Tue 01 Sep 2015 | By:

Pros and Cons to Starting an Arkansas Corporation

Pros and Cons to Forming a Corporation

Building your Arkansas business is a challenging task. There are many things to consider, like incorporating your startup. Incorporation is a vital legal procedure you must complete to protect your business.

Before incorporating, you will need to decide on a business structure.  A Corporation will provide you with full protection.

Starting a Corporation in Arkansas has its own set of advantages and disadvantages.  It’s important that you decide whether you want to form your Arkansas small business into a Corporation or not.  We have provided a list of pros and cons to assist you in making this important decision.


Pros of Forming a Corporation in Arkansas

1) Owner Protection From Potential Liabilities

Once you decide to incorporate your small business into a Corporation, you will be free from any personal, legal or financial liability if your business were to fail.

Forming a Corporation means that you are creating a separate entity.  If problems, such as a lawsuit, were to arise, your personal assets, properties and other valuable possessions would be safe from legal repercussions.

2) Ensures Business Continuation

The establishment of Perpetual Existence is one of the most important advantages of creating a Corporation.

Any business that is co-owned is at risk of being negatively affected by unforeseen events, such as the death of a partner or the transferring or selling of shares.

If you want to ensure the continuation of your business, forming a Corporation is the only way you can establish perpetual existence.

3) Attracting Investors Is Easier

For investors to be able to invest capital into your business, you need to form some sort of entity. If you form a Corporation, you prove your legitimacy to potential investors.

Additionally, a Corporation may also issue stocks, a strong selling point for investors who want to provide capital for business ventures.

4) Power-structure Is Well-defined

The organizational structure is well-defined in an Arkansas Corporation, where leadership is passed from directors, officers and shareholders. Job descriptions are also clearly stated, so everyone understands their roles and responsibilities within the company.

Decisions are made through thorough discussions across all organizational levels.  This helps to create smooth business operations and a harmonious work environment.

5) Builds Business Credibility

Forming a Corporation can be expensive and time-consuming.  This alone will show consumers that you are taking business seriously. Additionally, having a Co. extension after your business name will make your business more credible.

Customers, investors, and partners will trust you more, helping you gain attention as a reputable company.


Cons to Forming a Corporation in Arkansas

1) The Process Is Time-Consuming and Expensive

As with any kind of government procedure, forming a Corporation will take time and money.  You will have to prepare financially, as you will be required to pay numerous state filing fees before forming a Corporation.

One must organize documents, fill-out forms, and go through different procedures and steps to formalize an incorporation. An online incorporation service simplifies the process.  The service takes care of the entire incorporation process for you.

2) You Need To Follow Numerous Corporate Formalities

To establish your Arkansas startup as a separate entity, the state of Arkansas requires that all Corporations follow corporate formalities regularly.

Corporate formalities include conducting regular director meetings, record-keeping of corporate activities and establishing your business’ financial independence.

3) Corporations Have Heavier Tax Liabilities

Although Corporations can provide tax advantages, there are also heavier tax liabilities among other business structures like an LLC.  Since a Corporation is considered a separate entity, it will also have separate tax returns and is subject to double taxation.

Before you form a Corporation, it is best that you consult an attorney for legal advice on how you can avoid double taxation.

4) There Is More Paperwork

Paperwork is unavoidable when doing business. Unfortunately, forming a Corporation will require additional paperwork.  Documents requiring added attention include: certificates, Articles of Incorporation, bylaws and other forms to be submitted regularly.

5) Corporations Are Subject To More Government Regulation

Corporations are subjected to strict regulations, ranging from laws related to tax regulation to environmental compliance.  Corporations may also undergo government processes and procedures that other business structures are not required to complete.

As a business owner running a Corporation, you will make decisions that an individual proprietorship or partnership company will not have to make.

Is forming a Corporation the best choice for your business? While there are pros and cons, forming a Corporation will likely provide more advantages than disadvantages.  If you’d like to look into another option, consider filing an LLC.

Please be aware that this is not legal advice – it is solely an informational guide. For details on how to form a Corporation in Arkansas or starting a business in Arkansas, a lawyer has the best answers for you.

About Liesha Petrovich

Liesha is a small business owner of 20 years, host of Startup Savant, the owner of a karate dojo in Maine, and creator of Work Mobly. During free time she's with her family and working on a Doctorate in Entrepreneurship.