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STARTING AND OPERATING A BUSINESS IN ALASKA Copyright © 2005, Michael D. Jenkins
CONTENTS OF THIS SECTION:
I. INTRODUCTION I. INTRODUCTION Alaska has a somewhat unusual tax and legal structure under which businesses must operate. It also has an exceptionally friendly business climate, with no state personal income tax, no gross receipts tax, no state wide property or sales tax, and no personal property tax on intangible assets. It is also one of the few states that does not impose any real estate conveyance taxes on sales of real property. The main Alaska taxes a business may have to pay are the corporate income tax, specific natural resource taxes and taxes on commercial fishing, plus local sales taxes in some cities, such as Juneau, Nome, Ketchikan, and Homer. Taxes in Alaska are quite low, in relation to per capita incomes of residents. A 2005 study by the Tax Foundation found that Alaska, at 6.4%, had the lowest ratio of state taxes to per capita income of any state in the nation. In New Hampshire, the second lowest, the ratio was 7.4%, and the worst state was Maine, at 13%. Unique among the 50 states, Alaska pays each of its legal residents an annual "permanent fund dividend" from a large investment fund (the "Permanent Fund Corporation") that is maintained by the state. The fund was created in 1976 to receive 25% of the Alaska's large royalties from its huge oil and gas reserves, and such funds are invested in stocks, bonds, real estate, and other investments. Each eligible individual in Alaska receives a dividend from the fund each year, which has generally ranged from approximately $1,000 to $2,000, and was $919.84 in 2004. The state has adopted a limited liability company (LLC) law and a limited liability partnership (LLP) law, so that businesses operating in Alaska in LLC or LLP form may obtain the advantages of limited liability, without incorporating or becoming subject to corporate taxation, generally. At present, the Alaska economy is somewhat depressed, in terms of the level of unemployment and other economic measures, but has shown significant recovery in the last two years. For example, in December, 2004, the state's unemployment rate was 7.3%, down substantially from 8.1% a year earlier. This compares, however, to a much lower national unemployment rate of only 5.4%. In addition, the state has a very high cost of living, compared to national averages. To view the latest federal Bureau of Labor Statistics unemployment rate data for Alaska or any other state, visit the BLS website. Much of the recent sluggishness in the Alaska economy was attributable to a decline in the fishing industry, due to collapsing fish populations and competition overseas from farm-raised salmon, as well as consolidation of the oil operations of major oil companies on the North Slope, which has caused major cuts in oil industry employment in recent years. II. LEGAL ENTITIES -- FILING FEES AND REPORTING REQUIREMENTS. (a) In General. A business that operates in Alaska can operate as a sole proprietorship, a general or limited partnership, a corporation, or a limited liability company. In addition, like the federal tax law, the state income tax law also recognizes S corporations, for income tax purposes, and generally allows the income or losses of an S corporation to "flow through" and be taxed or deducted at the shareholder level, rather than taxing the corporation itself as an entity. Since Alaska has no state individual income tax, this means the income of S corporation Alaska also provides for limited liability partnerships, in which no partner is liable for debts of the partnership, in general, as in the case of a corporation or LLC, but with fewer legal formalities, generally, than are required for either a corporation or an LLC. However, as noted below, a limited liability partnership must demonstrate a certain specified degree of financial security to qualify as such. Each of the above entities is discussed below, along with the basic requirements for forming such an entity and any general ongoing (non-tax) reporting requirements that are applicable to it. The tax treatment of each form of legal entity is discussed in Section IV below. (b) Sole Proprietorships. In Alaska, no permission is needed from the government to start a sole proprietorship business, except to obtain a state business license, which is required for any form of business. Since there is no state personal income tax, no tax form filings are to report the income of a sole proprietorship for Alaska state tax purposes. Contact the Alaska Department of Commerce, Community and Economic Development, Division of Occupational Licensing, in order to register for a state business license. All forms of business organizations doing business in Alaska must pay a $200 biennial license fee to the state, with only a few exceptions for businesses that are required to have certain other types of licenses, such as commercial fishing licenses. Contact information for the Division of Occupational Licensing is listed in Section VI(a). (c) Partnerships. As a rule, general partnerships in Alaska can be formed with no formalities, although it is highly advisable to have a written partnership agreement. However, as discussed in Section IV(b), it will generally be necessary to obtain one or more local business licenses from localities in which you operate and, in some cases, state licenses, for any type of partnership, including general or limited partnerships, or limited liability partnerships. Partnerships must register with the state by filing with the Alaska Department of Commerce, Community and Economic Development, Division of Occupational Licensing. Contact information for that agency is listed in Section VI(a). A limited partnership, in which there is at least one general partner (who is liable for partnership debts) and at least one limited partner (who is not liable for partnership debts), may also be formed under Alaska law. Unlike a general partnership, a limited partnership must generally have a written partnership agreement, and must file a certificate of limited partnership with the Corporations Section of the Department of Commerce, Community and Economic Development, together with a filing fee of $150. Foreign limited partnerships must also register before being allowed to do business in Alaska, and must pay a registration fee of $150. For information on limited partnership filing requirements, see the contact information for the offices of the Alaska Department of Commerce, Community and Economic Development, Division of Occupational Licensing, Corporation Section, listed in Section VI(a). Limited liability partnerships (LLPs) are a new form of partnership permitted under the laws of Alaska. Like an LLC, an LLP provides limited liability for its owners, while retaining the tax advantages of a partnership for federal and Alaska state income tax purposes. However, unlike an LLC, an LLP typically operates like a regular partnership, and is not required to file articles of organization. Effective January 1, 2001, Alaska enacted a new version of the Alaska Limited Liability Partnership Act and a revised version of the Uniform Partnership Act. The new law applies to all LLPs formed on or after January 1, 2001. Until January 1, 2004, previously existing LLPs could elect to come under the provisions of the new act. On and after January 1, 2004, the new act applies to all LLPs formed in or doing business in Alaska. Any domestic or foreign partnership may register with the state of Alaska to become a registered limited liability partnership (LLP), by filing a brief registration form with the Department of Commerce, Community and Economic Development and paying a fee of $250 for a domestic partnership or $350 for a foreign partnership. Every LLP doing business in the state must meet certain minimum financial responsibility requirements. This means either having $1 million of liability insurance coverage, or certain "qualifying assets" (cash or or liquid assets, or letters of credit) of $1 million or more. If the insurance policy has a deductible, then the amount of the deductible must be covered by such "qualifying assets," but the amount of the coverage and the qualifying assets, in total, need not exceed $1 million. Every LLP doing business in Alaska, including both domestic and foreign LLPs must file biennial reports every other year with the Department of Commerce, Community and Economic Development. Every domestic LLP must pay a $100 biennial renewal fee; a $200 renewal fee must be paid every two years by a foreign LLP. For more information on LLP registration and reporting requirements, see the contact information for the offices of the Department of Commerce, Community and Economic Development, listed in Section VI(a). Note that one potential drawback of LLPs, if you will do business in other states besides Alaska, is that some states, like California and New York, only recognize certain types of professional partnerships as LLPs. If yours is not a professional partnership, such other states may simply treat your LLP like an ordinary general partnership, with no limitation of liability. A partnership agreement, for any type of partnership, should spell out in considerable detail such matters as the following:
There is no personal income tax in Alaska, so the income of a partnership is not taxed to the individual partners for state income tax purposes. Partnerships are not required to file an annual tax information return with the state, except in instances where a partnership has one or more corporate partners. (d) Corporations. To form a corporation in Alaska, you must file articles of incorporation with the Corporations Section, Division of Occupational Licensing of the Alaska Department of Commerce, Community and Economic Development. There is an initial fee of $150 for filing articles of incorporation, and a $100 biennial corporate tax that must be prepaid, for a total initial filing cost of $250. Foreign corporations -- those created under the laws of another state -- must obtain a certificate of authority to do business in Alaska, from the above agency. They pay an initial filing fee of $150 plus a $200 biennial corporate tax. Foreign corporations were formerly required to also file an annual affidavit of estimated taxes and license fees by June 2 of each year, but this requirement has been repealed. For more information on filing articles of incorporation or applying for a certificate of authority to do business in Alaska, see the contact information for the offices of the Division of Occupational Licensing, listed in Section VI(a). All corporations in Alaska, including foreign corporations and S corporations, are required to file biennial corporate reports and pay the biennial corporate tax of $100 for domestic corporations or $200 for foreign corporations by January 2, every other year. In addition to paying federal income taxes on its income, a corporation that does business in Alaska must also file corporate income tax returns with the state. See Section IV(c), for a discussion of state corporate income tax rates and tax return filing requirements. For tax forms and more information on corporate income taxes in Alaska, see the contact information for the offices of the Alaska Department of Revenue, listed in Section VI(a). (e) S Corporations. An S corporation is simply a regular corporation that has elected, for federal or state income tax purposes, or for both, to be taxed somewhat like a partnership, with its income, losses and tax credits flowing through to its owners, who report such income, losses, or credits on their individual tax returns. Since Alaska does not generally impose corporate income taxes on the income of an S corporation, and since there is no state income tax on individuals, the income of a business that is conducted in the form of an S corporation in Alaska will not be subject to any state income taxation, ordinarily. However, like any other for-profit corporation, and S corporation is required to file biennial reports and pay the applicable fee of $100 (or $200 for foreign corporations). (f) Limited Liability Companies. Alaska, like every other state in the U.S., has adopted a limited liability company (LLC) law. Thus, in addition to the traditional choices of a sole proprietorship, partnership, or corporation, a business that operates in Alaska may also choose to operate in the form of an LLC. In most states, LLCs are very attractive entities for many small businesses, in that they offer the same protection as a corporation from creditors for debts of the business, while offering much of the flexibility plus the flow-through tax treatment of a partnership for federal tax purposes. See Section IV(c), for a discussion of the income tax treatment of LLCs under Alaska tax laws. Two or more persons may form an LLC in Alaska. There is a filing fee of $150 to file articles of organization or to register a foreign LLC, plus payment of the initial fee for a biennial report, of $100 for a domestic LLC or $200 for a foreign LLC. File with the Alaska Department of Commerce, Community and Economic Development, Division of Occupational Licensing, Corporations Section. Alaska has no personal income tax, but it taxes LLCs as corporations if they are treated as corporations for federal income tax purposes. If an LLC is treated as a partnership, it is not required to file a tax return unless it has one or more corporate members. In that case it is required to file a partnership information return, and such corporate members will be taxable on their share of the LLC's taxable income. In addition to initial filing fees, an LLC formed in Alaska must subsequently file reports every other year and pay a filing fee of $100 with each report. A foreign LLC is also required to file a biennial report and pay the applicable filing fee of $200. Alaska's LLC law allows for 1-owner LLCs, effective since July 1, 1997. For more information on filing articles of organization for an LLC, see the contact information for the offices of the Division of Occupational Licensing, Corporations Section, listed in Section VI(a). This agency is a division of the Alaska Department of Commerce, Community and Economic Development. (g) State Securities Laws. Note that when your newly formed corporation issues shares of its stock to you or to anyone else as shareholders, you must be very careful to comply with both federal and Alaska securities laws. Sales of limited partnership interests or interests in a limited liability company are generally considered to be sales of securities, as well. Failure to comply with securities laws may subject you to lawsuits from disgruntled investors in the company or criminal prosecutions by the SEC or the state. Alaska law exempts certain small offering transactions that are made to either:
This is a highly technical area of the law, one for which you should consult a business attorney for advice and assistance. Also, for more detailed state securities law information, contact the administrator of securities at the state Division of Occupational Licensing, Corporations Section. III. BUSINESS ACQUISITIONS (a) In General. When acquiring an existing business, there are a number of state legal and tax issues you or, preferably, your business attorney, should attend to before closing the purchase. These include matters such as doing a title search for any real property that is being acquired, checking for any recorded security interests on personal property items, and thoroughly researching county, state, and federal records for any judgment liens, tax liens, or other liens, before property is acquired. You will also benefit from consulting a tax advisor before the agreement of sale is negotiated, in order to seek a structuring of the agreement so that the purchase price is allocated among the assets in a way that favors you. You may be able to obtain considerable tax savings if the purchase price is allocated in a way that gives you the best possible tax results under federal and state income tax laws, and other state tax laws, such as sales/use tax or property tax laws. Depending upon the state (or states) in which the seller's assets are located, you may also have to comply with state bulk sale or bulk transfer laws. You should also obtain tax releases from various state taxing agencies, as discussed below. (b) Bulk Sale Laws. Typical bulk sale laws require either publication of legal notices to all creditors in advance of the sale and recording of such notices in some cases, or maintenance of detailed lists of the property to be transferred, for inspection by the public. Alaska is one of the states that has repealed its bulk sale laws so you no longer have to be concerned with this requirement when buying a business in Alaska. However, before you close the purchase of a business, it is important to know if there are any security interests or liens against any of the assets of the business that would interfere with your receiving clear title to such assets. To check for such liens on property other than real estate, you or your attorney must do a search of the state records. Most such filings are made at UCC Central File Systems, Alaska Department of Natural Resources, in Anchorage. See the contact information for this agency listed in Section VI(a). (c) Tax Releases. When you acquire an existing business, you will want to make sure that you do not unwittingly become liable for any unpaid taxes owed by the seller. Typically, to protect yourself, you will need to receive a tax release or releases from various state taxing agencies, for such taxes as sales and use tax, income tax withholding, and state unemployment taxes, in each state in which the seller does business. If you fail to obtain such a release or written statement from the tax agency that the seller is not delinquent on any tax payments, you will be held responsible for such tax if it is not withheld from the purchase price proceeds and paid to the state at the time the sale of the business transpires. When acquiring an existing business in Alaska that has employees, you will need to get the seller to obtain a receipt from the Alaska Department of Labor and Workforce Development, certifying that there are no unpaid or overdue unemployment taxes owing. If there are any such taxes outstanding, you must withhold that amount from the purchase price, or you will be liable to the state for such tax, if the tax is not paid by the seller within 10 days after the purchase of the business or business unit. There is no state sales tax in Alaska, but you may also need to obtain sales tax clearances from cities that have sales taxes. Contact the city clerks for information on procedures. (d) Unemployment Tax Rating of Seller. In addition to obtaining tax releases, you may find it advantageous to succeed to the seller's unemployment tax experience rating, if the seller has a tax rate lower than you would otherwise obtain as a new business. If you acquire an entire business or a distinct unit of a business, the tax already paid on wages of the acquired employees earlier in the year can be counted as though your business paid such tax so that, for example, if an acquired employee's wages had already reached or exceeded the annual wage base on which tax must be paid, you would not need to pay any tax on wages paid to that employee for the rest of the year. In addition, to determine if you can succeed to a seller's favorable experience rating as a successor employer, contact the Employment Security Tax Section, Division of Employment Security, of the Alaska Department of Labor and Workforce Development, at the address listed for that agency in Section VI(a). IV. ALASKA TAXES AND OTHER GENERAL REQUIREMENTS (a) In General. Alaska has a very favorable tax environment, as the state has been fortunate since the discovery of vast oil deposits at Prudhoe Bay to derive most of its operating revenues from that source. As a result, the state has no personal income tax and no statewide sales tax, although there are local sales taxes in some cities. Most of the state's tax revenue comes from the corporate income tax and various natural resources on fishing and mineral production. (b) State and Local Licensing. Nearly any business, operated anywhere in the United States, will have to have at least one government license of some kind. In most cases, this will be a local license, issued by your city or county. Before you open your business, contact your local city or county hall and find out if your particular business needs one or more local licenses. Most kinds of local business licenses are granted upon payment of a fee, with no further requirements, except possibly for annual or other periodic renewal fees. However, if you are engaging in any kind of food business, you will usually need to also obtain a health department permit and show that you are in compliance with health department food-handling requirements. In addition, be sure to check with an attorney or local government zoning or planning department officials to determine if your business will be in compliance with all local zoning and planning restrictions. If you own or rent any type of facility, you will generally need fire department permits, showing that you meet fire safety codes and any construction or improvements to an existing structure will usually require a building permit. If you intend to simply operate your business from your home, you may be in violation of local zoning requirements, but this is less likely to be a concern if you don't have clients, customers, suppliers, or employees coming to your house on business, on a regular basis. State governments have also traditionally required special licenses for many kinds of professionals, such as physicians, dentists, lawyers, and accountants. To further protect consumers, Alaska has expanded the list of occupations that must be licensed by the state to include many other occupations. Most state licenses not only require payment of fees, but are only issued for a given profession or occupation upon showing that you have completed certain educational or experience requirements, or passed certain tests, or some combination of the foregoing. All businesses in Alaska must obtain a business license. The biennial fee for a license is $200 and must be submitted with a completed Alaska Business License Application, Form 08-4181. A separate license is required for each separate line of business you operate. However, only one license is required for each line of business, even if that line of business has multiple locations in Alaska. The biennial license fee or tax is reduced to $100 for sole proprietors who are 65 years old or older. Some businesses also require a separate occupational license, ranging from professions such as accountants or naturopaths to occupations like waste water system operators. The state provides a free Directory of Licensed Occupations in Alaska. This publication is available from the Research and Analysis section of the Alaska Department of Labor and Workforce Development. For information on state licensing and business registration requirements in Alaska, see the contact information for the offices of the Division of Occupational Licensing, of the Alaska Department of Commerce, Community and Economic Development and for the Research and Analysis section of the Alaska Department of Labor and Workforce Development, both of which are listed in Section VI(a). (c) Income and Franchise Taxes. Alaska is one of the few states that does not have an individual income tax. Thus, there is no state income tax on the earnings of individuals from a business that is conducted as a sole proprietorship. However, Alaska does have a corporation income tax on corporations other than S corporations. Partnerships are pass-through entities for Alaska income tax purposes, and are not subject to tax themselves, as separate taxable entities. Since there is no individual state income tax in Alaska, the income earned by a partnership is taxable only to any partners that are corporations. Corporations that do business in Alaska, other than S corporations, are subject to a graduated state income tax on their annual taxable income, ranging from 1% on the first $10,000 of income to 9.4% on income in excess of $90,000. The Alaska corporation income tax return, Form 04-611, is due within 30 days after the federal return due date, without regard to extensions. No state estimated income tax payments are required in Alaska for sole proprietors or most partnerships, since there is no state individual income tax. However, those partnerships that have corporate general partners are required to make a declaration of estimated income tax. Corporations and limited liability companies that are subject to the state corporation income tax are required to make an estimated tax declaration and to file quarterly estimated income tax returns. Estimated tax payments are filed with the Alaska Department of Revenue. Penalties will be imposed for failure to make the required estimated tax payments on a timely basis. See the contact information for the Department of Revenue that is listed in Section VI(a) for that agency. In Alaska, a limited liability company (LLC) will be treated as either a partnership or a corporation for tax purposes, depending on how it is categorized for federal income tax purposes. Thus, in the typical case, an LLC will be taxed as a partnership, thereby avoiding possible double federal taxation of income that can occur with a corporation. Since there is no individual income tax in Alaska, the income of an LLC will be completely free from state taxation, if the LLC is categorized as a partnership. Note that under IRS regulations, effective since 1997, an LLC is able to elect to be treated as a partnership if it has more than one owner, or as a sole proprietorship if it does not, for federal tax purposes. Alaska now also recognizes the validity of a one-owner LLC. (d) Sales and Use Tax. Alaska has no state wide sales or use tax, but many cities and boroughs impose sales taxes that may range up to 6%. Among those localities levying sales taxes are Juneau City and Borough, Homer, Nome, and Ketchikan City. No sales tax is currently levied in Anchorage, Fairbanks, or Valdez. For more information on local sales and use tax registration and compliance in your locality, contact your local city or borough offices. Effective January 1, 2004, Alaska has imposed a vehicle rental tax of 10% for passenger vehicles or 3% for renting or leasing of recreational vehicles. (e) Real and Personal Property Taxes. Cities and boroughs in Alaska generally levy and collect property taxes on both real and personal property located within their jurisdictions. In general, there is little that you must do in the way of compliance, unless you wish to challenge your assessed valuation, since the assessors will bill you for each year's property taxes as they come due. While Alaska generally taxes tangible personal property, it does not impose a property tax on intangible personal property, such as stocks, bonds, promissory notes, and other such paper assets. However, unlike many states, Alaska does not exempt business inventories from property taxes. (f)Other Business Taxes. Alaska imposes a number of other taxes on businesses, including:
Unlike most other states, Alaska does not impose any real estate conveyance taxes on transfers of real estate. Because fishing is one of Alaska's major industries, the state imposes a number of taxes and regulations on the fisheries and canning industries, some of which are described in the following paragraphs. If you are in the fishing industry, you will be subject to numerous fishing taxes and fees, including a $25 license fee for each location or vessel. Taxes include a 4.5% tax on shore-based salmon canneries or 3% tax on other shore-based canneries. Other taxes on fishing businesses include a 5% tax on floating fisheries. Reduced tax rates may apply for certain developing fish species. Other special fishing industry taxes include a 1%, 2%, or 3% salmon enhancement tax, imposed on the sale or transfer of salmon. Until 2005, a salmon marketing tax of 1% of the salmon resource value applied, but this tax was repealed, effective in 2005, and in its place, the seafood marketing assessment fee was increased slightly, from 0.3% to 0.5%. A landing tax of 3% is imposed on fisheries resources that are first landed in the state and not otherwise subject to the fisheries business tax. If you process seafood, you are also subject to a seafood marketing assessment each year. For more details, contact the Income and Excise Tax Audit Division of the Alaska Department of Revenue. (g) Trade Names. A trade name, also known as a fictitious or assumed name, is any name used in the course of business that does not include the actual legal names of all the owners of the business. Thus, if your business goes by any name other than your own real name, it is operating under a trade name. The same is true of a corporation, if it operates under a name other than its legal name. A trade name might also be one that suggests the existence of additional owners, by using such words as "company," "associates," or "group." In most states where you do business, it will be necessary to register a trade, fictitious, or assumed name, so that people who do business with you can find out who the actual owners of your business are. You may also want to register any such trade name, as a means of protecting against other companies usurping that particular trade name. In Alaska, if you have a corporation or your business has a fictitious business name, you will need to register it, in order to provide a public record of all the owners of a business. To register a business name, complete and submit an application and $25 fee to the Corporations Section of the Division of Occupational Licensing. The registration is good for five years and is renewable. For more information, contact the Corporations Section, Division of Occupational Licensing, of the Alaska Department of Commerce, Community and Economic Development. V. EMPLOYER REQUIREMENTS IF YOU HAVE EMPLOYEES (a) Employer Registration and Withholding. If you have any employees, you will already be withholding federal income tax and FICA taxes from their wages. However, since there is no state personal income tax in Alaska, employers need only to withhold federal taxes from employee wages, except for the employee portion of the state unemployment tax, discussed in Section V(b). (b) Unemployment and Other State Payroll Taxes. If your business has employees, you must register as an employer (Status Report, Form 1002) and pay state unemployment tax. Alaska unemployment tax applies to the first $27,900 of wages per employee in 2005. The rate of tax varies, depending on your firm's "experience rating" and the industry you are in. Unemployment contribution reports and taxes are due each quarter. Reports are filed on Form 1004. New employers are required to pay tax at a set rate which depends on the industry. The "standard rate" for 2005 is 4.19%. After you have had employees for a while, you will develop an unemployment tax experience rating. This rating is based on the number of employees you terminate who then claim unemployment benefits and the amount of such benefits paid to those former employees, under complex formulas. The state will inform you when they have assigned you an individual tax rate based on your firm's experience rating. That rate may be higher or, if you have had relatively few benefit claims charged to your account, lower than the standard new employer tax rate you initially were paying. The above unemployment taxes must be paid by you, as the employer. However, your employees must also pay in a small portion of their wages, 0.5% on the wage base amount (in 2005), which you must withhold from their paychecks and pay over to the state along with the employer contributions. To obtain a free booklet, the Employer's Handbook, and for other information about your responsibilities under the state unemployment tax laws, contact the Employment Security Tax Section, Division of Employment Security, of the Alaska Department of Labor and Workforce Development. Address information for that agency is listed in Section VI(a). (c) Workers' Compensation. Workers' compensation insurance is a state-mandated insurance requirement for most employers, in almost every state. In Alaska, virtually all businesses with one or more employees are required by law to have workers' compensation insurance, except those able to self-insure. Note, however, that a sole proprietor or a partner in a partnership is generally not considered an employee, but may elect coverage. Executive officers of a corporation are considered to be employees under the workers' compensation law, but may choose to waive coverage, with approval of the commissioner of labor. Coverage must be obtained from commercial insurance companies. If you are unable to obtain coverage from a commercial insurer, you may obtain it from Alaska's Assigned Risk Pool, which is administered by the National Council on Compensation Insurance (NCCI). Certain types of employees are not covered, such as:
Workers' compensation provides wage loss and medical benefits to employees injured on the job and it protects you, as an employer, from legal action for damages for injuries or job-related illnesses suffered by your employees. In effect, it is a "no-fault" insurance system for work-related injuries or illnesses. Thus, if you fail to obtain required workers' compensation insurance, and an employee is injured on the job, you will have opened yourself to unlimited liability and severe legal consequences, so it is very important to obtain workers' compensation insurance for your employees. Be aware that neither general liability nor health and accident insurance can properly substitute for workers' compensation insurance. As an employer, you must notify injured employees of their benefits and post a notice in the workplace informing your employees of their workers' compensation coverage. For more detailed information regarding your obligations as an employer under the Alaska workers' compensation laws, contact your insurance carrier or see the contact information for the offices of the Workers' Compensation Division of the Alaska Department of Labor and Workforce Development, listed in Section VI(a). (d) State Wage and Hour Laws. Alaska's minimum wage is considerably higher than the federal minimum wage, at $7.15 since January 1, 2003. The state's overtime pay law requires that you pay all employees, except certain exempt classes of employees, such as executives, at a rate of one and one-half times their regular rate for all hours worked in excess of 40 per week or 8 hours in one day. In addition, Alaska is one of only three states (California and Nevada are the others) that require overtime pay for any daily hours worked in excess of 8 hours. However, such hours are not counted as overtime hours worked for purposes of the weekly 40-hour rule, since the employee is separately awarded overtime pay for the daily overtime hours worked. Besides the federal wage-hour posters that you must display in the workplace, you must also display a state wage-hour poster, which you can obtain from the Alaska Department of Labor and Workforce Development. As under federal laws, the employment of children under age 18 is strictly regulated by the state of Alaska. As a general rule, children under age 18 may not work more than five hours without a half-hour break, more than six days in any one week, or in hazardous excavation, in mines underground, or in occupations that are dangerous to life or limb or injurious to the health of a minor. Children under 16 are protected by even stronger provisions, so that they may not generally work for more than 23 hours in a work week (with exceptions for domestic work and baby sitting), after 9 P.M. or before 5 A.M., or for more than 9 hours (combining school and work) in one day. Children under age 14 cannot be employed, except for a few specified jobs, such as newspaper delivery or sales, domestic work or baby sitting, and casing cans under competent supervision in canneries. In addition, a minor under the age of 21 is generally prohibited from selling or serving alcoholic beverages, or working in a place where such beverages are sold, with certain exceptions. For guidance and information regarding wage-hour and child labor laws, contact the Wage and Hour Administration of the Alaska Department of Labor and Workforce Development, at the address listed for that agency in Section VI(a). (e) State Occupational Safety and Health Laws. Employers in Alaska must post a Safety and Health Protection on the Job notice at each work site, and inform employees of the location and nature of operations involving toxic or hazardous substances. As an employer, you are required to furnish each employee with a place of work that is free from recognized hazards that cause or are likely to cause death or serious harm to employees. Note that while you may obtain a free safety consultation from federal OSHA experts, they must and will cite you for any violations they discover at your workplace. This is not the case with state safety inspections. If you request a safety consultation from the state Division of Labor Standards and Safety and they detect violations, they will not cite you if you promptly correct the unsafe conditions. For information on your job safety and health obligations as an employer, required posters, and possible on-site safety consultations, see the contact information for the Juneau offices of the Occupational Safety and Health Section, Division of Labor Standards and Safety, of the Alaska Department of Labor and Workforce Development, listed in Section VI(a). (f) Other Miscellaneous State Labor Laws. Other Alaska labor laws you need to be aware of, as an employer, include the following: (1) Wage payments to terminated employees. Alaska law allows an employer to pay wages on either a monthly or semi-monthly basis, at the election of the employee, unless agreed in advance by an employment contract that provides for monthly wage payments. If an employee is terminated, you must generally pay his or her wages in three working days after termination, or else you may be liable for additional wages up to the time payment is made, up to 90 days after termination. However, if the employee quits, payment is due by the next regular payday that is at least 3 days after the employer received notice of the employee's termination of services. (2) Right-to-work laws. About half the states have enacted "right-to-work" laws, which guarantee that no person may be denied employment for refusing to join a union or for not paying union dues, thus banning either "union shop" or "agency shop" agreements, or both. In a union shop, an employee not belonging to a union may be hired but then must join the union, usually within 30 days. In an agency shop, an employee need not join the union but, to remain employed, must pay union dues. Alaska does not have such a right-to-work law and allows union shop or agency shop contracts between an employer and a union. (3) State anti-discrimination laws. In addition to complying with federal anti-discrimination laws, employers must also be aware of and comply with state civil rights laws in Alaska and display a poster informing employees of their rights. Alaska laws prohibit discrimination in hiring and employing workers, on the basis of race, religion, color, national origin, age, physical or mental disability, sex, marital status, pregnancy, or parenthood when the reasonable demands of the position do not require distinction. While federal anti-discrimination laws generally exempt employers with fewer than 15 employees, Alaska's laws apply to employers with one or more employees. For more information on state civil rights laws in Alaska, contact the Alaska State Commission on Human rights at the address listed in Section VI(a). (4) Reporting new hires. Under federal welfare reform laws, employers in all states now have to report any newly-hired (or rehired) employees to a designated state agency (the Child Support Enforcement Division of the Department of Revenue for Alaska employers) within 20 days after the date of hire. Reports can be filed online on the Department of Revenue website or the completed forms can be mailed or faxed to the Child Support Enforcement Division at the New Hires reporting address or fax number listed in Section VI(a). VI. STATE SOURCES OF HELP AND INFORMATION (a) Key State Agencies Contact Information. Alaska, as many states have done in recent years, has set up a "one-stop" center to help your new or existing businesses to obtain all necessary state licenses and permits from a single office, without your having to go from agency to agency to meet all the legal and regulatory licensing requirements. The Division of Community Advocacy maintains a "one-stop" business assistance department, which provides information and assistance, including publications, for new and existing businesses. In March, 2004, the Division issued a 46-page publication entitled "Starting a Small Business" for new Alaska businesses, which is also available online, available from the Office of Economic Development of the state Department of Commerce, Community and Economic Development at the web link listed for that agency in Section VI(c). Contact:
SALES TAX. There is no state wide sales tax in Alaska, although some cities impose local sales tax. Check with your local city offices to see if you need to register for city sales taxes. FICTITIOUS NAME REGISTRATION. To register the use of a fictitious business name, submit your fictitious name registration and filing fee to:
(b) Small Business Development Centers. A number of Small Business Development Centers (SBDCs) are located throughout Alaska to assist you. These centers, usually located on college campuses, provide a wealth of start-up information and sponsor frequent business-oriented seminars. Contact the lead office below for information, or for the location of other SBDCs nearer to you.
(c) Internet Sites. If you have access to the Internet, there is a wealth of state and even local business information provided by state and local governments. All states now have a state government Web page, and most major state agencies also have sites on the Internet where you can obtain useful small business information on matters such as state taxes, financing sources, or the addresses and phone numbers (or e-mail addresses) of various state and federal agencies' offices in Alaska. Since new sites are appearing constantly, you might also want to search for other Alaska government Web sites by using one of the popular Internet search engines, such as Excite! or Yahoo. To start your Internet search for Alaska government information, you may want to begin with the following Internet sites: U.S. Small Business Administration: (d) Financing Sources. A number of public and private loan sources are available that can provide financial assistance or funding to your business. Some of the major Alaska financing sources you may want to contact include:
(Loan programs, such as the Commercial Fishing Revolving Loan Fund and the Fisheries Enhancement Loan Program, making loans up to $10 million for fish hatchery facilities.) For general information on development or financial assistance programs in Alaska, contact the Division of Economic Development of the Alaska Department of Commerce, Community and Economic Development, at the address listed above for that agency. If you are interested in federally guaranteed loans through the U.S. Small Business Administration (SBA), contact the SBA state office at:
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Copyright © 2005 Michael D. Jenkins
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