Starting a Business in Arkansas

A new business in Arkansas is within reach. Have you been wondering: precisely how do I start a business in Arkansas? And more importantly, can I do so no matter what the economic conditions are? Can I start a new business in Arkansas during a recession?

New Business in Arkansas: Advantages and Disadvantages

First of all, Business Insider has named Arkansas as the fourth worst state to start a new business in, and that is for the whole nation. This was according to a 2016 article. It does have a low cost of living. This is a point in the state’s favor. Yet the potential employee education level is near the bottom.

The population’s GDP per capita is $37,644, the sixth lowest in the country. The business tax environment is also unfavorable. This is because there is a poor corporate tax rate.

Recent Slight Improvements?

In 2018, Forbes places Arkansas at number 37. Also in 2018, Fit Small Business clocked in Arkansas at number 41.

So, why the differences? Keep in mind, first of all, that the three sites all have different methodologies.

Forbes praises Arkansas for low business costs and a good regulatory environment. But the economic climate and quality of life are sub-par. And the labor supply and growth prospects are abysmal.

Fit Small Business says Arkansas has the fourth-best cost of living in the country. The cost of starting a business is decent and access to capital is average. But then it all goes off the rails. Startup activity and taxes are both worse than average. And the labor market, a measure of the desirability of an area and the number of people with bachelor’s degrees, is in the bottom ten. But it’s the quality of life which really brings everything down – number 49.

Conditions seem to be improving in Arkansas, but only you can decide whether they have improved enough.

New Business in Arkansas: DBAs

A sole proprietorship or general partnership which intends to use a name other than the owner’s personal name must file for a fictitious name through a process called “Doing Business As”. File a Doing Business under an Assumed Name Certificate at any local county clerk office.

Start a New Business in Arkansas – Corporations

In addition to registering with the county clerk, domestic corporations must also register fictitious names with the Arkansas Secretary of State.

Start a New Business in Arkansas – Arkansas Top Industries

According to the Arkansas Economic Development Commission, the top industries in the state are aerospace and aviation; and paper and timber products. More of the top industries in Arkansas are advance food manufacturing and packaging; and biosciences.

Yet more Arkansas top industries are data centers and distribution and logistics services. Another set of top industries for Arkansas are regional headquarters (such as Walmart); and firearms and ammunition.

Even more Arkansas top industries are steel production; technical support services; and smart grid technologies (power electronics). Still more top industries in the state of Arkansas are software development and data management services. Finally, Arkansas is also known for sustainable building products and fixtures; transportation equipment manufacturing; and suppliers for Walmart.

Smart business owners should be able to spot opportunities with many of these larger industries. These can come in the form of, for example, trucking for any industry.

There are also opportunities in inventing and distributing new packaging and sustainable fixtures. In addition, new business owners could perform data support for the health care industry.

Here is exactly how to start business in Arkansas.

Start a New Business in Arkansas – Arkansas New Business Secretary of State Requirements

Register a Business Name

A sole proprietorship or general partnership which intends to use a name other than the owner’s personal name will need to file for a fictitious name via a DBA (“Doing Business As”). File a Doing Business under an Assumed Name Certificate at any local county clerk office.

In addition to registering with the county clerk, domestic corporations will also need to register fictitious names with the Arkansas Secretary of State. Check a state database of Arkansas companies online at the Arkansas Secretary of State website.

Note that when incorporating a small business in the state of Arkansas, the corporation’s name must include the word “corporation,” “incorporated,” “company,” or “limited.” However, a company could also use an abbreviation of one of these words in the name of the corporation.

A business owner can submit an application online at ‘Reserve an Arkansas Corporation Name’ at the Arkansas Secretary of State website. The name that they have chosen will then be reserved for a period of 120 days.

Business Permits and Licenses

There is information on the Professional Licensing page on the Arkansas government website. The Arkansas Department of Finance and Administration also keeps a list.

Local Permits and Licenses

The Association of Arkansas Counties keeps a map. It can help locate county office information.

Business Registration

Make sure to go to the Arkansas Secretary of State website for all necessary forms.

Tax Registration

The Department of Finance and Administration is also your go to place for tax registration. It is on their tax page.

Start a New Business in Arkansas – Virtual Offices

Alliance does not maintain Arkansas virtual business offices. However, Regus offers virtual Arkansas office space in Little Rock. And DaVinci has Arkansas virtual office space in Bentonville. For other areas of the state, business owners might want to seek out local entrepreneur. Or they might want to talk to computer user groups to try to find help in this area.

Start a New Business in Arkansas – Build Business Credit

Company credit is credit in a company’s name. It doesn’t link to an owner’s consumer credit, not even if the owner is a sole proprietor and the solitary employee of the small business.

As such, an entrepreneur’s business and individual credit scores can be very different.

The Advantages

Since company credit is independent from individual, it helps to safeguard an entrepreneur’s personal assets, in case of a lawsuit or business bankruptcy.

Also, with two separate credit scores, an entrepreneur can get two separate cards from the same vendor. This effectively doubles buying power.

Another benefit is that even start-ups can do this. Going to a bank for a business loan can be a formula for frustration. But building company credit, when done correctly, is a plan for success.

Personal credit scores rely on payments but also additional elements like credit utilization percentages.

But for small business credit, the scores really only depend on whether a company pays its bills on time.

Learn more here and get started toward building business credit attached to your company’s EIN and not your SSN.

The Process

Establishing small business credit is a process, and it does not occur without effort. A business will need to actively work to build company credit.

That being said, it can be done easily and quickly, and it is much more rapid than establishing consumer credit scores.

Merchants are a big part of this process.

Performing the steps out of sequence will result in repetitive rejections. Nobody can start at the top with small business credit. For instance, you can’t start with retail or cash credit from your bank. If you do, you’ll get a denial 100% of the time.

Start a New Business in Arkansas – Company Fundability

A company must be fundable to loan providers and vendors.

That’s why, a business will need a professional-looking website and e-mail address. And it needs to have website hosting bought from a merchant like GoDaddy.

Also, company phone and fax numbers ought to have a listing on ListYourself.net.

Likewise, the company telephone number should be toll-free (800 exchange or similar).

A business will also need a bank account dedicated only to it, and it must have every one of the licenses essential for operation.

Learn more here and get started toward building business credit attached to your company’s EIN and not your SSN.

Working with the IRS

Visit the IRS web site and get an EIN for the business. They’re free of charge. Select a business entity such as corporation, LLC, etc.

A company can get started as a sole proprietor. But they will more than likely wish to change to a form of corporation or an LLC.

This is in order to lessen risk. And it will optimize tax benefits.

A business entity will matter when it concerns taxes and liability in case of a lawsuit. A sole proprietorship means the business owner is it when it comes to liability and tax obligations. No one else is responsible.

Sole Proprietors Take Note

If you operate a business as a sole proprietor, then at the very least be sure to file for a DBA. This is ‘doing business as’ status.

If you do not, then your personal name is the same as the small business name. Hence, you can end up being personally liable for all company financial obligations.

Also, per the IRS, by having this arrangement there is a 1 in 7 chance of an IRS audit. There is a 1 in 50 probability for corporations! Prevent confusion and drastically decrease the chances of an Internal Revenue Service audit as well.

Beginning the Business Credit Reporting Process

Begin at the D&B web site and get a cost-free D-U-N-S number. A D-U-N-S number is how D&B gets a business in their system, to generate a PAYDEX score. If there is no D-U-N-S number, then there is no record and no PAYDEX score.

Once in D&B’s system, search Equifax and Experian’s sites for the business. You can do this at fastcs.wpengine.com/reports. If there is a record with them, check it for correctness and completeness. If there are no records with them, go to the next step in the process.

By doing so, Experian and Equifax will have activity to report on.

Vendor Credit Tier

First you need to build trade lines that report. This is also known as the vendor credit tier. Then you’ll have an established credit profile, and you’ll get a business credit score.

And with an established business credit profile and score you can start to obtain credit in the retail and cash credit tiers.

These varieties of accounts have the tendency to be for the things bought all the time, like marketing materials, shipping boxes, outdoor work wear, ink and toner, and office furniture.

But to start with, what is trade credit? These trade lines are credit issuers who will give you preliminary credit when you have none now. Terms are typically Net 30, rather than revolving.

Hence, if you get approval for $1,000 in vendor credit and use all of it, you need to pay that money back in a set term, such as within 30 days on a Net 30 account.

Details

Net 30 accounts have to be paid in full within 30 days. 60 accounts need to be paid fully within 60 days. In comparison with revolving accounts, you have a set time when you have to pay back what you borrowed or the credit you made use of.

To begin your business credit profile the proper way, you ought to get approval for vendor accounts that report to the business credit reporting agencies. When that’s done, you can then use the credit.

Then pay back what you used, and the account is on report to Dun & Bradstreet, Experian, or Equifax.

Vendor Credit Tier – It Helps

Not every vendor can help like true starter credit can. These are vendors that will grant an approval with marginal effort. You also want them to be reporting to one or more of the big three CRAs: Dun & Bradstreet, Equifax, and Experian.

You want 5 to 8 of these to move onto the next step, which is the retail credit tier. But you may need to apply more than once to these vendors. So, this is to confirm you are reliable and will pay timely.

Retail Credit Tier

Once there are 5 to 8 or more vendor trade accounts reporting to at least one of the CRAs, then move to the retail credit tier. These are companies such as Office Depot and Staples.

Only use your SSN and date of birth on these applications for verification purposes. For credit checks and guarantees, use the business’s EIN on these credit applications.

One such example is Lowe’s. They report to D&B, Equifax and Business Experian. They need to see a D-U-N-S and a PAYDEX score of 78 or more.

Fleet Credit Tier

Are there 8 to 10 accounts reporting? Then progress to the fleet credit tier. These are companies like BP and Conoco. Use this credit to purchase fuel, and to repair, and take care of vehicles. Just use your SSN and date of birth on these applications for verification purposes. For credit checks and guarantees, make sure to apply using the business’s EIN.

One such example is Shell. They report to D&B and Business Experian. They need to see a PAYDEX Score of 78 or more and a 411 small business phone listing.

Shell might claim they want a certain amount of time in business or profits. But if you already have sufficient vendor accounts, that won’t be necessary. And you can still get an approval.

Learn more here and get started toward building business credit attached to your company’s EIN and not your SSN.

Cash Credit Tier

Have you been sensibly handling the credit you’ve up to this point? Then move to the cash credit tier. These are service providers such as Visa and MasterCard. Only use your SSN and date of birth on these applications for verification purposes. For credit checks and guarantees, use your EIN instead.

One such example is the Fuelman MasterCard. They report to D&B and Equifax Business. They want to see a PAYDEX Score of 78 or higher. And they also want you to have 10 trade lines reporting on your D&B report.

Plus, they want to see a $10,000 high credit limit reporting on your D&B report (other account reporting).

Plus, they want you to have an established business.

These are businesses like Walmart and Dell, and also Home Depot, BP, and Racetrac. These are commonly MasterCard credit cards. If you have 14 trade accounts reporting, then these are in reach.

Start a New Business in Arkansas – Monitor Your Business Credit

Know what is happening with your credit. Make sure it is being reported and address any inaccuracies ASAP. Get in the practice of taking a look at credit reports and digging into the details, and not just the scores.

We can help you monitor business credit at Experian and D&B for only $24/month. See: fastcs.wpengine.com/monitoring.

Update Your Data

Update the information if there are inaccuracies or the information is incomplete.

Start a New Business in Arkansas – Fix Your Business Credit

So, what’s all this monitoring for? It’s to dispute any problems in your records. Errors in your credit report(s) can be fixed. But the CRAs typically want you to dispute in a particular way.

Disputes

Disputing credit report inaccuracies typically means you mail a paper letter with copies of any proofs of payment with it. These are documents like receipts and cancelled checks. Never send the originals. Always mail copies and keep the originals.

Fixing credit report inaccuracies also means you precisely spell out any charges you dispute. Make your dispute letter as crystal clear as possible. Be specific about the problems with your report. Use certified mail so that you will have proof that you mailed in your dispute.

Start a New Business in Arkansas – A Word about Business Credit Building

Always use credit smartly! Never borrow more than what you can pay back. Monitor balances and deadlines for payments. Paying on schedule and fully will do more to boost business credit scores than pretty much anything else.

Building business credit pays. Great business credit scores help a small business get loans. Your lender knows the company can pay its debts. They recognize the company is authentic.

The business’s EIN links to high scores and loan providers won’t feel the need to request a personal guarantee.

Business credit is an asset which can help your business in years to come.

Learn more here and get started toward opening a new business in Arkansas.

Want to start a new business someplace else in America? Then check out our handy guide to starting a business in any state in the country.

Arkansas’s Response to COVID-19

This is what Arkansas is doing about the novel coronavirus. On March 11, Governor Asa Hutchinson declared a state of emergency. The Governor put in a request to the SBA for Emergency Disaster Loans. 

See: arkansasonline.com/news/2020/mar/11/pine-bluff-patient-first-presumptive-case-coronavi

And see: https://governor.arkansas.gov/news-media/press-releases/governor-hutchinson-announces-relief-for-businesses-child-care-providers-to-ease-covid-19-impact