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With 14.5 million acres of farmland in the state, agriculture is the core industry the Arkansas economy is based on. It infuses around $16 billion into the state GDP annually. The Bear State is a national leader in rice production and ranks 3rd in cotton production.
Though taking the 41st general position in the CNBC Top States for Business rating for 2022, Arkansas hits the top positions in the cost of running a business and in the cost of living. Where it lags the most is the overall quality of life and access to capital.
With big Fortune 500 companies onboard such as Walmart, JB Hunt, Tyson, and Dassault headquarters, the state economy is still largely supported by multiple small enterprises (SMEs) that contribute a lot both to the state finances and to the local employment market.
If you have plans to join a small private business pool in Arkansas, check our SME statistics overview to look into the economic environment in the area.
As of 2021, Arkansas GDP reported by Statista was $120.71 billion, with agriculture making 15% of it;
Showing a 1% pandemic decline in 2020, the state GDP demonstrated a 6% bump-up in 2021;
During the period of economic stagnation due to the COVID-19 impact, the unemployment rate in the state has increased from 3.5% to 6.1%. yet, it’s already in 2021 that it fell to 4.1% showing a confident economic rise;
In a WalletHub Survey, Arkansas ranks the second state with the most pandemic-proof small businesses in the US after Pennsylvania;
1.718 SMEs generate nearly 19% of the $5.8 billion state export;
Though standing on the smaller size in population, the state accounts for 258.522 SMEs which make 99.3% of the total business count and 0.8% of the entire SME small business number in the US;
SMEs prevail in other services and construction sectors featuring 35.680 and 35.303 private firms accordingly;
In the meantime, the utility sector and company management have the lowest SME number, with only 252 and 175 entities in them;
There are 491.383 workers employed in small private companies in AR, which is over 47% of the entire labor force;
SMEs with the highest employment rates belong to the healthcare and social assistance and accommodation and food service sectors, with 87.745 and 72.652 workers engaged in them accordingly;
For the year 2019-2020, SMEs created 2.276 net jobs in the state which equals over 73% of the total job gain for that period;
Around 17% of SMEs are employer companies with 1-19 workers while 2.5% are employers with 20-499 workers;
The minimum wage in AR has increased from $10 per hour in 2020 to $11 per hour in 2021, with no projected growth in 2022;
Meanwhile, the average hourly rate is $20.83.
Top 10 Industries for Small Businesses in AR
Other services (excluding public administration)
Administrative, support, and waste management
Professional, scientific, and technical services
Healthcare and social services
Real estate, rental, and leasing
Transportation and warehousing
Entertainment and recreation
AR Small Business Demographics
Based on Census Bureau data, 43.1% of SMEs in the state are women-owned private firms, and around 90% of them are non-employer entities;
Men possess 139.877 SMEs and 80% of them are self-employed entities with no hired workers;
Women represent over 47% of the total workforce in the state;
Veterans maintain 5.6% of the AR manpower and own 9.3% of smaller firms;
Black Africans are the largest ethnic group accounting for 15.32% of the state population and owning 8% of SMEs;
Hispanics represent 6.4% of the population and control 4.7% of small businesses;
Other racial minorities share about 5% of SMEs and account for over 20% of entire state employees.
AR Small Business Formation
Unregistered business forms (sole proprietorships and partnerships) in AR have an average annual income of $22.000 while registered forms earn around $48.000, hence, there are many LLCs among SMEs in Arkansas;
With an LLC filing fee of $45, the state is one of the cheapest in the nation to register a business;
Incomes of standard LLCs are taxed under the personal tax rates of company owners after the profit distribution. Personal tax rates in AR vary depending on the amount of income and range from 0.0% to 4.9%;