How to Start an LLC in Alaska? (5 Steps Guide)
Starting a business in Alaska isn't uncommon, as this legal structure offers personal asset protection in case of lawsuits.
While an LLC is a great choice for many small businesses, it's not the only option.
As a business law expert, I've created a guide with five straightforward steps to help you navigate the process. With our team's experience in forming numerous Alaska LLCs, we aim to share our knowledge and simplify the journey for you.
Quick Summary
- You must choose a name, choose a registered agent, file articles of formation, get needed licenses and permits, and create an Alaska LLC operating agreement if you wish to form an LLC
- An LLC in Alaska offers LLC owners pass-through taxation, personal liability protection, and a flexible management structure.
- It is important to consult legal experts and get familiar with the mandatory steps after the LLC formation process.
How to start an LLC in Alaska
An LLC in Alaska provides personal liability protection and offers flexibility in managing your business. Below, we will walk you through the process of starting an LLC in Alaska, from choosing a name to filing the necessary paperwork.
1. Pick your Alaska LLC name
The first phase in forming an LLC is choosing a business name.
There are a few things to bear in mind when naming your Alaska LLC:
- Check the availability of your desired name on the Alaska Division of Corporations website.
- Your LLC name cannot contain words restricted by the state of Alaska, such as "Bank," "Insurance," and "Bail".
- 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 [1].
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 [2].
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.
It would be wise to look for a domain name at this stage as well. A website is a useful marketing tool.
It will enable customers to discover more about you and your company. Make sure to verify the availability of the URL including the name of your company.
Also, you can easily learn how to change an LLC name in Alaska, if you want to.
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.
2. Choose a registered agent for your Alaska LLC
Choosing an Alaska registered agent is a mandatory step.
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.
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 LLC registered agent. You can also be your own registered agent. However, most people prefer a professional registered agent service.
The name and address of the registered agent 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.
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 LLC 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 in Alaska 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.
4. Compose an Alaska LLC Operating Agreement
Compose an Alaska LLC operating agreement to keep things easier in the long run.
Operating Agreements are not a requirement in Alaska, but it's a good idea to have it in mind when you calculate the cost to start an LLC in Alaska.
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 operating agreements 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.
5. Apply for an EIN
You must apply for an EIN when running a business in Alaska.
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 Alaska LLC 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
After building an LLC, essential steps will include dealing with the biennial report, federal income taxation, and obtaining necessary licenses and permits.
Next to these steps, opening a business bank account is a must, while securing insurance is highly recommended.
1. File the Initial and the Biennial Report
New LLCs must submit their initial reports to Alaska within six months after their incorporation. To avoid forgetting, it is best to take care of it as soon as you can. We advise filing it with the articles of formation.
Alaska LLCs must also file a biennial report with the Alaska 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.
2. 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
- Partnership
- C-corporation
- S-corporation
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 elect to have their LLC 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.
3. Open a Business Bank Account
Opening a business bank account for your LLC is a must.
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.
4. 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:
- Alaska Business License - 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.
Related Articles:
- Best LLC Services in Alaska
- How Long Does It Take To Form an LLC in Alaska
- How to Look Up an LLC in Alaska
- How to Register a Business Name in Alaska
FAQs
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 Need to Have an Operating Agreement in the State of Alaska?
You don't need to have an operating agreement in the State of Alaska, to run an LLC.
However, within the operating agreements, you as a business owner will state the company's business structure. It's a vital document that helps all LLC members.
Do I Need a Business License for My LLC?
You will need a business license for an LLC if you want to run a legal business.
The Occupational Licensing Section of the Alaska Division of Corporations, Business, and Professional Licensing, is where you can get your license. Business licenses expire on the last day of December.
What Is a Professional Limited Liability Company in Alaska?
A professional limited liability company in Alaska, or PLLC, is a business that requires state licenses, such as accountants, attorneys, podiatrists, physical therapists, acupuncturists, and others. This is not to be mistaken for an LLC, although the formation process is similar.
Can I Form a Single-Member LLC in Alaska?
You can form a single-member LLC in Alaska, and it will be treated as a multi-member LLC in most cases. When it comes to submitting a tax return, single-member LLCs have more options.
Do You Want To Form an LLC In Alaska?
Starting your own business is challenging, but it can be tricky if you don’t know the regulations. This is why it helps to have legal support and the right kind of advice.
If you are ready for an Alaska-based business, know that forming an LLC in Alaska is relatively easy with the right help and advice from ZenBusiness, who, from our experience, will make business formation fast, clear, and well-organized. Plus, you will be informed at every step.
Seek expert guidance before registering an LLC to avoid decisions impacting your business long-term.
References:
- https://www.commerce.alaska.gov/web/cbpl/Corporations/DistinguishableBusinessName.aspx
- https://www.commerce.alaska.gov/web/
