Deciding between forming an LLC in Alaska or Delaware can be challenging due to the different regulations, taxes, and costs associated with each state.
Here we will break down the similarities and differences between Alaska vs. Delaware LLCs to help you make a decision on what’s best for your business.
Alaska vs. Delaware LLC
Delaware offers a well-established legal framework and flexible management structures but has an annual franchise tax.
Alaska has simplified procedures, no franchise tax, and provides more privacy for LLCs.
Both Delaware and Alaska offer strong asset protection for LLC owners. Delaware has a renowned Chancery Court and comprehensive liability shielding.
Alaska allows for series LLCs, providing added separation of assets and liabilities.
Delaware has no sales tax or personal income tax for non-residents but imposes an annual franchise tax.
Alaska has no personal income tax, sales tax, or corporate income tax, making it advantageous for tax purposes.
| Alaska LLC | Delaware LLC |
|---|---|
| Forming an Alaska LLC involves a straightforward process with a filing fee of $250. | Creating a Delaware LLC is based on a well-established legal framework, with a filing fee of $90. |
| It is not subject to an annual franchise tax. | It has an annual franchise tax, the amount of which depends on the number of authorized shares of stock. |
| Alaska does not levy a state-level personal income tax on individuals. | Delaware imposes a progressive personal income tax with rates ranging up to 6.6%, based on the individual’s income level. |
| It has a state sales tax of 1.5% | It does not have a state-level sales tax; however, local sales taxes may apply in certain municipalities. |
| Alaska impose corporate income tax rate of 9.4%. | Delaware impose corporate income tax rate of 8.9%. |
| It has required to pay every two year report fee of $100. | It has required to pay an annual report fee of $300. |
| Alaska provides privacy protection as the names of LLC members do not need to be disclosed in public filings. | Delaware requires the disclosure of LLC members’ names in public filings, reducing privacy protection. |
| It is not required to file an annual report. | It has an annual report filing requirement as part of their ongoing obligations. |
Cost Breakdown of The Two
You may use our free LLC cost calculator by state to find out filing fees, tax percentages, income taxes, and more.
Alaska LLC
The filing fee for forming an LLC in Alaska is $250.
LLCs in Alaska are required to file a report every 2 years, and the fee for this report is $100.
Similar to Delaware, LLCs in Alaska must maintain a registered agent, and the fee can range from $100 to $300 per year.
Delaware LLC
The filing fee for forming an LLC in Delaware is $90.
Delaware imposes an annual franchise tax on LLCs, which is based on the number of authorized shares of stock. The minimum tax for most LLCs is $300.
LLCs in Delaware are required to have a registered agent, and the fee for this service can vary but typically ranges from $100 to $300 per year.
Related Posts:
- Alaska LLC: Cost Breakdown, Pros and Cons, Requirements
- Delaware LLC: Cost Breakdown, Pros and Cons, Requirements
Similarities Between Alaska and Delaware LLC
Both Alaska and Delaware provide limited liability protection for LLC owners.
This means that the personal assets of the owners are generally shielded from the debts and obligations of the LLC.
In both jurisdictions, the LLC is considered a separate legal entity.
Both states offer flexibility in structuring the management of an LLC. Owners can choose to have either member-managed or manager-managed LLCs.
Member-managed LLCs involve the owners directly in the day-to-day operations, while manager-managed LLCs allow for the appointment of one or more managers to handle the business affairs.
Alaska and Delaware both provide privacy protection for LLC owners.
In both jurisdictions, the names of the LLC members or managers do not need to be disclosed in public filings.
This can be beneficial for those who prefer to keep their own information confidential.
LLCs formed in both Alaska and Delaware are recognized as separate legal entities distinct from their owners.
This means that the LLC can enter into contracts, own property, and engage in legal transactions in its own name.
Both states allow for the formation of foreign LLCs, which are LLCs formed in one state but registered to conduct business in another state.
Foreign LLCs must comply with certain registration and reporting requirements in the state where they are conducting business.
Additional Resources:
Steps to Form LLC in Alaska
Choose a name for your LLC that complies with Alaska’s naming requirements.
File Articles of Organization with the Alaska Division of Corporations, Business, and Professional Licensing.
Include required information in the Articles, such as the LLC’s name, purpose, registered agent, and management structure.
Pay the filing fee, which is currently $250, to the Division of Corporations.
Designate a registered agent located in Alaska to receive legal and official documents on behalf of the LLC.
Create an Operating Agreement that outlines the internal workings and management structure of the LLC.
Obtain any necessary business licenses and permits required for your specific industry or location.
File an Initial Report with the Division of Corporations within six months of forming the LLC.
Comply with any ongoing reporting and tax obligations imposed by the state of Alaska.
Maintain proper records, including financial and operational documents, for the LLC.
Steps to Form LLC in Delaware
Choose a unique name for your LLC that ends with “Limited Liability Company,” “LLC,” or “L.L.C.”
Prepare a Certificate of Formation, including the LLC’s name, registered agent details, and management structure.
File the Certificate of Formation with the Delaware Division of Corporations and pay the filing fee, which is currently $90.
Designate a registered agent in Delaware who will receive legal and official documents on behalf of the LLC.
Create an Operating Agreement that outlines the internal workings and management structure of the LLC.
Obtain any necessary business licenses and permits required for your specific industry or location.
Comply with Delaware’s annual reporting requirements by filing an Annual Franchise Tax Report and paying the franchise tax.
Maintain proper records, including financial and operational documents, for the LLC.
Familiarize yourself with Delaware’s business laws and regulations to ensure ongoing compliance.
Seek professional guidance from a legal or financial expert to ensure you meet all the necessary requirements and understand the implications of forming an LLC in Delaware.
Feature Comparisons Between Alaska LLC vs. Delaware LLC
Formation Requirements: Alaska has straightforward requirements, while Delaware has a well-established legal framework.
Maintenance Requirements: Alaska has minimal maintenance obligations, while Delaware has annual reporting and franchise tax requirements.
Privacy Protection: Alaska offers stronger privacy protection by not requiring the disclosure of member or manager names, while Delaware requires such disclosure.
Asset Protection: Alaska allows for a series LLC structure for added asset protection, while Delaware has a reputation for strong legal protections.
Tax Considerations: Alaska has no state-level income or sales tax, while Delaware has no income tax for non-residents but does impose an annual franchise tax.
Business Environment
Alaska LLC
Business-Friendly Environment: Alaska offers a business-friendly environment with relatively low regulatory burdens.
Tax Advantages: Alaska has no personal income tax, no sales tax, and no corporate income tax at the state level, making it attractive for businesses seeking tax advantages.
Natural Resource Industry: Alaska’s economy is heavily influenced by its rich natural resources, including oil, gas, and fishing.
This can present unique opportunities for businesses in these industries.
Geographic Considerations: Alaska’s geographic location and vast land area can pose logistical challenges, especially for businesses with supply chain and distribution needs.
Delaware LLC
Business Hub: Delaware is renowned as a business-friendly state and a hub for corporate entities.
Many large corporations choose to incorporate in Delaware due to its favorable laws, specialized business courts, and well-established legal framework.
Court System: Delaware has a specialized business court called the Chancery Court, known for its expertise in business law matters.
This court provides a predictable and stable legal environment.
Legal Precedence: Delaware has a long history of business-friendly legislation and has developed a significant body of case law, which can provide clarity and guidance for businesses operating within the state.
Annual Franchise Tax: Delaware imposes an annual franchise tax on LLCs, which can be a cost consideration depending on the size and structure of the business.
Read Also:
Alaska vs. Delaware Taxes
Alaska Taxes
Personal Income Tax: Alaska does not impose a state-level personal income tax on individuals.
This can be advantageous for individuals residing in or generating income in Alaska.
Sales Tax: Alaska also does not have a state-level sales tax, which means consumers and businesses are not subject to a sales tax on most purchases.
Corporate Income Tax: Alaska does not impose a corporate income tax at the state level, providing potential tax advantages for businesses operating in the state.
Delaware Taxes
Personal Income Tax: Delaware has a progressive income tax system with marginal rates ranging from 0% to 6.6%.
The tax rates and brackets are determined based on the individual’s income level.
Sales Tax: Delaware does not have a state sales tax. However, some local jurisdictions in Delaware do have a sales tax.
The maximum local sales tax rate in Delaware is 7.50%.
Corporate Income Tax: Delaware has a corporate income tax rate of 8.7%. This tax is imposed on the net income of corporations that are incorporated in Delaware.
Flexibility in Rules and Regulations
Alaska
Alaska provides flexibility in the formation and management of LLCs.
There are no specific requirements for the number of members or managers, allowing for single-member LLCs or LLCs with multiple owners.
This flexibility allows businesses to structure their management in a way that suits their needs.
Alaska allows for the creation of series LLCs, which provide flexibility in segregating assets and liabilities among different series within a single LLC entity.
Each series can have its own distinct business activities and protections, providing more flexibility for businesses with diverse operations.
Delaware
Delaware is known for its flexible and business-friendly legal framework.
The state has well-established corporate laws and a separate court system, the Chancery Court, dedicated to business matters.
This specialized court provides expertise and predictability in business-related legal disputes, offering flexibility in resolving conflicts.
Delaware offers flexibility in corporate governance matters, allowing companies to tailor their bylaws and internal operating procedures to meet their specific needs.
This flexibility can accommodate various ownership structures and management arrangements.
Key Differences Between Alaska and Delaware- An Overview
