Arkansas LLC Taxes
The low cost of living and warm climate has brought a sizeable amount of new residents and businesses to the state of Arkansas. Yet, as more business owners choose to start their ventures in the state, many may find it challenging to understand the business taxes involved.
Regardless of the size of your business, if you operate a limited liability company (LLC) in Arkansas, you will need to ensure you stay up to date on your finances and pay federal, state, and local taxes. Our guide will help you understand which taxes you will need to pay for your Arkansas LLC.
Recommended: Schedule a free consultation with an accountant to stay on top of your taxes.
Arkansas Annual Franchise Tax
In order to operate within the state of Arkansas, all LLCs must file Annual Franchise Tax Reports. All LLCs, regardless of business activity, must file yearly and pay the fee of $150 each year. This tax will always be due on May 1 by mail or online, and you will be charged a $25 late fee if you miss the deadline.
To learn more about the Annual Franchise Tax, visit the Arkansas Secretary of State website.
Arkansas LLC Taxes Owed
Like in other states, LLCs in Arkansas benefit from pass-through taxation, which means that the business’ profits will pass through to the individual tax returns of the members. As a result, your LLC itself does not pay taxes to the federal government or to the State of Arkansas. Instead, LLC owners must pay taxes on their portion of the income made from the LLC.
In Arkansas, LLC owners can expect to pay the following taxes:
Federal Taxes
Regardless of where your business is located, if you have an LLC within the United States, you will have to pay federal income taxes and federal self-employment taxes. These taxes are reported on your Form 1040.
Federal Self-Employment Taxes
It doesn’t matter if your LLC is a single-member LLC or a multi-member LLC; all LLC members must pay self-employment taxes on their share of the LLC’s profits. The self-employment tax rate is 15.3%.
Federal Income Taxes
Your federal income taxes will depend on your tax bracket, and the cutoffs for individual tax brackets, as well as the percent owed, will change each year.
Arkansas State Taxes
Each state has its own laws dictating how individuals and businesses are taxed. Arkansas is no different, and below we have compiled important state-level taxes you should know about for running an LLC in the state.
Arkansas Income Taxes
The income tax rate in Arkansas is 4.9%. This is slightly below the national average but is also not the lowest available rate. Still, some states have upwards of 10% for their income tax rate, making Arkansas quite advantageous in comparison.
Arkansas Sales and Use Tax
Arkansas has a sales tax rate of 6.5%, making it the ninth-highest state sales tax in the country. Cities and counties within Arkansas may also impose their own local sales tax rate, which averages out to 2.96%. These local rates are in addition to the original state sales tax rate, so the average sales tax rate for state and local combined would be 9.46%, the third highest combined rate nationwide.
More information on the state’s sales and use tax can be found on the Arkansas Department of Finance and Administration website.
Register for a Sales Tax License in Arkansas
If your business sells taxable goods or services, you must register for an Arkansas Sales Tax License with the Arkansas Department of Finance and Administration. The application for the permit costs $50, and your business will be charged monthly for the accrued sales tax.
Visit the Arkansas Department of Finance and Administration website for more information.
Additional State Taxes
Arkansas’ Department of Revenue oversees the collection of various taxes that businesses may have to pay depending on their location, industry, and number of employees.
These are a few taxes that business owners in Arkansas may be responsible for paying:
- Tobacco Tax
- Gross Receipts Tax (on utilities)
- Alcohol Tax
The Arkansas Department of Finance and Administration has more information on state-level taxes on its website.
Arkansas Local Taxes
The local laws and ordinances in the different cities and counties across Arkansas are likely to vary from one another. Regardless of where you live in Arkansas, we recommend you check with your local jurisdiction and ensure that your business obtains the proper local permits and follows any local regulations that may impact your business’s operation.
Arkansas LLC Compliance
You must obey Arkansas’ state and local laws to maintain your business's compliance and good standing. While LLCs in Arkansas do not have a standalone annual report, they must still file an Annual Franchise Tax Report each year with the state.
Arkansas Annual Franchise Tax Report
As mentioned above, all LLCs in Arkansas must file an Annual Franchise Tax Report in order to keep operating. Paying the franchise tax serves the same purpose that a standalone annual report in other states would.
This must be paid by May 1 each year by mail or online and costs $150. There is a $25 late fee for those that miss the deadline. You can file your Annual Franchise Tax Report on the Arkansas Secretary of State's website.
Our How to Start an LLC in Arkansas guide has more information on filing the Annual Franchise Tax.
LLC taxes are complex. While our guide can provide you with important information, we recommend you schedule a free consultation with an accountant to ensure that you handle your business taxes correctly.