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The State of Alaska has a reputation for being rugged and remote—the final American frontier. It’s also an exciting place to launch and operate your small business, whether part of the state’s robust resource-extraction trade, tourism, or any of the many other industries that power the largest state in the US. When setting up shop in Alaska, you may choose to form your business as a limited liability company, or LLC. There are advantages to doing so, as well as considerations to be aware of. This article will walk you through the steps to start and run an LLC in Alaska.
How to start an LLC in Alaska
- Name your Alaska LLC
- Create a business plan
- Get a federal employer identification number (EIN)
- Choose a registered agent in Alaska
- File for your Alaska LLC Articles of Organization
- Obtain business licenses and permits
- Understand Alaska state tax requirements
- Prepare an Alaska LLC operating agreement
- Examine business insurance options in Alaska
- Understand financial considerations
- Market your LLC
What is an LLC?
A limited liability company (LLC) is a fairly common type of business entity in the United States mainly because of the legal protections and tax treatment it affords its owners. Owners of LLCs, known as “members,” are not personally responsible for the LLC’s business debts. Instead, liability for those debts is assigned to the LLC itself. That means members are effectively insulated from damages arising from most legal claims against the LLC.
A second major benefit to forming your business as an LLC is how it is treated by tax authorities. LLCs usually enjoy “pass-through” tax status, meaning they are taxed a single time at members’ personal income levels. LLCs also usually avoid corporate taxes on business income (unless the members of the LLC elect for the business to be taxed as an S corporation—but this is rare).
Is an LLC right for you?
LLC isn’t the only business structure available to small business owners in Alaska. You might form your business as a sole proprietorship or corporation instead. To figure out if the LLC is the right option for you, consider the following questions:
- Do you have personal assets in need of protection? By forming an LLC, you can shield most or all of your personal assets from creditors and litigants.
- Are you looking to limit your tax liability? LLCs, by default, do not pay corporate taxes. They are generally classified as pass-through entities—meaning they are subject to one round of taxation on members’ personal tax returns. Traditional corporations are usually subject to so-called “double taxation”—both corporate taxes on income generated by the business, and income tax on whatever money owners earn from it.
If you think an Alaska LLC might be the right business entity for you, here are the steps to start one.
1. Name your Alaska LLC
Deciding on a name for your LLC is one of the first important business decisions you’ll make as an Alaskan small business owner. It’s the core of your brand recognition, and therefore your brand identity. A solid LLC name will communicate your business’s function and mission in a way that is both distinctive and memorable. There are also Alaska LLC naming guidelines you must follow, including:
- The LLC name must be distinct. The name you choose must be totally distinct from any other business entity currently registered with the state. You can run a search of existing business entities on the Alaska Department of Commerce, Community, and Economic Development’s website to see if your desired name is available.
- The LLC name must contain certain words. The name you choose must contain the words “Limited Liability Company,” or an abbreviation thereof: “L.L.C.,” or “LLC.” The word “Limited” may be further abbreviated to “Ltd.,” and “Company” to “Co.”
2. Create a business plan
Writing a business plan is a crucial part of developing a business—in Alaska or elsewhere. A good plan can help you effectively estimate startup costs and assess your business’s capacity for overhead. It can also indicate whether you might need to make adjustments to your goals or profit expectations, or seek further funding to accomplish your vision. On that note, business plans can also help investors evaluate the potential profitability of your business before they decide to invest money in it.
A good business plan should include your LLC’s name and a brief description of your LLC’s business function. It should also contain a thorough market analysis, an outline of the management structure, target customer profiles, and marketing, logistic, and financial plans.
3. Get a federal employer identification number (EIN)
A federal employer identification number (EIN) is a federal tax identification number—a nine-digit number assigned to businesses by the US Internal Revenue Service (IRS) to track a business’s tax obligations. Think of it like a Social Security number for your LLC. You’ll need an EIN to register your LLC with the proper government agencies. You can obtain one online through the IRS website, free of charge.
4. Choose a registered agent in Alaska
All businesses in Alaska, including LLCs, are required by law to appoint a registered agent. A registered agent is an individual or a professional service (known as a registered agent service) that is authorized to accept legal documents and other official correspondence on your LLC’s behalf.
You can appoint a member or employee of your LLC to this role, or hire a third-party individual or service that is authorized to do business in the state. Registered agents must have a physical mailing address in Alaska (not a PO box). Registered agents must also be available in person to sign for any documents during normal business hours.
5. File for your Alaska LLC Articles of Organization
An LLC in Alaska is only formally established once you’ve successfully filed Alaska LLC Articles of Organization with the state’s Division of Corporations. This is a set of forms that summarize essential information about your business for state registration authorities. Completed articles should include:
- Your LLC’s name
- A brief description of the LLC’s purpose
- The name and address of your registered agent
- Whether the LLC will be managed by a member or managed by someone hired by the LLC
- The signature of the LLC’s organizer (a member or employee authorized to act on the LLC’s behalf)
You will also have to pay a $250 filing fee to obtain your Alaska LLC Articles of Organization, regardless of whether you file online or by mail.
6. Obtain business licenses and permits
A general state business license is required to conduct business in Alaska. You can apply for it online, or by mail by filing a New Alaska Business License Application. The application’s filing fee is $50, and you must submit one every two years for renewal.
You may need to obtain additional business licenses or permits depending on your LLC’s line of business or its location in Alaska. Consult the Division of Corporation’s Professional Licensing guide for more information if needed.
7. Understand Alaska tax requirements
At both the state and federal levels, LLCs in Alaska are typically not subject to corporate taxes—unless members elect for the LLC to be taxed as an S corporation (in which case, the state’s 2% to 9.4% corporate income tax applies, depending on the LLC’s income). Income of the LLC is generally taxed at members’ personal-income levels.
There is no state sales tax in Alaska, but LLCs may have to pay certain state-level taxes, such as property taxes and certain employment/payroll taxes.
8. Prepare an Alaska LLC operating agreement
You are required by state or federal law to have an operating agreement. This internal document outlines how your LLC will conduct business, and can provide guidance for your internal operations, accountability, and goal setting.
An operating agreement typically includes:
- Your LLC’s business name and primary address
- How long you plan to run the LLC (perhaps indefinitely)
- Information on the LLC’s registered agent
- Information about the Articles of Organization
- The business’s purpose and mission statement
- An organizational chart listing members and their respective investments
- How profits and losses are divided between LLC owners
- The process for admitting new members and offboarding outgoing ones
- An overall management plan
- Various indemnification and liability provisions
9. Examine business insurance options in Alaska
Unexpected losses can be devastating for a small business, and those in Alaska are no exception. While LLCs offer a degree of limited liability protection in the event of debts or legal claims, you may still want to purchase insurance to protect your business’s non-covered assets. Standard policies available in Alaska include:
- Workers’ compensation. Alaska state law requires all businesses with employees to purchase workers’ comp—an insurance package covering injuries or illnesses workers may suffer on the job. This includes both full-time and part-time employees.
- General liability insurance. General liability insurance provides broad, generalized coverage for your business, covering losses that might occur due to lawsuits from accidents, injuries, or negligence connected to the LLC.
- Commercial property insurance. Commercial property insurance covers some or all of the costs associated with repairing or replacing lost, stolen, or damaged LLC property.
- Professional liability insurance. Professional liability insurance protects businesses that provide certain specialized professional services. These are usually in fields with a high bar for competence, like law, accounting, or real estate. This is also known as malpractice insurance.
- Cyber liability insurance. Data breaches and ransomware can harm your customers and tarnish your LLC’s reputation. Cyber liability insurance covers instances where you may have losses resulting from informing or compensating customers in the case of an attack.
The Small Business Administration maintains a list of forms of insurance your Alaska LLC may need.
10. Understand financial considerations
Insurance is just one part of the picture when it comes to funding your LLC. Other costs at this stage of launching the business might include renting an office, storage, or retail space, commissioning a professionally designed website, or paying for advertising, equipment, and/or software. You may also want to hire certain contractors, like lawyers, accountants, or other professionals. Because these costs can add up, you may be interested in accessible funding options, which allow you to repay funding as a percent of your Alaska LLC’s daily sales. This allows payments to fluctuate according to how much money you’re making. You may also consider opening a business bank account and obtaining a business credit card to handle cash flow and overhead.
11. Market your LLC
Once your new Alaska business is launched, it’s time to market it. Marketing your LLC allows you to reach new consumers and ideally turn them into repeat customers. A good marketing plan for your Alaska LLC will include elements like:
- Market research. Understanding your LLC’s market position is key. You can accomplish this by thoroughly researching things like customer profiles, competitor products or services, and industry trends.
- Advertising and promotion. Although traditional paid advertising may seem a little dated, it is still a highly effective tool for generating new business. You can design and place ads yourself or hire an advertising agency to do it for you.
- Social media. Any successful business today needs to maintain a robust online presence across all major social media platforms—Facebook, Instagram, TikTok, YouTube, and more. Consistently publishing content that aligns with your brand identity can garner more visibility and cohesive customer engagement.
- Public relations. Developing strong relationships with the press in Alaska and even with national and foreign outlets can bring organic, sustainable attention to your LLC.
- Customer retention. Building genuine relationships with customers is one way to turn them into repeat customers. You might do this by leveraging your marketing materials, digital tools, and social media presence to forge authentic connections.
Starting an LLC in Alaska FAQ
How much does it cost to form an LLC in Alaska?
Starting an LLC in Alaska costs, at a minimum, $250 to file Articles of Organization with the state government. You will also need to pay $50 every two years to renew your state business license.
Do you need an Alaska registered agent for your LLC?
Yes, all Alaska LLCs must appoint a registered agent or registered agent service to receive legal documents and other official correspondence. Whether you appoint an individual (such as an employee or LLC member) or a service, they must be available during normal business hours at an in-state, physical address (PO boxes do not qualify).
How do LLC state taxes work in Alaska?
LLC members in Alaska pay both state and federal income taxes on money earned from the business. Unless your LLC elects to be taxed as an S corp, you won’t have to pay corporate taxes on your Alaska LLC.