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Arkansas in 2023: a $45 LLC, a $150 annual, and a quieter rate cut

What the new Uniform Act, the May 1 franchise tax, and Act 315's 5.1% corporate rate actually mean for a filer this fall

The Editors
Staff, Incorporator.org
7 min read Updated
Contents 6 sections
  1. The mechanics
  2. Maintenance: the May 1 number
  3. Income tax: what 5.1% actually means this year
  4. Arkansas versus Delaware, honestly
  5. Who this state actually makes sense for
  6. Sources

n Arkansas LLC costs $45 to form online, $50 if you mail the paper, and $150 a year to keep in good standing. Those three numbers carry most of the weight; the rest is statutory housekeeping that finally got rewritten in 2021 and a corporate rate that dropped again this spring.

This is a guide for someone filing in Arkansas this quarter. It will not relitigate why anyone would form in Arkansas instead of Delaware; the answer, usually, is that they live here.

The mechanics

You file a Certificate of Organization with the Arkansas Secretary of State, Business and Commercial Services Division. The online filing is $45. The paper filing is $50. Arkansas is one of the few states that still prices the paper channel above the electronic one as a steering mechanism rather than a penalty, and the $5 difference is small enough that older filers routinely pay it without complaint.

The form itself is short: the LLC's name (which must include "Limited Liability Company," "LLC," or "L.L.C."), the registered-agent name and Arkansas street address, the principal office address, and the name and signature of an organizer. Arkansas does not require you to list members or managers on the Certificate, and the Secretary of State will not ask for an operating agreement, though the statute presumes you have one.

Turnaround online runs the same business day to a few days depending on queue. Paper filings mailed to the Victory Building in Little Rock take longer, measured in a week or two rather than hours. There is no statutory expedite tier in the Delaware sense; if you need the entity now, you file online and you get what the queue gives you.

The governing statute changed in 2021, and this matters if you are reading older guidance. Arkansas enacted the Uniform Limited Liability Company Act through Act 1041 of 2019, effective September 1, 2021, codified at Ark. Code Ann. §§ 4-38-101 et seq. It replaced the Small Business Entity Tax Pass-Through Act of 1993, which had governed LLCs for a generation. Most of the changes are technical (default fiduciary duties, the oral-or-written status of operating agreements, direct and derivative action provisions), but the practical consequence for a new filer is that the formation statute a 2015 template cites no longer exists. Check the cite against Title 4, Chapter 38 before you file anything sourced from a pre-2021 form book.

Maintenance: the May 1 number

Arkansas does not call it a franchise tax in the Delaware sense, and it is not really one, but it is the functional equivalent: a flat annual levy every LLC pays to stay on the rolls. The Annual LLC Franchise Tax Report is due May 1 every year, and the tax is $150 for an LLC regardless of revenue, assets, or activity. Corporations pay $300 on the same deadline if they have stock with par value, with a separate computation for corporations whose stock has no par value.

Administration moved from the Secretary of State to the Arkansas Department of Finance and Administration in 2021, and the online portal is now atap.arkansas.gov. The filing itself takes a few minutes once you have the entity's filing number and the federal EIN on hand. Miss the May 1 deadline and you pay the original $150 plus a $25 penalty and 10% annual interest, and if you ignore the notices long enough, the Secretary of State will eventually revoke the LLC's authority to transact business in the state. Reinstatement involves filing the back reports, paying the accumulated tax, penalty, and interest, and submitting a reinstatement application; it is not expensive but it is tedious, and it removes the liability shield for the period of delinquency in a way courts have increasingly taken seriously.

There is no other recurring state-level fee. Arkansas does not require biennial reports, beneficial-ownership updates beyond what federal law requires, or separate registered-agent filings. If you change your registered agent, you file a statement of change with the Secretary of State for $25.

Income tax: what 5.1% actually means this year

Arkansas taxes corporate income at a flat 5.1% for tax year 2023. That is new. Gov. Sarah Huckabee Sanders signed Act 315 of 2023 on March 6, 2023, dropping the top corporate rate from 5.3% to 5.1% effective for tax years beginning on or after January 1, 2023. The rate now lives at Ark. Code Ann. § 26-51-205. It is the second cut in two years, and the legislative direction is clearly toward parity with neighboring states that market themselves to business relocations.

For an LLC, the rate is only directly relevant if the LLC has elected to be taxed as a C-corporation. Default-treated LLCs (disregarded for single-member, partnership for multi-member) pass income through to the members, who pay Arkansas individual income tax on their share at individual rates. Arkansas also offers a pass-through entity tax election under Act 362 of 2021, codified at Ark. Code Ann. §§ 26-65-101 et seq., which lets an LLC or S-corp pay Arkansas income tax at the entity level. The election exists for the same reason every other state enacted one after the 2017 federal SALT cap: it converts a nondeductible state tax at the owner level into a deductible expense at the entity level, preserving the federal deduction. For a high-income Arkansas partner, the election routinely saves several thousand dollars a year with no change to actual state tax liability. The mechanics are worth a separate conversation with a CPA; the point here is that Arkansas has the election, and it has had it since 2021.

Sales tax, property tax, and the various local assessments sit outside the formation-cost comparison, but the Arkansas corporate rate matters if you are choosing between electing C-corp status here versus pushing income to members and paying at the individual top rate, which stands at 4.7% for 2023 after the same Act 315 package. For most operating LLCs in Arkansas, pass-through plus the PTE election is the right posture; C-corp election makes sense in narrower cases involving reinvested earnings, QSBS planning, or institutional capital.

Arkansas versus Delaware, honestly

The simple comparison: Arkansas is $45 plus $150 a year. Delaware is $90 plus $300 a year. Over five years, an Arkansas LLC runs $795 in state fees and a Delaware LLC runs $1,590, roughly double. The formation gap is small in absolute terms and the annual gap is the one that compounds.

That framing is misleading if you take it too literally, because nobody forms in Delaware for the $90. They form because of the Court of Chancery, the century of case law, the registered-agent infrastructure, and the signal it sends to institutional capital. Arkansas does not compete on those axes and does not try to. Arkansas competes on "this is where the business is," and for a business operating in Arkansas, the foreign-qualification math is straightforward: a Delaware LLC doing business in Arkansas has to register here as a foreign LLC anyway, which costs $270 online or $300 paper and layers a second annual franchise tax on top of Delaware's. The "cheap Delaware LLC" is not cheap once it operates in your home state.

For a sole-member consultancy in Fayetteville, a family-held rental portfolio in Hot Springs, or a regional services business with no ambition to raise institutional capital, forming in Arkansas is the right answer and the $45-plus-$150 posture is the whole story.

For a startup that expects to raise a priced round from a Sand Hill Road firm, Arkansas is where the business operates and Delaware is where the holding company sits, with the operating sub registered in Arkansas as a foreign entity. That posture costs more and is worth it exactly when the cap table calls for it.

Who this state actually makes sense for

Three kinds of filers belong in Arkansas in late 2023.

The first is anyone whose business is physically here. The foreign-qualification fees in any other state make the "form in Delaware and qualify in Arkansas" path strictly more expensive, and the case-law premium is not recoverable for a business that will never see the inside of a Chancery courtroom.

The second is a holding vehicle for in-state real estate. Arkansas recording mechanics, homestead rules, and the way the Uniform Act now handles member interests make a domestic LLC simpler than a foreign-qualified one for title and financing purposes.

The third is a closely held operating company whose owners are Arkansas residents and whose tax posture benefits from the PTE election. Paying the entity-level tax locally, deducting it federally, and keeping the compliance footprint inside one state is cheaper than any multi-state alternative for this profile.

What falls outside those three: a venture-track C-corp, a fund, or a multi-state real-estate roll-up. Those belong in Delaware or a Delaware-wrapped structure for the reasons every securities lawyer will tell you, and the Arkansas savings will not make up for the friction later.

If you are filing this month and the business is local, pull up the Secretary of State's online portal, spend the $45, and get back to work. The May 1 notice will arrive next spring; set a calendar reminder now, because the penalty is small but the reinstatement paperwork is the kind of task that quietly eats a Tuesday six years from now.

Sources

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