Form Ar1103 - Arkansas Election By Small Business Corporation Page 2
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2STATE OF ARKANSAS
Election By Small Business Corporation
PURPOSE
The Purpose of this election is to permit the undistributed taxable income of a “Small Business Corporation” to be taxed to the shareholders rather than the
corporation. The term “undistributed taxable income” means taxable income (as computed under the Income Tax Act of 1929 as amended) minus the sum
of (1) the tax imposed on certain capital gains and (2) the amount of money distributed as dividends out of earnings and profits of the taxable year.
INSTRUCTIONS
Subchapter S of the Federal Internal Revenue code of 1986, as amended,
The election must be filed during the first seventy-five (75) days of the taxable
and in effect as of January 1, 2013 has been adopted for Arkansas income tax
year. It shall be effective for the taxable year for which it is made and for all
purposes. A corporation may elect Subchapter S treatment for Arkansas income
succeeding taxable years unless it is terminated under provision of the law.
tax purposes only if it has elected Subchapter S treatment for federal income
This form must be signed either by the president, vice president, treasurer,
tax purposes for the same tax year. A copy of the Corporation’s “NOTICE OF
assistant treasurer, chief accounting officer, or other corporate officer (such
ACCEPTANCE AS AN S-CORPORATION” received from the Internal Revenue
as tax officer) who is authorized to sign.
Service must be submitted to approve the Arkansas Election, Form AR1103.
The Arkansas election will be held in suspense until the IRS Notice is received.
At the shareholder’s option on the date of the election, their signatures may
be entered on the consent shown in the lower portion of the election Form
Qualifying corporations may elect to be treated as a “Small Business (S) Cor-
AR1103 filed by the corporation in place of preparing and attaching the con-
poration” for Arkansas income tax purposes. The election may be made only
sents described below.
if the corporation meets all seven (7) of the following requirements:
IN GENERAL: The consent to the election of the corporation by all share-
(1) It is treated as a Small Business Corporation with the Federal Govern-
holders at the date of election (which may be incorporated in one statement)
ment.
shall be attached to this form unless otherwise shown on the face. In addi-
(2) It has no more than one hundred (100) shareholders. However, if stock
tion to an affirmative statement shall set forth the name and address of the
is held by a husband and wife as joint tenants by the entirety, or tenants
corporation and of the shareholder, the number of shares of stock owned
in common or is community property for the income from which is com-
by the shareholder, and the date(s) on which such stock was acquired. The
munity income, it shall be treated as owned by one shareholder.
consent must be signed by both the husband and wife if they have a com-
(3) It has only individuals or estates as shareholders.
munity interest in the stock or the income therefrom, and by each tenant in
(4) It has no shareholder who is a nonresident alien stockholder.
common, each joint tenant, and each tenant by the entirety. The consent of
(5) It has only one class of stock.
a minor shall be made by the minor or by his legal guardian, or his natural
(6) S Corporations are permitted to hold C & S Corporate Subsidiaries.
guardian if no legal guardian has been appointed (even if the case of stock
(7) It is a corporation organized under the laws of the United States or a
held by a custodian for a minor under a statute patterned after the Uniform
state or territory or it is a similar association taxed as a corporation.
Gifts to Minors Act). The consent of an estate shall be made by the executor
or administrator thereof. If the election is made before the first day of the
If the corporation is the parent of one or more Qualified Subchapter S Subsidiar-
corporation’s taxable year, the consent of persons who became sharehold-
ies (QSSS), the election must be completed by the parent corporation and
ers after the date of the election and on or before such first day shall be filed
must include the Notice of Acceptance for the parent and accompanied by
as soon as practicable after such first day but in no event later than the last
Federal Form 8869 for each subsidiary that will be filing with the corporation.
day prescribed for filing the election and a copy shall also be filed with the
corporation income tax return.
TO BE RECOGNIZED AS AN ARKANSAS S-CORPORATION
The annual Income Tax Return of a small business corporation is to be
The following must be met:
submitted on Arkansas Form AR1100S, and filed with The Department of
Finance and Administration, Corporation Income Tax Section, P.O. Box 919,
1.
The business must be registered with the Arkansas Secretary of State.
Little Rock AR 72203-0919.
(501) 682-1010
Generally, a “Small Business” election permits the taxable income of the
2.
The business must file with the Internal Revenue Service an Election
corporation to be taxed to the shareholders rather than to the corporation.
for Small Business Form (2553) and apply for a Federal Identification
All resident and non resident shareholders of S corporations doing business
Number (SS-4). (1-800-829-3676)
in Arkansas must file a properly executed Arkansas income tax return and
the tax must be paid on the shareholders’ taxable income on an Arkansas
3.
The business must file with the State of Arkansas an Election by Small
AR1000, an AR1000NR for non resident filers or AR1000CR if filing on a
Business Form (AR1103). (501) 682-4775.
Composite return with Arkansas Individual income tax.
For an election to be valid, all persons who are shareholders of the corpora-
Failure to so report and remit on the part of any shareholder is grounds upon
tion on the first day of the corporation’s taxable year or on the day of election,
which the Director shall be authorized to revoke the Corporation’s Subchapter
whichever is later, must consent to such an election. The Arkansas election
S Election and collect the tax from the Corporation by any manner authorized
form is AR1103, and can be obtained from the website,
by the Arkansas Income Tax Act of 1929 as amended.
gov and submitted to Corporation Income Tax Section, P.O. Box 919, Little
Rock, AR 72203-0919.
IMPORTANT NOTES
1. Send to the Department of Finance and Administration and upon approval a letter will be sent to you for proof of acceptance of your election.
2.You may use AR1103, Supplemental Shareholder’s Consent Form if an additional list of shareholders is necessary.
AR1103 instructions (R12/2013)
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