Follow our free guide to form an LLC in Alaska:
- Pros and Cons of Forming an LLC in Alaska
- Starting Your Alaska LLC
- Maintaining Your Alaska LLC
- Additional Alaska Resources
Check out our informative guide on building an LLC in Alaska and learn everything you need to know about forming your business.
Pros and Cons of Forming an LLC in Alaska
No Corporate/Franchise Taxes
Alaska does not impose any corporate or franchise tax on LLCs. The only taxes owed on the LLC’s revenue is the personal income tax paid by the members.
No State Income Taxes
Alaska is one of the few states in the country that does not have a state income tax. Residents are only required to pay a federal income tax on their earnings.
Privacy for Owners
Alaska does not require the members/manager of an LLC to be listed in the formation paper — an organizer can sign and file the Articles of Operation in place of the members.
High Cost of Living
Alaska is one of the most expensive states in the country to live in, mostly due to its location. Housing prices are almost 40% higher than the national average. Common food staples are also pricier — a loaf of bread and one gallon of milk run almost $5 each.
Alaska currently has the highest unemployment percentage in the nation (7.2%), mostly due to the decline in the oil market and its slow rebound. Qualified workers are leaving the state in search of work elsewhere.
The drop in oil prices has hit Alaska hard since 2014, leading to a massive state deficit of $700 million and GDP growth of only .2% in 2018. The state has also seen enormous foreclosures in the real estate market — up to 170 in 2017.
Cost of Doing Business
- $250 filing fee/$100 biennial report
- No corporate/franchise tax
Starting Your Alaska LLC
Forming an LLC in Alaska might seem like a difficult and complicated task, but with the right level of assistance, it is far less confusing than you might assume. Here are the steps needed to ensure that your Alaska LLC comes together correctly:
- Step 1: Name your LLC
- Step 2: Establish Ownership of your LLC
- Step 3: Choose a Registered Agent
- Step 4: File the Articles of Organization
- Step 5: File the Initial Report
- Step 6: Create your Operating Agreement
- Step 7: Register for an EIN
Step 1: Name Your Alaska LLC
Finding a name for your new business is an important first step in forming your Alaska LLC. As you narrow down the list of possible company names, there are a few guidelines to keep in mind:
- The official name of your business must end with: Limited Liability Company, Limited Company, LLC, or L.L.C
- Your business name cannot be intentionally misleading to consumers
- The name of your new LLC must not be similar to another organization’s name/trademark
A few restrictions do exist regarding the name of your LLC, depending on the state where you are starting your business.
A few examples include:
- “Lottery” and “Bank” are ineligible for use (any state)
- Terms that represent educations or Veterans’ organizations are restricted
- Terms related to the Armed Forces or civil servants (police, EMT, fire)
LLC business names associated with government and/or financial entities are not always restricted - it depends on the state. Additional paperwork may be required.
In addition to choosing a name for your LLC, creating an online presence is equally important in the current culture. You can easily check domain name availability at a number of online web services sites.
Step 2: Establish Ownership
The owners are actually known as members or managers, depending on the chosen management structure of the business.
LLC Management Structure Options:
- Member-managed (ownership of business is divided among the members and all parties receive portions of the profits)
- Manager-managed (the appointed manager is the main operator and the members are passive investors who are not actively involved in the daily business operations)
After you have selected a name for your business, you then need to choose a management structure and designate the members of the LLC. A few rules concerning LLC ownership in Alaska include:
Required Number of Members
Alaska LLCs must have at least one member or manager in order to form an LLC.
Member Disclosure Requirements
Alaska state law permits an organizer/authorized representative to sign and file the Articles of Operation in place of the LLC members.
LLC members in Alaska may be of any age.
There are no residency restrictions imposed on LLC members in Alaska.
Step 3: Find a Registered Agent in Alaska
All Alaska LLCs must appoint a registered agent for the business and submit the agent’s contact information, including a physical address, to the state. Per law, the agent has to be accessible during standard business hours since he/she is the LLC’s primary contact person for the state.
What is a registered agent?
A registered agent is a person or business who is authorized to accept official government notices (including the Secretary of State) and service of process notices on behalf of the LLC.
Why do you need a registered agent?
Whenever you form an Alaska LLC, state law requires you to appoint a registered agent so that the state government has a consistent contact person for your business. This position is definitely beneficial for LLCs that do not have a physical address.
Who can be a registered agent in Alaska?
The requirements to be a registered agent are as follows:
- A resident with a physical address in Alaska
- An LLC or corporation that is licensed to conduct business in Alaska
Please Note: It is also possible for you to be your own registered agent as long as you use a physical address.
Why you may not want to be your own registered agent
Because the registered agent’s name and address are a matter of public record, LLC business owners who choose to be their own registered agent risk compromising their personal information.
Tip: Avoid the hassles that come with being your own registered agent and choose Swyft Filings to fill the registered agent needs for small businesses in Alaska. Find more information here.
Step 4: File the Articles of Organization
One of the most important steps involved in officially forming an LLC in Alaska is filing the Articles of Organization with the Secretary of State. This necessary document includes the following:
- The name of the LLC
- The statement of purpose
- The location of the business
- The name and location of the registered agent
- The name(s) of the members or organizer filing the paperwork
- The structure definition as member-managed or manager-managed
Additional Alaska Filing Requirements - Professional Service Businesses
Alaska allows professional service businesses to form a corporation or an LLC, as long as the business owners have the proper licenses in place.
A few points to consider:
- All members of the LLC must be licensed in the profession of the business.
- The LLC is only allowed to provide services for which the business was formed.
- The members are still subject to whichever licensing boards govern the LLC’s profession.
Step 5: File the Initial Report
LLCs formed in Alaska are required to file an initial report with the Department of State within six months of formation. The purpose of the report is to make the Secretary of State aware of your newly created business.
Due Date: within 6 months of forming LLC
Step 6: Create an LLC Operating Agreement
An Operating Agreement may not be required to form an LLC in Alaska, but it is still a foundational and necessary part of any successful business. The agreement provides structure to your business and projects a sense of professionalism.
What is an LLC Operating Agreement?
The LLC Operating Agreement is an in-house legal document that defines the rights and responsibilities of each person involved in the business and lays out the details involving how the business will operate.
Why do I need an LLC Operating Agreement?
Because the LLC Operating Agreement defines the roles of the business’s members and provides direction for daily operations, the document ensures stability and structure to the LLC and reduces future disputes.
What goes into an LLC Operating Agreement?
While you are generally able to customize the LLC Operating Agreement to your business, most documents include the following:
- Designation of the members/managers
- Initial capital contributions of the members
- Voting designations and percentages
- Member transfer/addition rules and restrictions
- Distribution of profits
Tip: Get a customized LLC Operating Agreement for your small business with Swyft Filings. Add structure to your LLC now.
Step 7: Register for an EIN
Alaska state law requires any business that has/will have employees to register for an EIN. Additionally, most banks and financial institutions require the EIN in order to open any accounts.
What is an EIN?
The EIN (Employer Identification Number) is also known as a Federal Tax ID and is a nine-digit number that is assigned to your business by the Internal Revenue Service (IRS). The EIN identifies your business with the government much like a personal Social Security number.
What business entities need an EIN?
Different types of business entities need an EIN to operate:
- An LLC with employees (even if owned by one person)
- An LLC with more than one member
- A partnership (LLC or C-corp)
Please Note: A sole proprietorship is the only business entity that is not required to have an EIN.
Why is an EIN necessary?
Some of the most common reasons for your business to have an EIN are:
- To open a bank account in the U.S.
- To file your company’s taxes
- To hire employees
- To pay independent contractors
Please Note: If you collect revenue of any kind through a business entity, you will need an EIN.
Swyft Filings offers EIN services for small businesses in Alaska. Find more information here.
Maintaining Your Alaska LLC
The first part of forming your Alaska LLC is completed; the next part focuses on getting you ready to actually conduct business. There are a few steps that you need to compete to keep your LLC compliant with the state:
- Step 1: Register for taxes in Alaska
- Step 2: Apply for any needed permits and licenses
- Step 3: File the Biennial Report
- Step 4: Request a Certificate of Compliance
Step 1: Register for Alaska State Taxes
Alaska does not impose corporate or franchise taxes on LLCs, nor does the state have a state income tax. LLC members only need to pay federal income tax on their portion of the company’s revenue.
Step 2: Obtain Business Licenses and Permits
Alaska law states that all businesses (LLCs and corporations) must obtain a business license in order to conduct any business in the state.
In addition to the general business license, the state of Alaska also requires some businesses to secure additional licenses and permits. The required list can vary depending on the industry of the LLC.
Tip: If you would like to see more in-depth information on licenses and permits, please feel free to visit the content in our learning library that covers business licenses and permits.
Step 3: File the Biennial Report
LLCs formed in Alaska are required to file a biennial report with the Department of State. The purpose of the report is to keep your business’s information and status updated with the state.
After the initial report is filed, your LLC will file a biennial report every two years to keep the business’s information up-to-date with the Secretary of State.
Due Date: January 2nd (beginning 2 years after initial report)
Implications of Late Filings: $37.50 late fee/eventual closure of business
Swyft Filings helps you stay compliant by providing stress-free solutions. File your annual report with us today.
Step 4: Obtain a Certificate of Compliance
Once you have completed all of the steps to form your new Alaska LLC, the last thing to do is order a Certificate of Compliance.
The majority of financial institutions and businesses may want satisfactory evidence of your LLC’s legality with the state of Alaska. Having a Certificate of Compliance (also known as a Certificate of Good Standing) provides your LLC with a “seal of approval” from the Secretary of State.
What is a Certificate of Compliance?
The Certificate of Compliance is an official notification from the government agency that confirms your entity has been properly filed and is still in compliance.
Why should I obtain a Certificate of Compliance?
In the course of conducting business, there will be times when you will need to prove that your business is properly filed and fully compliant with the state. Many banks and businesses will request a Certificate of Compliance as part of the due diligence process (especially during major transactions).
For the most part, any time you need to show your business is properly filed and fully compliant, you will likely need to present a Certificate of Compliance.
Swyft Filings can create a Certificate of Compliance for your Alaska LLC. Click here for more information.