Arkansas Franchise Tax: Rates, Deadline, and Dissolution

The Arkansas franchise tax is an annual privilege tax that every corporation, LLC, bank, and insurance company registered with the Secretary of State owes by May 1, whether the business made money that year or not.¹ For most filers the bill is $150. Miss the deadline and the state adds a penalty and daily interest; ignore it for 60 days and the Secretary of State can start dissolving your business.²

Who Owes the Tax

The tax applies to every domestic and foreign entity that forms a separate legal entity registered with the Arkansas Secretary of State. That covers C-corporations, S-corporations, single-member and multi-member LLCs, PLLCs, banks, and insurance companies. An inactive entity with no revenue still owes the tax, because the obligation attaches to the existence of the entity on the state’s records, not to its activity.¹

Three groups are exempt:

Nonprofit corporations that are exempt from federal income tax
Partnerships formed under the Uniform Partnership Act (A.C.A. § 4-46-101 et seq.)
Limited partnerships formed under the Uniform Limited Partnership Act (A.C.A. § 4-47-101 et seq.)

Sole proprietorships and general partnerships aren’t registered as separate legal entities, so the tax doesn’t reach them.¹ The nonprofit exemption is tied to federal tax-exempt status; a nonprofit that hasn’t secured that status at the federal level still owes.

How Much You Owe

The franchise tax isn’t based on income. It’s a flat or capital-based charge that varies by entity type.

LLCs and PLLCs. Every LLC and professional LLC pays a flat $150 per year, with no scaling for revenue, assets, or membership.³ A dormant single-member LLC owes the same $150 as a large operating company.

Corporations with stock. The tax is 0.3% of the par value of outstanding capital stock, proportioned to Arkansas property relative to total property, with a $150 minimum.⁴⁵

Corporations without stock. A flat $300 per year, regardless of size.⁴

Banks and insurance companies. Banks with stock use the same 0.3% calculation as ordinary corporations, minimum $150. Insurance companies pay statutory flat amounts of $300 or $400 depending on their capital stock or assets.⁴

The May 1 Deadline and How to Pay

The tax is due on or before May 1 every year. The deadline applies to every taxable entity regardless of formation date.⁶ The Secretary of State mails notices early in the year, but not receiving one is not a defense to a late payment.

Two ways to file:

Online through the Secretary of State’s portal at sos-franchise.ark.org. You’ll need your filing number (on your tax report) and federal tax ID. Processing fees are $5 for credit cards and $3 for electronic checks.⁷
By mail, using the form printed from the Secretary of State’s website, signed in black ink, with a check or money order payable to the Arkansas Secretary of State.

Late Penalties and Interest

Filing after May 1 triggers a $25 late-filing penalty plus interest on the combined tax and penalty, calculated at a daily rate that works out to roughly 10% per year.⁶ Interest accrues every day the balance is outstanding.

Delinquency also freezes your other filings. Until you’re current on franchise tax, the Secretary of State won’t process amendments, registered agent changes, or other business record updates.

When Arkansas Can Dissolve Your Business

The state’s harshest tool isn’t the penalty. It’s ending the entity.

Domestic Corporations

The Secretary of State can begin administrative dissolution 60 days after a domestic corporation misses its franchise tax or annual report deadline.² Once dissolved, the corporation loses its authority to operate in Arkansas, and owners and officers can face personal liability for obligations the corporate structure would otherwise shield.

LLCs

LLCs get a longer runway. The Secretary of State can start proceedings if an LLC hasn’t paid a required tax or fee, or hasn’t delivered its annual report, within six months of the due date.⁸ After the Secretary of State issues notice, the LLC has 60 days to cure before dissolution becomes final.

Foreign Entities

Foreign corporations authorized in Arkansas face revocation of that authorization if they haven’t paid franchise taxes or penalties within 60 days after they’re due.⁹ Revocation bars the entity from legally doing business in the state.

Getting Reinstated

A dissolved corporation has two years from the effective date of dissolution to apply for reinstatement. The application must show the grounds for dissolution have been fixed, the corporate name still meets state requirements, and all state taxes are paid in full, backed by a certificate from the Department of Finance and Administration.¹⁰

A successful reinstatement relates back to the dissolution date, so the entity is treated as if it never lapsed. You will, however, owe every year’s franchise tax plus accumulated penalties and interest for the entire period. Past the two-year window, forming a new entity is usually the only path forward.

How to Stop the Tax From Accruing

Here is the trap that catches dormant business owners: franchise tax keeps building even after the state revokes your authority to operate. The obligation runs until you formally dissolve, withdraw, or merge the entity.³ Letting the business go quiet doesn’t stop the meter.

To end the obligation, a domestic entity files articles of dissolution with the Secretary of State along with a final franchise tax report. The dissolution filing fee is $45 online or $50 by mail, plus the final franchise tax payment of at least $150.¹¹ Foreign entities file for withdrawal of their certificate of authority. In either case, all outstanding franchise taxes, penalties, and interest must be paid before the Secretary of State processes the filing.

Deducting the Tax Federally

Arkansas franchise tax is generally deductible as a business expense on your federal return. Because the tax is based on capital stock value or a flat fee rather than net income, it qualifies as a deductible business expense instead of a state income tax. Corporations report it on the “Taxes and licenses” line of Form 1120; LLCs taxed as partnerships report it on Form 1065. Cash-basis businesses deduct in the year of payment; accrual-basis businesses deduct when the liability becomes fixed.

1
Arkansas Secretary of State. Arkansas Annual Franchise Tax Report – Limited Liability Company
2
Justia Law. Arkansas Code 4-27-1420 – Grounds for Administrative Dissolution
3
Arkansas Secretary of State. Franchise Tax / Annual Report Forms
4
Justia Law. Arkansas Code 26-54-104 – Annual Franchise Tax
5
Arkansas Economic Development Commission. Corporate Franchise Tax
6
Arkansas Secretary of State. Arkansas Annual Corporation Franchise Tax Report
7
Arkansas Secretary of State. State Franchise Tax and Annual Reports
8
Justia Law. Arkansas Code 4-38-708 – Administrative Dissolution
9
Justia Law. Arkansas Code 4-27-1530 – Grounds for Revocation
10
Justia Law. Arkansas Code 4-33-1422 – Reinstatement Following Administrative Dissolution
11
Arkansas Secretary of State. Forms / Fees / Records Requests – Corporations