Ready to start a small business? Read this first.
Starting a small business in Alaska requires choosing the right business structure to suit the needs of your business. The type of entity you select affects your taxes, liability, and operational flexibility. This is a quick-start guide to give you an idea of the steps involved in creating different business structures commonly used for small businesses.
1. Sole Proprietorship
A sole proprietorship is the simplest business structure, where one person owns and operates the business. The owner is personally liable for all debts and obligations and if you do not choose to operate as an LLC, this is the default entity for solo business owners.
How to Form a Sole Proprietorship in Alaska:
Choose a Business Name – If you plan to operate under a name other than your legal name, you must register a Business Name Registration with the Alaska Division of Corporations, Business, and Professional Licensing.
Obtain Necessary Licenses – Apply for an Alaska Business License through the Alaska Department of Commerce. Check with your municipality for information on local business license requirements.
Register for Taxes – Depending on your business type, you may need to register with the Alaska Department of Revenue for sales tax (if applicable) or employer taxes if you have employees. Check with your local municipality or government to see if your business is subject to local taxes.
2. General Partnership (GP)
A general partnership involves two or more individuals who share ownership, management, and liability for the business. WARNING: A partnership can be created without a partnership agreement or registration. All that is required is for two or more people to carry on a business for profit as co-owners. A partnership agreement is crucial in partnerships, and should be drafted by an attorney due to the complexities of partnership taxation and operation.
How to Form a General Partnership in Alaska:
Create a Partnership Agreement – While not required by law, a written agreement outlining responsibilities and profit-sharing is strongly recommended.
Register a Business Name – If using a fictitious business name, register it with the state.
Obtain a Business License – Apply for an Alaska Business License.
Register for Taxes – If hiring employees, register with the Alaska Department of Revenue.
3. Limited Liability Company (LLC)
An LLC provides liability protection for its owners (members) while maintaining flexibility in taxation and management.
How to Form an LLC in Alaska:
Choose a Business Name – Ensure your chosen name is unique by checking the Alaska Division of Corporations database.
File Articles of Organization – Submit these documents to the Alaska Division of Corporations and pay the required filing fee.
Appoint a Registered Agent – The agent must have a physical address in Alaska.
Draft an Operating Agreement – While not required, this document helps establish how your LLC will be run. DO NOT form an LLC with another person without an Operating Agreement in place.
Obtain a Business License – Apply through the Alaska Department of Commerce. Make sure you’ve filed your Articles of Organization first!
Register for Taxes – Apply for an Employer Identification Number (EIN) with the IRS and register for Alaska employer taxes if applicable. Consult with a tax professional to determine whether your LLC should be taxed as a ‘pass through entity’ or an S-Corp.
Anyone creating a business should seek the advice of independent counsel and a tax professional regarding the potential personal and tax liability and tax treatment of their business structure. It is also strongly recommended that businesses carry general liability insurance at a bare minimum.
If you need help starting or re-structuring your business, book an appointment and see how Cold Peak Legal can help!
