Alaska LLC Advantages Disadvantages

Alaska LLC Advantages Disadvantages

Alaska LLC Advantages 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 2009 Business Tax Climate Ranks 4th

Alaska ranks 4th in the Nation'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. The ranks of the nearest states were as follows: Hawaii (24th), Oregon (9th), Washington (12th) and California (48th).

Alaska’s State/Local Tax Burden the Lowest in the Nation:

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.

Alaska's Corporate Income Tax System

Alaska's corporate tax structure consists of ten separate brackets with a top rate of 9.4% kicking in at an income level of $90,000--the 5th highest rate in the nation. In 2007, Alaska's state-level corporate tax collections (excluding local taxes) reached $1,196 per capita, which ranked highest in the nation.

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