Arkansas Hiring Guide: DFA Withholding, 2.0% New-Employer Unemployment Rate on $7,000, Workers' Comp at Three Employees and $11 Minimum Wage
Arkansas Hiring Guide: DFA Withholding, 2.0% New-Employer Unemployment Rate on $7,000, Workers' Comp at Three Employees and $11 Minimum Wage
Hiring your first employee in Arkansas means dealing with several state systems, and each one starts at a different headcount. The arkansas minimum wage 2026 rate is $11.00 per hour for employers with four or more employees. Workers' compensation generally applies at three regularly employed employees. Withholding and unemployment insurance are registered separately with different agencies. This guide covers each requirement in the order most new employers need it.
Arkansas has no general state business license, so your hiring obligations come from the Department of Finance and Administration, the Division of Reemployment, the Workers' Compensation Commission and the Department of Labor and Licensing, plus any city rules where you operate.
Informational only: This guide is not legal, tax, or employment advice. Rates and thresholds change, so confirm current figures with the named agency before you act. For complex situations, consult a qualified CPA or attorney.
Start With Your Headcount
Most of Arkansas's employer rules depend on how many people you employ, so confirm your count before you register anything.
| Requirement | When it applies | Where you deal with it |
|---|---|---|
| Arkansas minimum wage of $11.00 per hour | Employers with four or more employees | Department of Labor and Licensing (confirm coverage) |
| Workers' compensation | Generally three or more regularly employed employees (A.C.A. 11-9-102) | Workers' Compensation Commission (confirm with the Commission) |
| Income tax withholding | Before your first payroll | Department of Finance and Administration, through ATAP |
| Unemployment insurance | Before your first payroll (confirm timing) | Division of Reemployment, Department of Commerce (Tax21) |
Step 1: Form Your Business and Get an EIN
Form your entity before you open payroll accounts so the accounts match your legal name. If you operate as a sole proprietor, you do not file with the Secretary of State. You record any business name you use other than your own with your county clerk.
An LLC is formed by filing a Certificate of Organization (Form LL-01) with the Arkansas Secretary of State. The filing fee is $45 online or $50 on paper. The Secretary of State anticipates processing of 3 to 5 business days for mailed, dropped off or online filings. In-person drop offs currently carry a 48 hour turnaround. A corporation files Articles of Incorporation for Domestic For-Profit Corporation (Form DN-01), also with a $45 online filing fee ($50 on paper).
Every registered entity must appoint a registered agent with a street address in Arkansas. A P.O. Box is not acceptable, and an incomplete filing will be returned for correction. Check name availability in the Secretary of State business search, then file through the Corporations Online Filing System. If you need time to decide, a name reservation costs $22.50 and holds the name for 120 days.
Apply for a federal Employer Identification Number with the IRS before your first payroll. You will use it for your state payroll accounts.
The recurring entity cost is the annual franchise tax report, due May 1 each year. An LLC pays a flat $150. A corporation pays a minimum of $150, or 0.3 percent of outstanding capital stock if that is greater, and a corporation without authorized stock pays $300. Late filing adds a $25 penalty plus interest.
Step 2: Register for Withholding With DFA
Income tax withholding is registered with the Arkansas Department of Finance and Administration through the Arkansas Taxpayer Access Point (ATAP). Register before you run your first payroll, and keep your registration information current.
Arkansas's top individual income tax rate is 3.7% for 2026. Act 1 of the 2026 special session, signed May 6, 2026, applies this rate retroactively to January 1, 2026. Older DFA formula methods printed with a 3.90% top bracket are out of date. Use DFA's current revised withholding tables for every pay period. Tell employees they may file a new AR4EC if their withholding needs to change. Your payroll software or preparer should be using the revised tables, so ask them to confirm this before your first run.
If you sell taxable goods or services, you also need a sales and use tax permit. It costs $50 and is applied for through ATAP. The state sales tax rate is 6.5%. Start at the DFA tax account registration page, and check the DFA home page for current notices.
Step 3: Register for Unemployment Insurance
Unemployment insurance is handled by the Division of Reemployment in the Arkansas Department of Commerce. It is not handled by the Department of Labor. Registration runs through the Tax21 system.
The taxable wage base is $7,000, which means only the first $7,000 paid to each employee in a year is taxed for unemployment. A new employer pays a rate of 2.0%. Experienced employers pay rates from 0.2% to 5.1%.
Here is what that looks like for a new employer with 10 employees, each paid at least $7,000 in a year. The contribution is 2.0% of $7,000, or $140 per employee, which totals $1,400. Employees who earn less than $7,000 produce a smaller amount. The Division assigns your actual rate, so confirm it in Tax21 after you register.
Step 4: Workers' Compensation Coverage
Workers' compensation coverage is generally required once an employer has three or more regularly employed employees under A.C.A. 11-9-102. Coverage is not required from your first hire for every business.
Building and building repair work is treated differently. Coverage starts at two employees in that work, and at one employee for a subcontractor or for a contractor who subcontracts work. The Workers' Compensation Commission's non-coverage form sets out these categories. Confirm your classification with the Commission before you rely on these thresholds.
Buy the policy before you reach the threshold so coverage is in place when your third regular employee starts. Ask your insurer to confirm in writing when the policy must begin.
Step 5: Minimum Wage Rules
The Arkansas minimum wage is $11.00 per hour for employers with four or more employees. If you have fewer than four employees, confirm with the Department of Labor and Licensing which minimum wage rule applies before you set pay. Do not assume the state rate governs your business without checking, and do not set pay for a covered position below $11.00 per hour.
City Licenses and Local Registrations
Arkansas has no general state business license and no county business license. Cities are the main local layer. The state has 75 counties and 500 municipalities, and local rules differ widely:
- Little Rock and North Little Rock impose a business license based on a base amount plus the number of employees.
- Bentonville maintains a free registry.
- Conway does not impose a city business license.
Check with your city clerk or finance office before you open. Ask whether the city requires a license, privilege license or registry, and whether your employee count changes the cost. Other cities may have their own rules, so do not assume the examples above apply to your location.
If you use a trade name, the filing location depends on your structure. Corporations and LLCs file a fictitious name with the Secretary of State for $22.50 online or $25.00 on paper. A domestic corporation must also file an approved form with the county clerk where its registered office is located, unless that office is in Pulaski County. Sole proprietors record their assumed name with the county clerk, and the county sets that fee, so confirm it there.
Industry Licenses Depend on the Job
Occupational licensing is handled by agency or board, not by a general business license. Check the relevant agency before you hire for a licensed role:
- Department of Labor and Licensing: the Contractors Licensing Board, the Electrical Examiners and the HVAC/R Board.
- Department of Health: plumbers, cosmetologists, massage therapists and food establishments.
- Alcoholic Beverage Control Division: alcohol. Medical Marijuana Commission: cannabis.
- State Police: security and investigators.
Hiring Checklist
- Count your regularly employed workers to see which thresholds apply.
- Get a federal Employer Identification Number from the IRS.
- Form your LLC or corporation with the Secretary of State, or record your assumed name with the county clerk.
- Appoint a registered agent with an Arkansas street address.
- Register for withholding, and for a sales and use tax permit if needed, through ATAP.
- Register with the Division of Reemployment and confirm your rate in Tax21.
- Bind workers' compensation before your third regular employee starts, or earlier for building work.
- Pay at least $11.00 per hour where the state rule applies.
- Check city, occupational and industry license requirements.
- Calendar your annual franchise tax report for May 1.
Where to Get Help
The Arkansas Small Business and Technology Development Center offers free guidance for new owners, and the SBA Arkansas district page lists local resources. For payroll setup, ask a CPA. For your entity, contracts and employment documents, ask an attorney. Confirm any figure in this guide with the named agency before you rely on it.
Reminder: This content is informational only and is not legal or tax advice. Consult a qualified CPA or attorney for your specific situation.