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After you start an Alaska LLC, there are two main types of ongoing filings. The first is the Biennial Report with the state, and the other is taxes.
Paying taxes is an important part of running a business, but figuring out which taxes you need to pay can be a pain.
This lesson will provide you with general resources and the basics of Alaska LLC tax filing requirements.
What taxes does a Limited Liability Company pay in Alaska?
Each LLC has a different tax situation, so the taxes paid for an Alaska LLC varies.
The amount and types of taxes owed for your LLC depends on rules like:
- how your LLC is taxed
- state and local tax laws
- any sales and use tax requirements, or
- whether you have employees
Additionally, some business types are required to register for industry-specific taxes.
Pro Tip: We recommend hiring an accountant to ensure your LLC meets all of its tax obligations.
We also recommend getting an EIN Number for your LLC. An EIN is also called a Federal Tax Identification Number. They mean the same thing.
Not only will an EIN number be used to open an LLC bank account, but it will also be used for filing taxes with the local, state, and federal governments.
LLC pass-through taxation (Who pays the taxes?)
By default, LLCs don’t pay taxes.
Instead, the LLC Members are responsible for reporting the income (or losses) on their personal 1040 tax return. The Members pay taxes on any LLC profits. This is because of LLC pass-through taxation.
Simply put, pass-through taxation means the responsibility for reporting tax information from an LLC “passes through” the LLC to the LLC Members.
How are LLCs taxed in Alaska?
By default, an Alaska LLC is taxed by the Internal Revenue Service (IRS) based on the number of Members the LLC has. Then the Alaska Department of Revenue honors this and taxes your LLC the same way at the state level.
An LLC with 1 owner (Single-Member LLC) is taxed like a Sole Proprietorship.
An LLC with 2 or more owners (Multi-Member LLC) is taxed like a Partnership.
The above are referred to as the “default status“. Meaning, they are automatically applied based on the number of LLC Members.
Alternatively, you have the option of requesting an “elective status” for your LLC. This is done by filing an extra form with the IRS. Once granted, this elective status means the IRS will treat your LLC as a Corporation (either an S-Corporation or C-Corporation) for tax purposes.
Note: Your Alaska LLC Operating Agreement should also include information about how your LLC is taxed.
Federal Income Taxes
There are several different options for how the IRS can treat your LLC for tax purposes.
Single-Member LLC taxes (default status)
The IRS treats all Single-Member LLCs as Disregarded Entities for tax purposes. This just means that the IRS doesn’t expect the LLC to file its own federal income tax return.
Instead, the owner of the Single-Member LLC files the return (and pays the federal income taxes).
How the LLC pays federal income tax is determined by who owns the LLC:
- If the LLC is owned by an individual, the LLC is taxed like a Sole Proprietorship.
- If the LLC is owned by another company, the LLC is taxed as a branch/division of the parent company.
Multi-Member LLC taxes (default status)
If an LLC has two or more owners, the LLC is taxed like a Partnership.
The LLC needs to file a 1065 Partnership Return and issue a Schedule K-1 to the LLC owners.
The K-1s report each owner’s distributive share of profits. And the K-1 income “flows through” to the owners. The income taxes are then paid by each owner on their personal income tax return (Form 1040).
Husband and Wife LLC taxes
You may have heard that in some states, a husband and wife LLC has the option to file taxes as a Single-Member LLC (aka Qualified Joint Venture) instead of a Multi-Member LLC.
This is true for community property states (like Texas). That said, Alaska isn’t a community property state, which means Qualified Joint Ventures are not available in this state.
Electing to have your LLC taxed as a Corporation
Instead of the default statuses above, a Limited Liability Company (LLC) can be taxed like a Corporation.
Note: We recommend speaking with an accountant before making a corporate election.
There are two types of corporate elections:
- S-Corporation
- C-Corporation
LLC taxed as an S-Corporation (elective status)
By filing Form 2553 with the IRS, your LLC can request to be taxed like an S-Corporation.
Being taxed as an S-Corp can help businesses (with established profits) save money on self-employment taxes.
Tip: There are additional expenses to having your LLC taxed as an S-Corporation Most new business owners shouldn’t make this tax election until their business is established and revenue is consistent. Once there is at least $70,000 in annual net income per LLC Member, we recommend speaking to your accountant about this option.
LLC taxed as an C-Corporation (elective status)
By filing Form 8832 with the IRS, your LLC can request to be taxed like a C-Corporation.
Being taxed as a C-Corp can help large employers save money on healthcare fringe benefits.
Note: This election is not common. Most of our readers don’t choose to have their LLC taxed as a C-Corporation.
Alaska State Income Tax for Alaska LLCs
Good news! Alaska doesn’t have state-level income tax. This means you don’t have to file a state-level income tax return for your Alaska LLC income if you have a Single-Member LLC.
And if all of your Multi-Member LLC’s Members are “natural persons” (actual people), then you’re not required to file a state income tax return.
That said, if one of the Members of your Multi-Member LLC is a company, then you’re required to file an IRS Form 1065 and an Alaska Partnership Information Return (Form 6900).
There are also other types of Alaska business tax that apply to certain industries and types of businesses.
We recommend hiring an accountant to prepare and file your state income taxes.
You can also contact the Alaska Department of Revenue for more information about Alaska state taxes.
Local Income Tax for Alaska LLCs
You and/or your LLC may need to file and pay income taxes with your local municipality (town, city, county, etc.).
We recommend hiring an accountant to prepare and file your local income taxes.
You can also contact your municipality to check on their requirements.
Alaska Sales Tax
Alaska is one of the few states that does not charge a sales tax at the state level. However, your Alaska LLC may be required to collect sales tax at the local level. If your local municipality requires you to collect sales tax, you may need to get a Seller’s Permit.
A Seller’s Permit is the license that allows you to collect sales tax on retail sales where you do business. It’s sometimes also called a:
- resale license
- wholesale license
- sales tax permit/license
- reseller permit
They all mean the same thing and we may use these terms interchangeably.
If you have any questions about whether you need a Seller’s Permit for your LLC, you should contact your local municipalities.
You can read more information about Alaska sales tax here: Alaska DCRA: Alaska Sales Tax Information & FAQs.
And for more information on permits, read Alaska Business Licenses and Permits.
Tip: Save time by hiring an expert. We recommend using TaxJar. They'll help you register for, collect, and pay sales tax.
Alaska LLC Payroll Taxes
If your Alaska LLC will have employees, you must submit payroll taxes. Payroll taxes are essentially a group of taxes and filings, including:
- Federal income tax withholding
- State income tax withholding
- Social Security tax
- Medicare tax
- Federal unemployment taxes (FUTA)
- State unemployment taxes (SUTA)
- Local/county deductions
- Employee deductions
As an employer in Alaska, you need to set up payroll, withhold payroll taxes from employees’ paychecks, and then submit those filings and taxes to various state and government agencies.
Although you can file payroll taxes yourself, the calculations can be burdensome and very complex. And if done improperly can lead to penalties and fines. Most people hire a payroll company or ask their accountant for help.
Our favorite payroll company is Gusto Payroll. They’ll automate and take care of your payroll taxes.
You can read more about Alaska payroll tax resources here: Alaska Department of Labor and Workforce Development: Employers.
Managing your books & staying organized
You can keep track of income and expenses using Microsoft Excel or Google Sheets. Or you can use software to help automate things and save time.
The accounting software we recommend is Quickbooks Online.
Working with an accountant
As you can see, figuring out the different types of taxes you owe can be complicated, let alone how to properly fill out all the forms. And doing taxes improperly or missing deadlines can be harmful to your business
We strongly recommend working with an experienced accountant in Alaska to help make sure you file your federal, state, and local taxes correctly.
Check out our guide on how to find an accountant.
Alaska Department of Revenue Contact Information
There are other types of Alaska business tax that apply to certain industries and types of businesses.
You can contact the Alaska Department of Revenue at (907) 465-2300 for more information about Alaska state taxes.
Alaska LLC Taxes FAQs
Do I have to pay an annual fee for my LLC in Alaska?
Sort of. All Alaska LLCs are required to file an Alaska LLC Initial Report within 6 months of the LLC being approved.
After that, you will file a document called the Alaska LLC Biennial Report every two years. Your first Biennial Report will be due by January 2nd two years after you filed your Initial Report.
For example, Mary files her Initial Report for Mary’s Berries LLC on May 3rd, 2023. Her first Biennial Report will be due two years later on January 2nd, {year +2}.
These filings are meant to keep your contact information up-to-date with the state. And these fees are separate from the federal, state, and local taxes that you pay.
The LLC Biennial Report is filed with the Alaska Division of Corporations. It is not a tax paid to the Alaska Department of Revenue.
The Initial Report filing is free, and filing the Biennial Report for Alaska LLCs costs $100. This is paid every two years for the life of your LLC.
How much is an LLC in Alaska?
Alaska LLC Costs include:
$250 to form your Alaska LLC (to file your LLC Articles of Organization).
$100 in biennial fees (to file your LLC Biennial Report every two years) for an Alaska LLC.
Do I need to file an Alaska state tax return for my LLC?
Maybe – it depends on what type of LLC you have.
Single-Member LLC taxed as a Sole Proprietorship: No. You only need to file your personal tax return (Federal Form 1040) and include your LLC profits on the return.
Multi-Member LLC taxed as a Partnership: It depends. 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 one of the Members of your Multi-member LLC is a company, then you’re required to file an IRS Form 1065 and an Alaska Partnership Information Return (Form 6900).
Please double-check this information with your accountant though before submitting any documents, as taxes are usually more complicated.
LLC taxed as a Corporation: Yes. Although Alaska doesn’t require state income taxes for LLCs or individuals, the state does require state-level income taxes for business entities taxed as Corporations.
This means your LLC must file tax returns with the IRS and the Alaska Department of Revenue to pay your Alaska corporate income tax. Check with your accountant to make sure you file all the correct documents.
How do I know my LLC tax classification?
You can tell your LLC’s tax classification by looking at how many Members are in your LLC.
This is because LLCs receive their tax classification from the IRS based on the number of Members (owners) your LLC has.
If you have one Member, your LLC is taxed as a Sole Proprietorship.
If your LLC has more than one Member, your LLC is taxed as a Partnership.
This is called being taxed in your default status. Meaning, you don’t have to file any paperwork to let the IRS know that’s how your LLC will be taxed because they tax LLCs that way by default.
However, in order for your LLC to be taxed as a Corporation, you or your accountant would have to file paperwork with the IRS letting them know you’ve chosen to be taxed as a Corporation.
And then the IRS would mail you an Approval Letter to confirm you’ve chosen the Corporate tax election for your LLC.
Note: Being taxed as a Corporation is rare for LLCs, so most people don’t need to worry about this.
And if you’re still unsure about how your LLC is taxed, we recommend calling your accountant or the IRS (1-800-829-4933). To speak to a live person at the IRS, press option 1, option 1 again, and then option 3.
How to start an LLC in Alaska?
Here are the steps for starting an LLC in Alaska:
- Choose an LLC name and make sure it’s available
- Choose who will be your Alaska Registered Agent
- File the Alaska LLC Articles of Organization
- Complete and sign an LLC Operating Agreement
- Get a Tax ID Number (EIN) from the IRS
- Open an LLC bank account
- Check whether you need a business or sales tax license in Alaska
References
Alaska Department of Revenue
IRS: Tax Information for Businesses
Alaska Department of Revenue – Tax Division
Alaska Department of Revenue: Tax Division – Tax Types
Alaska Tax Resources and Links to State and Federal Agencies
Matt holds a Bachelor's Degree in business from Drexel University with a concentration in business law. He performs extensive research and analysis to convert state laws into simple instructions anyone can follow to form their LLC - all for free! Read more about Matt Horwitz and LLC University.
ALASKA LLC GUIDE
Follow the lessons below to form your Alaska LLC.
I am a single member LLC in Alaska. If I take on an additional member into my LLC do I have to disclose ownership percentage when I file the Notice of Change of Officials form or can I leave it blank?