In Alaska, you can establish a sole proprietorship without filing any legal documents with the Alaska Secretary of State. There are four simple steps you should take:
1. Choose a business name.
2. File a trade name (optional).
3. Obtain licenses, permits, and zoning clearance.
4. Obtain an Employer Identification Number.
1. Choose a Business Name
In Alaska, a sole proprietor may use his or her own given name or may use an assumed name. Your assumed name must be distinguishable from names of existing organized entities as well as reserved or registered business names. It is always a good idea to choose a name that is not too similar to another registered business because of common and federal law trademark protections. To make sure your business name is available, run a search in the following government databases:
- U.S. Patent & Trademark Office: (Click on the TESS link under Tools.)
2. File a Trade Name
If you use a business name that is different from your legal name, Alaska requires you to register the assumed name with the Alaska Division of Corporations, Business and Professional Licensing. The filing fee is $25. Registered trade names for sole proprietors are good for five years. You will need to renew your trade name prior to the end of the fifth December following registration. Filing a renewal application can be done 3 months prior to its expiration. The renewal filing fee is $25.
3. Obtain Licenses, Permits, and Zoning Clearance
Your business may need to obtain a variety of licenses and permits depending on its business activities. All businesses in Alaska must obtain a state business license. This is an annual license that must be renewed each year. The license fee is $50 per year. You can obtain a state business license by visiting the Alaska Division of Corporations, Business and Professional Licensing website. Alaska provides a comprehensive list of every license and permit that may be required by any sole proprietorship. A business can obtain this information by going to the Alaska Division of Professional Licensing. Select your business activity and you get a list of all the required state licenses as well as required filings and laws you may be subject to such as examination requirements and inspections. Additionally, local regulations may apply to your business. You should check with your city or county clerk or licensing department.
4. Obtain an Employer Identification Number
Sole proprietors who wish to have employees need to obtain an Employer Identification Number, or EIN. This is a nine digit number issued by the IRS for tax reporting purposes. All businesses with employees are required to report wages to the IRS using their EIN. Registering for an EIN can be done online at the IRS website.
Sole proprietors without employees are not required to have an EIN because they can use their Social Security number to report taxes. Nevertheless, you may want to obtain one anyway for your business. Some banks require one to open a bank account and it can reduce the risk of identity theft.
In Alaska, businesses that have employees are required to file employee and wage reports. Employers will need to use their EIN to create a state account in which to file these reports. Links to relevant information are available from the Alaska Department of Labor and Workforce Development.
As an employer in Alaska you should be aware of all relevant tax issues related to your employees. For more information on being an Alaska employer see the Establishing a Business in Alaska brochure on the State of Alaska website (under Business).
It is important to consider doing the following once you have established your sole proprietorship:
- Open a business bank account. Using your assumed business name and EIN, you should set up a bank account to keep your business and personal finances separate.
- Obtain general liability insurance. Because sole proprietors are personally liable for all debts and obligations of the business, a business liability insurance policy may be the only form of financial protection against unforeseen events.