Guide to Starting an LLC in Alaska
If you’re thinking of starting your own business, Alaska is a great place to do it. There are many advantages to starting an LLC in Alaska, from the supportive business community to the favorable tax climate. This guide will walk you through the basics of starting an LLC in Alaska, from choosing a name to filing your paperwork. So read on to learn more about how to make your business dreams a reality in The Last Frontier!
The Limited Liability Company (LLC) is a popular business structure for many businesses starting in Alaska. The LLC provides personal asset protection and has the potential to save money on taxes. With a little research, you can learn how to form an LLC in Alaska without an attorney.
Unlike a sole proprietorship or partnership where the small business owner can be held personally liable for lawsuits against the business, the LLC is a separate legal structure, protecting the business owner’s personal assets.
LLCs in Alaska have a unique benefit compared to other states, which is having perhaps the best protection against charging orders in the United States. A charging order is the result of a final judgment against a company if it is found liable. Even if a creditor obtains a charging order against an LLC in Alaska, they cannot access the business income or assets.
Besides the liability protection, the Limited Liability Company provides several other benefits over the sole proprietorship, partnership, and corporation because of the multiple tax options, ease of administration, and management flexibility.
Also see: Guide to starting a business in Alaska
Steps to Form an Alaska LLC
Making the decision to start your own business is a huge step, and it’s important to do your research before you get started. If you’re thinking of starting an LLC in Alaska, here are the steps you need to take.
Total Time: 10 minutes
Step 1: Choose a Name for the LLC
The first step to starting an LLC in Alaska is finding a name.
First off, the company name of the LLC also has to be unique to other registered entities in the state of Alaska. Check the availability of LLC names in Alaska by doing an Alaska entity search through the Corporations Database on the Alaska Department of Commerce, Community, and Economic Development website.
There are a few name requirements to be aware of as well. For starters; the legal name of the LLC must be one of the following words or abbreviations:
– Limited Liability Company
– Limited Liability Co.
Additionally, the LLC name cannot include the word “city,” “borough,” “village,” or any word that could refer that the business is part of a municipality or government agency.
Before selecting a business name, you may also want to see if the domain name is also available.
Step 2: Appoint an Alaska Registered Agent
A Registered Agent must be appointed for every LLC in Alaska. The Registered Agent is either a resident of Alaska or an Alaska corporation that is authorized to transact business in Alaska.
The Registered Agent ensures proper service of process, also known as a notice of litigation. The agent ensures the company receives all important correspondence such as tax documents, summons, summons, and other legal documents in a reasonable time frame should the LLC need to prepare for and respond to a lawsuit.
The requirements to be an Alaska Registered Agent include;
– Over 18 years of age
– Available during normal business hours to receive service of process
– Have a physical address (no PO Boxes are allowed).
You as the business owner can act as your own registered agent in Alaska and not pay for a registered agent.
Any individual meeting the above requirements can be the agent, however, the agent’s name and address becomes public record, and with that comes a loss of privacy. This is more important for some entrepreneurs, especially when they are doing business from home or still employed. Hiring a commercial Registered Agent service like Northwest Registered Agent will help keep the owner’s names from being publicly listed.
Learn more about the requirements for a Registered Agent in Alaska
Step 3: File the Alaska Articles of Organization
The paperwork to create an LLC in Alaska is called the Articles of Organization.
To get started, either register and file online with the Alaska Department of Commerce, Community, and Economic Development or download the Alaska LLC Articles of Organization (Form AS 10.50.075).
The steps for filing for a domestic LLC in Alaska online or by mail are largely the same. The state filing fee is $250, whether submitted online or through the mail.
Turnaround time for approving the Articles of Organization is immediate when filing online versus 10-15 business days for mailed in forms. After the LLC is approved, a copy of the Alaska Articles of Organization will be mailed back along with the Alaska Entity Number.
Estimated Cost: 250 USD
When filing the Articles of Organization, there are a few sections that may be unfamiliar. Let’s go over a few of those sections.
Purpose of the LLC
In this section, describe the business activities of the LLC. It is usually better to be a little vague in case the focus of the business ever changes. To keep the purpose of the business flexible, you can use “Any lawful business for which a limited liability company may be organized under the laws of the State of Alaska.”
NAICS (North American Industry Classification System) is a six-digit number that classifies and categorizes the type of business activities performed by your LLC. This information is used in reporting statistical data for each of the industries in the U.S. Remember this number as you will need it when filing annual tax returns. See how to do a NAICS search here.
If the activities of your business aren’t specifically listed, choose the closest activity.
The Management section asks whether the management structure of the LLC is Member-Managed or Manager-Managed.
Member-Managed LLCs have an active involvement in the day-to-day operations of the business.
Manager-Managed LLCs are hired by the members to run the LLC, similar to a CEO of a corporation.
Most LLCs are member-managed.
If you have questions regarding the filing of the Articles of Organization, contact the Alaska Division of Corporations, Business, and Professional Licensing.
Phone: 907-456-2550 (phone)
IncAuthority and IncFile are currently running a special where you only pay state fees for your LLC formation and they do the rest!
You have an Alaska LLC, now what??
Once the LLC has been formed, there are a few additional steps to take care of. Below is a list of the most common tasks.
File the Initial Report
After the LLC is formed, an Initial Report will need to be filed with the State of Alaska Division of Corporations within six months of forming the entity. Filing can be done online or by mail.
Prepare an LLC Operating Agreement
The operating agreement is a legal document that governs the framework of an LLC. This document covers items like ownership rights, capital contributions, LLC member responsibilities, how profits and losses are distributed, and more.
In Alaska, the LLC Operating Agreement is an internal document and not required, but it is still worth considering. Without an operating agreement:
- The LLC could be subject to generic state rules that may be detrimental in the event of a lawsuit.
- Member’s personal liability protection may be diminished.
- LLC members may not have a full understanding of their roles and responsibilities, which could lead to costly disputes in the future.
Obtain an EIN
The EIN or Employer Identification Number (also called a Federal Employer Identification Number or FEIN) is a unique 9-digit tax identification number assigned to a business by the Internal Revenue Service (IRS). Similar to a social security number for an individual, the EIN identifies business entities for tax purposes. The EIN will be needed in order to hire employees, open a bank account, register for business licenses and permits, file tax returns, and more.
There is no cost for the EIN when registering through the IRS. The number is available immediately when applying through the IRS website. However, you can register by phone, fax, or mailing IRS Form SS-4.
Related: How to Register for an Alaska EIN
Elect the LLC’s Form of Federal Income Taxation
One of the major benefits of the Limited Liability Company is the tax flexibility it provides. When applying for the Employer Identification Number, you will choose how the entity will be taxed for federal income tax purposes. While there are some limitations, an LLC may be classified for federal income tax purposes as a:
- Sole proprietorship
While this may sound confusing, this refers to how the LLC is taxed, not the legal structure.
Related: How can an LLC be taxed?
By default, LLCs are pass-through entities. Instead of the LLC paying taxes on profits, the profits or losses flow through to the members. Since there is no personal income tax in Alaska and LLCs by default receive pass-through taxation, the LLC does not pay income tax either.
Single-member LLCs will, by default, be taxed as a sole proprietorship. The members can elect to be taxed as a C-corporation or an S-corporation.
Multi-member LLCs will, by default, be taxed as a partnership. The members can elect to be taxed as a C-corporation or an S-corporation.
In general, the difference between being taxed as a corporation and being taxed as a sole proprietorship or partnership the profits and losses are passed to the member’s federal income tax returns based on their percentage of ownership. As a result, the owner will pay self-employment taxes on all business profits. As an alternative, electing to be taxed as a corporation allows the members to take a reasonable salary and then pay payroll taxes. Any remaining profits are distributed and aren’t subject to payroll taxes, resulting in potential tax savings. Electing to be taxed as a corporation can bring other concerns such as double taxation (C-corporation).
Before electing how your LLC will be taxed, be sure to talk with an accountant to assess which one will be best for you, especially since Alaska doesn’t impose a state income tax.
Open an LLC Bank Account
Opening a checking and/or savings account for your LLC is important for liability protection as the account separates the business’s funds from the member’s personal funds.
Several documents will be needed to open an account, such as:
- A banking resolution is a document that authorizes the members of the LLC to open a business bank account on behalf of the LLC.
- Copies of the original formation documents from the state showing the creation of the LLC.
- Driver’s licenses of the members.
- Depending on the age of the LLC, an Alaska Certificate of Compliance may be needed to prove the LLC is active and in good standing with the state.
Apply for Alaska Business Licenses and Permits
Depending on what your business does and where it is located, there will likely be some business licenses and permits to register before starting. Some common registrations include:
- Business License – In addition to a state business license that is required for all businesses operating in Alaska, many cities also require businesses to be licensed in order to operate.
- Professional License – Certain services such as barbershops, accountants, home inspectors, and others must be licensed.
File State of Alaska Biennial Reports
In addition to the Initial Report, LLCs are also required to file a Biennial Report every two years with the Division of Corporation, Business & Licensing. The report is due before January 2 of the filing year and updates ownership information and other details.
Common Questions To Starting an LLC in Alaska
How much does it cost to start an LLC in Alaska?
To form an LLC in Alaska, the Articles of Organization will need to be filled out and pay the state filing fee of $250 to the Alaska Department of Commerce, Community, and Economic Development.
Are there recurring fees for an LLC in Alaska?
Every other year, a biennial report and a $100 state filing fee will need to be paid to the Alaska Department of Commerce, Community, and Economic Development to keep the LLC active.
How long does it take to start an LLC in Alaska?
Online filings are processed immediately when registering online or 10-15 days when mailing.
How do you reserve a business name in Alaska?
If you find the business name you want but are not ready to register the LLC, a name may be reserved for up to 120 days by filing a Business or Corporation Name Reservation Application. A $25 fee must be paid to reserve a name.
When is a registered agent needed in Alaska?
Anyone can act as a registered agent, provided they are a registered agent service or an adult, a resident of the state, and are generally available during normal business hours.
Does an LLC need a business license in Alaska?
It’s sometimes thought that the LLC and Alaska business license are the same, but they aren’t. An LLC is referred to as the business entity, which is how the business is organized to conduct business. A business license is approval from a government entity to legally operate.
What is an Alaska Foreign Limited Liability Company?
An LLC that is physically operating in states outside of where it was formed. Physically operating means having a presence such as having an office or employee. The LLC will need to register as a foreign LLC in each state where it plans to operate.
What is an Alaska Professional Limited Liability Company (PLLC)?
Businesses that require state licensing such as accountants, attorneys, podiatrists, physical therapists, acupuncturists, etc. often must file as a Professional Limited Liability Company (sometimes referred to as a Professional LLC or PLLC) instead of an LLC. Filing for a PLLC is very similar to that of the LLC.