Structuring your Arkansas business the right way can bring real benefits. While many small business owners run their operations as a sole proprietorship or in partnership with a family member or friend, other entity designations can help eliminate risk and reduce your tax obligations. Depending on your company’s existing structure and long-term aspirations, forming an S corporation could help you save big money.
The Arkansas S Corporation
An Arkansas S corporation provides business owners two big benefits:
- Providing their owners with limited liability, meaning their personal assets—such as a home, car, or checking account—are safe from creditor claims which may arise through contractual problems or litigation
- Allowing for pass-through taxation, where business profits can be filed and claimed on the owner’s individual tax return. In other words, the company may not need to pay federal corporate taxes.
Forming Your Arkansas S Corporation
Establishing an Arkansas S corporation is not necessarily difficult. However, you will have to comply with federal and state laws governing S corporation operations and taxation. At a minimum, S corporations must meet the following requirements:
- Be a domestic corporation
- Have only allowable shareholders (individuals, trusts, estates)
- Have 100 or fewer shareholders
- Offer only one class of stock
- Not be an eligible corporation, defined by the IRS as certain financial institutions, insurance companies, and domestic-based international sales companies
Arkansas also has certain requirements for S corporations. In order to establish an S corporation, you must submit IRS Form 2553 to the Internal Revenue Service. However, Arkansas will not recognize your tax status until you meet separate requirements set by the state Income Tax Division.
Get Help When You Need it
An S corporation can help you limit business liability and drive down your corporate and personal tax burden. However, S-type entities are not ideal for every operation. An Arkansas business lawyer can help you keep your paperwork up to date with the state and federal government while designing custom-made strategies to save you and your company the money you need to prosper. Contact Quraishi Law & Wealth today to schedule your initial consultation.