Articles of Organization

Arkansas law requires that you must file articles of organization with the state for your new LLC before you begin conducting business. These articles must be signed by either all the members listed in the articles of organization or by an organizer, who must also be a member of the LLC. There is also a $50 filing fee.

The articles must include:

• The name of the LLC
• The address of the initial designated office
• The name and address of the initial agent for the LLC (the agent must sign the articles, accepting designation as the agent)
• The name and address of the organizer(s)
• Whether the LLC's duration will be perpetual or for a specific term
• Whether the LLC will be member-managed or manager-managed
• If manager-managed, the name and address of the initial manager(s)
• Whether one or more LLC members are to be liable for the LLC's debts and obligations

Your new LLC is officially "organized" once the articles of organization are delivered to the Secretary of State and accepted for filing. You may designate a delayed effective date up to 90 days after the date of filing if desired.

Registered Agent and Office

Arkansas LLCs must maintain a registered agent in the state-someone designated to receive official state administrative or legal correspondence. A registered agent for an LLC in Arkansas can be an individual resident, a Arkansas LLC or corporation, or an out-of-state ("foreign") corporation or LLC with an office in Arkansas.

The LLC's registered office must be in the state, but is not required to be a place of the LLC's business.

Operating Agreement

Another very important LLC document is its operating agreement, which can be amended or repealed as specified by the agreement itself. Operating agreements for Arkansas LLCs are not required to be in writing (although it's an excellent idea), and they may not:

• Unreasonably restrict a member or manager's access to information or records
• Eliminate the duty of loyalty
• Unreasonably reduce the duty of care
• Eliminate the obligation of good faith and fair dealing; however, the operating agreement may determine reasonable standards by which the performance of the obligation is to be measured
• Vary the right to expel a member in an event
• Vary the requirement to wind up the limited liability company's business in a case specified
• Restrict rights of a person, other than a manager, member, or transferee of a member's distributional interest

Ideally, the operating agreement lists the members, how much they have invested, how profits are divided, and how much weight each member has when votes are taken. It may also list standards for meetings (how much notice, what constitutes a quorum, rules for voting, etc.) and so on, but is not required to do so. Usually, though, the operating agreement restates and/or expands on requirements mandated by the state.

Membership in the LLC

LLCs must have at least one member, and each member may be either a natural person or a registered legal entity who completes the procedural requirements. To become a member, an individual usually has to make a contribution, pay money, or transfer property to the LLC, or else assume an obligation to do so or render some kind of service. If the operating agreement does not specify membership procedures in writing, a person or entity may become a member upon the unanimous consent of all the current members.

A member is dissociated from the LLC when any one of the following event occurs:

• The LLC receives notice of the member's express desire to withdraw
• An event occurs that is agreed to in the operating agreement as causing a member's dissociation
• Upon transfer of a member's distributional interest (other than a transfer for security purposes or a court order charging the member's distributional interest which has not been foreclosed)
• The member's expulsion under provisions of the operating agreement or by unanimous vote of the other members
• On application by the LLC or another member, the member's expulsion by judicial determination because the member engaged in wrongful conduct that adversely and materially affected the company's business
• An individual member's death or a judicial determination that the member has otherwise become incapable of performing member's duties under the operating agreement
• Substitution and acceptance of a successor trustee
• Termination of the existence of a member if the member is not an individual, estate, or a trust other than a business trust

Except for a member's or manager's wrongful acts or omissions, all debts, obligations, and liabilities of an LLC belong only to the LLC.

Ongoing Requirements

All Arkansas LLCs must file a report with the Arkansas Secretary of State each year between January 1 and April 1, with the first report due in the year following the calendar year of organization. This report will include:

• The LLC's name and the state or country under whose law it is organized
• The address of the LLC's designated office
• The name and address of its agent for service of process in this state
• The address of the LLC's principal office
• The names and business addresses of any managers

Also, it's a good idea for your LLC to keep minutes of the meeting proceedings and committees of the owners or members.

Dissolution

An Arkansas LLC is dissolved when any one of the following events occurs:

• An event specified in the operating agreement
• Consent of the number or percentage of members specified in the operating agreement
• An event that makes it unlawful for all or substantially all of the business of the company to be continued (any cure of illegality within 90 days after notice to the LLC of the event is effective retroactively to the date of the event for purposes of this section)
• On application by a member or a dissociated member, upon entry of a judicial decree
• On application by a transferee of a member's interest, a judicial determination that it is equitable to wind up the company's business
• The expiration of the term specified in the articles of organization

Taxes

An LLC has some tax advantages when compared to a corporation, including the availability of more deductions. However, there is no requirement for an LLC to be a separate tax entity like a corporation. Instead, an LLC can be a "pass-through entity" when it comes to taxes, so that the LLC owner or owners report business losses or profits on their personal tax returns, in the same way that a partnership would.

Arkansas LLCs pay a minimum annual franchise tax of $150.

Articles of Incorporation

Arkansas state law requires filing of articles of incorporation. The articles must be delivered to the secretary of state by an incorporator

• Corporation name
• The corporation's principal office address
• Address of initial registered office
• Name of initial registered agent at that office
• Name and address of each incorporator
• Corporate purpose (Arkansas allows a corporation to be formed for any legal purpose)
• The number of shares the corporation is authorized to issue, including information about stock classes and the par value of each share

Other information that is not required to be listed in the articles-but which the corporation may decide to include:

• The names and addresses of the initial directors
• Provisions managing the business and regulating the affairs of the corporation
• Specific limitations regarding the corporate purpose(s)
• Provisions regulating the powers of the corporation, its board of directors, and shareholders
• Personal shareholder liability for the corporation's debts under certain conditions
• Provisions eliminating or limiting a director's personal liability to the corporation or its stockholders for monetary damages in certain situations

Registered Agent and Office

Arkansas corporations must have a registered agent in Arkansas who is designated to receive official state administrative and legal correspondence. The registered agent must be either an individual Arkansas resident whose business office is the same as the registered office, or a corporation whose business office is the same as the registered office.

Bylaws

A corporation is required to keep a copy of its bylaws at its main executive office, but is not required to file them with the state. At its initial meeting, the board of directors should adopt corporate bylaws, and then keep them updated as time goes on. Bylaws describe the corporation's basic managerial and legal operating principles, including information on:

• Shareholders and directors meetings
• The authority, number, and tenure of directors
• Voting procedures
• The duties, responsibilities, and tenure of officers
• How stock is issued
• How and when annual financial information is provided to shareholders

Directors and Officers

Your new Arkansas corporation is required to have at least one director. The articles of incorporation or bylaws may list director qualifications. A director does not need to be an Arkansas resident or a shareholder of the corporation unless so stated in the articles of incorporation or bylaws.

The board of directors is required to elect officers in accordance with the corporation's bylaws. The titles and duties of corporate officers must be described in the corporation's bylaws, or they must be appointed by the board of directors in accordance with the bylaws. A duly appointed officer may appoint as many officers or assistant officers as authorized by the bylaws or the board of directors. The bylaws or the board of directors will delegate responsibility to one of the officers for preparing minutes of the directors' and shareholders' meetings, as well as for authenticating corporate records. The same individual may simultaneously hold more than one office in a corporation.

Required Reports

An annual franchise report must be filed with the Arkansas Secretary of State each year. This report must include:

• The corporation's name and its state or country of incorporation
• The address of its registered office
• The address of the corporation's principal office
• The names and business addresses of the corporation's directors and principal officers
• A brief description of the nature of its business
• The total number and itemization by class and series of authorized shares
• The total number and itemization by class and series of issued and outstanding shares

Taxes

Arkansas' corporate tax structure consists of six separate brackets with a top rate of 6.5 percent that takes effect when corporate income reaches $100,000. Arkansas' top rate ranks 30th highest nationally among states with corporate income taxes.

The Arkansas secretary of state recognizes S corporation status. A "subchapter S" corporation or "S corp" is one that chooses to be treated as a pass-through entity for tax purposes in the same way as a sole proprietorship or partnership. Tax-related information for the S corp is filed as part of the owner's individual income tax. Arkansas does not require filing a separate form for the S corp.