Alaska LLC Advantages and Disadvantages

Alaska LLC Advantages and Disadvantages

Organizing an Alaska LLC

An Alaska limited liability company is formed by filing Articles of Organization with the Alaska Secretary of State and paying a fee of $250.

Alaska LLC 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.

An Alaska LLC offers business entrepreneurs the form of corporate organization that provides perhaps the most flexibility to you. An LLC formation, like the alternative corporate forms of organization like a limited partnership or a Subchapter S Corporation, are generally prime candidates for a business juststarting. The state of Alaska gives public support to an Alaska LLC.

Should I form an Alaska LLC?

Starting a business involves risk, the risk that the business may either succeed or fail. The upside is high, financial freedom and time freedom; independence; unlimited earning potential. The downside is equally steep, potential financial ruin if you've staked everything you own on your business's ultimate success and thrown your career out the window. If you're running your business as a sole proprietorship or a general partnership, everything you own is on the line.

An Alaska LLC satisfies a necessary condition of your business planning developement in that it meets the requirement that you establish a legal form of organization in order to gain the statutory benefits and protection available in Alaska to your LLC. Your Alaska LLC establishes a legal presence within the state, which you can use either as a platform for in-state operations or by registering your Alaska LLC via your agent's physical address in order to meet the purely statutory requirement for tax and filing purposes absent an in state operation.

A limited liability company (LLC):

The LLC is a relatively new type of hybrid business structure that is now permissible in most states. It is designed to provide the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership. Formation is more complex and formal than that of a general partnership.

The owners are members, and the duration of the LLC is usually determined when the organization papers are filed. The time limit can be continued if desired by a vote of the members at the time of expiration. LLC's must not have more than two of the four characteristics that define corporations: Limited liability to the extent of assets; continuity of life; centralization of management; and free transferability of ownership interests.

  • An LLC is a type of business ownership combining several features of corporation and partnership structures

  • An LLC is not a corporation or a partnership

  • An LLC may be called a limited liability corporation, the correct terminology is limited liability company

  • owners are called members not partners or shareholders

  • number of members are unlimited and may be individuals, corporations, or other LLC's

Advantages and Disadvantages of LLC

Advantages of Limited Liability Company

  • Limited Liability: Owners of a LLC have the limited liability protection of a corporation.

  • Flexible Profit Distribution: Limited liability companies can select varying forms of distribution of profits. Unlike a common partnership where the split is 50-50, LLC have much more flexibility.

  • No Minutes: Corporations are required to keep formal minutes, have meetings, and record resolutions. The LLC business structure requires no corporate minutes or resolutions and is easier to operate.

  • Flow Through Taxation: All your business losses, profits, and expenses flow through the company to the individual members. You avoid the double taxation of paying corporate tax and individual tax. Usually, this will be a tax advantage, but circumstances can favor a corporate tax structure.

Disadvantages of Limited Liability Company

  • Limited Life: Corporations can live forever, whereas a LLC is dissolved when a member dies or undergoes bankruptcy.

  • Going Public: Business owners with plans to take their company public, or issuing employee shares in the future, may be best served by choosing a corporate business structure.

  • Added Complexity: Running a sole-proprietorship or partnership will have less paperwork and complexity. A LLC may federally be classified as a sole-proprietorship, partnership, or corporation for tax purposes. Classification can be selected or a default may apply.

Alaska’s 2012 Business Tax Climate Ranks 4th

Alaska ranks 4th in the Tax Foundation's State Business Tax Climate Index. The Index compares the states in five areas of taxation that impact business: corporate taxes; individual income taxes; sales taxes; unemployment insurance taxes; and taxes on property, including residential and commercial property.

Tax Freedom Day Arrives on April 3 in Alaska

Tax Freedom Day is the day when Americans finally have earned enough money to pay off their total tax bill for the year. In 2011, Alaska taxpayers work until April 3 (38th nationally) to pay their total tax bill, 9 days before national Tax Freedom Day (April 12). The Tax Freedom Days of neighboring states were: Hawaii, April 6 (ranked 30th nationally); Oregon, April 8 (ranked 23rd highest nationally); Washington, April 16 (ranked 5th highest nationally); and California, April 16 (ranked 6th highest nationally). Full study of Tax Freedom Day, nationwide and in each state

Alaska's State and Local Tax Burden Lowest in the Nation

Since 1990, Alaska's state and local tax burden has consistently been the nation's lowest. Alaska's 2009 tax burden of 6.3% of income is well below the national average of 9.8%. Alaska's tax burden has decreased overall from 11.0% (12th nationally) in 1977 to 6.3% (50th nationally) in 2009. Alaskans pay $2,973 per capita in state and local taxes.

Before the Trans-Alaska pipeline was finished in 1977, taxpayers in Alaska bore the second-highest tax burden in the country. By 1980, with oil tax revenue pouring in, Alaska repealed its personal income tax and started sending out checks instead. The tax burden plummeted, and now Alaskans are the least taxed.

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.

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