Five New Acts Arkansas Businesses Should be Aware of in 2023
In an ever-changing business landscape, it is critical that business owners and entrepreneurs stay in the know about new legislation that could impact the way businesses are run throughout the state. The Arkansas General Assembly has passed five acts that are set to become law starting on July 31, 2023. All business owners should be aware of what these acts are, and how it could affect their businesses going forward.
Act 256 – Naming Legal Entities
Act 256 makes a minor change to a familiar legal standard concerning how new business owners go about naming their legal entities. When someone creates a new legal entity, their desired name must be submitted to and approved by the Secretary of State. With Act 256, the Arkansas legislature has removed the legal standard requiring the entity’s names not be “confusingly similar” to other names. Beginning in August, names of legal entities need only be “distinguishable” from others according to the 94th General Assembly. Act 256 also gives guidance on what “distinguishable” means in the legal context. A name is considered “distinguishable” unless the only difference(s) is one or more of the following: “(a) a suffix; (b) a definite or indefinite article; (c) the word and versus the & symbol; (d) the singular, plural, or possessive form of a word; or (e) a punctuation mark or symbol” according to Act 256ction 3.
Acts 195 and 687 – Hiring Underage Employees
Acts 195 and 687 both make it easier for businesses to employ individuals under the age of 16, while simultaneously adding criminal penalties to existing child labor laws. Act 195 no longer requires that individuals under the age of 16 possess an employment certificate from the Arkansas Labor Division in order to be hired. Employers are free to hire those under the age of 16 without having to go through the process of checking documentation. However, Act 687 adds stricter criminal penalties for those who knowingly violate child labor laws. In addition to civil actions, those who knowingly violate child labor laws are committing a misdemeanor. If the violation results in “serious physical injury to or death of the minor,” the employer is committing another misdemeanor. If a second serious injury or death to a minor results from violation of child labor laws, the employer will face felony charges.
Act 795 – Protecting LLC Member Interest against Personal Judgements
The passing of Act 795 makes it more difficult for debtors to foreclose a charging order against an individual’s ownership of an LLC. One of the primary reasons people create LLCs is to minimize risk of their personal assets being impacted by the liabilities of the business. However, if someone obtains a personal judgment against a member of an LLC, that person can go after the member’s ownership distributions from the company in order to pay an outstanding debt. If the distributions are not sufficient to pay back the debt, the creditor can then have a charging order foreclosed and assume ownership of the member’s interest in the LLC outright, by receiving the transferable interest and not becoming a member of the LLC, according to Act 795. The standard for having a charging order foreclosed upon before Act 795 was dependent on whether the distributions from the LLC were paying the debtor back “within a reasonable time.” Following Act 795 being enacted, the only way a charging order can be foreclosed is if the debtor can show that at least one of the LLC members, “engaged in bad faith or intentional misconduct in managing the limited liability company’s operations or finances so as to reduce or eliminate distributions to the judgment debtor,” Act 795 Section 2, Subsection b.
Act 196 – Lowers Employer Business SUTA tax
Act 196 is the only one of the acts that contained an emergency clause and went to effect immediately after being signed by Governor Sanders on March 6, 2023, according to Act 196 section 11. Act 196’s primary purpose is to eventually lower the amount of unemployment taxes business owners pay to the state unemployment fund. The legislature seeks to accomplish this by shortening the length of time a person has to file for and claim unemployment benefits before they are ineligible. This should reduce the amount being paid out of the fund, and once the fund reaches a dollar amount in reserve, unemployment insurance tax rates will be lowered per employee.
Reading and understanding these changes to Arkansas employment laws is crucial for business owners to manage their risks. Protect yourself by staying on top of upcoming legislations, or call The Law Group of Northwest Arkansas PLLC’s experienced business lawyers at 479-316-3760 with questions about your business.