Definitions

Definitions

Franchise Tax – A franchise tax is a state tax levied on certain businesses for the privilege to exist and do business within the state. The tax is levied regardless of profit or loss for the business in any given year.

Clearance–The term “clearance” is used to differentiate between actions that a corporation may take within the state. For example, a corporation may request clearance if the company is dissolving to finalize the franchise tax account with the state.

Corporation – Per Arkansas Code § 26-54-102, the term “corporation” means any corporation, domestic and foreign, active and inactive, which is organized in or qualified under the laws of the State of Arkansas and includes, but is not limited to, any person or group of persons, any association, joint-stock company, business trust, or other organizations with or without charter constituting a separate legal entity of relationship with the purpose of obtaining some corporate privilege or franchise which is not allowed to them as individuals and which is exercising, or attempting to exercise, corporate-type acts, whether or not existing by virtue of a particular statute.

General Filing – Clearance for general filing can be given if the previous three (3) tax years of franchise tax returns are filed and paid.

Reinstatement–When a corporation is forfeited, reinstatement to all rights, powers, and property may occur if all franchise tax requirements are met within seven (7) years of the date of forfeiture.  Included in the franchise tax requirements is the filing of all delinquent franchise tax reports and payment of all taxes and penalties due to the satisfactory of the Arkansas Department of Finance and Administration.

Dissolution – A corporation may file for dissolution clearance with the Franchise Tax Section when the company itself is being ended and all assets are redistributed.  Upon dissolution, the corporation will no longer exist.  To receive clearance for dissolution, the company must have submitted the previous three (3) tax years of franchise tax returns, the final return, and paid any outstanding balance.

Domestic Corporation – To be a domestic corporation, the company must have been incorporated in the same state in which it is doing business. For example, a corporation engaging in business within the state of Arkansas would be a domestic corporation if the original state of incorporation is also Arkansas.

Entity – An entity is an organization formed by one person (or more) for a specific function.

Foreign Corporation – To be a foreign corporation, the company must have been incorporated in a state (or country) that is not the state in which it is doing business. For example, a corporation engaging in business within the state of Arkansas would be a foreign corporation if the original state of incorporation is Tennessee.

Authorized Stock – The term “authorized stock” refers to the number of shares a company is allowed to issue as per the articles of incorporation for that company.

Issued and Outstanding Stock – Shares of stock that have been issued to the public are known as issued and outstanding stock.  The number of shares issued should never exceed the number of shares authorized.

Par Value – The stock value as stated in the corporate charter of a company. Shares usually have no par value or very little par value and have very little relation to the share’s market price. This is also referred to as face value.

Limited Liability Company – Limited Liability Companies (LLC) combine many favorable characteristics of corporations and partnerships and provide limited liability to its members. Members of an LLC can manage the company themselves or to elect managers. An LLC may be structured as a corporation or as a partnership.

Legal Reserve Mutual Insurance – A legal reserve mutual insurance company is one that maintains a monetary reserve in support of its policies according to the law of the state in which it does business.

Insurance with Authorized Capital Stock – An insurance company may decide to issue stock instead of maintaining a monetary reserve for its policies. An insurance company with authorized capital stock is owned by its shareholders with the intention of making a profit for them in the form of dividends.

Partnership – A partnership is an entity formed by at least two individuals, typically to conduct a for-profit business.