Arkansas Tax ID (EIN) Number & Business RegistrationPublished:
Starting a business in Arkansas isn’t especially complicated, but there are some key points you’ll need to consider before moving forward. Before you get lost in daydreams about making it big as a business owner, you should familiarize yourself with the realities of business creation and ownership. Arkansas is particularly welcoming to small businesses. More than 99 percent of Arkansas businesses are small businesses—there are nearly 245,000 of them. And those businesses collectively employ 48.5 percent of the Arkansas workforce. Arkansas is seeing a respectable economic growth rate of 2.2 percent, and an output of more than $19.8 trillion. You will find plenty of opportunities—especially if you take advantage of the many resources available to you, including the Arkansas Small Business and Technology Development Center (ASBTDC).
Steps to Obtain an Arkansas Tax ID Number & Business Registration:
- Legal Formation of your Arkansas Business
- Obtain your Federal Tax ID (EIN) Number
- Arkansas State Tax ID Number
- Arkansas Licenses & Permits
When you create your Arkansas business, you’ll need to choose a specific business type, each of which has strengths and weaknesses. These are the most noteworthy structures you’ll need to consider:
- Sole proprietorships.Sole proprietorships are the simplest type of business to start, so they tend to appeal to first-time entrepreneurs or small businesses with no long-term plan for expansion. In this business type, you’ll pay taxes as an individual, but you won’t get any liability protection, which means you’ll be exposed to any debts and obligations on behalf of the business.
- Partnerships.Partnerships are nearly identical to sole proprietorships; the main difference is the number of members. Partnerships have two or more members, and have a standing partnership agreement to dictate how the proceeds and decision making power are split.
- Limited liability companies (LLCs).Limited liability companies (LLCs) are a little more complex, because they’re treated as standalone entities that track their own income and expenses. They don’t pay taxes on income at the federal level, and in Arkansas, they’re required to file an annual report, while paying a flat $150 tax rate per year (unless they’ve opted to be taxed as a corporation). LLCs also provide you with some liability protection; you won’t personally take on debts or liabilities of the organization.
- Corporations.Corporations are the most complex business type, and are subject to more laws and restrictions than other business structures. They have the ability to raise funds by issuing public shares, which makes them the favorite choice of entrepreneurs with long-term visions of growth and expansion. Like LLCs, they’re treated as separate entities, and they provide a great deal of liability shielding to their owners, but they’re taxed differently. At the federal level, corporations are taxed on all eligible income. In Arkansas, corporations are taxed using a three-factor formula, paying 1 percent on the first $3,000 of taxable income, 2 percent on the next $3,000, 3 percent on the next $5,000, 5 percent on the next $14,000, 6 percent on the next $75,000, and 6.5 percent on all income above that threshold.
If you’re confused about which business structure will serve your organization best, take a step back and work on your business plan (which you should have in place before you finalize this decision, no matter what). Once you have a better understanding of how your business plans to make money, what competition you’ll face, and how you plan to grow over the next several years, it should become clear to you which business structure will serve you best—or you’ll at least be able to rule out a few possibilities.
Your employer identification number (EIN) or federal Tax ID Number is a unique number associated with your business; you’ll get one when you officially register your business with the federal government. You’ll need this number if you plan on hiring employees, if you’re going to open a business bank account, or if you’re going to establish monetary agreements and partnerships with other businesses. In short, almost every business will need one.
If you want to expedite this process and make it as simple as possible, make use of our online federal Tax ID Number obtainment service.
In addition to your federal tax ID, you may need an Arkansas state tax ID number. This number is used for a variety of state-level functions, including registering for sales taxes on eligible goods and services, and hiring and paying employees. You’ll also need it for excise taxes and other special state-level taxes.
To make things speedier and easier for entrepreneurs, we also offer Arkansas state tax ID obtainment services. The process is simple; with a few pieces of information about you and your business, we'll have you set up and ready to grow in no time.
In Arkansas, you may also be required to have specific licenses, permits, or certifications before you can begin operations. Because these licenses may vary based on your location, and are required for dozens of different industries, it’s hard to list them all in any concise fashion. You can search through municipal code records to find out whether your business is required to have specific licenses, or contact your local Chamber of Commerce to find out more. If you know other business owners in this industry, you may speak with them as well to get a feel for the requirements.
If you have a strong business idea and a business plan in place, you’re only a few logistical steps away from making your business a reality. Take advantage of our federal tax ID and Arkansas state tax ID obtainment services to accomplish those steps even faster!