Business Law

Choosing the right business structure matters. The choice between an LLC, corporation, partnership, sole proprietorship, or other entity may affect liability, taxation, ownership rights, management authority, transferability, financing, succession, and litigation risk.

Arkansas LLCs are governed by the Arkansas Uniform Limited Liability Company Act, Ark. Code Ann. § 4-38-101 et seq. Under Ark. Code Ann. § 4-38-201, one or more persons may form an LLC by delivering a certificate of organization to the Arkansas Secretary of State for filing. A limited liability company is formed when the certificate of organization becomes effective and at least one person has become a member or manager.

Arkansas corporations are governed primarily by the Arkansas Business Corporation Act of 1987, Ark. Code Ann. § 4-27-101 et seq. Articles of incorporation must include required statutory information, including a corporate name satisfying the statute, the number of shares the corporation is authorized to issue, the street address of the initial registered office, the name of the initial registered agent, and the name and address of each incorporator. See Ark. Code Ann. § 4-27-202.

Formation is only the beginning. A business should also have internal documents that explain who owns what, who controls what, who may bind the business, how profits and losses are handled, how ownership interests may be transferred, and what happens if an owner leaves, dies, becomes disabled, stops contributing, or breaches duties to the company.

For Arkansas LLCs, the operating agreement is one of the most important business documents. Under Ark. Code Ann. § 4-38-105, the operating agreement governs relations among members, relations between members and the LLC, relations with managers, the activities and affairs of the LLC, the conduct of those activities and affairs, and the means and conditions for amending the agreement, except where the statute provides otherwise.

If the operating agreement does not address an issue, the Arkansas Uniform Limited Liability Company Act supplies the rule. That may not be the rule the owners would have chosen.

An operating agreement should address ownership percentages, capital contributions, distributions, tax allocations, management authority, voting thresholds, member duties, information rights, restrictions on transfer, buyout rights, death or disability, deadlock, dispute resolution, expulsion, dissolution, indemnification, confidentiality, and what happens if a member stops participating or competes with the business.

A single-member LLC can also benefit from a written operating agreement. It may help preserve separateness, document authority, support banking or financing, and clarify what happens if the owner dies, transfers the business, or brings in another owner.

A corporation should have more than articles of incorporation. Bylaws and shareholder agreements can define the internal rules for meetings, voting, directors, officers, stock transfers, buyouts, succession, restrictions on ownership, and dispute resolution.

Closely held corporations need especially careful planning because the owners are often also employees, directors, officers, family members, friends, or business partners. When the relationship breaks down, the absence of clear documents can turn every decision into a dispute over authority.

A shareholder agreement may address buy-sell rights, valuation, death, disability, divorce, termination of employment, deadlock, noncompetition or nonsolicitation issues where enforceable, confidentiality, insurance-funded buyouts, and restrictions on transfer to outsiders.

Businesses should maintain the basic records and formalities needed to show that the business is separate from its owners. That includes maintaining accurate records, using business accounts for business purposes, documenting major decisions, filing required reports, maintaining a registered agent, keeping licenses current, and making sure contracts are signed in the correct capacity.

Under Ark. Code Ann. § 4-38-212, Arkansas LLCs and registered foreign LLCs must deliver annual reports to the Secretary of State containing required information, and the first annual report must be delivered after January 1 and before April 1 of the year following the calendar year in which the LLC’s certificate of organization became effective, with subsequent annual reports due in the same annual window.

Good governance is not just administrative neatness. It helps prevent owner disputes, supports financing, assists with sale or succession, and reduces the risk that business and personal affairs become tangled in litigation.

LLCs and corporations are often formed to limit personal liability. That protection is important, but it is not automatic in every circumstance. Arkansas courts may disregard the entity form in extraordinary cases when the corporate or LLC form has been abused to the injury of a third party.

Arkansas courts have described veil piercing as an equitable remedy applied with caution. Cases such as Anderson v. Stewart, 366 Ark. 203, 234 S.W.3d 295 (2006), and Winchel v. Craig, 55 Ark. App. 373, 934 S.W.2d 946 (1996), show that courts may look at misuse of the entity, failure to follow formalities, inadequate records, commingling, fraud, efforts to evade obligations, sham entities, or other conduct showing that the entity form has been abused.

Business owners can reduce risk by keeping separate bank accounts, documenting major transactions, avoiding personal use of company funds, maintaining proper records, signing contracts in the company’s name, observing required filings, and treating the business as a separate legal entity.

Business owners and managers may owe duties to the business and, in some situations, to each other. In an Arkansas member-managed LLC, Ark. Code Ann. § 4-38-409 provides that a member owes the duties of loyalty and care described in the statute, along with the contractual obligation of good faith and fair dealing. The duty of loyalty includes duties to account to the company for certain property, profit, or benefit; to refrain from dealing with the company as or on behalf of a person with an adverse interest; and to refrain from competing with the company before dissolution.

The duty of care in an Arkansas member-managed LLC is to refrain from grossly negligent or reckless conduct, willful or intentional misconduct, or a knowing violation of law. Managers in manager-managed LLCs are subject to corresponding statutory duties, while ordinary members in manager-managed LLCs generally do not owe those duties solely by reason of being members, subject to the statute and operating agreement.

These duties matter in disputes involving self-dealing, diversion of business opportunities, misuse of company money, competing businesses, exclusion of owners, refusal to provide records, unauthorized distributions, improper transfers, and business breakup litigation.

Business breakups are often as personal as family-law disputes and as document-heavy as commercial litigation. Ownership disputes may involve LLC members, corporate shareholders, partners, family businesses, contractors, investors, or friends who formed a business without fully planning for conflict.

Common disputes include unequal work contributions, unauthorized spending, frozen-out owners, refusal to provide records, competing side businesses, misuse of funds, disagreement over distributions, failure to repay loans, deadlock, breach of operating agreements, breach of fiduciary duties, and disputes over who owns what percentage of the business.

Possible remedies may include damages, accounting, injunction, declaratory judgment, buyout, dissolution, appointment of a receiver in appropriate cases, enforcement of operating agreements or shareholder agreements, or negotiated separation of the owners.

The first step is to identify the governing documents: articles, certificates, bylaws, operating agreements, shareholder agreements, tax records, minutes, ownership ledgers, bank records, loan documents, and communications among the owners.

Businesses depend on contracts with customers, vendors, suppliers, landlords, employees, independent contractors, lenders, buyers, sellers, and service providers. A business contract should define the deal clearly and allocate risk before a dispute arises.

Our office assists with service agreements, sales contracts, independent-contractor agreements, commercial leases, purchase agreements, settlement agreements, payment plans, promissory notes, guarantees, releases, confidentiality agreements, nonsolicitation agreements, vendor agreements, and other commercial documents.

Commercial contracts should address payment, default, interest, attorney’s fees, warranties, limitations of liability, indemnity, insurance, delivery, scope of work, termination, dispute resolution, governing law, venue, confidentiality, and ownership of work product or materials.

Buying or selling a business requires more than agreeing on a price. The transaction may involve assets, equity, inventory, accounts receivable, equipment, real estate, leases, employees, customer lists, intellectual property, assumed debts, tax issues, financing, warranties, restrictive covenants, licenses, permits, and transition obligations.

A business sale may be structured as an asset purchase, stock purchase, membership-interest purchase, merger, or other transaction. The structure affects liability, tax treatment, transfer requirements, consent issues, and post-closing obligations.

Documents may include a letter of intent, confidentiality agreement, purchase agreement, bill of sale, assignment of contracts, lease assignment, deed, promissory note, security agreement, noncompete or nonsolicitation agreement where enforceable, consulting agreement, corporate or LLC approvals, closing statement, and releases.

Careful due diligence matters. A buyer should understand what is being purchased and what liabilities may follow. A seller should understand what obligations remain after closing and how payment will be secured.

Businesses often use employment agreements, independent-contractor agreements, confidentiality agreements, nonsolicitation agreements, commission agreements, severance agreements, and noncompete agreements.

In Arkansas, employment noncompete agreements are governed by Ark. Code Ann. § 4-75-101 when the statute applies. The employer must have a protectable business interest, and the restriction must be limited in time and scope in a manner not greater than necessary to protect that interest. The statute recognizes interests such as trade secrets, intellectual property, customer lists, goodwill, confidential business information, training, and other valuable employer data.

The statute also provides that continued employment is sufficient consideration for an employment noncompete, that a two-year post-termination restriction is presumptively reasonable as to time unless the facts show otherwise, and that courts may reform unreasonable employment noncompetes to make them reasonable and enforce them as reformed.

Act 232 of 2025 amended Arkansas law to provide that a covenant not to compete agreement restricting a physician’s right to practice within the physician’s scope of practice is void. Restrictive covenants involving licensed professionals, medical providers, business sales, franchises, nonsolicitation provisions, confidentiality provisions, and trade secrets should be reviewed carefully because different rules may apply.

Businesses often depend on information that gives them a competitive advantage: customer lists, pricing, processes, formulas, software, methods, margins, vendor information, business plans, technical information, or other confidential data.

The Arkansas Trade Secrets Act, Ark. Code Ann. § 4-75-601 et seq., protects qualifying trade secrets from misappropriation. “Misappropriation” includes acquiring a trade secret by improper means or disclosing or using another’s trade secret without consent under circumstances described by the statute.

Trade-secret protection usually requires more than calling something confidential. The business should take reasonable steps to preserve secrecy, such as limiting access, using confidentiality agreements, marking sensitive materials, controlling electronic access, training employees, and responding promptly to suspected misuse.

Trade-secret disputes may require emergency action, including injunctive relief, especially when an employee, contractor, competitor, or former business partner has taken or used confidential information.

Business disputes may involve false statements, deceptive advertising, misrepresentations, unfair practices, bait-and-switch conduct, false claims about goods or services, or other conduct governed by the Arkansas Deceptive Trade Practices Act, Ark. Code Ann. § 4-88-101 et seq.

Under Ark. Code Ann. § 4-88-107, deceptive and unconscionable trade practices include knowingly making false representations about the characteristics, uses, benefits, source, sponsorship, approval, certification, standard, quality, grade, style, or model of goods or services, along with other listed conduct.

Private claims under the ADTPA are limited. Under Ark. Code Ann. § 4-88-113(f), a private claimant must prove actual financial loss proximately caused by reliance on a practice declared unlawful by the Act, and private class actions are generally prohibited except as provided by the statute. The Attorney General also has public-enforcement authority.

ADTPA claims should be evaluated carefully because not every unfair business dispute is an ADTPA claim, and not every breach of contract becomes deceptive trade practice litigation.

Unpaid invoices, accounts receivable, promissory notes, service charges, rent, and business debts can affect cash flow quickly. Collection cases may involve open accounts, account stated, breach of contract, unjust enrichment, promissory notes, personal guarantees, security agreements, or post-judgment enforcement.

Our office assists with demand letters, payment agreements, lawsuits, judgments, garnishments, liens where available, debtor examinations, and post-judgment collection strategy.

The documents matter. Businesses should keep signed contracts, invoices, delivery records, payment histories, account statements, emails, text messages, change orders, and any written acknowledgment of debt or default. Under Ark. Code Ann. § 16-56-111, partial payment or written acknowledgment of default may toll the limitations period for written obligations.

Commercial litigation may involve breach of contract, fraud, misrepresentation, unpaid accounts, ownership disputes, trade secrets, restrictive covenants, commercial leases, real estate, business torts, partnership disputes, member or shareholder disputes, and enforcement of settlement agreements.

A strong commercial case begins with document control. The key evidence often includes contracts, invoices, corporate records, emails, text messages, bank records, tax documents, purchase orders, delivery records, accounting data, ownership records, and communications between the parties.

The goal is to understand the leverage early: the claims, defenses, damages, collectability, likelihood of injunctive relief, attorney-fee exposure, business disruption, and whether settlement, mediation, litigation, or emergency court action best serves the client.

Businesses are often sued because a deal failed, a customer is dissatisfied, a partner relationship collapsed, a contractor was not paid, an employee left, or someone is trying to impose personal liability on an owner.

Defense strategy depends on the claim. A breach-of-contract case may turn on the contract language, performance, damages, prior breach, waiver, limitations, or lack of causation. A fraud claim may require proof of a false representation, knowledge, reliance, and damages. A trade-secret claim may fail if the information was not actually secret or reasonable steps were not taken to protect it. A veil-piercing claim may fail if the entity was treated as separate and not abused.

Our office defends businesses by identifying the controlling documents, narrowing the issues, preserving evidence, evaluating early dismissal or summary judgment where appropriate, and pursuing a resolution that accounts for cost, risk, and business reality.

A business should have a plan for what happens when an owner retires, dies, becomes disabled, leaves the company, files bankruptcy, divorces, becomes unable to work, or wants to sell. Without a plan, the business may face uncertainty at the worst possible time.

Succession and exit planning may involve operating agreements, shareholder agreements, buy-sell agreements, valuation methods, life insurance, voting rights, restrictions on transfer, employment agreements, estate planning documents, trust planning, and business-sale documents.

A practical plan should identify who can own the business, who can manage it, how the purchase price will be determined, how payment will be made, what happens during a dispute, and how the business can continue operating while ownership changes.