Are you looking to form a limited liability company (LLC) in Alaska, but you’re not sure how the process works? There are several important steps to create a compliant Alaska LLC that can do business in the state.
To get started, please reference our five-step guide below or hire an affordable online LLC formation service.
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What Is an Alaska LLC?
The Alaska LLC is one of the most popular business structures in the state. It’s a more casual and flexible type of business than a corporation but includes the personal asset protection that’s lacking in sole proprietorships and general partnerships.
LLCs in Alaska have simple formation and maintenance requirements, several options for how they can be taxed, and flexible management. From one-person businesses to multi-member LLCs with several owners, the LLC is a popular choice for a reason.
Setting Up a Brand-New Alaska LLC in 5 Steps
For the first part of this guide, we’ll cover the five essential steps to setting up an Alaska business that doesn’t have employees yet. These steps also apply to businesses with employees, but we’re keeping things streamlined to start. If you do have employees, make sure you complete these steps and the steps for employers (which we’ll cover later in the guide).
Step One: Choose a Business Name
Your LLC’s name is often the first impression you get to make on potential customers, and therefore it goes without saying that this is an important step. There are a few different aspects to consider when naming your business.
In the state of Alaska, you’re required by law to meet several requirements for your business name. Here’s a quick glimpse at the rules for LLCs:
- Your name must include the abbreviations “LLC” or “L.L.C.,” or the phrase “limited liability company” (which can include “Ltd.” or “Co.” as abbreviations, if desired)
- Your name cannot include words like “City” or “Borough” or any other phrasing that implies your business is a formal municipality
- Your name may not be vulgar or misleading regarding your business purpose
- Your name must be “distinguishable on the record” or distinct from the names of other state businesses
For more information on naming rules in Alaska, please consult the Alaska Revised Limited Liability Company Act.
Another aspect to consider is including language that explains what your business does ― for example, if you’re starting a coffee shop, put the words “coffee” or “brew” in your LLC name. Additionally, if your business has strong values like being environmentally friendly, you can indicate that by including the word “green.” This helps potential customers know exactly what to expect from your business.
Once you’ve picked the perfect name for your business, you don’t want to lose it to another aspiring entrepreneur. Thankfully, Alaska allows you to reserve your business name in case you aren’t quite ready to register your business. To do that, you’ll need to file the New Business Name Reservation form online or by mail. There’s a $25 fee for this reservation (and don’t confuse it with the Name Registration procedure, which is only available to businesses that are already licensed).
Filing this reservation protects your chosen name for your exclusive use for a full year. You can learn more about name reservations here.
Step Two: Appoint a Registered Agent
Every LLC in Alaska is required to designate a registered agent, which is the individual or registered agent service that receives government correspondence on behalf of your business, then forwards those documents to you.
When you appoint an Alaska registered agent, here are the state requirements to be mindful of:
- Every entity that registers with the Alaska Department of Commerce must appoint a registered agent
- The agent must be an individual resident of Alaska whose business address matches the address of the registered office OR a business entity with the authority to operate in Alaska
- An agent must be continuously maintained
You can find a full rundown of state laws here.
Without a registered agent, you could lose your good standing with the state of Alaska, and the state also has the right to dissolve your LLC if they decide to. In a worst-case scenario, you could miss the alert regarding a lawsuit against your company, which could even lead to a judgment against your business because you didn’t defend yourself.
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Step Three: File Formation Documents
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Once you are ready to form your Alaska limited liability company, you will fill out the Articles of Organization. You can either do this on your own or hire an Alaska LLC service. Some services, like ZenBusiness, even offer to form your LLC for free (just pay your state’s fee).
This is the document that will register your LLC with the state. You’ll want to ensure all of the following information is correct on the form:
- Your chosen business name
- Disclosure of your business purpose
- Name and address of your registered agent
- Whether your LLC will be managed by your members or managers
- Any additional information you wish to include
Like most states, Alaska does not require you to submit your operating agreement in conjunction with this filing. However, immediately after submitting this filing, you will need to file an Initial Report. It’s a simple filing, but it helps the state get a little more information about your business.
We also appreciate that Alaska provides both online and paper filing methods, so you can pick the method you prefer. That said, for the quickest processing, we recommend filing online. Either way, you’ll pay a $250 fee to register.
- Total cost: $250
- Processing speed: Immediately online or 10-15 business days on paper
Step Four: Draft an Operating Agreement
After you register an LLC in Alaska, create a detailed outline that explains how you will run and manage your new business. Even though it doesn’t need to be filed with the state, put one together and keep it for your records.
When you open a bank account, you may be asked for this document in order to open an account. You’ll also want to keep in mind that any future business partners or managing members may also be interested in seeing your operating agreement before joining your company. After all, this document essentially serves as your overall plan for success.
An attorney can help you outline your operating agreement, or you can create one from a free template online. You can read more about operating agreements, but some of the basic information you’ll want to have includes:
- Individual members’ ownership percentages
- Rights and responsibilities
- Voting powers and meeting guidelines
- Allocation of profits and losses
- Management rules for the LLC
- Provisions for buying out a member/owner or transferring their shares in the case of illness or death
Step Five: Get Licenses & Permits
Alaska law requires an LLC to obtain all necessary licenses and permits before starting operations. State law also decrees that an LLC can only provide one specific type of service. All owners of the LLC must be licensed or registered to provide the specific service under which the LLC was assembled.
Every single business will need to obtain a general business license from the state. There are no exceptions to this rule, and the business needs to be renewed on an annual basis. This license (and renewal) costs $50.
The type and cost of the permits that your business may require vary depending on the nature of the services your LLC offers. That’s especially true for certain trades that require licensure, such as accountancy and law. For more information on what professions require licensure in Alaska, we recommend checking out the state’s Professional Licensing page.
Last but not least, you should check with your city or county to see if they maintain any licensure requirements.
Next Steps for Newly Formed LLCs
1. Obtain a Business Bank Account
One of the most important aspects of running an LLC is ensuring that your business funds remain separate from your personal finances. And to do that, you’ll need a separate bank account for your business.
Obtaining a business bank account is pretty simple, and you can choose the financial institution you like best. Some banks will ask to review your LLC’s operating agreement, and it’s a near-certainty that they’ll ask to see your EIN (Employer Identification Number). This is a free registration with the IRS, and the number acts a lot like a Social Security number for a business.
Once you have your account, you’ll be able to get checks, make payments using your business card, and so on.
If you failed to get a business bank account, you would technically be blurring the line between your personal accounts and your business accounts. That compromises your personal asset protection.
2. Prepare for Tax Time
Regardless of how far away April 15th is, it’s never too soon to prepare for tax time and set up accounting software. As an LLC owner, the exact tax rates you’ll pay depend on the taxation structure you choose for your business. If you choose to be taxed as a corporation, the LLC itself will pay taxes from its own funds. Meanwhile, LLCs taxed as pass-through entities don’t technically pay taxes; their members do. The profits are distributed to the LLC’s members, and each member reports that income on Schedule C of their personal taxes.
If you choose to be taxed as a corporation, you’ll pay the following rates:
- Federal: 21%
- State: 0-9.4%
Meanwhile, LLCs taxed as pass-through entities pay these rates:
- Federal: 10-37%
- State: No personal income tax
In order to compliantly file and pay your taxes, you’ll fill out a complete copy of federal Form 1065 including all federal K-1s, statements, and attachments. If you’re taxed as a corporation, you will also have to submit Form 6000, the Alaska corporate income tax return. LLCs that are taxed as pass-through entities will not have to worry about any income tax forms because Alaska doesn’t charge a personal income tax.
Alaska also does not levy a sales tax, although many counties and municipalities in the state have their own sales taxes. Depending on your industry, there may be a chance that you’re subject to an industry-specific tax. For example, Alaska has unique taxes for fisheries, mining, and more. For more information on these taxes, we recommend consulting the Alaska Department of Revenue.
Because taxes can be incredibly complicated, we highly recommend consulting with a business attorney or accountant to ensure that you cover all requirements on the state and federal levels.
3. Be Ready to File Your Biennial Report
Regardless of whether you pay income taxes or not, Alaska requires your LLC to submit a Biennial Report every other year. The form keeps the state up-to-date about key information, such as your business’s impact on Alaska commerce, your registered agent’s name and address, your business contact information, and more.
The form is easy to submit online, but you can also download a paper copy and file it by mail if you prefer. No matter how you file, you’ll need to submit it by January 2nd of every other year. There is a $100 filing fee.
4. Consider Business Insurance
The big advantage of the LLC is that it offers you personal asset protection. But that doesn’t mean that mishaps won’t happen along the way. We highly recommend obtaining a general liability policy with the right coverage for your business.
In the event of a mishap or natural disaster, an insurance policy can help you navigate unexpected expenses. Be sure to compare your different options to get the best coverage for your particular type of business.
Extra Steps for Businesses with Employees
When you’re operating as a one- or two-person show, operating a business is relatively streamlined. Things get more complicated when you bring employees into the picture, but employees also help raise your business to new heights. But to reach those heights, you need to comply with employee-related legal requirements.
Step One: Address Employee-Related Taxes
Obtaining an EIN does more than allow you to get a business bank account. It also lays the groundwork for other taxes, such as Social Security and withholding taxes. For example, you’re required to withhold income taxes from employee paychecks, make Social Security and Medicare tax payments, and pay unemployment fund taxes. For more information on employer taxes at the federal level, look here.
There are similar taxes on the state level. Since Alaska does not require a state personal income tax, you will not have to worry about withholding taxes. You will, however, be responsible for Unemployment Insurance Tax contributions within Alaska.
Step Two: Obtain Additional Insurance
Every Alaska business with one or more employees is strictly required to obtain a workers’ compensation insurance policy. This helps ensure that employees who are injured on the job will still be able to maintain an income (and it protects you from some of the expense of providing that income in the process). For more information on this policy requirement, check out the Department of Labor and Workforce Development.
If you haven’t already obtained a general liability policy, we highly recommend that you do so when you bring employees into the business. The more people you have involved in a business, the higher your risk of needing general liability insurance.
Of course, proper care and discretion will eliminate most problems, but incidents happen — from faulty products to an employee slipping and falling. And in some cases, insurance can be the difference between a minor hiccup and a budget-breaker.
Step Three: Enlist Help
For some entrepreneurs, part of the fun of running a business is the opportunity to wear lots of different hats: accountant, manager, marketer, quality control expert — it’s a near-endless list. And if your business is still pretty small, you might be able to handle many of these tasks yourself, especially if you’re prepared with a business administration degree.
But if you aren’t (and it certainly isn’t a prerequisite), some of these tasks may leave you feeling overburdened or out of your depth. For instance, navigating employer-related taxes might steal valuable time you’d rather spend promoting your business or developing a new product. An accountant or tax attorney, however, knows those tasks like the back of their hand. You may decide it’s worth the added expense to enlist their help.
Ultimately, it’s your decision whether to bring in professionals or to DIY. But in our opinion, it’s often worth it to get help from specialized pros.