Alaska is a very business-friendly state. It has the lowest total tax burden in the nation, out of all 50 states. This includes the lowest personal income tax rate in the country (Alaska has no income tax), and low business taxes.
Even more surprisingly, Alaska has the 4th fastest rate of startup growth in the country. Anchorage, Juneau, and Fairbanks have all become mini hubs for entrepreneurs and startup companies.
There are businesses large and small in Alaska, but the state has a surprising amount of small businesses. There are around 73,000 small businesses in Alaska, according to 2019 data from the Small Business Administration (SBA). This accounts for more than 99.1% of all businesses in the state.
But how do you start a business in Alaska? The specifics depend on what type of business you want to open, the structure of the business (LLC, corporation, etc.), and several other factors. The guide below will walk you through everything you need to know to start an Alaska business now!
Decide on a business idea
First and foremost, you’ll need to decide what kind of business you want to start. Chances are you already have something in mind, but if not, here are some things to consider:
- What are you talented or naturally skilled at? Could this talent make you well suited to a certain type of business?
- What business does your community need? Have you talked to people to find out?
- What are you interested in? Can you combine any of your passions with a business idea?
- Is this going to be a full time business, or more of a side hustle?
These are questions to ask yourself when deciding on a business idea. Once you have decided, move on to the next step.
Plan your Alaska business
Now it’s time to start planning. This means coming up with a business plan, naming your business, researching locations, and more. There’s a lot to cover here, so let’s break it down:
Select a business name
To name an Alaska business, you must register the business with the state. Uniquely, Alaska by default allows multiple businesses to register under the same name. Most states require that you select a name that is not already taken, but Alaska does not have this requirement.
With that said, having the same business name as another business can create confusion for your customers. It’s beneficial to still choose a name that is not in use. You can use the Alaska Business Entity Search feature to figure out if your desired name is already in use or not.
Business names in Alaska must meet certain requirements:
- Alaska business names can be similar or even identical to other business names in the state; however, trademarks can still apply here.
- Certain words or phrases are restricted, or may require additional paperwork. For example, you cannot use the term “engineer” in your business name unless you actually hold a professional engineer’s license.
- If you’re not yet ready to register your business, you can reserve a business name for 120 days
- You can see the full AK business naming rules here.
Business owners in Alaska can also make use of what is called a DBA or “doing business as” name. These are secondary names that businesses can operate under. This provides some flexibility in how you brand and market your new business. You can learn more about this here.
Before you decide on a name for your business, it’s worthwhile to check if the domain name is available.
Register a domain name
Once you choose a name, you should immediately register a domain name for your new business. In most cases, getting a .com domain name is ideal, but there are many other extensions (.biz, .net, etc.) that are worth considering.
You can use a tool like Namechk to search for an available domain name and find a great deal on the registration cost. You may find that your desired names are taken, so you may need to get creative.
Complete market research
Once you have an idea, you’ll want to do some market research. You want to gain a better understanding of who your customers – and competitors – are. You can achieve this by conducting online research, running focus groups, sending out surveys, and more. There are also companies that can help you complete market research, for a fee.
Select a business location
Unless you plan to run a remote/virtual business, you will need to find a physical location for your company. Research commercial property in your area, and take note of typical costs. For customer-facing businesses (retail and some services), location is very important, so take your time in selecting the right area for your business.
Create a business plan
You will now need to create a detailed business plan for your new venture. This plan is helpful for your own purposes, and will also be necessary in order to obtain funding from a bank. A good business plan should contain these elements:
- Finances: How much funding does the business need to get started? How many sales does it need each month to break even on expenses?
- Product: What do you plan to sell? Is it a product or a service? What problem does your business solve, and how is it distinct from your competitors?
- Marketing: How will you drive sales? What marketing and sales efforts do you plan to employ? How much money will you set aside to fund marketing efforts?
- Staff & Partnerships: How many people will you need to hire, and what skill sets do they need to have? Will you have any partnerships or arrangements with other local businesses?
If you need help, you can find business plan templates online that will help walk you through the steps you need to take to draft a detailed business plan. If you plan to seek funding, you may also wish to call your bank to see what they require in terms of business plans.
Decide on a business structure
Before you form your business as a legal entity, you will need to decide which business structure you will use. There are a few different types of businesses, each with its own pros and cons.
Sole props are single-person operations. Examples include freelancers, gig economy workers and consultants. A sole proprietorship business is very easy and inexpensive to form, and tax reporting is also fairly simple. As a sole proprietor, your business taxes are reported as part of your personal tax return.
The downsides to a sole prop are that you cannot hire employees, and you don’t have the legal liability shield that something like an LLC or corporation would provide. 100% of the debts and liability of a sole proprietorship go to the sole owner: you.
A general partnership is an unincorporated business structure similar to a sole proprietorship, except with two active owners/participants. Partnerships do not have liability protection.
Limited Liability Company (LLC)
A limited liability company, or LLC, is a popular choice for business owners because it provides liability protection to the owners. It separates the business from the owners, which means the personal assets of owners will not be at risk if the company gets sued or goes into bankruptcy.
LLCs are also a bit easier to form than corporations. Even so, there is definitely more work involved with an LLC than there is with a sole proprietorship.
A corporation is owned by its shareholders, and is a separate entity. There are a few different types of corporations (C-corp, S-corp, etc), with the main differences being the way they are treated tax-wise.
Corporations are more regulated than LLCs, which makes them more attractive to outside investors. For this reason, most large companies are corporations. The downside is that it takes more effort, and more paperwork, to form a corporation.
A nonprofit is a legal entity that is set up with charitable status, meaning that its goal is not to make a profit, but rather to address a certain cause. Nonprofits are funded by donations, rather than investors, and are subject to many regulations. They are exempt from most forms of taxation, although tax returns must still be filed.
Register your business in Alaska
The next step is to actually register the new business in Alaska. The process for this differs slightly depending on the business structure.
For the simplest experience, we recommend that you use a business formation service. Some good options include Northwest Registered Agent, ZenBusiness, and Bizee. These companies can help walk you through the entire process of starting your Alaska business and help avoid costly errors.
Registering an Alaska company will require several important steps, including:
- Selecting a name for your business (see step #2 above)
- Choosing a Registered Agent for the business (this agent is responsible for receiving important legal documents on behalf of your business)
- Filing formation documents with the state of Alaska
- Applying for an Employer Identification Number (EIN) from the IRS
Form a business in Alaska
You will need to work with the Alaska Division of Corporations, Business and Professional Licensing (CBPL). The specific requirements will vary a bit depending on what type of business entity you are forming (LLC, corporation, etc), but generally speaking, you will need to file some paperwork with the CBPL.
Form an Alaska LLC
Follow these steps:
- Name your LLC (follow the Alaska LLC naming rules)
- Choose a Registered Agent (or use a service such as Northwest Registered Agent)
- File the LLC Articles of Organization by mail, or online, and pay the $250 filing fee
- Draft an LLC operating agreement
- Apply for an EIN with the IRS
Form an Alaska corporation
Follow these steps:
- Decide on the type of corporate tax treatment you want (C corporation or S corporation)
- Choose a Registered Agent (or use a service such as Northwest Registered Agent)
- Appoint directors
- File the Articles of Incorporation online or by mail, and pay the $250 filing fee
- Apply for an EIN with the IRS
Apply for business licenses and permits
Registering your business and forming an LLC or corporation is an important part of starting your business – but in order to operate legally, you will likely also need to obtain certain permits and/or business licenses.
The specifics vary depending on the type of business you are running, as well as your location. For example, restaurants will need health permits, bars will need liquor licenses, and medical service providers will need various professional licenses and federal permits. You will need to research the specifics that relate to your business type.
There are different requirements at each level of government:
- Local: Cities and counties may require certain business licenses or permits. Contact your county clerk for details.
- State: Alaska may require certain permits or licenses. Check the Alaska Division of Corporations, Business and Professional Licensing website for details.
- Federal: Federal permits/licenses may be required for certain regulated industries, such as construction, medicine and legal services. Check the Small Business Administration (SBA) guide for more details.
At this time, you should also apply for an Employer Identification Number (EIN). An EIN is a federal tax ID that is required to hire employees. You can apply for an EIN online with the IRS – the application is free, and quick.
For most businesses, some startup funding will be necessary in order to get started. In step #2, you should have calculated your funding needs while drafting a business plan. Use this information to determine how much funding you need to raise.
For bootstrapped companies, you may be able to get by with your own personal savings, or some seed investments from friends and family. If your funding needs are small, this is likely your best route.
If your business plan indicates that substantial funding is needed, you will likely need to apply for a loan and/or a grant.
- Small business loans are offered by banks, credit unions and other lenders. They can range from as little as a few thousand to hundreds of thousands. Specifics will depend on your business, as well as your personal creditworthiness. Most small business loans are issued in a lump sum, and paid back on a monthly basis, with interest.
- Small business grants are offered by government agencies and some nonprofits. They are essentially business loans that don’t need to be paid back – but they usually have substantial fine print. It’s worth looking into, however, as there may be grants available, particularly for businesses serving an important social need, or for underprivileged entrepreneurs starting their first business.
Set up your business finances
Beyond securing funding, there are other routine tasks that you need to take care of to get your business’ finances in order. This includes:
- Opening a business checking account. You should have a separate business bank account that you use solely for business purposes. You can open this account at most banks, credit unions and financial institutions. Call ahead to see what documents will be required to open this account.
- Open a business credit card or line of credit. This is not strictly necessary, but most businesses can benefit from having a business credit card, and/or a business line of credit. This can be used for day-to-day expenses and purchases, and may also earn you some rewards.
- Set up your accounting system. As a business owner, you will need to keep very detailed records about all revenue and expenses. To do this, you’ll want to set up the proper foundation from day one. This could be investing in an account software such as QuickBooks or Xero, hiring a bookkeeper, or at the very least establishing a spreadsheet to track everything. If you do not have any accounting experience, it’s wise to hire a professional to help.
- Purchase business insurance. Most businesses should have some form of liability insurance, and potentially other forms of business insurance as well. Insurance policies can help protect your equipment and buildings from costly damage, and help shield your company from liability if a worker or customer is injured or otherwise harmed. Speak with a local business insurance provider to get started.
Create a business website
In this day and age, having a solid web presence for your business is very important. And social media profiles, while important, are no replacement for an actual website. You will want to build a professional business website that you can use to drum up business, inform your customers, and stay connected with your clientele.
The simplest way to build a website is to use a website builder from a web hosting provider. When you register a new domain name, look for a provider that also offers web hosting and a site builder, so that you can purchase everything at once and get your site set up quickly.
Unless you plan to operate a solo business (with you as the only worker), you will likely need to hire employees. To do this, you will need a federal employer identification number (EIN), which is a free tax ID number issued by the Internal Revenue Service (IRS).
You may be required to report new hires to the State of Alaska. You should also register with the Alaska Department of Revenue and research your tax reporting requirements.
Employers are also responsible to register for the Employment Security Tax. Because Alaska has no personal income tax, businesses do not need to register for Alaska withholding tax.
At this point, you also should look into setting up your payroll system – whether you handle it yourself, or use a payroll service.
Run and grow your business
Now it’s time to get down to business and engage with the day-to-day activities that are sure to bring your business success. This means marketing your products and services, maintaining good relationships with your return customers, and setting yourself apart from the competition.
Alaska business FAQs
Still have questions about running a business in Alaska? Here are some answers to frequently asked questions.
What are some business resources in Alaska?
Entrepreneurs in Alaska have a variety of resources available. A great place to start is the Alaska Small Business Development Center (AKBDC). This resource provides free business advisor services, webinars and training, and many other useful resources. AlaskaChamber.com is another good resource, as is the Alaska District Office of the Small Business Administration (SBA).
Are there business assistance programs available in Alaska?
Yes, there are a variety of business assistance programs available in AK, many of which target certain types of entrepreneurs. The best place to explore these programs is at the Small Business Assistance Center website, which is operated by the Alaska Division of Economic Development.
What is the minimum wage in Alaska?
The Alaska Minimum Wage is $10.34 per hour, as of 2021. Business owners can check the Alaska Department of Labor website for details.
What business taxes does Alaska have?
Alaska has a variety of taxes that businesses may be subject to. The state of Alaska does not have a statewide sales and use tax, however, local jurisdictions may have sales tax. For example, the city of Juneau does have sales tax. You can check with local city and county governments for details.
How do I dissolve an LLC or Corporation in Alaska?
If you need to dissolve (close) your business for any reason, you will need to complete some steps. You will need to close down your business tax accounts with the Department of Revenue, and you will need to file the LLC Articles of Dissolution with the State of Alaska. Closing a business can be complex, so it may be worthwhile to hire a certified public accountant (CPA) for this process.
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