Becoming an entrepreneur is rewarding for a number of reasons. Not only will you get to take charge of your own destiny, starting a business from scratch and setting your own schedule, you’ll also enjoy a practically unlimited income ceiling. Before you get started, however, you’ll need to follow a few steps to ensure your business has everything it needs from the outset. Alaska is a particularly friendly state to small business owners and entrepreneurs. There’s no state-level sales tax in Alaska, which saves your customers money and reduces the complexity in your own life, though you may be required to pay a local sales tax based on the city or county in which you operate.
Steps to Getting a Tax ID (EIN) Number and Registering Your Alaskan Business
- Forming a Business in Alaska
- Federal Tax ID (EIN) Number Obtainment
- Alaska State Tax ID Number
- Localized Licenses and Permits in Alaska
Before deciding how to form your Alaska business, it’s important to do conduct research and thoroughly understand the ins and outs of your company. The conventional path forward here is that you’ll need to decide which business structure will suit your business best. There are four main options to consider:
- Sole proprietorships. Sole proprietorships are the easiest business structure to understand, and the easiest one to start, but they aren’t ideal for many businesses. They’re ideal for single-person operations, since you’ll pay taxes as an individual and won’t have to mess with much paperwork. However, sole proprietorships have no liability protection, so you could be held responsible for any issues related to the business, including debts you take on.
- Partnerships. Partnerships are quite similar to sole proprietorships, with the exception of involving two or more people. Each partner will pay taxes on their share of income like an individual, and both of you will be exposed to liability issues.
- Limited liability companies (LLCs). Limited liability companies (LLCs) are slightly more complicated than sole proprietorships or partnerships because they’re treated as separate legal entities. LLCs are considered pass-through entities because they don’t owe taxes on income directly, but you’ll owe taxes as an individual on any profits or income you take from the organization. As the name suggests, LLCs provide some level of liability protection, making them a safer choice for most business owners.
- Corporations. Corporations, including S-corporations and C-corporations, tend to be more complex, but they offer a few major advantages. Corporations provide much more liability protection than other types of businesses, and can raise funds by issuing public shares (though there are some strict regulations here). The biggest downside is double taxation; corporations must pay taxes on all income, and you’ll also owe taxes as an individual on any income you draw from the business. The corporate tax rate for Alaska businesses varies, though in some cases, the capital gains tax rate of 4.5 percent may apply. You won’t pay any taxes on the first $25,000 of corporate income you generate in the state, with tax rates increasing to a maximum of 9.4 percent for income above the $222,000 threshold.
Chances are, your business will be required to get a federal tax ID number. This number is also called an employer identification number, or EIN. It’s a nine-digit, unique identifying number provided to you when you register your business with the federal government. You’ll need one if your business has multiple members, if you’re going to hire employees, or if you’re going to open a business bank account or business line of credit. Even if you aren’t specifically required to have one, it’s a good idea to get one so you can use it on various business applications in the future.
The best way to get a federal tax ID is to make use of our online federal tax ID number obtainment services. You just need to answer a few questions about your business, and we’ll email you your new tax ID in under an hour.
In many states, your business will be required to obtain a state tax ID number, registering your business with the state and enabling you to set up sales tax. However, there is no state-level state tax in Alaska; instead, you may be required to set up sales taxes based on the requirements of your city and county. You may need an Alaska state tax ID number if you’re hiring employees in the state, however, or if you’re going to owe excise taxes on certain goods.
Before you get an Alaska state tax ID number, you’ll need to get a federal tax ID number. Once you have that, you can use our Alaska state tax ID number obtainment services to apply for your state tax ID online. The process may take up to 4 to 6 weeks.
Many businesses in Alaska will be required to get a license or permit in order to operate legally. However, there’s no general, state-level license that you can obtain. There also isn’t a single, comprehensive agency in Alaska through which you can get any feasible license or permit you need. Instead, licenses and permits tend to be regulated at the local level. You’ll need to visit your local Chamber of Commerce to see if your business needs any licenses, permits, or certifications because of its industry or the nature of the business. Do note that no matter what kind of license you’re applying for, you’ll likely need a federal tax ID number to complete the application.
There are currently 69,115 small businesses in Alaska, which is solid, considering the entire population of the state population is merely 740,000. Together, they support more than 141,316 employees, or more than half the state’s working population.
The economy of Alaska has historically focused on the petroleum and gas industry, which represents about a third of the economic activity in the state. The federal government is also active in the area, responsible for providing hundreds of thousands of jobs. The state is mostly rural, so businesses that cater to rural populations tend to perform well, but you’ll also find some thriving urban areas where other types of startups can set up shop.
If you need a federal tax ID number or an Alaska state tax ID number, be sure to take advantage of our tax ID number obtainment services. There’s no faster or easier way to get the tax ID numbers your business needs.