Alaska LLC Taxes

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Alaska LLC Taxes

How to form an LLC in Alaska
This Quick Start Guide is a brief overview of how to form an LLC in Alaska.

Detailed Lessons:

6. EIN Number
7. Business License
8. Biennial Report
9. Taxes ← you are here

 

Alaska LLC Costs:
Alaska LLC filing fee: $250 (one-time fee)
Alaska LLC initial report fee: $0
Alaska LLC biennial report fee: $100 (every 2 years)

Need to save time?
Hire a professional to form your LLC in Alaska:
Northwest ($39 + state fee) or LegalZoom ($149 + state fee)

(check out Northwest vs LegalZoom)

Note: Our tax lesson is not as step-by-step as our Alaska LLC formation lessons, due to the uniqueness and variation among businesses formed in Alaska.

Taxes are not as straightforward as forming an LLC, and therefore, the information below is an overview, and not a comprehensive guide.

Recommendation:
We recommend speaking with a few accountants in Alaska to make sure you meet all your federal, state, and local tax obligations. We also recommend reading our How to Find an Accountant guide.

Overview

Federal Income Tax

Most Alaska LLCs do not pay taxes directly to the federal government. Instead, the members of the LLC are responsible for reporting income or losses on their personal 1040 tax return with the IRS.

LLC income is most often reported on a Schedule C, however, you may need to include additional Schedules, depending on how you derive your income.

By “most LLCs”, we are specifically referring to LLCs taxed in their default status. Unless you elect to have your LLC taxed as a Corporation (C-Corp or S-Corp), single-member LLCs are taxed like a Sole Proprietorship and multi-member LLCs are taxed like a Partnership.

Alternatively, LLCs may elect to be taxed as a C-Corp or more popularly, as an S-Corp (in order to save money on self-employment taxes).

If an LLC is taxed as a C-Corp, it must file federally, using Form 1120. If an LLC is taxed as an S-Corp, it must file federally, using Form 1120S.

LLC taxed as an S-Corp:

Typically, most accountants recommend that your Alaska LLC’s net income (income minus expenses, but not including salaries) be around $70,000 per year (per Member) plus or minus. At this net income level, the accounting and administrative costs of maintaining the S-Corp tax status are offset by the self-employment tax savings.

S-Corp taxation is much more involved than what we’ve mentioned here (filing quarterly payroll tax returns, administering payroll checks, accounting and booking, corporate returns, and how this affects your overall taxes), so we strongly encourage you to speak with a few accountants in Alaska to get a good grasp on the pros and cons.

If you’d like to read more about an LLC taxed as an S-Corp, please see this article: LLC Taxed as an S-Corp.

Alaska State Income Tax

Alaska does not impose a personal income tax at the state-level.

Alaska Department of Labor

If your LLC has employees, you can find more information on unemployment and workers’ compensation taxes from the Alaska Department of Labor: http://www.labor.state.ak.us/home.htm

LLCs Treated As Partnerships

Note: Multi-member Alaska LLCs (those with 2 or more members) are by default treated as Partnerships for tax purposes. If all of your LLC’s members are “natural persons” (actual people), then you’re not required to file a state income tax return.

However, if your Multi-member LLC has at least one member (owner) that’s a company, then you’re required to file an Alaska Partnership Information Return:
http://tax.alaska.gov/programs/documentviewer/viewer.aspx?6640f

Please double-check this information with your account though before submitting any documents, as taxes are usually more complicated. You can also find additional information here:
http://tax.alaska.gov/programs/programs/index.aspx?60390
http://tax.alaska.gov/programs/documentviewer/viewer.aspx?6750f

Sales and Use Tax

Alaska does not impose a sales and use tax. However, cities, municipalities, and boroughs may impose their own sales and use tax. To learn more, you can read the Division of Community and Regional Affairs’ tax guide “Alaska Taxable”: https://www.commerce.alaska.gov/dcra/dcrarepoext/Pages/AlaskaTaxableDatabase.aspx

Other Taxes in Alaska

Alaska imposes the following taxes:

• Alaska Film Office
• Alaska Tax Credits
• Alcoholic Beverage Tax
• Commercial Passenger Vessel Excise Tax
• Corporate Income Tax
• Electric Cooperative Tax
• Employment Security Tax
• Estate Tax
• Fisheries Related Taxes
• Gaming Large Passenger Vessel Gambling Tax
• Marijuana Tax
• Mining License Tax
• Motor Fuel Tax
• Oil and Gas Production Tax
• Oil and Gas Property Tax
• Regulatory Cost Charges
• Telephone Cooperative Tax
• Tire Fee
• Tobacco Tax
• Vehicle Rental Tax

Alaska Tax Resources

Alaska Department of Revenue – Tax Division:
http://tax.alaska.gov/programs/about/contacts.aspx

Alaska Tax Resources and Links to State Agencies:
http://tax.alaska.gov/programs/about/links.aspx

Local Taxes for Alaska LLCs

If your business is located in Alaska, you likely need to file and pay local taxes to your city, municipality, and/or borough.

Again, this depends on where your LLC is located and what type of business you are in. And we recommend seeking professional assistance from an accountant in Alaska.

Our Recommendation

Calculating your tax obligations federally (with the IRS), on the state-level (with Alaska), and locally (with your city, municipality, borough) can be complicated and if done improperly, can negatively impact your Alaska LLC.

We recommend that you get help from a local accountant once your Alaska LLC is formed. We recommend reading our How to Find an Accountant guide.

Hiring a tax professional will not only help you keep your Alaska LLC in compliance, but it will also give you an advisor to go to for other business questions.

You’ll want someone who’s a good fit for your company, makes you feel comfortable, and is willing to answer all of your questions. It should be someone you like personally as well as professionally. We recommend talking with at least 5 accountants before making your final decision.

Matt Horwitz
Founder & Educator, LLC University®
Forming an LLC shouldn't be so complicated. Our step-by-step guide will make the process a breeze – and no complex legal jargon! LLC University® teaches people how to form an LLC for free in all 50 states. We hope you find our free guides and resources helpful in your business journey.

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