Starting a Business in Arkansas
Arkansas is a state with a friendly business environment for anyone looking to start up a business or looking to relocate one. In recent years the state has streamlined its regulatory process (only necessary Business Licenses are needed) making it easy to open up shop or relocate an existing business. Arkansas has put a lot of effort into cultivating workforce development systems to help the economy grow. There has also been an influx of foreign capital as more and more foreign investors are seeing value in the state. Arkansas is well known for its long standing history as a transportation hub for various industries, but as of late it is also becoming a hub for technology. You have the opportunity to take advantage of a number of incentives to help your business expand and thrive. Incentives are given in the form of tax credits, tax refunds, grants or loans, and tax exemptions.
STEPS TO STARTING A BUSINESS IN ARKANSASThe Arkansas Secretary of State helps with making sure that your administrative filings are done correctly so you can move on to other tasks. This will also help to avoid any problems with future changes. The Arkansas Department of Finance and Administration governs many of the rules and regulations relating to Arkansas businesses. Once you have completed an Arkansas corporation search, selected a business name, and formed a company with the Arkansas Secretary of State, you will be able to apply online for a Sales Tax Permit. If you are structured as anything other than a sole proprietor, you will need to get a Federal Tax ID Number first. The last major issue you will have to deal with is to get the Business Licenses you will need. Some other things can be done while preparing to run an Arkansas business such as seeing the various ways to collect sales tax and looking up an Arkansas sales tax rate. You can also apply for a business bank account or see the outcome of submitting forms AR-1R or ST-1. Due to the mass emergence of online businesses, laws have been changing rapidly regarding the levy of sales tax to out of state sellers. If you make out of state sales, you may unknowingly be a remote seller and have sales tax nexus. There are different types of nexus including affiliate nexus, marketplace facilitator nexus, and click through nexus. If you meet certain sales criteria that were set forth by legislation that Arkansas has agreed to, it may require you to apply for streamlined sales tax. Once all compliance issues are dealt with, you can research benefit programs. The following are a list of some of the major programs that Arkansas offers to help your business on its road to success.
- Arkansas offers three different research and development tax credits to help Arkansas businesses facilitate growth:
- The first is the In House Research Credit that is matched by an equivalent federal tax credit. This credit is equal to 20% of the research and development of the business.
- The second research credit is the Strategic Value Credit which is given to businesses that are related to science or technology. The credit is equivalent for up to 33% of qualified R & D expenditures.
- The last research credit is geared towards businesses in targeted industries. The credit is equal to 33% of qualified in house R & D expenditures incurred in the first 5 years.
- ArkPlus is an income tax credit that is given to companies who meet a specific investment and employee payroll criteria. The credit is equal to 10% of the investment into a business project and cannot exceed 50% of the total tax liability. Under certain circumstances, a technology based company may be eligible for a sales tax credit equal to 2%-8% of the total capital investment.
- The Advantage Arkansas Income Tax Credit is for companies that are able to offer new full time jobs. With this credit up to 4% of employee payroll can be taken for up to 5 years. The tax credit cannot exceed 50% of the total tax liability in a given year.
- Another employment creation incentive is the Arkansas Create Rebate Program. Businesses that can offer new full time employment with an annual payroll of $2,000,000 can qualify for annual cash payments for up to 10 years.
- The Arkansas Sales Tax Exemption for manufacturing incentive offers qualified manufacturing businesses an exemption on machinery or equipment used in the manufacturing process. All of this equipment is exempt from Sales and Use Tax. A seller’s permit is required to qualify for this exemption.
- Arkansas also offers a Tax Refund program called the Tax Back Sales and Use Tax Refund. Eligible businesses must make a minimum capital investment of $100,000 and have minimum payroll of at least $50,000. If these requirements are met, the business would be able to take a refund on Sales and Use Tax levied on the purchase of machinery, equipment, and other building materials.