How to Form a Professional Corporation in Arkansas


Steve Bennett
Steve Bennett
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Form a Professional Corporation in Arkansas

Are you considering starting a professional corporation in Arkansas? Congratulations! Establishing a professional corporation is an excellent choice for entrepreneurs and professionals alike who seek to benefit from a business structure that provides limited liability protection, tax advantages, and enhanced credibility. However, navigating the process of forming a professional corporation in Arkansas can be daunting.

This article aims to provide a comprehensive guide on how to form a professional corporation in Arkansas, covering everything from understanding the basics of this business entity to the essential steps and requirements you must comply with to launch your new venture successfully. Let’s dive in and explore the ins and outs of forming a professional corporation in Arkansas!

What is a Professional Corporation in Arkansas?

A professional service corporation (PSC), sometimes called a professional corporation (abbreviated as PC), is a type of organization authorized by state law to allow owners of particularly licensed professions in Arkansas. The owner of a professional corporation is responsible for their own negligence or misconduct, but they are not held personally accountable for the actions of other owners. PC or P.C. is a regularly used abbreviation to identify professional corporations.

PCs and LLCs provide personal asset protection; that is, the personal assets are free from business debts. However, they do not have similar tax benefits. There is no secret formula as to which type of business structure is better than the other. It solely depends on the requirements of your business. However, forming an LLC is easier than setting up a PC in Arkansas.

– LLCBuddy Editorial Team

Unlike other types of corporations, owners of Professional Corporations get two types of citizenship. One is where they incorporated the corporation, and the other is where they conduct the business. This benefit is not available for other types of corporations. You can form a free LLC in Arkansas if you hire a professional service that provides LLC formation at $0.

How to Form a Professional Corporation in Arkansas

To form a Professional Corporation for the professional service you provide, you must follow a few steps that include verifying if you are qualified for a PC, naming your business, hiring a Registered Agent, filing the Articles of Incorporation, outlining an operating agreement, requesting for an EIN, opening a bank account, getting a business license, and filing for an annual report and taxes.

Step 1: Verify If You Are Qualified for a Professional Corporation

In forming a professional corporation in Arkansas, you should know if you are qualified. There are specific professions that are allowed to form a professional service corporation, including-

  • Doctors
  • Architects
  • Engineers
  • Accountants
  • Lawyers and others

You should be qualified to have a license to provide your service. In most cases, once you have graduated with your studies, passed the exam, and got your license, you may now form a professional corporation. However, if you work in an industry that doesn’t offer a license or professional certification, you should consider forming a corporation or limited liability company.

Step 2: Name your Professional Corporation in Arkansas

After you have decided on the idea to form a professional corporation in Arkansas, deciding the name for your corporation is significant. There is a complete guide on Arkansas LLC name guidelines for you to have a proper business name. Here are some regulations you must follow while naming your professional corporation.

  • The business name should have the word PC, frequently followed by the name of the principal owner in place of Inc or LLC. (Example. John Doe, MD, PC)
  • No confusion with a government entity name.
  • A unique name is needed with no match
  • Limit of restricted words that need a license.

In Arkansas, if you do not wish to file your professional corporation right away but want to hold the name that you have decided on, then you can reserve your corporation name for 120 days. To keep the name, you must file a name reservation application with Arkansas Secretary of State.

A professional corporation, professional association, service corporation, or professional service corporation must be present in the name if it doesn’t already. You might opt to register your business under a different legal name if your preferred name isn’t available. Once you have chosen a name, you can submit an application for a DBA (doing business as). In this manner, you can choose any name you desire to run a clinic or law firm.

Step 3: Choose the Arkansas Registered Agent

The next step in forming a professional corporation is hiring the Arkansas Registered Agent, a person that accepts legal paperwork on behalf of your business. This person or business will receive important tax forms, legal documents, all notices of lawsuits, and other official government correspondence in Arkansas. Forming a professional corporation for your service will be easier if you have Registered Agent in Arkansas.

Alternatively, you can serve as your own Arkansas Registered Agent if you have the time. However, you must stay compliant to avoid missing any important documents from Arkansas.

Step 4: File the Articles of Incorporation in Arkansas

After you hire a Arkansas Registered Agent to form a professional corporation, the next step is to file the Arkansas Articles of Incorporation. In writing the Articles of Incorporation, the business name, owner’s contact information, corporation address, and Registered Agent contact information should be written. You should also include the names of all co-owners. All owners have to prove they have the proper license to practice the specific profession they intend to.

Filing the Articles of Incorporation in Arkansas may be done with two ways, in-person and by mail. The Articles of Incorporation fee may vary from different states. However, in Arkansas, it costs $45 for filing in-person and by mail. There’s no online filing available.. For offline filing, Send the form by mail or drop it in person to Arkansas Secretary of State, 1401 W. Capital Ave., Suite 250, Little Rock, AR 72201.

Step 5: Write an Operating Agreement in Arkansas

An operating agreement is a document that contains all of your company’s organizational details. It is not required to draft an operating agreement in most states. Yet, having one as an internal document is strongly advised. The Arkansas operating agreement includes information like-

  1. About Business
  2. Members and management
  3. Capital contribution
  4. Profit Distribution
  5. Change of membership
  6. Dissolution

Step 6: Designate the PC Board of Directors in Arkansas

The next step is to appoint the initial board of directors in your PC in Arkansas. All the initial directors must submit their details to the owner. The owner must keep the records and submit them in accordance with the Arkansas SOS. When writing the By-laws, as a shareholder and owner, you must make sure there is a point mentioned about appointing a new director later.

Step 7: Write the Corporate Bylaws

Now that you are done forming the team of the board of directors, the next step is to draft corporate bylaws. Corporate bylaws are the basic rules that control a corporation. It includes the organization’s structure, processes, laws, and rules. As a result, all personnel, managers, and corporation members must obey the firm’s rules.

In creating corporate bylaws, you should include the following on how the decisions will be made.

  • The responsibilities are given to each officer.
  • How will judgments in business be made?
  • Where and when are the annual shareholder meetings?
  • The minimum number of shareholders required for decision-making.
  • Location and timing of dividend payments.

Step 8: Hold the First Board of Directors’ Meeting

After drafting the corporate bylaws, gather all the board of directors for the first meeting. This meeting will be finalized by appointing directors to manage the company’s daily operations, approve the bylaws, choose the corporation’s accounting year, and approve the stock issue. All board meetings should have minutes taken and stored with the company’s records.

Step 9: Request an EIN in Arkansas

After documenting the operating agreement, you should get or request an Employer Identification Number (EIN). An EIN will serve as the tax ID for your professional corporation. EIN can be obtained from the Internal Revenue Service (IRS). It is a 9-digit number similar to Social Security Number. EIN, however, is distinct from SSN. It is only used for business-related activities, particularly for submitting general taxes. The form must be completed and uploaded to the IRS website.

The application of an EIN in Arkansas can be through the following:

  • Apply Online- The online EIN application is the preferred method for customers to apply for and obtain an EIN.
  • Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that the Form SS-4 contains all of the required information.
  • Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is 4 weeks.
  • Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

After you have your EIN number, you can benefit in a number of ways. It will give your professional corporation the final advantage necessary to operate at full capacity without encountering legal or judicial issues.

Step 10: Open a Bank Account and Prepare for Taxes

Once you have filed and received your Employer Identification Number, you should open a bank account since you will use this account for yourself, your clients, and your employees.

Your business dealings in Arkansas might be simpler by having a US business bank account because it boosts your company’s legitimacy and liquidity. For firms other than sole proprietorships, most banks demand an EIN to create a business bank account. Also, keeping separate finances helps you avoid combining personal and professional finances. Also, having an EIN makes tax preparation easier. With a professional corporation, you can anticipate paying employment and corporate taxes.

Step 11: Get a Business License in Arkansas

Before your professional corporation operates in Arkansas, you need to have a business license first. A business license is a formal document issued by the state government agency that allows you to operate your business in the geographic region that that agency governs. In Arkansas, business license and permit costs depend on the business’s nature and type. You must check with the local authorities if any special licenses or city-based permits are needed.

Step 12: File Your Taxes in Arkansas

Finally, you are down to the last step. After getting a business license and being ready to operate, do not forget to file your taxes first. You should start paying taxes quarterly as soon as possible to avoid a large tax bill. Each state has different tax requirements. Go through the Arkansas classification of taxes for the taxes an LLC in Arkansas has to pay.

Important Information

Maintaining Professional and Business License in Arkansas

Now that you have established your professional corporation, you must maintain or renew your professional license every now and then. Even if your business is established but you don’t have a valid license to operate, your business is irrelevant. And, even if your professional license is still valid for a year or two, but your business license is already expired, it is still irrelevant.

Make time to check the status of your licenses at least once per year. Then, you can keep from missing anything significant. If there are any issues, you can address them.

Filing an Annual Report in Arkansas

In Arkansas, you will be required to submit a report each year. The owners’ and Registered Agent’s names and contact details are listed in the annual report. Also, it should include all of your yearly financial activity. You must submit one yearly in Arkansas, and you can do it yourself or hire someone else to handle it. Everything must be precise and up to date.

Advantages of Forming a Professional Corporation in Arkansas

A professional corporation takes a lot of time to process and pursue. However, with the help of the Arkansas Registered Agent, everything will become easier. In fact, there are advantages that will help you form a professional corporation in Arkansas.

  1. Limited Liability: The biggest advantage of setting up a professional corporation is that the owners are not held personally responsible for the debts and obligations of the company. This indicates that only the company’s assets will be confiscated to settle claims and creditors if the business is sued or declares bankruptcy. Additionally, this protection exempts corporate owners from being held accountable for other owners’ reckless or criminally negligent acts.
  1. Tax Deductions: Similar company expenses, such as employee fringe benefits, startup and operating costs, and equipment purchases, can be written off by professional companies in the same ways they can be for other kinds of firms. However, there are several tax deductions professional corporations can take advantage of that other types of businesses can’t. For example, the salaries and bonuses paid to owners and employees are tax-deductible.
  1. Retained Earnings: Professional corporations can keep a portion of their profits under the corporate tax system to grow their companies.

FAQs

What is a Professional Corporation in Arkansas?
A professional corporation in Arkansas is a type of business entity that provides professional services, such as those related to healthcare, accounting, law, engineering, architecture, and other professional services.
How do I form a Professional Corporation in Arkansas?
To form a professional corporation in Arkansas, you must first file Articles of Incorporation with the Arkansas Secretary of State. The Articles must include the name of the corporation, the purpose of the corporation, the address of the registered office, and the names and addresses of the initial directors.
What are the requirements for forming a Professional Corporation in Arkansas?
To form a professional corporation in Arkansas, you must have a registered office in the state, you must have at least one director, and all directors must be individuals, not corporations or other entities. The corporation must also have a registered agent in the state, and the name of the corporation must include the phrase “professional corporation” or “professional limited liability company” or an abbreviation of those phrases.
Are there any restrictions on the types of businesses that can be formed as a Professional Corporation in Arkansas?
Yes. The Arkansas Professional Corporation Act states that only those businesses that provide professional services, such as those related to healthcare, accounting, law, engineering, architecture, and other professional services, are eligible to be formed as a professional corporation in Arkansas.
What are the advantages of forming a Professional Corporation in Arkansas?
One of the main advantages of forming a professional corporation in Arkansas is that it provides limited liability protection to the shareholders and directors of the corporation. Additionally, the corporate structure of a professional corporation allows for more flexibility in the management of the business.
What are the tax implications of forming a Professional Corporation in Arkansas?
Professional corporations in Arkansas are subject to the same state and federal taxes as other corporations. Additionally, professional corporations are subject to the Arkansas Franchise Tax.
What is a professional corporation in Arkansas?
A professional corporation in Arkansas is a corporation formed for the purpose of providing professional services, such as legal, accounting, medical, engineering, or other services that require a license from the state of Arkansas.
What are the benefits of forming a professional corporation in Arkansas?
Forming a professional corporation in Arkansas provides a number of benefits, including limited liability protection for the shareholders, continuity of existence, centralized management, and the ability to issue stock.
What is the process for forming a professional corporation in Arkansas?
The process for forming a professional corporation in Arkansas includes filing a Certificate of Formation with the Arkansas Secretary of State, obtaining a Registered Agent, and filing the necessary annual reports and fees.
What information is required to form a professional corporation in Arkansas?
The information required to form a professional corporation in Arkansas includes the name of the corporation, the name of the Registered Agent, the names and addresses of the directors and officers, and the purpose of the corporation.
How much does it cost to form a professional corporation in Arkansas?
The cost to form a professional corporation in Arkansas is $45, which covers the filing fee for the Certificate of Formation.
What are the rules and regulations for professional corporations in Arkansas?
Professional corporations in Arkansas must be specifically authorized by the Arkansas State Board of Accountancy, Arkansas State Board of Nursing, Arkansas State Board of Pharmacy, or other professional licensing board, and must comply with all applicable laws and regulations.
What is the registered agent for a professional corporation in Arkansas?
The registered agent for a professional corporation in Arkansas is an individual or business entity that has a physical street address in Arkansas and is authorized to accept service of process on behalf of the corporation.
What is the legal status of a professional corporation in Arkansas?
A professional corporation in Arkansas is a separate legal entity, distinct from its shareholders and officers, and is subject to the laws of the state of Arkansas.
How do I form a professional corporation in Arkansas?
To form a professional corporation in Arkansas, you must file a Certificate of Incorporation with the Arkansas Secretary of State. The Certificate of Incorporation must include the name of the corporation, the name and address of the registered agent, the duration of the corporation, and the names and addresses of the incorporators.
What are the advantages of forming a professional corporation in Arkansas?
The advantages of forming a professional corporation in Arkansas include limited liability protection, tax benefits, asset protection, and increased credibility.
Are there any restrictions on forming a professional corporation in Arkansas?
Yes, there are certain restrictions on forming a professional corporation in Arkansas. The professional corporation must be formed by a licensed professional, and it must adhere to the Arkansas Professional Corporation Act.
What are the requirements for naming a professional corporation in Arkansas?
A professional corporation in Arkansas must include the words “Professional Corporation” or “P.C.” in its name. Additionally, the name must be distinguishable from other business entities registered with the Arkansas Secretary of State.
What are the filing fees associated with forming a professional corporation in Arkansas?
The filing fee to form a professional corporation in Arkansas is $45.
How long does it take to form a professional corporation in Arkansas?
It typically takes 7-10 business days to form a professional corporation in Arkansas.
Do I need to appoint a registered agent when forming a professional corporation in Arkansas?
Yes, you must appoint a registered agent when forming a professional corporation in Arkansas. The registered agent must have a physical address in Arkansas.
What are the requirements for maintaining a professional corporation in Arkansas?
The requirements for maintaining a professional corporation in Arkansas include filing an annual report, providing notice to members, and paying taxes. Additionally, the professional corporation must abide by all applicable laws and regulations.
Are there any tax advantages to forming a professional corporation in Arkansas?
Yes, there are certain tax advantages to forming a professional corporation in Arkansas. Professional corporations are treated as separate entities for tax purposes, which can provide a significant tax benefit.
What is the annual report requirement for professional corporations in Arkansas?
Professional corporations in Arkansas must file an annual report with the Arkansas Secretary of State each year. The annual report must include the name and address of the registered agent, the name and address of the corporation, and the number of shares of stock issued and outstanding.
Is it necessary to have a corporate meeting for professional corporations in Arkansas?
Yes, it is necessary to have a corporate meeting at least once a year for professional corporations in Arkansas. The corporate meeting must be attended by a majority of the incorporators or their duly appointed representatives.
Do I need to provide notice to members of a professional corporation in Arkansas?
Yes, it is necessary to provide notice to members of a professional corporation in Arkansas. The notice must be provided in writing at least 30 days prior to any corporate meeting or other corporate action.
What are the liability protections for professional corporations in Arkansas?
Professional corporations in Arkansas provide limited liability protection for their members. This means that the members are generally not liable for the debts and liabilities of the corporation.
What are the dissolution requirements for professional corporations in Arkansas?
The dissolution requirements for professional corporations in Arkansas include filing a Certificate of Dissolution with the Arkansas Secretary of State, providing notice to creditors, and paying all outstanding debts and liabilities.
Are there any restrictions on the transfer of shares of a professional corporation in Arkansas?
Yes, there are certain restrictions on the transfer of shares of a professional corporation in Arkansas. The transfer must be in compliance with the Arkansas Professional Corporation Act and the corporation’s articles of incorporation.
Are there any restrictions on the dissolution of a professional corporation in Arkansas?
Yes, there are certain restrictions on the dissolution of a professional corporation in Arkansas. The dissolution must be in compliance with the Arkansas Professional Corporation Act and the corporation’s articles of incorporation.

Also Read

Why Arkansas Professional Corporation is So Important

Arkansas Professional Corporation allows professionals to pool their resources and expertise, creating a collaborative environment that fosters innovation and growth. By forming a corporation, professionals can combine their unique skills and talents to offer a diverse range of services to their clients. This collaborative model not only enhances the quality of services provided but also enables professionals to tap into a broader network of contacts and opportunities.

Furthermore, Arkansas Professional Corporation grants professionals the ability to raise capital and attract investors to their businesses. By issuing shares of stock, professionals can secure funding for business expansion, equipment purchases, and other essential investments. This influx of capital can fuel growth and propel the business to new heights, enabling professionals to reach their full potential and achieve their goals.

In addition to financial benefits, Arkansas Professional Corporation also offers tax advantages to its shareholders. By operating as a corporation, professionals can take advantage of deductions and credits that are unavailable to sole proprietors or partnerships. These tax breaks can significantly lower the business’s overall tax liability, allowing professionals to retain more of their hard-earned profits.

Moreover, Arkansas Professional Corporation provides professionals with greater credibility and professionalism in the eyes of their clients and peers. Operating under a corporate structure demonstrates a commitment to excellence and sets professionals apart from their competitors who may operate as sole practitioners or in informal partnerships. This enhanced reputation can lead to increased trust and confidence from clients, ultimately driving more business and fueling further success.

Another significant advantage of Arkansas Professional Corporation is the ease of succession planning and continuity. By incorporating their business, professionals can ensure that their legacy continues beyond their own tenure. Shareholders can easily transfer ownership stakes through stock sales or transfers, allowing the business to seamlessly transition to new leadership and thrive for generations to come.

In conclusion, Arkansas Professional Corporation is an indispensable tool for professionals looking to establish and grow their businesses in the state. These entities provide a myriad of benefits, including limited liability protection, collaboration opportunities, access to capital, tax advantages, enhanced credibility, and succession planning. By forming a professional corporation, professionals can secure their personal assets, foster innovation, attract investment, minimize taxes, build trust with clients, and ensure the longevity of their business. Overall, Arkansas Professional Corporation is vital for professionals seeking to excel in their respective fields and leave a lasting impact on their industries.

Conclusion

In forming a professional corporation in Arkansas, having someone to help you build it is not necessary but suggestible. Even though it is easy because of the listed benefits and advantages above, forming your group of professional individuals will make it somehow successful. Just make sure to be guided by the steps and ensure that every one of the details and records is accurate and precise. And if you have any questions, share them in the comment section below.

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