If you plan on starting a business in Arkansas, choosing to operate as a sole proprietorship is the quickest way to get your business off the ground. This is because Arkansas doesn’t impose the same level of registration requirements on sole proprietorships that it does on other business entities, such as corporations and limited liability companies.
Arkansas Sole Proprietorships
The great thing about starting a business as a sole proprietor in Arkansas is that you can start operations whenever you want without having to file documents or pay fees to the Arkansas Secretary of State. However, a significant disadvantage to this is that Arkansas doesn’t recognize a sole proprietorship as a separate entity, meaning that you’re personally liable for all debts and obligations of the business. In contrast, the owners of an Arkansas corporation must file articles of incorporation with the state, but after doing so, they aren’t personally liable for the debts of the corporation, as a corporation is an entity that is separate and distinct from its owners.
Business Name Registration
When operating an Arkansas sole proprietorship, state law only allows you to conduct business in your own name. However, if you prefer to conduct business using an assumed name, commonly referred to as a DBA, you must file a “Doing Business Under an Assumed Name” certificate in the county clerk’s office of each county where you will transact business. The certificate is a simple one-page form that you must fill out and sign in the presence of a notary before filing it with the county clerk and paying the $25 fee. To illustrate, if John Smith starts an accounting business as a sole proprietor, he can only refer to his business as “John Smith.” However, if he prefers to name the business, “Smith Accounting Consultants,” he can only do so after filing a DBA certificate in each county where he intends to practice.
Arkansas Business Licenses
Despite the fact that sole proprietors don’t register their businesses, depending on the type of business you operate and the city or county where it operates, you may need to file applications for business licenses. The city of Fayetteville, for example, requires all sole proprietors that have a place of business within city limits to obtain a business license, which always requires the payment of a fee. There are a number of exemptions to this requirement, none of which apply to sole proprietors unless they are under the age of 18. Keep in mind, however, that not every city and county requires you to obtain a business license, so you will need to check with your local city or county government office.
Although not technically a registration requirement, you will need to file tax returns that report your sole proprietorship income to the state and federal government. You can use the same net income you report on a Schedule C attachment to your federal return for Arkansas state income tax purposes.