Arkansas law allows a business to incorporate and be recognized as its own legal entity. As a separate entity from the owners, the business is then considered to be functioning on its own when it buys and sells property, assents to contracts and exercises legal rights. The office of the Secretary of State is the agency that receives applications for incorporation in Arkansas, and they must be completed in conformity with certain guidelines.

Benefits of Incorporation in Arkansas

A corporation enjoys benefits that unincorporated companies do not. Primarily, it cannot be held accountable for an amount of debt greater than the value of the assets that the owners have invested in it. Had the business instead remained a collection of the owners' personal assets, the personal property of the stakeholders could be liquidated to pay the liabilities of the business, if it runs into financial problems. Also, creditors in the Alma area typically prefer to deal with corporations, since a loan is an investment more easily evaluated when the credit-worthiness of various owners is not an issue. Finally, the ownership of a corporation is divided into an abundance of equal portions or "shares" of stock. Without this mechanism, transferring ownership of a business would be impractical.

Costs of Incorporation

There are costs associated with incorporation, both short and long term. First, businesses in Arkansas may be charged a fee to incorporate. Also, a corporation is taxed as its own entity. The individual incomes of the owners are still taxed also, and this can mean the same income is taxed twice, known as double taxation. With proper planning and assistance from a local Alma lawyer, you can avoid this disadvantage.