Fri 18 Dec 2015 | By:

Pros and Cons to Forming an Alaska Corporation

Pros and Cons to Forming a Corporation

The main reason why most entrepreneurs incorporate their Alaska startup under the Corporation business structure is because they want to shield themselves from financial and legal liabilities.

Starting a Corporation in Alaska has so many advantages and only a few disadvantages. To give you a better idea of the pros and cons of an Alaska Corporation, I’ve put this article together to show you the tip things you need to be aware of. Let’s start with the pros!


Pros to Forming a Corporation in Alaska

1) Limited amount of legal and financial liability on the business owner.

When you incorporate your business and form a Corporation, you are creating a separate entity that has its own rights and conducts its own business transactions. In situations where your Corporation incurs debts and other credits, you will not be held liable for it because in the eyes of the law. You are two separate entities.

2) Attracts business investors.

If you incorporate your Alaska small business under Corporation, you’ll be able to issue stocks or sell shares. This is a strong selling point to many investors. To be able to convince investors to invest capital into your venture you need to form a Corporation (Note: an LLC will also do).

3) Well-defined chain of command and organizational structure.

The management structure of a Corporation is well-established. Roles are well-defined and job descriptions are clear. The chain of command is also arranged in an organized manner, from directors, officers and shareholders. With this, there is unity of command and your Alaska Corporation will be able to do business harmoniously.

4) Ability to take advantage of tax benefits.

Forming an Alaska Corporation will allow you to take advantage of tax benefits. For instance, you’ll be able to avoid double taxation by choosing to pass-through taxation into your personal expenses.

5) Establishes Perpetual Existence.

Perpetual Existence simply means that you’ll be able to ensure the continuation of your Alaska Corporation despite of circumstances which includes the death of an owner, transfer and selling of shares and many other situations that may affect the business.

6) Develops the credibility of the business.

Trust is important when doing business and incorporating gives you an added boost of credibility. Having an extension in your name such as an LLC or Inc. will gain the trust of consumers or partners. The fact that they’re dealing with a legit and legally registered company is an assurance on their part as buyers.


Cons to Forming an Alaska Corporation

1) Many Corporate formalities.

As mandated by law, Corporations are required to follow certain Corporate formalities. These formalities are designed to fully establish the Corporation as a separate entity which has its own rights and transactions. Corporate formalities may include regular meetings of directors, keeping records of corporate activity, and others.

2) Involves numerous paperworks.

You need to file more paperwork than you would if you were to file an LLC. Some of them include the Articles of Incorporation, certificates, bylaws, corporate minutes and other regular paperworks mandated by law.

3) Tax filing is more tedious.

Tax filing as a Corporation is more tedious because you need to file a different tax forms and you will not have the right to claim personal tax credits. Aside from this, business losses are only applicable to the business, they will not give you any benefit such as in the case of your personal taxes.

Now that you’ve read the pros and cons of forming an Alaska Corporation, I hope that you are fully convinced on the importance of the process. While it has its own share of disadvantages, if you weigh them in closely, you can clearly see that the pros outweigh the cons.

If you haven’t decided to incorporate yet, think hard so you’ll be able to make the right decision because the status in which you’ll operate as a business is very important. If you need another option, I’d highly recommend looking into filing an LLC instead.

Please be aware that this is not legal advice – it is solely an informational guide. For details on how to form a Corporation in Alabama or starting a business in Alaska, a lawyer has the best answers for you.

About Liesha Petrovich

Liesha is a small business owner of 20 years, host of Startup Savant, the owner of a karate dojo in Maine, and creator of Work Mobly. During free time she's with her family and working on a Doctorate in Entrepreneurship.