How to start an LLC in Alaska
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To formalize your business and benefit from the LLC business structure, you need to follow Alaska’s process for creating a business. It is important to comply with all state laws and form your LLC in a way that it can operate in Alaska for a long time successfully. Ready to learn more? Check out our step-by-step guide.
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An LLC, or limited liability company, is a type of small business that offers both personal asset protection and favorable tax conditions for the owners. This designation is managed at the state level through Alaska’s Department of Commerce, Community, and Economic Development, which grants the designation of an LLC.
Alaska may be a fairly rural state with a small population, but it is a state that welcomes and supports small businesses. In fact, because of the state’s small towns and villages, over 99% of the businesses in Alaska are small businesses, many of them LLCs. Starting an LLC is a common step that Alaska business owners take, and the process is simple.
Name the LLC
Have a name in mind? See if it’s already listed on the state website. If the name comes up in a search, it’s taken. If it doesn’t, it’s yours to claim.
Everything you do for your LLC, from formation to everyday operations, will be done under the business’s legal name. For this reason, the first thing you need to do is choose and register your business’s name. While this sounds simple, there are a number of rules surrounding what you can call your LLC. The most important component of a name is that it is not taken by another Alaska business – a simple name search can help you determine name availability.
Other name requirements in the state include:
- The name must include “limited liability company” or an abbreviation like LLC or L.L.C.
- You cannot include any words that may confuse your company for a government agency (like FBI, State, Department, etc.)
- Words that are restricted to certain business types without the correct qualifications – for example, you cannot include the term “Attorney” unless a licensed lawyer is part of the LLC
- Entity names cannot mislead regarding the company’s purpose
- While names can include the names of a city, village, or borough, they cannot contain the words “city”, “borough”, or “village” or otherwise imply the business is a municipality
Research domain name and social handles
Alaska only requires that your business name is unique within the state’s records. However, you don’t want to choose a name and then find out there is another popular business with the same name. As a part of your research, look online to see what comes up when you search the business name you have in mind. Pay special attention to website domain names and social media handles.
Even if there is no exact match, consider the customer perspective and what they may find trying to look for your business. It can be important that both a domain name and social media handle are available, so that clients can easily transition between platforms and find the same information. You’ll want to be sure there isn’t another very similar name that clients may stumble upon, especially if they could be a competitive business.
You can also file a name reservation with the state of Alaska to hold a business name for 120 days.
Select a registered agent
Alaska requires that all LLCs have a registered agent named as part of their formation. A registered agent is any individual or business entity who receives all important legal documents, tax correspondence, and service of process on behalf of the business. Essentially, they are the main point of contact between your business and the Alaska state government.
You can act as your own registered agent or have a trusted individual you know to be the registered agent, whether they are part of your LLC or not. The only requirements are that the agent is over 18 and has a physical address, not a P.O. box, in the state of Alaska. However, being a registered agent also means you are expected to be available during all business hours to receive correspondence, and some people do not want to commit to this.
If you choose to outsource the job of being a registered agent, you can work with a registered agent service for an annual fee.
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File Articles of Organization
The most important step when creating your LLC is officially filing with the state of Alaska to form the business. This is done through a document called Articles of Organization, or Form 08-484 through the Department of Commerce, Community, and Economic Development.
In some states, you’d file these forms with the secretary of state, but Alaska has a different agency, the Department of Commerce, Community, and Economic Development.
The form is available online, or it can be sent by mail, fax, or delivered in person.
The Articles of Organization require you to provide basic information about your business, including:
- Entity name and mailing address: the name you have chosen for your business. If the name does not meet Alaska’s guidelines, your LLC will be rejected.
- Business purpose: the type of business you will be forming. As long as the purpose is legal and not prohibited by state law, you can choose “any lawful” for this field.
- NAICS: the grouping code that describes your business activity, as designated by Alaska.
- Registered agent: the name of your registered agent and the registered office address.
- Governing authority: whether members or managers will manage your LLC.
You will also need to provide information like the address of the business and potentially contact information for yourself. Once you have ensured all information is properly filled out, you can submit the forms.
You can fill out and submit your Alaska LLC formation documents here.
Filing fee
There is a $250 cost to file your Articles of Organization with the state of Alaska. This fee is non-refundable, so if your application is rejected and must be resubmitted, you will not be returned the original cost.
Alaska processing time
The Department of Commerce, Community, and Economic Development estimates a 10 to 15 day processing time for both online and mail formation.
Create an LLC operating agreement
Alaska does not have a requirement that LLCs create or implement operating agreements, but it is highly recommended that all businesses have one in place. These agreements are legally binding documents that set clear rules and expectations for your LLC. Operating agreements can be used when there are any disputes in the future or decisions to be made, as well as acting as guidelines for general operations.
There are no mandatory formats for an operating agreement, and you can craft one that is specific to your business. However, you can also find many templates online that include common sections and content. You can expect most operating agreements to cover:
- Organizational information: When the LLC was formed and who the members were, as well as how ownership will be divided.
- Management and voting: Whether members or an appointed manager will manage the LLC and how they will vote on business matters.
- Contributions: How much each member invested in the business so far and how funds may or may not be raised in the future.
- Distributions: How members will divide profits and losses.
- Changes to membership: What happens if a member leaves the company, both in terms of buying them out and how they will be replaced in the agreement.
- Dissolution: What happens if all members agree to dissolve the LLC.
Once a new business is created and Alaska has approved your Articles of Organization, you’re officially doing business as an LLC owner. However, there are still a number of steps you must take to operate your business in full compliance with the law and ensure everything runs smoothly.
Get your EIN
One of the main purposes of your Social Security Number is to tie your LLC tax records to your unique personhood and allow the IRS to track those taxes over your lifetime. Similarly, the Internal Revenue Service (IRS) issues all businesses an employer identification number, or EIN, for tax purposes. It’s attached to your federal tax documents, among other uses.
There are some businesses that do not need an EIN, but most do. You will need to apply for an EIN if your business:
- Has one or more employees
- Is an LLC with more than one member
- Has excise tax liabilities
Even if you do not need an EIN, it can be useful to have one. Some banks and lenders prefer to use an EIN for transactions, and being able to provide one means you do not ever need to provide vendors or clients your personal Social Security Number. Obtaining an EIN is free, and you will be issued one immediately when you apply online.
You can get your EIN by visiting the IRS website.
Open business bank accounts
One of the major benefits of forming an LLC is that the owner’s personal assets are protected when the business has an obligation. However, if you are mingling personal and business expenses, this protection is eroded and a lawsuit can lead to personal losses. The best way to prevent this is to use dedicated banking and credit accounts for your business. This makes it easy to track your expenses, avoiding more tax paperwork, along with showing that you are a separate entity from your business.
Most major banks and lenders will issue debit, credit, and other accounts for businesses. These may even include certain benefits and perks that you would not otherwise have access to.
Entrepreneurs may want to apply for a business credit card as well.
Review LLC tax rules in Alaska
Alaska is one of only five states that does not impose sales tax, which means that if you do not have employees, you are not responsible for any state taxes.
However, if you do have employees, you need to register for Unemployment Insurance tax through the State of Alaska. There is no state withholding tax, so this is the only tax you will see as it relates to paychecks.
LLC owners will pay taxes on the business’ profits on their personal income tax returns.
File a biennial report
LLCs in Alaska are required to file a biennial report with the Department of Commerce, Community, and Economic Development to stay in good standing with the state. This report includes basic information about your business and costs $100 to file, which is required every other year.
You can file a Texas annual report with the Department of Commerce, Community, and Economic Development.
Get insurance for your LLC
This management structure does offer personal liability protection, which means your personal assets aren’t used to cover business debts. However, it is important to protect your business from any lawsuits or unexpected costs that may arise. At a minimum, your LLC should have general liability insurance, which offers broad policies to protect against legal action. Certain professional service providers may also obtain additional liability insurance to cover things like malpractice.
Alaska requires any business with five or more employees, including officers and LLC members, to obtain workers’ compensation insurance. This policy will cover job-related illness, injury, or death.
How much does it cost to start an LLC in Alaska?
The main cost associated with forming an Alaska LLC is the Articles of Organization filing fee, which is $250. Other fees, like business license renewal and biennial report fees, come later. There are optional fees involved in things like reserving a name or filing for a DBA.
LLCs are charged filing fees, sole proprietorships are not since they don’t have to file any paperwork with the state.
During this process, you can expect these fees:
- Articles of Organization filing fee: $250
- Name reservation fee (optional): $25
- DBA registration: $25
- Biennial report fee: $100 every other year
- General business license: $0 to apply, $50 for annual renewal
- Certificate of Compliance: $10
There may be additional costs if you choose to use a service as your registered agent or to draft an operating agreement. Localities may also require additional licenses and permits that have associated fees. Because Alaska does not have a state tax, there is no additional cost for taxes.
About BOI Reports…
For LLCs to operate legally, owners must understand and comply with Beneficial Ownership Information (BOI) reporting rules under the Corporate Transparency Act. Properly filing your report with the Financial Crimes Enforcement Network (FinCEN) is crucial to avoid penalties. If you are unsure whether your LLC must disclose ownership information to FinCEN, see our post about BOI reporting here.
Additional resources to help you set up a business in Alaska
Other places you can visit to understand the process of forming an LLC include:
- The Alaska Corporations Database, which allows you to search for LLC names or reserve a name you plan to use.
- A list of registered agents in Alaska that the Department of Commerce, Community, and Economic Development recommends.
- Alaska requires a business license, which can be applied for online.
FAQs
What’s the difference between a single-member LLC and a manager-managed LLC?
A single-member LLC is a one-person business. A manager-managed LLC means the LLC is managed by a designated person or small team of managers, rather than the single owner of the LLC.
Is there an EIN for Alaska state taxes?
Alaska issues an Alaska Entity Number, which acts as an EIN for organizations within the state. Your Alaska Entity Number is used when doing things like filing personal taxes, submitting biennial reports, or applying for a business license.
Does my Alaska LLC need a business license?
Alaska requires a general business license to be issued to all LLCs in order to operate, which must be renewed each year. Certain industries and professions may require additional permits to operate. Because Alaska does not impose a sales tax, there is no seller’s permit or equivalent license necessary.
Can I reserve a business name in Alaska?
If you want to use a business name but are not ready to form your LLC, you can reserve the name for up to 120 days. This can be done online, by mail or fax, and in person by filling out Form 08-559. There is a $25 fee to reserve a name, which is a non-refundable fee, even if you do not use the name or choose another one.
Do LLCs have to pay taxes in Alaska?
In an LLC, the profits and losses are paid through the owners’ personal income taxes. Since Alaska does not have a personal income tax, this means that there is typically no tax applied to LLCs at the state level. However, they will still be responsible for things like Unemployment Insurance if the LLC has employees and any federal taxes.
What can I name my LLC in Alaska?
Alaska requires that any business, including LLCs, have a name that is unique and distinguishable from all other businesses formed in the state. Additionally, an LLC must include the words “limited liability company” or an abbreviation like “LLC” or “L.L.C.” in the name. Some words are restricted, including anything that implies the business is a government entity.
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