Starting a business in Arkansas offers numerous advantages because the state offers a unique blend of advantages, including a low cost of living and a diverse, skilled workforce. Additionally, Arkansas’ strategic central location within the United States and its well-developed transportation infrastructure make it an excellent choice for businesses seeking easy access to major markets. With abundant resources and support networks available, Arkansas has fostered a nurturing entrepreneurship environment that cultivates growth and innovation, positioning it as a great destination for small business owners ready to embark on their business journey.
Arkansas Small Business Stats
- Arkansas is home to 264,245 small businesses (99.3% of all businesses) in Arkansas that employ 497,605 employees (47.2% of all employees). (2022 SBA Small Business Profile)
- Exports by small Arkansas firms reached $934 million. (2022 SBA Small Business Profile)
- Small businesses accounted for 47.2 percent of Arkansas, which exceeded the national share. (Statistics of US Businesses)
- Arkansas ranks #2 as the most affordable state to live in the U.S. (2023 Entrepreneur)
- US News ranked Arkansas as #14 for fiscal stability.
Steps to Starting a Business in Arkansas
It’s not easy navigating the requirements of starting a business in Arkansas, but following our step-by-step guide, we cover the essential tasks that most businesses will need to do, such as choosing the right business structure, obtaining necessary licenses, finding funding, and more.
Step 1: Choose a Business Idea
If you’re still exploring business ideas, this is your first stop. As you are filtering opportunities, I have a few things you may want to consider.
First, consider your skills and interests. What do you excel at? What do you enjoy doing? Do you have any special knowledge or experience that could be useful in starting a business? If so, use this as the foundation for your business idea.
Next, research the local market and industry trends in Arkansas. What types of businesses are popular in the area? Are there any gaps or needs that could be filled by starting a new business? Understanding what’s already out there can help you come up with an original and profitable idea. a list of popular small businesses in Arkansas that cater to the needs of the local community and contribute to the state’s economy. These businesses span various industries, reflecting the diverse opportunities available in the region:
Boutique retail shops: These businesses offer unique clothing, accessories, and home décor items, catering to local tastes and preferences.
Outdoor recreation and tourism services: Companies offering guided tours, fishing trips, boat rentals, and equipment rentals for outdoor enthusiasts capitalize on Arkansas’ natural beauty.
Agricultural services and products: Small farms and businesses that focus on organic produce, artisanal food products, and farm-to-table initiatives are popular in Arkansas.
Finally, don’t be afraid to get creative! Think outside the box and come up with something unique that no one else is doing yet. Check out our library of business ideas to get detailed industry information, trends, costs to start, tips, and lots more.
Step 2: Write a Business Plan
Writing a business plan in Arkansas, as in any other state, offers several benefits to entrepreneurs looking to start or grow their businesses. A well-structured business plan serves as a roadmap, providing direction and focus, and can help to clarify objectives, assess feasibility, secure funding, identify potential challenges, and more.
Writing a business plan, let alone your first plan, can be a daunting process, but remember that it’s an essential tool for your business’s success. Stay focused, break the process into manageable steps, and maintain a positive attitude throughout the journey.
Related: How to write a business plan
Step 3: Select a Business Entity
Starting a business in Arkansas can be an exciting venture, but it’s important to understand the different business structures available. In Arkansas, entrepreneurs have several options when it comes to structuring their businesses, and the most common include Sole Proprietorship, General Partnership, Limited Liability Company (LLC), and Corporation. Before starting an entity, it is essential to consider the benefits and drawbacks of these business structures and evaluate which one aligns with your long-term goals and risk tolerance.
A Sole Proprietorship is essentially an individual that decides to go into business. This is the easiest and least expensive of the four entities to set up, as there is no state filing. In this structure, there is no legal distinction between the business owner and the business itself, so if the business is sued, the owner’s personal assets are potentially at risk.
Sole proprietorships (and partnerships, too) that operate under a business name that is different from the owners will need to file the Arkansas Trade Name registration.
The General Partnership is a type of business structure where two or more individuals agree to share the management, profits, and losses of a business. In a general partnership, each partner is personally liable for the debts, obligations, and liabilities of the business, including those incurred by other partners on behalf of the partnership.
Related: What is a partnership?
A Corporation is a type of business structure formed under Arkansas state law. It is a separate legal entity from its owners, known as shareholders, and offers them limited liability protection. This means the shareholders are generally not personally responsible for the corporation’s debts, obligations, or liabilities.
Corporations are more complex than sole proprietorships or partnerships and require more formalities, such as registering with the Arkansas Secretary of State, creating bylaws, and appointing a board of directors, however in addition to the liability, the corporation offers advantages like increased credibility and the ability to issue shares to raise investment funds.
Related: How to form an Arkansas Corporation
The Limited Liability Company (LLC) is a popular type of business entity that also offers the liability protection of a corporation and is a way for people to start and run a business without having to worry about being personally responsible for any debts or other obligations that the business might have, without the administrative requirements of a corporation.
To form an Arkansas LLC, you need to file the Certificate of Organization paperwork with the Arkansas Secretary of State’s office and pay a filing fee.
Related: How to form an Arkansas LLC
Forming a corporation or LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.
Some popular formation services include:
IncFile - Great service and free registered agent the first year.
Northwest - Privacy-Focused: Free registered agent and private business address for 1 year!
ZenBusiness - Easy to use and free registered agent for 1 year!
Step 4: Register the Business
The licenses and permits required for a business in Arkansas will depend on the type of business, its location, and the specific activities it engages in. Some of the common licenses and permits that businesses may need to obtain include:
Business Licenses: There is no general state of Arkansas business license, however, many cities require a business license to operate.
Sales Tax Permit: Businesses selling products and certain services will need to register for a Sales Tax Permit with the Arkansas Department of Finance and Administration.
Employer Identification Number: Certain business structures or businesses that have employees will need to register for an EIN from the Internal Revenue Service (IRS).
Professional Licensing: Some services such as barbers, landscape contractors, tattoo artists, septic tank cleaners, and home inspectors require state licensing in Arkansas before offering their services.
Zoning Permits: Many cities and/or counties require zoning approval before operating a business out of a location, and this even sometimes includes home-based businesses.
Step 5: Open a Business Bank Account
Opening a business checking account is an important step for businesses as it helps keep their finances organized. The specific requirements for opening a business bank account in Arkansas can vary from institution to institution.
Generally, this includes providing personal information such as your name, address, and Social Security Number. You may also need to provide proof of your business’s formation documents and/or tax ID number. Additionally, you will likely be required to make an initial deposit into the account.
When selecting a financial institution for your business banking needs, it is important to research each one thoroughly and compare their offerings. Consider factors such as fees, interest rates, services offered (such as online banking), and customer service ratings before making your decision.
Step 6: Find Financing
There are many different ways to finance a new business, but the right choice will vary depending on your needs and goals. From conventional bank loans to Small Business Administration (SBA) guarantees, to investors, grants, and many other sources, it can be difficult to wade through what is available and best for your business.
Be sure to research all available options before making any decisions so that you can find the best solution for your situation!
Step 7: Hire Employees
Hiring employees is an important decision and comes with many responsibilities. It’s important to understand the various state and federal employment laws, regulations, and reporting requirements as an Arkansas employer.
Step 8: Obtain Business Insurance
As a business owner, it is important to have the right insurance coverage to protect your business from potential risks. Business insurance can provide protection against financial losses due to property damage, liability claims, and other unforeseen circumstances.
Most types of business insurance are optional in Arkansas, except for worker’s compensation insurance for businesses with three or more employees or those businesses operating in risky industries such as construction.
Step 9: Set up an Accounting System
Not staying on top of accounting for a small business can have serious implications. Without an accurate and comprehensive financial record, it can be difficult to know how much money is being earned and spent, as well as what the current financial status of the business is. This can lead to inaccurate forecasting or budgeting, in addition to improper filing of taxes.
Related: Setting up accounting for a business
Common questions when starting a business in Arkansas
Is Arkansas a good place to start a business?
Arkansas is an attractive place to start a business due to its unique combination of low costs, business-friendly policies, a skilled workforce, and strategic location. A few of the top reasons include:
Low cost of living and business expenses: Arkansas consistently ranks among the states with the lowest cost of living in the U.S., which can translate into lower business expenses, such as rent and employee salaries. This can be an attractive feature for entrepreneurs looking to start a business.
Access to resources and support: Arkansas is home to numerous organizations and programs that offer support to entrepreneurs and startups. For example, the Arkansas Small Business and Technology Development Center (ASBTDC) provides assistance with business planning, market research, and financial analysis.
Skilled workforce: Arkansas boasts a skilled and diverse workforce, with a strong focus on industries like agriculture, manufacturing, and technology. The state’s educational institutions, like the University of Arkansas, also contribute to the development of a talented labor pool for businesses to draw from.
Strategic location and infrastructure: Arkansas is centrally located in the United States, making it an ideal spot for businesses that require access to major markets or to minimize shipping costs. The state has a well-developed transportation infrastructure, including highways, railways, airports, and navigable waterways, which can facilitate the movement of goods and services.
What are the steps to starting an LLC in Arkansas?
There are three main steps to starting an LLC in Arkansas. These include:
There are a few more details to consider depending on the business. Learn more about starting an LLC in Arkansas.
How much does it cost to start an LLC in Arkansas?
The cost to start an LLC in Arkansas is $45 to file the Certificate of Organization with the Arkansas Secretary of State.
What licenses do you need to start a business in Arkansas?
There isn’t a general business license required by the state, however the types of business licensing in Arkansas will depend on the type of business, its location, and the specific activities it engages in.