How to Start a Sole Proprietorship in Arkansas
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Entreprenuers that are looking for the most simple way to start their single owner business in Arkansas can choose to start as a sole proprietor. Establishing a business as a sole proprietorship in Arkansas doesn’t require any formal steps, but you’ll need to complete additional filings and processes to operate under your business name in Arkansas legally and ensure you comply with state and local regulations. This guide will outline the process to get your sole proprietorship started and compliant.
Liability Risk of Sole Proprietorships
Keep in mind that a sole proprietorship does not protect your personal assets if you are sued. If you’re seeking liability protection you may want to consider forming a Arkansas LLC instead. If you want more details on how an sole proprietorship is different from an LLC, visit our Sole Proprietor vs LLC guide.
Checklist for Starting a Sole Proprietorship in Arkansas:
1. Come Up with a Business Name
When starting a sole proprietor business in Arkansas, the first step is to come up with a business name. One of the most impactful decisions you’ll make when getting started will be choosing a business name that stands out from the crowd and is memorable. You’ll want to make sure your name is unique, makes it clear what your business is about, and can be easily remembered so that your prospective customers can more easily find you. If you’re having trouble coming up with business names be sure to visit our 15 tip guide to coming up with a business name to find some inspiration.
Complete a Arkansas Business Name Search
After you’ve come up with a few great business names, complete a basic name search to determine if the name is unique within the state and that the name is not trademarked:
2. Register Your Business Name
Now that you’ve decided on a great Arkansas business name, it’s time to get the name registered. As a sole proprietor you register your business name by filing a DBA or “doing business as” name. In Arkansas a DBA is also referred to as a “Assumed Name”. A DBA filing can also allow you to use different business names for different lines.
The process of filing a Arkansas DBA is managed and issued at the county level. To file your DBA you’ll need to submit your Assumed Name application along with the 25 filing fee to the county clerk’s office.
Get Professional Help to File your DBA
Ensure your Arkansas DBA is filed properly with the help of Swyft Filings.
3. Obtain Business Licenses and Permits
Sole proprietorships are subject to business and professional licensing requirements. Business and professional licenses are issued at the federal, state, and local levels. The types of licenses and permits your business is required to file will vary widely depending upon the nature of your business and how it operates.
Federal Licenses and Permits
Most common types of businesses are not subject to federal licensing, however if manufacture or sell products that are regulated at the federal level you will need the relevant federal license before you begin operating. Below is a list of federal agencies from the U.S. Small Business Administration (SBA) that issue federal permits and licenses :
- U.S. Department of Agriculture
- Federal Aviation Administration
- Bureau of Alcohol, Tobacco, Firearms and Explosives
- U.S. Fish and Wildlife Service
- National Oceanic and Atmospheric Administration Fisheries Service
- Federal Maritime Commission
- Bureau of Safety and Environmental Enforcement
- U.S. Nuclear Regulatory Commission
- Federal Communications Commission
- U.S. Department of Transportation
Arkansas State Business Licenses and Permit Resources:
For information on state-level licenses and permits in Arkansas visit the Arkansas Secretary of State: Business Services website.
Local Licenses and Permits
Local licenses and permits vary widely depending on where your business operates and the nature of the business, however the most common types of local licenses and permits include:
- Operating License
- Building Permits
- Zoning and Land Use Permits
- Health Licenses and Perits
- Signage Licenses
Professional Licenses
If you work in a regulated profession you may also require a profressional license. These licenses are required to show proof that you have completed the required training or possess the required expertise to work in the field. There are a wide variety of industries where a professional license is required but some of the most common are:
- Accountants
- Electrictians
- Financial Advisors
- Hair Stylists & Barbers
- Insurance Agents
- Mechanics
- Medical Professionals
- Plumbers
- Real Estate Agents
With how complex and time consuming the business license research process can be, we recommend using a service to determine which licenses you’ll need to apply for.
Get Professional Help with your Business Licenses
Let the experts at MyCorporation do the research to determine which licenses you need.
4. Get an EIN from the IRS
If you have employees, you are required to get an EIN. EINs are a nine-digit ID number issued by the IRS to identify businesses for tax purposes. You can apply for an EIN for free online using the IRS’ EIN Assistant.
If you don’t have employees, you are not required to get an EIN as a sole proprietor. However, it can be useful to get an EIN. They are often required to open a business bank account and can be used in place of your social security number for most business applications.
Important Note about Sole Proprietor EINs:
Since sole proprietorships are not viewed as separate from an individual, sole proprietor EINs are issued under their names, not their DBA names. As a result, you will only be issued 1 EIN as a sole proprietor for your lifetime. This will be used for any and all businesses you will operate as a sole proprietor. If you apply for an EIN as a sole proprietor and receive reference error 101, this likely means that you have already been issued an EIN previously. If you cannot recall your EIN or have not been issued an EIN previously, you will need to call the IRS Business and Specialty Tax Assistance line at 1-800-829-4933 and use the prompts related to reference number 101.
5. Open a Business Bank Account
The final step to making your Arkansas sole proprietorship a reality is to open a business bank account. It’s important to keep your business and personal transactions separate to prevent the co-mingling of funds. The easiest way to do this is to open a designated business bank account and use it only for business transactions. This will make it easier for you to complete your accounting and bookkeeping tasks.
Check out this helpful guide to learn how to opening a business bank account.
Other Items to Consider
Once you have established your sole proprietorship, you will also want to complete these important tasks:
- Setup Credit Card Processing:
Considering that over 60% of transactions are done via debit and credit cards, it’s essentially a requirement to accept credit card payments. We go over how to do this in our How to Accept Credit Card Payments guide. - Establish an Accounting System:
You’ll need to determine the accounting method you will use for your business: cash basis accounting vs. accrual accounting. To learn more, check out our guide on small business accounting 101. - Get Business Insurance Coverage:
As a sole proprietor, you lack personal liability protection, so getting adequate business insurance could be your only financial protection method. Learn more about business insurance here.