The Arkansas franchise tax is an annual fee every corporation and LLC registered in the state must pay for the privilege of doing business there. It’s due May 1 each year, and the minimum for most entities is $150. This is not an income tax. The amount is set by your entity type and, for some corporations, your capital structure, and the obligation continues year after year until you formally dissolve or withdraw the entity, even if it stopped operating long ago.
Who Has to Pay
Arkansas draws the net broadly. Any corporation or LLC organized in the state or qualified to do business there owes the tax, whether it’s active or inactive, domestic or foreign. The law also reaches associations, joint-stock companies, business trusts, and other organizations that operate as separate legal entities exercising corporate-type powers.1Justia Law. Arkansas Code 26-54-102 – Definition
Domestic and foreign corporations both file. A federal S-corporation election changes nothing at the state level; S-corps are still corporations under Arkansas law and pay the franchise tax like any other corporation.2Arkansas Secretary of State. Corporation FAQs Newly formed or newly qualified corporations get a one-year grace period and don’t need to file until the calendar year after incorporation or qualification.3Justia Law. Arkansas Code 26-54-105 – Franchise Tax Reports
Every Arkansas LLC files, including single-member LLCs and foreign LLCs holding a certificate of registration. The tax is a flat $150 regardless of revenue, assets, or number of members.4Justia Law. Arkansas Code 26-54-104 – Annual Franchise Tax
Three groups are outside the tax entirely:
- Nonprofit corporations organized under Arkansas law.
- Corporations and entities exempt from federal income tax, not only 501(c)(3) charities but also 501(c)(4) social welfare organizations, 501(c)(6) business leagues, and other exempt categories.
- General partnerships and limited partnerships formed under Arkansas’s versions of the Uniform Partnership Act and Uniform Limited Partnership Act.
Because these are separate exemptions in the statute, a nonprofit corporation qualifies even without a federal exemption letter, and a federally exempt organization qualifies even if it isn’t structured as a nonprofit corporation.1Justia Law. Arkansas Code 26-54-102 – Definition Sole proprietorships owe nothing under this tax at all.
How Much You Owe
LLCs pay the flat $150. For corporations, the calculation depends on your capital structure.
A standard corporation with capital stock pays 0.3% of the par value of outstanding capital stock, proportioned by the ratio of the corporation’s real and personal property in Arkansas to its total property everywhere. The minimum in this category is $150.4Justia Law. Arkansas Code 26-54-104 – Annual Franchise Tax If the corporation issues no-par-value shares, each share is treated as having a par value of $25 for this calculation.3Justia Law. Arkansas Code 26-54-105 – Franchise Tax Reports A corporation with 10,000 no-par shares, for example, would start from an assumed par value of $250,000 before applying the rate and the property proportion.
Corporations without any authorized capital stock pay a flat $300.4Justia Law. Arkansas Code 26-54-104 – Annual Franchise Tax
Insurance companies, legal reserve mutual insurance corporations, mutual assessment insurance corporations, and mortgage loan corporations have their own statutory rates ranging from $300 to $400, or in the case of mortgage loan corporations a 0.3% capital-stock formula with a $300 minimum.4Justia Law. Arkansas Code 26-54-104 – Annual Franchise Tax If you operate in one of those industries, check the statute for the tier that fits your capital or asset size.
When and How to File
The report and payment are both due on or before May 1. The report must reflect the corporation’s condition as of the close of business on the last day of the preceding calendar year.3Justia Law. Arkansas Code 26-54-105 – Franchise Tax Reports
Most filers use the Secretary of State’s online portal at sos-franchise.ark.org. You’ll need your entity’s file number (printed on the tax report form) and your federal tax ID. Online payments carry a processing fee of $5 for credit card and $3 for electronic check.5Arkansas Secretary of State. State Franchise Tax and Annual Reports Paper returns can be mailed to the Secretary of State but must be postmarked by May 1.
The Secretary of State mails or emails a notice to each entity’s registered agent, but not receiving one is not a defense. The obligation exists whether or not you get the reminder.
Penalties for Late Filing
Missing May 1 triggers a $25 penalty plus 10% annual interest on the unpaid tax and penalty, running from the due date until everything is paid.6Justia Law. Arkansas Code 26-54-107 – Computation of Tax – Penalty For an LLC on the $150 minimum, daily interest is small, but it compounds and the real risk is losing your entity’s legal standing.
A statutory cap limits the damage in any single year. Total tax, penalty, and interest for one tax year cannot exceed twice the tax owed.6Justia Law. Arkansas Code 26-54-107 – Computation of Tax – Penalty If your tax is $150, your maximum exposure for that year is $300.
By November 1 the Secretary of State mails delinquent entities a warning that their charter is subject to revocation. That warning is your last practical chance to pay before administrative action starts.6Justia Law. Arkansas Code 26-54-107 – Computation of Tax – Penalty
On or before January 31, the Secretary of State revokes the charters or authorities of all corporations, domestic and foreign, that are still delinquent on franchise tax for a prior year.7Justia Law. Arkansas Code 26-54-111 – Charter Revocation for Failure To Pay The full timeline moves faster than many business owners expect: tax due May 1, warning by November 1, revocation by January 31 of the following year.
A revoked corporation or LLC loses its legal standing. It cannot enter into contracts, file lawsuits, or legally conduct business in Arkansas. Reinstatement means paying all past-due taxes, penalties, interest, and any reinstatement fees. Each year the entity existed without filing adds another year of minimum tax and penalties to the total. A corporation with past-due franchise taxes is also blocked from filing any other documents with the Secretary of State until the delinquency is cleared.
Getting Penalties Reduced or Waived
The Secretary of State can reduce or waive penalties and interest in certain situations. Relief is available if you were reasonably mistaken about whether the tax applied to your entity or how it should be calculated, and insolvent or bankrupt entities can also request relief.6Justia Law. Arkansas Code 26-54-107 – Computation of Tax – Penalty
There’s a specific waiver for entities that were not actually doing business in Arkansas during the delinquent period and that intend to dissolve. In that situation the Secretary of State is required to waive the amount due. The Secretary of State can also waive outstanding fees for a taxpayer that wants to dissolve, which is a practical escape valve for businesses that let years of delinquency stack up on an entity they no longer use.6Justia Law. Arkansas Code 26-54-107 – Computation of Tax – Penalty
Stopping the Tax for Good
The franchise tax doesn’t end because your business stops operating. It ends when you formally dissolve a domestic entity or withdraw a foreign entity’s registration through the Secretary of State. Until that paperwork is filed, the tax keeps accruing every year, and that’s the source of most delinquency problems.
At dissolution or withdrawal, you must pay the franchise tax for the prior calendar year if it hasn’t been paid, plus the minimum franchise tax for the year of dissolution.3Justia Law. Arkansas Code 26-54-105 – Franchise Tax Reports For an LLC that’s a final $150. For a corporation with stock it’s $150 or the calculated amount, whichever applies.
If your entity is already delinquent and you’d rather close it than reinstate it, contact the Secretary of State’s office about a fee waiver before paying years of accumulated penalties on a shell you plan to dissolve anyway.