How to start a business in Arkansas

From ample hot springs and freestone rivers to gemstone mining and the World Championship Duck Calling competition, Arkansas has it all!

Don’t duck your calling! You’re here because you have an idea and it’s time to take action. But where do you even start? Paperwork, planning, money & marketing ... there's a lot to being an entrepreneur! Here’s a simple rundown of what’s needed to start & maintain a small business in Arkansas. Make sure you don’t miss any of the 7 key steps to legit business ownership!

7 steps to starting your business off right:

  1. Make a plan: Figure out where you’re heading and a create a plan to get there

  2. Name your biz: Choose a name and make sure it’s available to use

  3. Legal Structure: Decide if you’ll be a Sole Proprietor, LLC, S-Corp or other entity

  4. Paperwork: Get set up properly on the state, federal and local levels

  5. Money: Ensure your banking, bookkeeping, taxes, etc. are on track

  6. Insurance: Consider what insurance your business will need

  7. Spread the word: Create a marketing plan to get your ideas out into the world

 
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Step 1: Make a plan

Having a destination in mind and a plan get there is essential to entrepreneurship. Some business owners prefer to map out every detail and some like to keep it a little more open. Regardless of your method, writing things out ahead of time helps you avoid a lot of pain and confusion in real-time. You’ll save a ton of energy by focusing only on the things that are in alignment with your vision.

Option 1 – Formal Business Plan

If you’ll be pursuing funding through investors, hiring a team or getting a big piece of real estate, a formal business plan is probably the way to go. There are plenty of resources (like this one or this one) on the internet to help with that.

Option 2 – Business Roadmap Doc

For most small businesses (especially if you are a 1-person operation), I recommend creating a business roadmap doc. In it, you should clarify things like who your audience is, what your unique strength/superpower is, your business mission/vision statements, and a rough outline of your goals and milestones. Roadmaps are a great way to clarify your vision, while offering enough flexibility for you to pivot and grow.

 
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Step 2: Business Name

Before you get too far down the small business rabbit hole, it’s helpful to choose a name and make sure it’s available to use. In addition to a google search, I recommend, at the bare minimum, searching federal and state databases.

Do your own research

Where to find help

There are lawyers that specialize in helping small business owners protect their name! If you want to minimize risk, consult with a business attorney about your brand name.

 
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Step 3: Legal Structure

The way you structure your business can have a huge impact on your finances and day-to-day operations. There are pros and cons to each structure. One thing I’ve found really helpful to consider is how closely I want my business and personal finances to overlap. This not only affects your taxes, but can have a profound affect on your mindset as a business owner.

Common biz structures

  • Sole proprietorship: A business with one owner that is not registered as an LLC or corporation. You, personally, and your biz are a single entity in the eyes of the IRS.

  • Limited Liability Company (LLC): An LLC can have one or more owners. In an LLC, the business is a separate tax entity from you, the owner.

  • S Corporation (S-Corp): Your personal and business finances are completely separate. After registering as a corporation, you must meet a few requirements and submit an additional piece of paperwork. There may be some tax benefits for S-Corps.

Where to find help

There are SO many variables that go into determining your legal structure. Because a lot of those variables have to do with finances and taxes, a CPA (Certified Public Accountant) is a great resource to help you make this decision.

You can also check out this nifty chart by the U.S. Small Business Administration!

 
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Step 4: Paperwork

Paperwork is arguably the most challenging part of business start-up. Do you consult a lawyer, hire a CPA or try a DIY approach? The maze of government websites can be maddening! Let’s break it down…

A NOTE FOR SOLE PROPRIETORS…

Because your biz is tied to your social security number, rather than a business tax ID number, you may not need to do everything on the following list. Setting up a sole proprietorship is generally known for being a little simpler to start. If you have any questions about your specific situation, a CPA or business lawyer are both great resources.

There are three types of things you’ll need to do

  • Registration / business license: Lets the government(s) know you exist.

  • Permits / specialty licenses: Legally says you’re allowed to do the specific thing you’re doing where you’re doing it.

  • Get set up to pay taxes: A tax ID number allows the government to tax your business separate from you as a person. It’s kinda like a social security number for your biz. Depending on your business, there may be a few types of taxes you’re responsible for.

Helpful links for DIY-ers

#1 – STATE LEVEL

#2 – FEDERAL LEVEL

  • Optional: Get a trademark through the United States Patent and Trademark Office. It isn’t required immediately, but doing it sooner rather than later limits your risk. If you decide to trademark your business name (so that you have exclusive rights to use it), you may want to hire a business lawyer to help.

  • S-Corps must file election with form 2553 (doesn’t apply to other business structures).

  • Most businesses need an EIN (Employer Identification Number) from the IRS.

  • If you do any of the following business activities, you’ll need a federal permit: Agriculture, Alcoholic beverages, Aviation, Firearms ammunition and explosives, Fish and wildlife, Commercial fisheries, Maritime transportation, Mining and drilling, Nuclear energy, Radio and television broadcasting, Transportation and logistics

#3 – LOCAL LEVEL

  • Check with you local city or municipality to see if there’s anything you need to do!

Where to find help

When I first started out, I was SO confused about who to turn to to help me get my paperwork in ship shape. It turns out that both Business Lawyers AND Certified Public Accountants (CPAs) are able to help you file new biz paperwork. It’s completely your choice whether to DIY, hire a lawyer, hire a CPA or hire both.

I like to get help from lawyers when I have questions about agreements between people and protecting my assets. I like to rely on my CPA for financial advice. When deciding what type of help you need, you may ask yourself, “Are my biz set-up concerns more about the people I’ll be working with or the financial implications of my decision?”


 
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Step 5: Money

Making sure your finances are legit is one of the most time-consuming and stressful parts of small business ownership. It can bring up a lot of fear. For this reason, many entrepreneurs either put it out of mind entirely or feel a need to control every penny. Setting up a solid money system from the beginning can help you avoid TONS of stress!

Money must-dos

#1 - BIZ BANKING

  • You need a business bank account. Straight up. No matter what type of legal entity you chose, opening a separate account for your business is crucial. Keeping things separate offers clarity on what your business is actually producing.

  • Check with your bank or credit union on the specific things they’ll need from you. It’ll probably be something like: 2 forms of ID, your Tax ID number (if anything but a sole prop) and your biz documentation.

#2 - BOOKKEEPING

#3 - TAXES

Where to find help

  • The Money Course: Simplifies the ins & outs of managing business finances, teaches you what to look for in a CPA, takes the stress out of tax time, and helps you create solid financial systems.

  • Bookkeeper: Organizes receipts & bank statements, categorizes transactions, reconciles bank accounts, does invoicing and completes payroll. At the end of the year a bookkeeper provides a profit / loss statement and balance sheet for taxes. They are required to have a high school diploma.

  • EA (Enrolled Agent) / Tax preparer: They simply file taxes. They must have passed a national exam or have 5+ years of IRS experience.

  • Certified Public Accountant (CPA): Their role is Interpreting/analyzing/summarizing financial data. They also do everything tax-related. They must have a bachelor’s degree, must pass an exam and be licensed at the state level.

 
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Step 6: Insurance

As a small business owner, it’s important to protect your business assets, personal assets and clients/customers. Here are several types of insurance you may want to consider.

You may need one or more of the following:

  • General liability insurance: Basically every business should have this. It’s what protects you from financial ruin if someone sues you.

  • Product liability insurance: If you produce a physical product, this protects you from financial loss resulting from a malfunctioning product.

  • Professional liability insurance: If you’re a service-based small biz, this type of insurance protects you from financial loss resulting from negligence or error.

  • Home-based business insurance: If you run a business out of your home (especially if you’re bringing clients/customers into your space) you may need to add on to your home-owners or renters insurance policy.

Where to find help

Many insurance companies combine the above plans into a bundle, so be sure to shop around.

The Small Business Administration is a great resource for more insurance details.

 
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Step 7: Spread the word

Putting yourself out there takes guts. Talking about your passion project can be weird. Learning to share your idea authentically takes work. But when you finally open the door, the results can be mind-blowing!

5 ways to start spreading the word

  1. Invite a mentor or someone you look up to for coffee to share the news.

  2. When people inevitably ask what you do, start describing yourself as a business owner…even if it feels uncomfortable.

  3. Get in touch with me. I want to share your story! I’ll soon be featuring interviews with new business owners!

  4. Join a local mastermind or networking group.

  5. Text 10 people right now.

Where to find help

Enroll in the branding or marketing course. You’ll learn how to connect with your people through a framework of integrity and empathy. And grow a thriving business while you’re at it!

Reach out to me, Tess, the creator of this site. I’d love to help you come up with a strategy that’s right for you!