Are you looking to form an Arkansas professional corporation, but you’re not familiar with the incorporation process?
Professional corporations are those owned and operated by licensed professionals, like doctors, lawyers, and architects. There are quite a few important steps you’ll need to take to create your Arkansas professional corporation and maintain it, so this guide will outline the rules and regulations involved with this process.
To get started, please reference our 11-step guide below or hire a professional online incorporation service like LegalZoom.
How to Form an Arkansas Professional Corporation (in 11 Steps)
Step One) Choose a Name
One of the most important aspects of the incorporation process is naming your business. There are three major elements to consider when choosing a name:
When naming a professional corporation in the state of Arkansas, you will need to include the words “professional service corporation” or the abbreviation “PSC.” Your professional corporation’s name also cannot include any words or abbreviations that indicate other business types, like the phrase “limited liability company” or the initials “LLC.” You also are not allowed to include words that refer to certain types of businesses (like “bank” or “law office”) unless your business fits those descriptions.
In addition to the legal considerations, you might want to identify your line of business or your mission in your company name. For example, you can display any closely held values in your name, like using the word “green” for environmentally friendly businesses.
A Name You’re Proud of
Keep in mind that this is your business, so you should choose a name that you’re proud of, and that you enjoy sharing with potential customers. You should also make sure it sounds good when spoken aloud, and also looks good when written down.
Check Whether Your Preferred Name is Available
Visit the Arkansas Secretary of State’s website to check whether it is already in use. If it’s not unique enough, you may need to tweak it or come up with a new name altogether.
Get Your Company URL
To solidify your brand and to fully embrace the company name, register your URL. You’ll be able to quickly build a company website so that nobody else can use it.
Step Two) Select a Registered Agent
Arkansas professional corporations must designate a person or business to receive legal notices on behalf of the company. This important point of contact is known as the registered agent. You will be required to list the registered agent’s name and address when filing the Articles of Incorporation in step four.
Who can be my registered agent?
A registered agent must have a physical address within the state of Arkansas where mail and legal notices can be served during regular business hours. You can hire a service to act as your registered agent, serve as your own registered agent, or even use an accountant or other business professional’s address – with their consent, of course.
The Arkansas Secretary of State says that,
The registered agent is the ‘mailbox’ for the corporation. He or she is the person or entity designated by the corporation to receive any service of legal action or other official communication on its behalf. . .The registered agent’s address must be a street address in Arkansas, and the agent must be located at that address. . . A post office box or “mail drop” may not be used as the registered agent address.”
We recommend hiring a professional service to act as your registered agent. Doing so will help eliminate junk mail and more importantly, keep your personal and/or business address off the public record. For a list of the top 5 registered agent services, check out our guide.
Step Three) Complete Your Articles of Incorporation
This is THE document that formally registers your professional corporation with the state of Arkansas. You can either file the Articles of Incorporation online, or complete a paper application and submit it to the Arkansas Secretary of State by mail or in person.
Keep in mind that you are acting as the incorporator when you fill out and submit the Articles of Incorporation. You should sign as the incorporator before submitting the document.
|Cost to File||$45 for online filings and $50 for paper filings|
|Time to Complete Filing||Within 2 business days of receipt; if submitting in person, processing can often be completed while you wait|
|Agency||Arkansas Secretary of State|
Arkansas Secretary of State
|Agency contact info for filing questions||501-682-1010|
Step Four) Establish a Corporate Record
Professional corporations are required under Arkansas law to document and keep a permanent record of all important company decisions.
The official corporate record may be kept at the professional corporation’s principal place of business, or stored in a safe location elsewhere. You should take the opportunity to set up a secure digital or physical location for storing company records as soon as possible.
Step Five) Designate a Board of Directors
The incorporator is responsible for selecting initial director(s) of the professional corporation. The incorporator should record initial director appointments in a signed document and file it to the corporate record. This document is known as the “incorporator’s statement.” A sample incorporator’s statement can be found here.
The initial directors will serve until new directors are elected at an annual shareholder meeting, or as otherwise indicated in the bylaws. The incorporator may also serve as an initial director. Keep in mind that your directors must all share the same profession as the one the professional corporation was formed for.
Step Six) Create Corporate Bylaws
Corporate bylaws set out the rules and procedures for how the professional corporation will operate. Some important topics typically covered in the bylaws include:
- How shareholders will conduct votes
- The total number of directors and how each director will be elected
- How often the board of directors will meet
- The types of officer roles that will be appointed
- Procedures for resolving internal disputes
Bylaws are required for corporations in the state of Arkansas.
Bylaws help your business run smoothly, and are sometimes required by financial institutions for opening business bank accounts or acquiring loans.
Either the incorporator or the initial directors may prepare the company bylaws. The bylaws should be recorded in an internal company document, signed by the incorporator or a director, and filed to the corporate record. The bylaws are not filed with the state of Arkansas.
Popular Strategies for Preparing Bylaws:
- Use a free online template. Northwest Registered Agent has a great free template you can download.
- Hire a lawyer to draft the bylaws. If your business has investors, is already profitable, or has multiple co-owners, we strongly encourage you to hire a lawyer experienced in Arkansas corporate law to help you draft suitable bylaws. Look through Avvo’s directory of KY attorneys you can work with.
Step Seven) Hold First Board Meeting
After designating a board of directors and preparing bylaws, the new professional corporation should call for an initial board meeting. The incorporator often arranges and attends this first meeting. During the first board meeting, the initial directors should plan to cover the following topics:
- Review and approve corporate bylaws
- Designate officers to manage day-to-day business affairs
- Choose a bank
- Approve issuance of stock certificates
- Determine whether the company should elect to be taxed as a C corporation or S corporation (see step nine for more details)
Recording Meeting Minutes: a detailed record of all key discussions and decisions during the board meeting should be prepared and distributed to all board members for their review and approval. This record is known as the “minutes.” A copy of the minutes should be sent to each director for review and filed in the company record.
Step Eight) Handle Tax Obligations
You’ll need a federal tax ID number (EIN) to operate a professional corporation in Arkansas. You can obtain your EIN from the IRS for free, and it’s a fairly painless and simple process. An EIN enables your professional corporation to hire employees, file corporate taxes, open business bank accounts, and more.
A major decision for any professional corporation is determining whether to be taxed as a C corporation or an S corporation. Take a look at how these two formats differ:
- C Corp: The majority of professional corporations are C corporations, as they are subject to far fewer restrictions than S corps. With a C corp, profits are taxed at the corporate level, and again on the personal tax returns of the shareholders, resulting in what’s commonly referred to as double taxation.
- S Corp: This is only an option if your professional corporation has fewer than 100 shareholders, only issues one class of stock, is not owned by another business entity, and does not have any foreign shareholders. If your corporation meets these requirements, you can select the S corp’s pass-through taxation which eliminates the double taxation issue of C corps. S corp dividends are not taxable.
All companies that conduct business in Arkansas must pay an annual franchise tax. The franchise tax is a privilege tax collected by the Arkansas Secretary of State. More information on the franchise tax and the filing process can be found on the Arkansas Secretary of State’s website.
Corporations in Arkansas are also subject to corporate income tax. For more information on the corporate income tax and to find the appropriate forms for your business, you should visit the Arkansas Department of Finance and Administration’s website.
Note that additional taxes like sales & use taxes may also apply to your business. You should review the Arkansas Department of Finance and Administration’s Starting a New Business in Arkansas guide for further information on other tax requirements in Arkansas. You can use the Arkansas Taxpayer Access Point to register a new business, file reports, and pay certain taxes such as the sales and use tax.
Note that your city and/or county may impose additional taxes on your business. You should contact them to confirm whether there are any local taxation requirements. Resources for four of the largest cities in Arkansas can be found online:
Step Nine) Obtain Business Licenses and Permits
Although Arkansas does not require a general business license for companies doing business in the state, a state license or permit may be required by a state board, commission, or association. A list of state agencies, boards and commissions can be found online.
You should also check with your local governments to determine if any additional licenses or permits are required by your city or county.
Step Ten) Acquire Insurance
Arkansas requires every company with three or more employees to obtain workers’ compensation insurance, regardless of the type of business the company is engaged in. More information on the workers’ compensation insurance requirement is available on the Arkansas Workers’ Compensation Commission’s website.
In addition, you should also pursue general liability insurance and other more industry-specific types of insurance. Because professional corporations are specialized businesses, you will most likely require insurance policies based on your occupation.
Step Eleven) Open a Business Bank Account
To operate a professional corporation and receive the limited liability protection that comes with it, you have to keep your personal assets entirely separate from your business assets. Due to this requirement, it’s strongly advised that you acquire a business bank account for your corporation.
Get Help Forming a Professional Corporation
The process of forming a professional corporation in any state can be a lengthy one. If you run into any trouble along the way, remember that there are plenty of organizations that can help you navigate the incorporation process.
Online Incorporation Services
If you would like to hire an affordable business incorporation service to create your professional corporation for you, services like LegalZoom and MyCorporation can help you out. These service providers can handle most of the formation process, while still charging much lower rates than a business attorney’s fees.
There isn’t the same level of personalization that a lawyer can provide, but online incorporation services can still be a tremendous help. The only major issue with these service providers is the fact that they can’t provide any actual legal advice, so you need to know what you want ahead of time.
Arkansas Business Attorney
There are some situations where hiring a business lawyer is a preferable route to using an online incorporation service. The professional corporation as a business structure can be highly complicated and specialized, and if you want to have the peace of mind that every single step was taken care of by a true expert, hiring a business attorney to form your Arkansas professional corporation is the way to go.
If you would like to pursue this route, there are some convenient services that can help you choose the right lawyer for your business. We like to use Avvo, which has extensive reviews and ratings for hundreds of Arkansas business lawyers, which can make it much easier to select an attorney who has your best interests in mind, and also has the expertise to get the job done right.
If you need additional information on starting or growing your business in Arkansas, the Arkansas Small Business and Technology Development Center provides one-on-one consulting on business plans, financial analysis, and other matters. They also provide assistance with market research. Business consultants are available at eight offices across the state.
You can also contact the Arkansas district office of the U.S. Small Business Administration. Events, news and small business resources can all be found on their website.