLC’s name is often the first impression you get to make on potential customers, and therefore it goes without saying that this is an important step. There are a few different aspects to take into consideration when selecting a name for your business:
In Arkansas, the name of your PLLC must contain the words “Professional Limited Liability Company,” “Professional Limited Company,” or the abbreviations “P.L.L.C.,” “P.L.C., “PLLC,” or “PLLC.” The name cannot include the name of a person who is not a member of the PLLC except that of a deceased member.
Another aspect to consider is including language that explains what your business does. For example, if you’re a doctor, put the word “physician” or the initials “MD” in your PLLC name. Additionally, if your business has strong values like being environmentally friendly, you can indicate that by including the word “green.”
Do You Like It?
At the end of the day, this is your business, and you should choose a name that makes you proud. You should also make sure your PLLC name both sounds good when spoken out loud, and looks good when written down.
The most important consideration for naming a PLLC is to not get too attached to any one business name until you know that it is available for use. You should check whether your chosen name is available by searching the Arkansas Secretary of State’s website. Once you’ve confirmed the name is available, you can reserve it for up to 120 days by either applying online or submitting a paper application. The filing fee is $22.50 for online applications and $25 for paper applications.
Step Two) Designate a Registered Agent
Every PLLC in Arkansas is required to designate a registered agent, which is the individual or business entity that receives government correspondence on behalf of your business, then forwards those documents to you.
According to the Arkansas Secretary of State, the registered agent is a person or entity designated by your company to receive service of legal action or other official communications on its behalf. An owner, shareholder or officer of your company is permitted serve as the registered agent. Note that the registered agent address must be a street address in Arkansas, and the registered agent must actually be located at that address. A P.O. Box or “mail drop” may not be used as the registered agent address.
Without a registered agent, you could lose your good standing with the state of Arkansas, and the state also has the right to dissolve your PLLC if they decide to. In a worst-case scenario, the state could fail to alert you regarding a lawsuit against your company, which could even lead to a judgment against your business because you didn’t defend yourself.
At the end of the day, we recommend hiring a dedicated registered agent service to handle these requirements. Doing so will help eliminate junk mail and more importantly, keep your personal and/or business address off public record.
Step Three) File Formation Documents with the State
Once you are ready to form your Arkansas professional limited liability company, you will fill out the Articles of Organization for Limited Liability Company
This is THE document that will register your PLLC with the state. You’ll want to ensure all of the following information is correct on the form:
- Name of your PLLC
- Address of your PLLC’s principal place of business
- Name and address of the registered agent
- If the PLLC is to be manager-managed, a statement to that effect
- Name and signature of the organizer(s) of the PLLC
Cost to Form a PLLC
The filing fee for the Articles of Organization is $45 if you file online or $50 if you submit a paper form.
The Arkansas Secretary of State’s Corporations Division completes most filings within two business days of receipt. If filing in person, filings can often be processed while you wait.
Step Four) Create an Operating Agreement
After you register a PLLC in Arkansas, create a detailed outline that explains how you will run and manage your new business. Even though it doesn’t need to be filed with the state, put one together and keep it for your records.
When you open a bank account, you may be asked for a copy of this document. You’ll also want to keep in mind that any future business partners or managing members may also be interested in seeing your operating agreement before joining your company. After all, this document essentially serves as your overall plan for success.
An attorney can help you outline your operating agreement, or you can create one from a free template online. You can read more about operating agreements here, but some of the basic information you’ll want to have includes:
- Individual members' ownership percentages
- Rights and responsibilities
- Voting powers and meeting guidelines
- Allocation of profits and losses
- Management rules for the PLLC
- Provisions for buying a member owner out, or transferring their shares in the case of illness or death
Step Five) Handle Taxation Requirements
The vast majority of PLLCs require a federal tax ID number, or EIN. An EIN is basically the business version of a social security number, and it’s used for a variety of important PLLC functions.
For instance, you’ll need an EIN if you want to hire any employees, and many banks require them to open business bank accounts as well. You’ll also need one for tax purposes, hence the name federal tax ID number. Get an EIN for your LLC for free through the IRS.
Arkansas subjects all PLLCs to an annual franchise tax, or privilege tax. The Arkansas Secretary of State is responsible for collecting these taxes. You can find more information about the franchise tax and how to pay on the Arkansas Secretary of State’s website.
Depending on the nature of your business, you may also need to pay additional taxes, such as sales & use taxes. For more information on the taxes that may apply to your business in Arkansas, you should review the Arkansas Department of Finance and Administration’s Starting a New Business in Arkansas guide.
To access your tax accounts, file and pay taxes, and view correspondence from the Arkansas Department of Finance and Administration online, you can register with the Arkansas Taxpayer Access Point.
Depending on where in Arkansas your business is located, you may also need to pay some local taxes. The four largest cities in Arkansas each provide online resources for businesses: Little Rock, Fort Smith, Fayetteville, and Springdale.
Step Six) Obtain Business Licenses and Permits
General business licenses are not required in Arkansas, but keep in mind that a state license or permit may be required by a state board, commission, or association. The state of Arkansas maintains a list of state agencies, boards and commissions online. Given the nature of a PLLC, at least one of these licenses or permits will be required in order for you to legally operate your PLLC in Arkansas.
Would You Prefer a Professional Form Your PLLC?
If you would prefer to have a professional handle the paperwork for you, consider hiring an online business formation service.
Because of the often-complex nature of professional limited liability companies, some of our favorite service providers don’t offer PLLC formations, but there are still plenty of quality companies that do provide this service. A couple of our favorites for PLLC formation are LegalZoom and MyCorporation.
Another option would be to hire a business attorney to handle your PLLC formation. While this is certainly a more expensive route than using an online formation service, a lawyer’s expertise could come in handy when you’re forming a specialized business structure like this.
Next Steps: What to Do After Creating a PLLC in Arkansas
Open a business bank account
We highly recommend that you establish a separate business banking account so that your business and personal finances are maintained completely separate. This is important because it helps protect your personal assets and also makes filing taxes much easier. Once you receive your EIN from the IRS, you’ll be able to use it to establish an account at the bank or credit union of your choice.
Generally, businesses with three or more employees in Arkansas are required to carry workers’ compensation insurance. For further information on this requirement, you should visit the Arkansas Workers’ Compensation Commission’s website. Though not required, it’s probably also a good idea to pursue general liability insurance, as well as some industry-specific policies pertaining to the profession practiced by your PLLC.
Understand income reporting
Income reporting is just what it sounds like – reporting the income you made from your business. It’s important to note that you must file this form whether you made or lost money over the course of the year.
Forms for LLCs can be found on the Arkansas Department of Finance and Administration’s website.
Understand annual reporting
Arkansas requires each PLLC to file an annual LLC franchise tax form either online or by submitting a paper form. This form is used to update certain information about your PLLC on an annual basis. You will also need to pay the annual franchise tax upon filing this form.
Find an accountant
We don’t recommend that you attempt to manage your business finances without the help of a professional. There is too much room for error, and a professional can ultimately save you time and money by guiding you on how to best manage your business finances. At a minimum, enlist professional help to set you up with software and the steps for keeping up with your finances on a regular basis. Then, consult back with your accountant at least a couple of times per year – and especially at tax time – to ensure you’re keeping track of everything correctly.