Arkansas at a glance
Partnership law
RUPA (revised)
LLC default split
Equal per-capita
Operating agreement
Not required
Community property
No
Formation cost
$45
Annual cost
$150 annual franchise tax
Arkansas has relatively low LLC formation costs at $45 but charges a $150 annual franchise tax. The state follows RUPA for partnerships and adopted ULLCA in 2021, defaulting to equal per-capita distributions for LLCs.
Default partnership rules in Arkansas
Arkansas adopted RUPA, which treats partnerships as separate entities and defaults to equal profit sharing among partners. Each partner has equal management rights and equal voting power regardless of capital contribution. Partners owe fiduciary duties of loyalty and care. A partner can bind the partnership in ordinary business matters. These defaults apply unless a partnership agreement provides otherwise.
The most important takeaway: profits are split equally by default in Arkansas, regardless of capital contributions. If you and a partner start a business and one of you invests $100,000 while the other invests $5,000, you still split profits 50/50 without a written agreement. This is true in every US state, including Arkansas.
LLC defaults in Arkansas
Under Ark. Code 4-38-404, Arkansas defaults to equal per-capita distributions among LLC members regardless of capital contributions. Arkansas adopted ULLCA in 2021. Members share equal management authority in a member-managed LLC. The state does not require an operating agreement, but without one, these default rules govern the LLC. Arkansas LLCs must file an annual franchise tax report. The state also imposes an income tax on business income.
Because Arkansas follows RULLCA with equal per-capita defaults, LLC members should pay special attention to their operating agreement. Without one, a member who contributed 90% of the capital gets the same share of profits as a member who contributed 10%. Use our equity calculator to determine a fair split based on actual contributions.
What happens when a partner leaves in Arkansas
Under Arkansas's RUPA adoption, dissociation of a partner does not automatically dissolve the partnership. The remaining partners can continue the business and must buy out the departing partner's interest at fair value. If the dissociation was wrongful, the departing partner may be liable for damages. The partnership agreement can specify additional terms for departure and buyout.
A written partnership agreement should still address departure terms specifically, including how the buyout value is calculated, the payment timeline, and any non-compete provisions. While RUPA provides a default framework, the details of a buyout can still lead to disputes if not spelled out in advance. Understanding the concept of dead equity is important for managing these situations. Learn more about how dead equity affects businesses.
Marriage and business equity in Arkansas
Arkansas is an equitable distribution state. In a divorce, business interests acquired during the marriage are generally considered marital property and are divided equitably, which does not necessarily mean equally. The court considers factors like the length of the marriage, each spouse's economic situation, and contributions to the business. A business started before marriage may be partially marital property if it grew in value during the marriage due to either spouse's efforts.
Even though Arkansas is not a community property state, marriage can still affect your business equity. In equitable distribution states, courts divide marital property based on what is fair, which may include business interests acquired or grown during the marriage. A clear equity agreement and proper documentation of ownership can help protect your business in the event of a divorce.
Formation and cost considerations in Arkansas
| Formation cost | $45 |
| Annual/recurring cost | $150 annual franchise tax |
| State income tax | Yes |
| Partnership law | RUPA (revised) — partnership continues after departure |
| LLC default distributions | Equal per-capita (RULLCA) — all members get equal share |
| Operating agreement | Not required (strongly recommended) |
Frequently asked questions
How much does it cost to start an LLC in Arkansas?
The filing fee for Arkansas Articles of Organization is $45, one of the lower filing fees in the country. However, Arkansas LLCs must pay a $150 annual franchise tax, so the ongoing cost is moderate. The total first-year cost is at least $195 before any legal or professional fees.
What is the default profit split for an LLC in Arkansas?
Arkansas adopted ULLCA in 2021, which defaults to equal per-capita distributions among all members regardless of capital contributions. If two members form an LLC and one contributed 70% of the capital, they still split profits equally unless an operating agreement provides a different arrangement.
Do I need an operating agreement for my Arkansas LLC?
Arkansas does not legally require an operating agreement. However, without one, your LLC is governed by the state's default rules, which may not reflect your actual arrangement. For any multi-member LLC, a written operating agreement is strongly recommended to avoid disputes about profit sharing, management, and what happens when a member leaves.
What happens when a partner leaves a business in Arkansas?
Under RUPA, a partner's departure does not dissolve the partnership. The remaining partners can continue operating and must buy out the departing partner's interest at fair value. The partnership agreement can set specific terms for how the buyout is calculated and paid.
Related resources
- Equity calculator: find a fair split for your business
- Does your small business need an equity agreement?
- Equity for small businesses: the complete guide
- Dead equity calculator: how much is yours costing you?
- Slicing Pie calculator
- What is an operating agreement?
- All 50 states: partnership and LLC default rules
Partnership laws in neighboring states
Disclaimer: This page provides general information about Arkansas partnership and LLC default rules and is not legal advice. Laws change, and the information here may not reflect the most recent amendments. The formation costs and annual fees listed are approximate and may vary. Consult a qualified attorney licensed in Arkansas for advice specific to your situation. Equity Matrix is a software tool for tracking contributions and calculating equity; it does not provide legal services.
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