How to Form an Alaska Partnership
How to Form an Alaska Partnership
In Alaska, business owners can decide to structure their businesses in different ways. If you are creating a business with other people you may want to think about forming a partnership. Partnerships can be created informally or formally when two or more people want to come together to run a business. There are both advantages and disadvantages to each type of partnership.
Types of Partnerships: Liability & Tax Considerations
Generally, partnerships are considered pass-through entities, so the profits and losses from the partnership are reflected in the personal income taxes of the partners and the partnership itself doesn’t have to file corporate taxes. The IRS website has information on federal tax requirements for partnerships.
Personal liability is the other important topic to consider when forming a business. Liability refers to how many of your personal assets are able to be seized when the business has to settle a debt. The reverse is true as well, meaning your business assets may be used to settle your personal debts.
The types of partnerships offered in Alaska are compared below, with information highlighting the differences in liability and tax considerations.
Note: For any partnership other than a general partnership, business owners are required to obtain a business license from the Alaska Department of Commerce, Community, and Economic Development.
General Partnership (GP)
Liability of partners: No liability protection is offered to general partners by the general partnership structure. Their personal assets may be affected as a result of delinquent partnership debts, lawsuits against the business, and other debts.
Tax overview: All revenue generated by the partnership, in addition to any losses incurred, must be accounted for on the partners’ individual income tax returns.
Limited Partnership (LP)
Liability of partners: Two types of partners exist in LPs: limited and general. General partners are liable for the LP’s debts as if they were in a general partnership, while limited partners are only liable up to the monetary amount that they invest in the partnership. This means if a limited partner provided $100,000 of startup money, they could only ever lose that much money due to a lawsuit or other debt.
Tax overview: When it comes to taxes, LPs are treated the same way as GPs. Both general and limited partners share the profits and losses from the partnership on their income tax returns, based on their ownership interest in the LP. Limited partnerships must file a yearly informational return with the Alaska Department of Revenue.
Limited Liability Partnership (LLP)
Liability of partners: Limited liability partnerships are almost exactly like GPs, except they also shield partners from liability created by the actions of other people within the partnership. This makes them very popular with professions where extreme liability is an accepted part of doing business such as medical professionals, attorneys, and accountants.
Tax overview: In Alaska, LLPs must file informational tax returns with both the IRS and the Alaska Department of Revenue.
Limited Liability Company
If you need additional taxation choices or greater protection from personal liability you may want to consider forming a limited liability company (LLC). The LLC business structure combines many of the advantages of partnerships while offering greater flexibility in tax structures. On the downside, they often require more effort to maintain than a partnership but even then, they are known for their simplicity.
How to Form a Partnership in Alaska
If you decide to form a partnership in Alaska, there are a few critical steps to go through in order to properly establish the business.
Step 1: Select a name for your partnership
Almost any name will do, so long as the name has not already been taken. Your business’s name must also contain information on the type of entity it is. An example being a limited partnership named “ABC Gadget Manufacturing:” could be called “ABC Gadget Manufacturing, LP.”
Step 2: Register the business name
It is important to register your business name so other businesses can’t use it in their official paperwork, logos, and ads. Ensuring your business name is registered prevents other businesses from potentially stealing your name or confusing your customers.
First, you should search to see if another business is already using that name in the state's database. If you find the name you want is available, you can file it with the Corporations, Business & Licensing Division (CBPL) of the Alaska Department of Commerce, Community, and Economic Development.
Step 3: Complete required paperwork
In Alaska, all partnerships except general partnerships require official paperwork is filed with the state along with the current filing fee.
General Partnerships: There is no formal filing requirement to form a GP, but general partners are encouraged to file paperwork with the secretary of state to avoid conflict.
Limited Partnerships: In Alaska, a LP must file a Certificate of Limited Partnership with the Secretary of State.
Limited Liability Partnerships: Alaska law requires that people file an Articles of Organization with the CBPL in order to form an LLP.
Step 4: Determine if you need an EIN, additional licenses or tax IDs
Partnerships with employees should obtain an Employer Identification Number (EIN) from the IRS. Additionally, some businesses require additional licenses from the state in order to operate. Further taxes may be required as well, depending on your business, check with the CBPL to get further details about your specific business.
Step 5: Get your day to day business affairs in order
Once you have your appropriate paperwork back from the CBPL, you can start doing business in Alaska. Every new partnership should consider getting the following items for the business:
- A bank account for your business
- A permanent address for the business
- Website for your company
Ready to start a partnership? LegalZoom will help you choose which type of business partnership may be right for you. We can also file the paperwork to form your business, help you find a registered agent, and get you in touch with an attorney or tax professional.