Alaska Corporation Advantages and Disadvantages - Alaska’s small businesses will face a friendlier regulatory environment, thanks to a new law that gives Alaskan small businesses a voice in the state’s regulatory process.
Upon signing the regulatory flexibility bill Governor Frank Murkowski said, “HB 33 is a step in the right direction to ensure the small business community in Alaska has a voice in crafting the regulations that affect their ability to make a living. This in turn will mean that agencies specified in the bill will have to consider the adverse impacts to small business before promulgating regulations. I am encouraged by this move to help return common sense to the regulatory process affecting a very important sector of our economy.”
Alaska Corporation - Articles of Incorporation must be drafted and submitted to the Alaska Secretary of
State, Corporations Division. Once articles of incorporation have been successfully filed, your Alaska Corporation has
been formed and this begins its existence as a Alaska corporate entity.
Should I Incoprorate in Alaska ?
A corporation, chartered by the state in which it is headquartered, is considered by law to be a unique entity, separate and apart from those who own it. A corporation
can be taxed; it can be sued; it can enter into contractual agreements. The owners of a corporation are its shareholders.
The shareholders elect a board of directors to oversee the major policies and decisions. The corporation has a life of its own and does not dissolve when ownership changes.
Advantages and Disadvantages: Alaska Corporation
Advantages of a Corporation
Shareholders have limited liability for the corporation's debts or judgments against the corporations.
Generally, shareholders can only be held accountable for their investment in stock of the company. (Note however, that officers can be held personally liable for their actions, such as the failure to withhold and pay employment taxes.)
Corporations can raise additional funds through the sale of stock.
A corporation may deduct the cost of benefits it provides to officers and employees.
Can elect S Corporation status if certain requirements are met. This election enables company to be taxed similar to a partnership.
A corporation pays 15% federal income tax on taxable income up to $50,000; 25% tax on income from $50,001 - $75,000; 34% tax on income from $75,001 - $100,000; 39% tax on income from $100,001 - $335,000; and 34% tax on income over $335,000.
A sole proprietor who filed a federal income tax return under the status of married, filing jointly, would pay 15% federal income tax on taxable income up to $35,800; 28% tax on income from $35,801 to 86,500; and 31% tax on income over $86,501.
Disadvantages of a Corporation
The process of incorporation requires more time and money than other forms of organization.
Corporations are monitored by federal, state and some local agencies, and as a result may have more paperwork to comply with regulations.
Incorporating may result in higher overall taxes. Dividends paid to shareholders are not deductible form business income, thus this income can be taxed twice.
Federal Tax Forms for Regular or "C" Corporations
Form 1120 or 1120-A: Corporation Income Tax Return
Form 1120-W Estimated Tax for Corporation
Form 8109-B Deposit Coupon
Form 4625 Depreciation
Alaska’s Business Tax Climate Ranks 3rd
Alaska ranks 3rd in the State Business Tax Climate Index, which measures the impact on business of five major elements of the tax system: the percentage of income taken by all taxes, the individual income tax rates, the corporate income taxes, the sales tax rate, and the complexity of the tax system. The ranks of neighboring states were as follows: Hawaii (50th), Oregon (10th), Washington (9th) and California (38th).
50-State Comparison of Business Tax Climates
Alaska’s State/Local Tax Burden the Lowest in the Nation:
For the past 14 years, Alaska’s tax burden has been consistently ranked as the nation’s lowest. Over this period of time, the burden has continued to fall as the individual incomes of taxpayers have risen faster than state/local tax collections. Estimated now at 6.3% of income, Alaska’s state/local tax burden percentage remains firmly entrenched as the lowest nationally, well below the national average of 10.0%.
Alaska’s Individual Income Tax System
Alaska levies no individual income taxes, joining six other states with the same policy: Wyoming, Washington, Nevada, Florida, Texas and South Dakota.
Alaska’s Corporate Income Tax System
Alaska’s corporate tax structure consists of ten separate brackets with a top rate of 9.4% kicking in at an income level of $90,000. In 2003 corporate tax collections reached $319 per capita, ranked 1st highest in the nation.
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