Congratulations! If you’re reading this article then it means you’ve either made the decision to form an LLC in the state of Alaska or are interested in what it takes to get one started. Whatever the case, this is a fantastic opportunity to learn the steps involved in forming an LLC in Alaska.
In this article, I’ll walk you through each of the steps involved in forming an Alaska Limited Liability Company (LLC), the reasons many small business owners choose an LLC as their business structure, and the options available to you during the LLC formation process so that you have a clear picture of the process and whether choosing to form an LLC is the right direction for your business.
(If you want to skip to the ‘how to form an LLC’ section, click here)
Table of Contents
What Is An Alaska LLC?
An Alaska LLC is a Limited Liability Company formed in the state of Alaska that is governed by the laws, regulations, and statutes of the State of Alaska Division of Corporations, Business, and Professional Licensing .
Why choose An LLC?
There are many benefits to forming an LLC in Alaska as opposed to other business entities (such as a sole trader, sole proprietorship, or corporation). Many of these you’ll experience naturally over the course of your business operations, but here are a few of the reasons small business owners choose an LLC as their business structure.
1. Limited Liability And Asset Protection
The primary reason most small business owners choose an LLC for their business structure (as opposed to another business structure like a sole proprietorship) is that LLC owners cannot be held personally responsible for the liabilities and debts of their business. This is referred to as limited liability and asset protection and it means that your creditors can’t list your home, car, other personal assets, or finances as a means of fulfilling financial obligations of your LLC, should you become the target of a lawsuit or file for bankruptcy.
The past year has shown us that even the most prepared business can crumble in the face of catastrophe. Unforeseen circumstances (such as a global pandemic) can overwhelm even the best-managed businesses, so having this kind of protection is vital to many small business owners and many cherish the peace of mind it affords them. Building a business is no easy task, and anyone who has put in that kind of hard work will value the protection that forming a Limited Liability Company can provide.
The next major benefit to forming an LLC that sways small business owners’ decision to form an LLC is privacy. Normally when you form a business in Alaska, such as a sole proprietorship or sole trader, you’ll be required to list your personal information with the State of Alaska Division of Corporations, Business, and Professional Licensing. This results in information like your name, address, and other personal details being listed on the public record. Once your information becomes listed on the public record, anyone can access it; therefore, cybercriminals such as hackers and identity thieves gain easy access to that information.
When you choose to form an LLC, you can protect this information. This is achieved by hiring an LLC formation service. LLC formation services are businesses that specialize in formatting and filing your LLC documents, and assist with the LLC formation process. They will register their information with the Alaska Division of Corporations on behalf of your LLC, allowing your personal details to remain off the public record while still retaining ownership and control of your Limited Liability Company (LLC).
The last major reason many Alaska business owners choose to form an LLC is the federal tax benefits they qualify for.
If you were to form a corporation or other business entity, you would likely experience a phenomenon known as “double taxation”, but LLCs avoid this entirely.
Here’s a breakdown of what “double taxation” is: The profits of a corporation are charged a corporate income tax rate. Then the already taxed funds are distributed to the shareholders in the form of dividends, which are then subject to a separate tax rate. This results in the aforementioned “double taxation”.
When you form an LLC in Alaska, you’re able to avoid this phenomenon.
LLCs experience taxation differently. The income your LLC generates will be taxed at company rates, not corporate rates. Then this money will be disbursed to the members of your LLC as personal income, which is only subject to the personal income tax rate. LLCs in Alaska don’t pay any federal taxes.
If that surprises you, there are even more tax benefits for LLCs beyond simply avoiding “double taxation”.
The Tax Cuts and Jobs Act of 2017 provided LLCs with a tax benefit known as Qualified Business Income Deduction (QBID). Once this act was instituted, this provided a 20% tax discount to LLCs that isn’t available to other business entities.
How To Start An LLC In Alaska
Now that you know what an LLC is and we’ve reviewed some of the main reasons business owners choose to form an LLC as their business structure, we can discuss the steps necessary to LLC formation. Here are the five steps you’ll need to take in order to get that business off the ground.
*IMPORTANT* If you need someone to assist you with filing all the legal documents necessary to form an LLC in Alaska, then there’s good news. Professional services are available that can help you. They’re called LLC formation services and their purpose is to smooth out the LLC formation process and make it as hassle-free as possible.
Their fees can be as low as $0 plus the LLC filing fee and they’ll help you file all the legal forms to establish your LLC in Alaska. My recommendation for an LLC formation service is ZenBusiness and they charge $49 plus the LLC filing fee.
If you’d like the helping hand an LLC formation service can provide and want to benefit from the privacy protection that comes from hiring one, check out my guide to finding the best LLC formation service here.
1. Obtain Articles Of Organization Form
The path to LLC formation typically begins with obtaining the Articles of Organization form from the State of Alaska Division of Corporations. You can get the PDF here. This form is the main document you will be filing and many of the following steps will refer back to it.
Once obtained, your Alaska Articles of Organization will need to include the following information:
- The name of your LLC,
- The purpose you have in mind for your business,
- The name and address of your chosen registered agent,
- Whether or not your LLC will be member-managed or managed by a manager,
- And finally the signature of your LLC’s organizer.
Once you have all of that information, your Articles of Organization can be filed with the Alaska Division of Corporations for a fee of $250, and you can file the LLC Articles of Organization online or by mail.
2. Choose Your Business Name
The next task you'll need to complete when forming an LLC is to choose a business name for your LLC. However, this is more complicated than simply choosing the first name that you think of for your Alaska LLC.
The state of Alaska Corporations Section requires that all Alaska LLCs and businesses have unique names, which means that if the LLC name that you have chosen for your Alaska LLC has already been taken by another business in Alaska it's unavailable and you can't use it. Luckily, it's easy to find out if the LLC name you want is available by performing a search on the Alaska Department of Commerce, Community, and Economic development corporations database.
If the business name you have chosen has already been taken you can add a suffix to the end of it. Alaska state laws and regulations by the state of Alaska Corporations Section require all Alaska LLCs to add the words “Limited Liability Company” to their LLC name. Of course, you can shorten this to “LLC”, “L.L.C”, or “Limited Liability Co”. Alaska State law also permits you to use the name of a city, borough, or village in the name of your Alaska LLC; however you are not permitted to use the words “city”, “borough”, or “village” in the title or otherwise imply that your LLC is a municipality.
Once you've found a name for your Alaska LLC, you will need to file a Business or Corporation Name Reservation application with the Alaska Department of Commerce, Community, and Economic Development. You can file online or by mail along with a payment for the state filing fee ($25), and once filed your business name will be reserved for 120 days. Click here for the link to file online.
If the name that you've been forced to register isn't to your liking (who would be crazy about an LLC with the suffix “Limited Liability Co” tacked to the end of it?) You can register for a trade name, fictitious name, or DBA (“Doing Business As”) name. This is the name that you use in advertisements and on signs rather than the LLC name that you've registered. The form that you will need to file online or by mail (along with a $25 state filing fee) is a New Business Name Registration form. You can file online here.
3. Choose An Alaska Registered Agent
The next step that you need to complete to start an LLC in Alaska is to choose an Alaska registered agent. There are two reasons this is important. Firstly, Alaska state law requires that all Alaska LLCs have a registered agent. Secondly, you will need to list your Alaska registered agent on your LLC Articles of Organization.
A registered agent must receive mail, legal documents, and service of process on behalf of your Alaska LLC, becoming its point of contact. The registered agent of your LLC will list their name and address (which must be in the state of Alaska) on public record with the Alaska Department of Commerce. If you choose to use a professional registered agent service they're not hard to find. There is a list of Alaska registered agent services on the Alaska Department of Commerce, Community, and Economic Development website along with an FAQ section about registered agent services. You can check it out here.
The benefit to using a professional registered agent service is that a registered agent must guarantee that you receive the mail, legal documents, and service of process that official government offices send to your LLC, and your identity and personal information will remain safe and off the public record. Typically a registered agent service in Alaska will cost between $99 and $299 per state per year.
You are taking on several risks if you decide to take on the registered agent role for your LLC rather than use a professional service. One of these is that your personal information will be listed on the public record, cyber criminals could use it to steal your identity. Another is that if you miss a service of process, your Alaska LLC could be sued and you would have a way to defend yourself from the lawsuit. But the biggest risk is that if you miss important correspondence from the state of Alaska Corporations section, they could find your LLC to no longer be in compliance with Alaska state laws regarding LLCs which could result in your company no longer being able to do business in the state of Alaska.
Because of all these risks I always recommend that new Alaska LLCs use a registered agent service.
If you would like more information on how a registered agent service can help to protect your identity and save you the work of becoming the registered agent for your LLC yourself check out my guide to the best Alaska registered agent service here.
4. Choose Your LLC Address
Your Alaska LLC must of course have an address in Alaska. You will have to list an address for your LLC on your Alaska LLC Articles of Organization which will be listed on the public record much like your LLC name. The address you list is also the point of contact for your business in Alaska and will be where all of the mail, legal documents, and service of process are sent for your Alaska LLC.
If you've decided not to use a registered agent service, you'll need to list the physical address of your business in Alaska here. If your Alaska LLC does not have an office-based,physical address then you will be forced to list your office or home address here. This is problematic because putting your name and address on the public record could put it into the hands of cyber criminals who could do disreputable things with the information.
If you have decided to use a registered agent service then they will list their name and address on the public record rather than yours, which will protect your personal information and your identity.
5. Sign And File Your Articles Of Organization
The last step to start an LLC in Alaska is to file the Articles of Organization.
You need to make sure that your form contains all of the pertinent information such as the LLC name and address, your registered agent's name and address, the purpose of your Alaska LLC, and the managerial system for your LLC.
Once you've checked that all the information on your form is correct, it's time to sign and file the Articles of Organization for your LLC in Alaska. You can sign the articles yourself but this puts your name on the public record which leaves you vulnerable to identity theft. But an LLC formation service will list their name and sign the articles for you. Not only will you retain ownership of your LLC in Alaska in this arrangement, but your personal information is kept off the public record which leaves it less vulnerable to cyber criminals so it's a win-win situation for LLC owners and Alaska.
You have two options when it comes time to file the articles of organization for your LLC in Alaska. Either filing method requires a state filing fee of $250. You can file online here or file by mail. If you file by mail, you'll need to send the form along with your payment for the state filing fee to the following address:
State of Alaska
Division of Corporations, Business and Professional Licensing
PO Box 110806
Juneau, AK 99811
Once you filed your articles of organization with the Alaska Corporations Section they will contact you by mail or email once they've processed all of the formation documents and your payment for the filing fee. This typically takes between 10 to 15 days in Alaska and they process your documents in order of the day they were received. If you would like your documents processed more quickly, many Alaska state LLC formation services offer expedited processing as part of their services. This can speed the process up and get it done in as little as 72 hours.
Other LLC Activities
Once you’ve got your Alaska LLC Articles of Organization there are still a few important steps to make sure your LLC starts off on the right track. There are several important actions you’ll have to take or prepare for in order to ensure your LLC in Alaska remains in good standing.
First, you need to file an Initial Report for your LLC. The initial report is similar to an annual report that many other states require, except that the initial report must be filed within six months of your LLCs date of organization. For example, if your LLC formed in July then your initial report would be due in January. Your initial report must also include several important pieces of information, such as the name of your LLC’s registered agent and your registered office address in Alaska. There is no filing fee associated with your initial report. You can file your initial report online here.
In addition to the initial report, Alaska LLCs are also required to file a biennial report. Like the initial report, biennial reports are required to include information like your LLC’s name, the state or country where your LLC was organized, and the name and address of each person owning at least a 5% interest in the company. To file a biennial report, all you are required to do is fill out the Biennial Report form and ensure that it is filed before January 2nd of the year it is due. For example, an Alaska LLC organized in 2021 would be required to file a biennial report in 2023, your subsequent Biennial reports would be due every two years. The fee for filing your biennial report is $100 for a domestic LLC or $200 for a foreign LLC. For an FAQ about biennial reports in Alaska click here, or click here for a link to file your biennial report online.
If you’re operating outside the state of Alaska, then you’ll need to follow a slightly different process for organizing your LLC. The key difference when forming a foreign LLC as opposed to a domestic LLC is that you’ll need to file a Certificate of Registration of Foreign Limited Liability Company, and this can be done online or via postal mail. The fee for filing this foreign LLC registration form is $350.
You’ll also be required to obtain an Alaska business license for your Alaska LLC. To do so, you’ll need to fill out a New Alaska Business License Application form, which you can do online or by mail. If filing by mail, you can obtain a copy of the New Alaska Business License Application PDF here. The filing fee is $50.
If all of these business license applications, reports, and registration forms seem overwhelming, there are services available to assist you. An Alaska PEO service can assist you with filing the forms for your local business licenses, and other online legal services offer help to file these documents and reduce the stress and hassle of operating your business.
Alaska LLC Fee Summary
Whether or not you’ve enlisted the aid of an LLC formation service on your journey to start your Alaska LLC, there are several fees you’ll have to pay along the way. Here’s a list of some of the costs you’ll encounter when forming an Alaska LLC.
Articles of Organization filing fee: $250
Name Reservation filing fee: $25
Registered Agent Fee: $99-$299 per year
Alaska Business License Application filing fee: $50
Biennial Report filing fee: $100 domestic $200 foreign
State Personal Income Tax: 0%
State Corporate Income Tax: 0%-9.4%
After Starting Your Alaska LLC
Congratulations! You’ve filed your Alaska Articles of Organization, applied for a New Alaska Business License, and obtained any other local and state business licenses necessary to form your LLC in Alaska. So take some time to celebrate these business victories. Take that fishing trip you’ve always wanted, or have a celebratory dinner with your business partners or friends. But you can’t stay away long because after starting a business with an LLC there are still things you need to do to make sure that your LLC can function well.
Here are the steps you need to take after forming your LLC to ensure it has the proper business foundations:
Step 1. Create An Operating Agreement
Your Alaska LLC is under no legal obligation to create an LLC operating agreement but it’s highly advisable that you do. Without drafting your own LLC operating agreement, your business will be forced to use the state-approved operating agreement that is listed on the Articles of Organization form. This could be bad for your business because you may not want vanilla instructions for the way that your business operates. So it's better to create the instructions yourself rather than be told how your business should be run.
To illustrate how important operating agreements are, think of your business as a computer. The LLC would be comparable to the computer’s case protecting the inner workings from damage. The LLC Operating Agreement would be like the computer's operating system, telling the computer how to respond to stimuli and what tasks each bit of hardware should perform.
Operating Agreements serve a dual purpose both as a contract between LLC members and a list of clearly written operational instructions for your business. The operating agreement for your business should list each LLC member, and then go on to clearly spell out the operational, managerial, financial and structural facets of your business along with establishing the effective date for your LLC.
*IMPORTANT* Before you draft your operating agreement it is important to decide what sort of managerial system that your LLC will have. You can choose either a single member managerial system or a multi-member managerial system. If you choose a single-member system then one member will make all of the decisions for your business. In a multi-member managerial system a handful of members will vote on each decision about your business. You also have the option to have a member-managed LLC or a manager-managed LLC. These are all things you should decide before you draft your Operating Agreement.
Typically an operating agreement begins by listing each LLC member by name before proceeding on to define which members or managers make high-level decisions for your business, and then clearly spell out the ownership percentages and the percent of profits and losses that each LLC member is entitled to. The operating agreement should define the role of each LLC member as well as their interactions with other LLC members, who their superiors are, and the tasks each department is responsible for. With all of these things clearly defined it leaves no room for petty squabbles in the workplace.
Operating agreements should also contain a section that describes what happens whenever one LLC member leaves and another joins as well as the member succession plan. Many inexperienced LLC owners leave this particular clause out of their Operating Agreements, however, the addition of this section provides a clear set of instructions in case of a falling out between LLC members that leads to a restructuring of the business. It may seem unnecessary, but having a set of clearly defined well-thought-out rules is crucial during these highly emotional times.
Your LLC operating agreement will be vitally important during the first few months of your LLC's establishment. It provides guidelines and instructions about the roles of each LLC member and employee, their financial compensation, and a precise description of how the business should be run.
You're not required to write an Operating Agreement for your Alaska LLC, but if you do you should include the sections and instructions that I provided for you here because they will help your business run smoothly. I'll explain the effects of a poorly written Operating Agreement on your business.
In case I haven't made this point clear already, your business is obligated to operate according to the framework and instructions you've laid out in your Operating Agreement, and a poorly-written operating agreement could be disastrous for your business growth. Many business owners design their operating agreements poorly and forget to include room for things like innovation, change, and business growth. If you design a well-written operating agreement for your business then you should be able to watch as your business grows and flourishes without the confines of faulty operating instructions. But a poorly designed Operating Agreement can hold your business back and stunt its growth.
If you're inexperienced with writing an operating agreement and you're concerned about getting it right, then the good news is that there are services available to help you.
You can get a free operating agreement template from Northwest Registered Agent's website. Assistance with the wording and some guidance with writing the Operating Agreement, consider describing to online legal services which will help you get the wording right. And if you would like someone to write the agreement for you, LLC formation services typically include drafting an Operating Agreement as part of their services.
Step 2. Apply For An Employer Identification Number
There are certain activities that your Alaska LLC may take part in that will require you to get an EIN (Employer Identification Number). Some of these activities include hiring employees and opening a business bank account for your LLC. If you get an EIN for your Alaska LLC your business will qualify for specific permits and licenses that it wouldn't qualify for otherwise. Of course, you don't have to hire employees for your small business just to get an EIN. An employer Identification Number is simply a tax identification number for businesses similar to a Social Security number.
You can apply for an EIN through the IRS (Internal Revenue Service), and applying for an EIN is easier than you would think.
A lot of LLC formation services in Alaska will apply for an EIN on behalf of your Alaska LLC as part of their services, which makes applying for an EIN foolproof. You can apply for an EIN and yourself without the assistance of an LLC formation service, however. All you need to do is log on to the IRS website Monday- Friday between 7 AM and 10 PM to fill out the application and submit it online.
Step 3. Open A Business Bank Account
The last step you need to complete after starting a business and forming your LLC is to open a business bank account.
Small business owners often overlook this step, either forgetting it or underestimating its importance. Many of them seem to think that running both business and personal transactions through one account somehow saves them time or trouble. But there are two very good reasons why you should not run business transactions through your personal bank account.
The first reason is having an LLC bank account can make filing federal tax returns effortless. Oftentimes, business owners believe that they can remember which transactions were for business or personal reasons. But these transactions typically happen several months before federal tax return season rolls around and time only makes it more difficult to remember anything. But having an LLC bank account makes filing taxes far easier because the only transactions listed on the statements will be business transactions and you won't have to remember a thing.
The second reason is you want to maintain liability protection. When you run business transactions through your personal account you then become vulnerable to lawsuits and identity theft. Furthermore, the liability protection that you enjoy as an LLC owner is nullified whenever you conduct business this way and the assets in your bank account are vulnerable to lawsuits.
So to make tax season a breeze and protect your personal assets, simply open a business bank account for your Alaska LLC.
To open a business bank account for your Alaska LLC, you will need what is known as a bank kit. A bank kit contains certified copies of many of the formation documents that you have been accumulating such as the Articles of Organization, EIN, Operating Agreement, and initial resolution of your LLC. Of course, you can collate all of these documents yourself, but LLC formation services also typically include the creation of a bank kit as part of their services.
Congratulations on starting a business and forming your own LLC! The decision to form an LLC is momentous and you'll likely remember this moment for the rest of your life.
If you've decided to do without LLC formation services (which typically costs as little as $0 plus state filing fees), here are the five steps that you'll need to take to form an LLC on your own in Alaska.
- Obtain the Articles of Organization form
- Name your LLC
- Choose your Registered Agent
- Choose your LLC address
- Sign and file your Articles of Organization
It may seem like the red tape, form filing, application submitting, and state filing fees will never end and it is quite easy to become overwhelmed by all of this. But if you get through it there's nothing to compare with the sense of pride and accomplishment from having done this yourself, so it’s definitely worth the work.
Congratulations again on your LLC and best of luck on your business adventure!