File an Alaska S Corp

Considering turning your business into a S corporation in Alaska? It’s a move that could lead to beneficial tax savings for your venture. Specifically, for owners of a limited liability company (LLC) in the Last Frontier, electing S corp status might be a smart strategy to minimize self-employment taxes. Generally, the income from an LLC would be fully subject to these taxes. However, by adopting S corp status, you can allocate a portion of the business income to yourself as a salary. This salary is the only part that will incur self-employment taxes, while any additional profits distributed as dividends escape this taxation.

This article aims to guide you through the process of starting a S corp in Alaska, highlighting how this tax choice can help ensure you and your business enjoy a more tax-efficient arrangement while staying aligned with regulatory requirements.

Requirements and limitations of S Corporations

Only certain businesses can choose a S Corp election. To be eligible for S Corporation classification, an entity must:

• Be a domestic corporation
• Have only one class of stock
• Have only allowable shareholders, which include individuals, certain trusts, and estates
• Not be an ineligible corporation, such as certain financial institutions, insurance companies, and domestic international sales corporations
• Have no more than 100 shareholders

If your business entity doesn’t meet these filing requirements, it will not qualify for a S Corp classification. 

File Form 2553 with the IRS

If your business does meet these minimum filing requirements, you can then file for election as a S Corp by completing and filing Form 2553 with the IRS. Importantly, this has to be done: 

• No more than 2 months and 15 days after the beginning of the tax year in which the election is to take effect, or
• At any time during the tax year preceding the tax year that the election is to take effect.

Visit the IRS website for more detailed instructions on how to properly and timely file Form 2553 for your Alaska business. 

Which entities can apply for a S Corp designation?

Business structures like limited liability companies (LLCs) and corporations (C Corps) can benefit from a S Corp designation. An LLC can save money on self-employment taxes while a C Corp can avoid double taxation. Learn more about what a S Corp is.  

Filing as a S Corp in Alaska

If you plan to create an Alaska S Corp, you’ll first need to create an LLC or C Corp. From there, you’ll need to file the appropriate paperwork with the IRS in order to get a S Corp election.

If you’re ready to learn about filing as a S corporation in Alaska, we’ll walk you through it. First, we’ll show you how to form an Alaska LLC and how to form a corporation in Alaska. Then we’ll explain how to file for S corp status as either an LLC or corporation.

S-Corp Election Steps for LLCs

For detailed formation steps, see our Alaska LLC formation guide.

• Step 1 – Choose a name
• Step 2 – Appoint a Registered Agent in Alaska
• Step 3 – Choose directors or members/managers
• Step 4 – File Articles of Organization
• Step 5 – Apply for S Corp status with IRS Form 2553

S-Corp Election Steps for Corporations

For detailed formation steps, see our Alaska Corporation formation guide.

• Step 1 – Choose a name
• Step 2 – Appoint directors
• Step 3 – Choose an Alaska registered agent
• Step 4 – File the Alaska Certificate of Incorporation
• Step 5 – Create Corporate bylaws
• Step 6 – Draft a shareholder agreement
• Step 7 – Issue shares of stock
• Step 8 – Apply for necessary business permits and licenses
• Step 9 – File for an EIN
• Step 10 – Submit your annual report
• Step 11 – Apply for S Corp status with IRS Form 2553

File Form 2553 to Turn Business into a S Corporation

Finally, you’re ready to turn your business into a S Corporation. You will do so by making what’s called a S Corp election.

To make the election, you file Form 2553 with the IRS. This form is what officially changes the entity’s classification to a S Corp. For LLCs, however, you must first change your entity classification to Corporation status by filing IRS Form 8832 before filing your Form 2553. 

Additionally, don’t forget to get an Employer Identification Number (EIN) for your business. Not sure how to get started? We can help you obtain one from the IRS today with our EIN Service.

Weighing the pros and cons of creating an S Corporation

Like many business entities, an S Corp designation has its pros and cons. Take a look at them below and weight them before deciding if a S Corp election is right for your business.

The pros of a S Corp

In addition to pass-through taxation, some of the most common advantages of creating a S Corporation include: 

• Improved asset protection
• Cash method of accounting
• Tax-favorable characterization of income

The cons of an S Corp

As with most things, there are certain cons to take note of as well. For example, common disadvantages associated with forming an S Corporation include: 

• Closer IRS scrutiny
• Less flexibility in allocating income and losses
• Higher formation and maintenance expenses
• More stringent tax qualification obligations
• Stock ownership restrictions

Thus, before setting your entity up as an S Corp, carefully consider these pros and cons. This will help you determine whether an S Corporation classification meets the needs and goals of your business. If you’re still not sure if an S Corp classification is right for your Alaska business, be sure to consult an experienced business lawyer to discuss your options in more detail. 

S Corp Tax Calculator

The S Corporation tax calculator below lets you choose how much to withdraw from your business each year, and how much of it you will take as salary (with the rest being taken as a distribution.) It will then show you how much money you can save in taxes.

Disclaimer: The savings estimate provided by this tool is for informational purposes only and should not be considered financial, tax, or legal advice. Actual savings may vary depending on individual circumstances and other factors. We recommend consulting with a qualified tax or legal professional before making any decisions regarding your business entity. ZenBusiness, Inc. is not responsible for any actions taken based on the information provided by this tool. Use of this tool does not establish any client relationship with ZenBusiness, Inc.

What to know before creating an S Corporation in Alaska

At the time of formation, the default for a business entity is classification as a C Corporation. Thus, if you want your business to be set up as an S Corp, you’ll have to actively change its status. 

Of course, forming an S Corp may not be the right move for all businesses. Thus, before deciding whether to make this election, there are a few important things you should know. 

What’s the difference between an S Corporation and a C Corporation?

Again, the default classification for a corporation at the time of formation is as a C Corp. Notably, C Corps must file and pay taxes on their corporate income at the entity level in addition to the shareholder level on each individual’s income taxes. Thus, while S Corps benefit from pass-through taxation, C Corps do not. 

However, although C Corps can’t avoid double taxation, they do benefit from greater flexibility and less stringent requirements in the formation process. 

What are the requirements to create an S Corporation? 

To create an S Corporation, you must first form a business that falls within the limitations identified above. Then, you have to file Form 2553 with the IRS within one of the timeframes listed above.

Get help establishing a Alaska LLC with S corp tax election

Ready to get started? Form your S Corp today with our help. We can also support your business venture from start to finish with a wide variety of formation, compliance, and maintenance products and services. Start your company and file as an S Corp with us today.

If an S Corp isn’t the right fit for your business, our Alaska LLC Formation Services and our Alaska Corporation Formation Services can help make the business formation process a breeze. And even after formation, you can use our Worry-Free Compliance Service to better ensure that you stay legally compliant with the state. In short, we have all the tools and resources necessary to help you start, manage, and grow your business.

Filing an S Corp in other states? See below for additional resources:

• File an S Corp in Washington State
• File a Kansas S Corp