Are you looking to form a limited liability company (LLC) in the state of Alaska, but you’re not sure how the formation process works? There are several important steps when it comes to creating an Alaska LLC that is compliant and able to do business in the state.
What is an Alaska LLC?
The Alaska LLC is one of the most popular business structures in state. It's a more casual and flexible type of business than a corporation, but includes the same personal asset protection you get with a corporation. That means you aren't personally liable for debts or lawsuits against your business. This is a critical protection that is lacking from 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.
Forming an LLC in Alaska (in 6 Steps)
Step One) Choose an LLC 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 take into consideration when selecting a name for your business:
Legalities: In the state of Alaska, every limited liability company is required to have either the initials “LLC” or the phrase “limited liability company” in the name. In addition, you cannot include any words that refer to other business types (like “corporation” or “incorporated”), and you also can’t use words that are typically used to refer to specific kinds of businesses (like “bank” or “law office”).
Explanatory Naming: Another aspect to consider is including language that explains what your business does ― for example, if you’re a plumber, put the word “plumber” or “plumbing” in your LLC name. Additionally, if your business has strong values like being environmentally friendly, you can indicate that by including the word “green.”
Do You Like It?: At the end of the day, this is your business, and you should choose a name that makes you proud. You should also make sure your LLC name both sounds good when spoken out loud, and looks good when written down.
The most important consideration for naming an LLC is to not get too attached to any one business name until you have either reserved the name with the state of Alaska, or you’ve officially formed your business. In Alaska, you’ll have to do your homework to determine if your name is distinct enough from other businesses, so you’ll want to conduct an internet search, check logs of businesses who’ve applied for professional licenses, and even check telephone directories. If you’re not yet ready to form your LLC, you can reserve your desired name (protects that name for 120 days) or register it (5 years’ protection) here.
Step Two) Designate 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.
According to the Alaska Secretary of State,
The registered agent of a corporation is an agent upon who may be served processes, notices, or demands required or permitted by law to be served upon the corporation . . . The registered agent is statutorily responsible for receiving and forwarding processes, notices, or demands on to the last known address of the entity.”
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, the state could fail to alert you regarding a lawsuit against your company, which could even lead to a judgment against your business because you didn’t defend yourself.
Our Recommendation: At the end of the day, we recommend designating a Registered Agent service to handle these requirements. Doing so will help eliminate junk mail and more importantly, keep your personal and/or business address off public record. Incfile and Northwest Registered Agent both offer a free Registered Agent service when you utilize their services to form an LLC. Both are fast and affordable. In fact, they’re the best available.
Step Three) File Formation Documents with State
Once you are ready to form your Alaska limited liability company, you will fill out the Articles of Organization.
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
- Name and address of your registered agent
- Management style (member-managed or manager-managed)
- Name(s) and address(es) of the LLC’s manager
- Name and address of the LLC’s organizer
- Signature of organizer and registered agent
- Effective date
In Alaska, you can file your Articles of Organization online or download the PDF form and mail it in.
Cost to Form an LLC: The state of Alaska charges a $100 fee to form an LLC.
Processing Time: It takes 10-15 days (during heavy filing times) for the state to process your hardcopy Alaska LLC formation paperwork and get your finalized documents in the mail to you. However, some forms can be filed electronically and process much faster—usually within one business day. Please note that the estimate of business days begins once ALL required paperwork is in order and filed correctly.
Step Four) Create 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 create one from a free template online. You can read more about Operating Agreements here, 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 a member owner out, or transferring their shares in the case of illness or death
Step Five) Handle Taxation Requirements
The vast majority of LLCs require a federal tax ID number, or EIN. An EIN is basically the business version of a social security number, and it’s used for a variety of important LLC functions.
For instance, you’ll need an EIN if you want to hire any employees, and many banks require them to open business bank accounts as well. You’ll also need one for tax purposes, hence the name federal tax ID number. Get an EIN for your LLC for free through the IRS.
The state of Alaska doesn’t collect state income taxes on individuals, so if your LLC’s income is filed under Schedule C on your personal income report (like a partnership or sole proprietorship), the LLC won’t pay state taxes on that income.
But if your LLC reports as a corporation, you’ll need to file taxes for the Corporate Income Tax. Alaska operates corporate taxes on a scaled-income rate; if your LLC has a higher taxable income, you’ll pay a higher rate. Consult the state’s guide here if you’ll be filing and reporting as a corporate LLC.
However, every Alaska LLC, regardless of its taxable status, must file a biennial report. You’ll file an Initial Report here within six months of forming your LLC. From then on, you must file a report every two years. The filing fee is $100, and you can begin filing here.
Beyond that, you may be subject to certain industry-specific taxes depending on the nature of your business. The Alaska Department of Revenue lists different types of taxes that may apply to your business.
Depending on where in Alaska your business is located, you could also need to pay some local taxes. The state also does not levy a sales and use tax, but the city or municipality where you operate may. You’ll want to consult with an accountant or your local governing offices to determine what taxes (if any) you must pay for sales and use.
Step Six) Obtain Business Licenses and Permits
Alaska does require a general business license for each LLC, but that license is applied for and obtained prior to filling out Articles of Organization (see step 3), so you’re already good to go on the general business license.
In addition to the general business license, Alaska requires Endorsements to sell specific products, including tobacco, e-smoking, and nicotine products. Additionally, many industries require licenses, such as hairdressers, veterinarians, and more. To find out which licenses may apply to your LLC, check the Business Licensing Statutes.
Would you prefer to have a professional form your LLC?
If you would prefer to have a professional handle the paperwork for you, consider hiring an online incorporation service like LegalZoom and Incfile. To see which is the better option for you, check out our side by side comparison.
Next Steps: What to do After Creating an Alaska LLC
Open a business bank account: We highly recommend that you establish a separate business banking account so that your business and personal finances are maintained completely separate. This is important because it helps protect your personal assets and also makes filing taxes much easier. Once you receive your EIN from the IRS, you’ll be able to use it to establish an account at the bank or credit union of your choice.
Get Business Insurance. Alaska does not maintain a mandatory general liability insurance requirement, but if you’re operating in a high-risk business or serve the public (ex: restaurants and food service), you may find a policy helpful. Alaska maintains a pure comparative negligence system since it is a fault state, so payments in litigation could be expensive if you’re uninsured. Most businesses with employees are required to maintain a worker’s compensation insurance policy, but members of an LLC are exempt from this requirement. After you obtain these legally required policies, it’s probably also a good idea to pursue general liability insurance, as well as some industry-specific policies.
Understand income reporting. Income reporting is just what it sounds like – reporting the income you made from your business. It’s important to note that you must file this form whether you made or lost money over the course of the year. Every Alaska LLC, regardless of its taxable status, must file a biennial income report. You’ll file an Initial Report here within six months of forming your LLC. From then on, you must file a report every two years. The filing fee is $100, and you can begin filing here.
Understand annual reporting. The state of Alaska has a guide that can be accessed here to walk you through reporting your income or loss for the year.Your annual report will essentially serve to update the state on any pertinent information regarding your business that has changed over the course of the year.
Find an accountant. We don’t recommend that you attempt to manage your business finances without the help of a professional. There is too much room for error, and a professional can ultimately save you time and money by guiding you on how best to manage your business finances. At a minimum, enlist professional help to set you up with software and the steps for keeping up with your finances on a regular basis. Then, consult back with your accountant at least a couple of times per year – and especially at tax time – to ensure you’re keeping track of everything correctly.