A corporation is a limited liability entity, which means that the corporation’s shareholders are protected from personal liability for the corporation’s debts and obligations. A corporation’s limited liability may also help protect shareholders’ assets if an employee is sued.
Requirements for Incorporating in Arkansas
Preparing Your Articles of Incorporation
An Arkansas corporation is formed by filing articles of incorporation with the Secretary of State. Once you have filed the articles, the corporation formally exists. The articles of incorporation may contain many provisions, but they must include the following:
- Name of the corporation
- Corporate purpose
- Stock structure
- Registered agent
- Names and addresses of incorporators
- Number of people who will serve as initial directors
- Duration of the corporation
- A statement that the corporation will not conduct any business until at least $300 has been received for issued shares
In regards to the corporation’s stock structure, the articles of incorporation must meet the following criteria:
- The articles of incorporation must list the total number of shares the corporation is authorized to issue. If there is only one class of shares, the articles must state their par value or state that there is no par value. Par value is a minimum amount for which shares can be sold.
- If there is more than one class of shares, the articles must list a designation and the preferences, rights and limitations of each class. They must also list the number of authorized shares in each class and their par value or state that there is no par value.
- If there will be a series of shares within any class, the articles must provide a designation for the series and list any variations in the relative rights and preferences between series. Alternatively, articles can state that the directors have the authority to establish series and determine their rights and preferences.
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Naming Your Corporation
You should check the availability of your proposed corporation name before filing articles of incorporation. You can do this by contacting a business services representative in the Secretary of State’s office or by conducting a search on the Secretary of State website. You can reserve a corporate name for 120 days by submitting a form to the Secretary of State.
Your name must meet the following criteria:
- It must include the words “corporation,” “incorporated” or “company,” or an abbreviation of one of those words. If one of those words is the last word of the actual company name, you must add a suffix. For example, “Jones and Company” is not acceptable, but “Jones and Company, Inc.” is.
- It must be distinguishable from the names of other corporations that are incorporated or authorized to do business in Arkansas.
An incorporator is a person who files the articles of incorporation. The name and addresses of all incorporators must be listed in the articles of incorporation, which must meet the following criteria:
- Your corporation must have at least one incorporator.
- An incorporator must be a person who is at least 21 years old.
- After the articles of incorporation have been filed, the incorporators must meet to elect directors and transact other business. After that, the incorporators have no additional responsibilities.
Directors are responsible for managing the corporation’s business and affairs. Directors have a fiduciary duty to the corporation, which means they must exercise good business judgment and act in good faith and in the best interests of the corporation and its shareholders. A corporation must meet the following criteria in regards to directors:
- There must be at least three directors unless there are one or two shareholders, there can be one or two directors, but there cannot be fewer directors than there are shareholders.
- Arkansas law does not specify a maximum number of directors. The number of initial directors is established in the articles of incorporation, and the number of directors should then be stated in the bylaws.
- Directors do not need to be shareholders or residents of Arkansas. The articles of incorporation or bylaws can establish qualifications for directors.
Specifying a Registered Agent
A registered agent is a person that receives legal actions and other official correspondence on the corporation’s behalf and may be an individual or a professional corporate service company. You must provide an Arkansas street address where your registered agent is located.
Stating a Corporate Purpose
Arkansas requires you to state a primary purpose for your corporation. In addition, your corporation must be formed for the purpose of conducting any business not contrary to law.
Determining Incorporation Bylaws
Bylaws outline a corporation’s internal structure and provide operating procedures. They may include provisions for the regulation and management of the corporation’s affairs. Directors are required to adopt bylaws, which must be consistent with the law and the articles of incorporation.
Costs of Incorporating in Arkansas
The Arkansas Secretary of State requires a fee when filing articles of incorporation or reserving a corporation name. Corporations are also required to pay state and federal income taxes.