How to set up an LLC for your rental property in Arkansas

If you own rental properties in Arkansas or are planning to buy one, you might be wondering about the best way to protect your investments and manage your rental business. One popular option landlords consider is setting up an LLC, or limited liability company. In this guide, we’ll walk through how to set up an LLC for a rental property in Arkansas, covering the costs, steps, and key details you need to know. 

This article is tailored specifically to Arkansas landlords, so you’ll get the scoop on state-specific rules, fees, and requirements — plus helpful tips to make the process smoother.

What an LLC is and what it can protect you from as a landlord

An LLC is a business structure that separates your personal assets from your rental property business. This means if there’s a lawsuit related to your rental property—say a tenant gets injured on your premises—an LLC may help protect your personal savings, home, or other personal belongings from being targeted in a lawsuit.

That said, an LLC isn’t a complete shield. It won’t protect you if you personally guarantee a loan, engage in illegal activity, or fail to keep proper separation between your personal and business finances. Also, it won’t protect against all risks, which is why many landlords combine an LLC with landlord insurance. For more on this, check out our article on LLC vs umbrella insurance.

If you’re curious about whether landlords should use an LLC, that article dives deeper into the pros and cons.

Step-by-step: how to set up an LLC for a rental property in Arkansas

Generally, the process involves steps such as:

1. Choose a name for your LLC

Your LLC’s name must be unique in Arkansas and include “Limited Liability Company,” “LLC,” or “L.L.C.” You can check name availability using the Arkansas Secretary of State’s business name search tool.

2. Designate a registered agent

An LLC in Arkansas must have a registered agent with a physical address in the state. This person or company receives official legal documents and service of process on behalf of the LLC.

3. Prepare and file articles of organization

The official document to create your LLC is called the articles of organization. It includes basic info like your LLC’s name, registered agent, and the LLC’s purpose. We’ll cover more on what are articles of organization and how to file articles of organization in Arkansas later.

4. Create an operating agreement (optional but recommended)

Arkansas doesn’t legally require an operating agreement, but it’s smart to have one. This document outlines how your LLC will be managed and the rights of its members—kind of like a rulebook for your rental business.

5. Get an EIN from the IRS

An Employer Identification Number (EIN) is like a social security number for your LLC. It’s needed to open a bank account, file taxes, and hire employees (if any). We’ll explain how to get an EIN for an LLC in Arkansas below.

6. File any necessary permits or licenses

Depending on your rental property type and local rules, you might need permits or business licenses, so check your city or county regulations.

7. Open a separate bank account for your LLC

Separating your LLC’s finances from your personal accounts is generally recommended to help maintain liability protection and simplify accounting.

How much does it cost to set up an LLC in Arkansas?

The primary cost is the LLC filing fee to submit your articles of organization. In Arkansas, that fee is $45 if you file online or by mail, making it one of the more affordable states. 

There is also an annual franchise tax of $150 due each year, plus a small annual report fee of $150. Arkansas requires LLCs to file an annual franchise tax report and pay this tax to remain in good standing.

If you hire a lawyer or use an online service to help with setup, expect to pay extra fees that vary widely.

How long does it take to set up an LLC in Arkansas?

Filing your articles of organization online typically takes 1 to 3 business days for processing. Paper filings by mail can take 7 to 10 business days. If timing is important for your rental purchase or financing, the online filing option is your best bet.

Articles of organization: what they are and how to file them in Arkansas

Articles of organization are the official documents you file with the Arkansas Secretary of State to create your LLC. They include:

• Your LLC’s name  
• The address of the principal office  
• Registered agent’s name and Arkansas physical address  
• Duration of the LLC (usually perpetual)  
• Whether the LLC is managed by members or managers

To file, you can use the Arkansas Secretary of State’s online portal or mail a paper form. The official filing page is here: Arkansas Secretary of State business services.

Once processed and approved, your LLC legally exists in Arkansas.

Do I need a lawyer to start an LLC, or can landlords DIY the process?

You don’t need a lawyer to start an LLC in Arkansas if you feel comfortable handling the paperwork yourself. The process is designed to be accessible for non-lawyers. Many landlords successfully set up LLCs on their own using the Secretary of State’s website.

That said, if your rental business structure is complex or you want advice on tax implications, it’s wise to consult a qualified attorney or accountant.

How to get an EIN for an LLC that owns rental property in Arkansas

After forming your LLC, you need an EIN from the IRS to open bank accounts and handle taxes. The good news is, getting an EIN is free and easy.

You can apply online at the IRS website: IRS EIN application. The process takes about 10 minutes, and you’ll get your EIN immediately.

If your LLC has multiple owners, or you plan to hire employees, having an EIN is essential.

Do LLCs need annual reports and other ongoing compliance in Arkansas?

Yes. Arkansas requires LLCs to file an annual franchise tax report and pay the $150 franchise tax every year to stay active and in good standing. The report is due by May 1 each year.

Failing to file the annual report or pay the franchise tax may result in your LLC being administratively dissolved, which might affect liability protection.

In addition, you should keep your LLC’s records up to date, including any changes to the registered agent or address.

S corp vs LLC for landlords: a quick look

Many landlords wonder about the difference between an LLC and an S corporation (S corp). Both are business entities that provide liability protection, but they differ in tax treatment and management.

• LLCs are simpler to set up and maintain, with fewer formalities.  
• S corps have stricter rules but can offer tax advantages in some cases, especially for active businesses paying salaries.

For rental properties, many landlords choose LLCs for these reasons, but you should consult a tax professional to determine what’s best for your situation.

LLC vs umbrella insurance for rental property risk management

An LLC creates a legal barrier between you and your rental property liabilities, but it doesn’t cover everything. That’s where landlord insurance and umbrella insurance come in.

Umbrella insurance extends your liability coverage beyond your landlord policy limits and can cover personal liabilities outside your rental business.

If you’re deciding between an LLC and umbrella policy for protection, understand they serve different roles and often work best together. Read more about the differences in our post on LLC vs umbrella insurance.

For landlords in Arkansas, finding the right insurance is crucial. Learn about landlord insurance in Arkansas options to protect your investment.

When does an LLC make sense for landlords in Arkansas?

An LLC might offer certain benefits if you want to:

• Separate your personal assets from your rental property business  
• Simplify management if you have multiple properties or partners  
• Gain credibility with lenders and tenants  
• Potentially save on certain taxes with professional advice

But it may not be necessary if you only own one property and the costs and paperwork outweigh the benefits. Also, if you don’t maintain the LLC properly—mixing personal and business finances or failing to file reports—you could lose liability protection.

Next steps: review your insurance and business structure

Setting up an LLC for your Arkansas rental property can be a useful option for many landlords, depending on their circumstances, but it’s just one piece of the puzzle. Be sure to review your landlord insurance coverage regularly and consider umbrella policies for extra peace of mind.

To get started or learn more, check out Steadily’s resources on should landlords use an LLC, LLC vs umbrella insurance, and landlord insurance in Arkansas.

For official Arkansas LLC forms and filing, visit the Arkansas Secretary of State business portal. For your EIN, head to the IRS EIN application page.

Remember, while this article offers a helpful overview, always consult a qualified attorney or tax professional for personalized advice tailored to your rental business.

Setting up an LLC in Arkansas doesn’t have to be complicated, and it can offer valuable protection for your rental property business. With a bit of planning and the right resources, you can get your LLC up and running smoothly and focus on growing your rental portfolio.