If you are looking to start a business in Alaska, one of the first things you will need to do is form an LLC. An LLC is a limited liability company. It is a separate legal structure that protects the business owner's personal assets in the event of a lawsuit.
This article will explain all you need to know about forming an LLC in Alaska. We will cover the process step-by-step and provide some helpful resources along the way. Let's go!
Step 1: Pick your Alaska LLC name
The first phase in forming an LLC in Alaska is choosing a business name.
There are a few things to bear in mind when naming your Alaska limited liability company:
- Your business name must be unique in Alaska. You can check the availability of your desired name at the Alaska Division of Corporations website.
- Your LLC name cannot contain words restricted by the state of Alaska. For example, words like "Bank," "Insurance," and "Bail" are not allowed.
- Your business name must end with "LLC" or "Limited liability company."
- It cannot contain the words "city," "village," "borough," or any other word that could refer to the company being a part of the government or municipality.
- Your LLC name must not contain words used in a government agency.
Take a look at the complete listing of Alaska's naming rules. Check which LLC names are available in Alaska through the Corporations Database on the Alaska Department of Commerce, Community, and Economic Development website.
Once you have chosen a business name, you have the option to file a "name reservation" with the Alaska Division of Corporations. This way, you will ensure that no one else can use your desired name in the state. The fee for filing a name reservation is $25.
At this point, it would also be a good idea to check for a domain name. Having a website is a good marketing strategy. It will help your customers know you better and learn about your business. Make sure you check if the URL with the name of your business is available.
Applying for a DBA: A BA (“Doing Business As”) Name
A "trade name" in Alaska is a separate name under which you can register and conduct business. If you want to do business under a name different than your LLC's legal name, you'll need to get a trading name. A trade name can be registered online or by mailing the Alaska Department of Commerce a completed New Business Name Registration form. The filing fee is $25.
Read More: How to Register a Business Name in Alaska?
Step 2: Choose a registered agent for your Alaska LLC
The next important decision you will make when forming an LLC in Alaska is choosing a registered agent.
An Alaska registered agent is the point of contact for your business.
They receive legal and tax notices on behalf of your LLC, and they are responsible for forwarding these legal documents to you.
It's essential to choose a reputable registered agent who can handle these responsibilities effectively.
When selecting a registered agent, bear the following in mind:
- They must be located in Alaska.
- They must have a physical street address in Alaska. PO boxes are not allowed.
- They must be available during regular business hours.
You are free to appoint anyone as your registered agent. You can also be your own registered agent. However, most people prefer a professional registered agent service. These professional services are designed to provide registered agent services for businesses, and they typically have experience dealing with legal and tax notices.
The agent's name and address are made public, resulting in a loss of privacy. For some entrepreneurs, this is important, primarily if they work from home or are self-employed. If you use a reliable registered agent service, the number of unsolicited phone calls and mailings will be reduced.
Step 3: File Alaska Articles of Organization
Once you have chosen a registered agent, it's time to file your Alaska LLC Articles of Organization with the Department of Commerce, Community, and Economic Development. You can file online, by mail, by fax, or in person. This is the document that officially creates your LLC. The filing fee for Articles of Organization is $250.
There are a few things you will need to include in your Articles of Organization:
- The name of your Alaska LLC.
- The name and address of your registered agent.
- A primary purpose of the LLC. A reason for the LLC formation. It can be a general statement.
- Duration of the period over which the LLC will exist. Usually, LLCs are perpetual, meaning the duration is indefinite. A perpetual LLC can be dissolved willingly or involuntarily. If your LLC exists for a purpose that will end at a specified date, you will write that date here.
- What is the management structure of the LLC: is it managed by managers or by its members. LLC owners usually opt for a member-managed LLC.
- NAICS (North American Industry Classification System)
- The person forming the LLC needs to sign the Articles.
NAICS (North American Industry Classification System)
The NAICS (North American Industry Classification System) is a six-digit number that categorizes and classifies the types of commercial operations your limited liability company conducts. This information is used to report statistical data for each of the United States' industries. Remember this number because you'll need it when filing your annual tax returns.
Choose the closest activity if your business's activities aren't listed.
Step 4: Compose an Alaska LLC Operating Agreement
Operating Agreements are not a requirement in Alaska, but it's a good idea to have one.
An operating agreement spells out the rights and responsibilities of the members of your LLC. It also clarifies how profits and losses will be divided, how the LLC will be managed, and what happens if someone leaves the LLC or dies.
Your Alaska LLC Operating Agreement can be as simple or complex as you want it to be.
You can include details about how the LLC will operate, how members will contribute money and property to the LLC, and what happens if someone wants to sell their interest in the LLC.
The LLC operating agreement is an essential document because it helps prevent disputes between members. It's also good to have an operating agreement because it provides a roadmap for the LLC's future. If you don't have one, the courts will rule on how the LLC should operate based on Alaska law. This can be a costly and time-consuming process.
Step 5: Apply for an EIN
An EIN is an Employer Identification Number (federal tax identification number). This nine-digit number is used to identify businesses for tax purposes. The internal revenue service uses it to track income and employment taxes.
You'll need an EIN if you want to hire employees, open a bank account for your LLC, or file any business taxes. You can apply for an EIN online on the IRS website or by mail.
The Internal Revenue Service will provide you with an EIN for free. Obtaining an EIN is a simple procedure that can be completed online or via mail.
Essential Steps After the LLC Formation Process
File the Initial and the Biennial Report
Alaska requires new LLCs to file an initial report within six months of formation. It's best to deal with it as soon as possible, so you don't forget. We suggest you file it together with the Articles of Organization.
Alaska LLCs must also file a biennial report with the Division of Corporations, Business & Licensing every two years, in addition to the initial report. It costs $100 to submit a biennial report. A penalty of $37.50 is added to your report if the Alaska LLC biennial report is more than a month late.
The initial and biennial reports' purpose is to give the state the most up-to-date information on your LLC, such as member names and your registered agent address.
By filing the initial and biennial reports, you provide the state with the latest information about your Alaska LLC. The reports contain information like member names and your registered agent address.
Form of Federal Income Taxation
Another vital decision you should make regarding your Alaska LLC is how it will be classified for federal income tax purposes. You will be deciding this when you apply for the EIN(federal employer identification number).
These are the options for federal income taxation:
- Sole proprietorship
Don't be confused by the names. This is only for tax purposes. The legal structure of your company remains the same.
LLCs are pass-through entities by default. Rather than the LLC paying taxes on earnings, the profits or losses are distributed among the members.
Because Alaska has no personal income tax and LLCs are subject to pass-through taxation by default, the LLC does not pay income tax.
- Single-member LLC will be taxed as a sole proprietorship by default. Members can choose whether to be taxed as a C-corporation or an S-corporation.
- Multi-member LLC will be taxed as a partnership by default. Members can choose whether to be taxed as a C-corporation or an S-corporation.
Open a Business Bank Account
A bank and/or savings account for your LLC is necessary for liability protection because it isolates the business's funds and business income from the owners' personal funds.
To open a bank account, you'll need a few documents, including:
- A banking resolution (a document that authorizes the members of the LLC to open a business bank account on behalf of the LLC.)
- Copies of the state's original LLC formation documents.
- 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 License and Permits
Before starting your firm, you'll need to register for several business licenses and permissions, depending on what your company does and where it's located. The following are some examples of standard registrations:
- Business Licence - In addition to requiring a state business license for all enterprises operating in Alaska, many cities also require businesses to be licensed to operate in their specific field
- Professional licenses are required for certain services such as barbershops, accountants, and home inspectors.
How Long Does It Take To Start an LLC in Alaska?
When filing a hard copy of your Articles of Organization, it can take anywhere from 10 to 15 business days to be processed. Online filings are processed right away.
How Much Does It Cost to Start a Limited Liability Company in Alaska?
It costs from $250 to $275 depending on whether you want to reserve your name. Filing the Articles of organization costs $250, and you pay it to the Alaska Division of Corporations. The name reservation is $25.
What Is a Foreign LLC?
A foreign LLC is physically located in a state other than the one in which it was created. It is physically operating if it has an office or an employee. All LLCs must register as foreign LLCs in each state where they intend to do business.
Do I Have to Have an Operating Agreement in the State of Alaska?
No, you don't. An operating agreement is not required to register an LLC in Alaska.
However, within the operating agreement, you as a business owner will state the company's business structure. LLC's operating agreement is a vital document that helps all LLC members.
Do I Need a Business License for My Alaska Limited Liability Company?
To conduct business in Alaska, an LLC must get a license.
The Occupational Licensing Section of the Division of Corporations, Business, and Professional Licensing, is where you can get your license. Business licenses expire on the last day of December. You can pay an annual fee to renew it.
What Is a Professional Limited Liability Company?
Businesses that require state licenses, such as accountants, attorneys, podiatrists, physical therapists, acupuncturists, and others, must usually file as a Professional LimiteLiability Company (PLLC) rather than an LLC. The process of forming a PLLC is similar to that of forming an LLC.
Can I Form a Single-Member LLC in Alaska?
A single-member LLC is a company that doesn't have more than one member. It is treated the same as a multi-member LLC for most purposes. In Alaska, the steps to incorporate a single-member LLC are the same as those outlined above.
When it comes to submitting a tax return, single-member LLCs have more options.
Congratulations! You've decided to start your own business. It can be exciting, but it can also be daunting. However, forming an LLC in Alaska is relatively easy with the right help and advice from a professional.
If you have any questions about the process or feel like you need help registering a new LLC, make sure you seek out business advice from someone who knows what they are doing before making any decisions that could affect your company for years to come.