How to Start a Business in Alaska: Accounting and Taxes Checklist

A hands-on portable guide advising Alaska small-business owners on how to set up an accounting and tax system.

A business opportunity in Alaska is new and exciting, but good accounting and tax practices are needed right from the start. This Alaska business accounting checklist will guide you along the essential steps to establish reliable bookkeeping, manage tax obligations, and keep sensitive records in order so that work can go off without a hitch and legal risks are reduced.

Select a structure and document the decisions made

The first accounting decision you will make is choosing a legal structure (sole proprietor, partnership, corporation, or limited liability company). That choice has consequences for tax treatment, liabilities and bookkeeping. Record your election in the formation paperwork and retain a copy of registration or operating/ partnership agreement in your financial file. These papers will essentially dictate how you report income and what accounts you’ll keep tabs on.

Get an employer identification number and open business accounts

Seek an identification number for tax and payroll purposes. Name an account for your business’s bank and credit accounts to keep personal money separate from you’re financing you’re company, it makes bookkeeping a lot easier and shields liability. Book the first investment in the business as owner’s capital or loan on your chart of accounts.

Create a unique chart of accounts for your business

Create a list of accounts by category (assets, liabilities, equity, income and expenses). Use transparent account names for your revenue streams as well for your cost of goods sold, payroll expenses, rent expense and utility expense, marketing and professional fees, and tax liabilities. By organizing the chart of accounts you can close months faster and prepare taxes more accurately.

Create some bookkeeping habits and record flows

Choose a bookkeeping method (cash or accrual) and streamline the way invoices, receipts and bills are handled. Set up a cycle for entering transactions daily or weekly, reconciling bank and credit card statements monthly and reviewing financial statements. File original receipts and essential papers in well-labeled folders, and paralelly store digital copies with standardized files names.

Understand local tax obligations

Sale and Use Tax Alaska does not have a state sales tax, but some local jurisdictions levy sales or use taxes. Find out in which municipalities you're liable for taxes, and make sure of any unique local tax rates or filing regulations. Keep track of taxable sales separately on your books so that reporting for local taxes is accurate. Also be sure to look for any local licensing and business privilege taxes that might come into play with your fillings.

Configure payroll and employee type

If you have employees, then register for payroll tax withholding and unemployment accounts on an as-needed basis. Properly classify workers as employees or independent contractors; misclassifications can result in penalties and back taxes. DEDUCT Federal and any applicable State Taxes and Report Employer Payroll Liabilities and Expenses. Keep track of payroll information such as wages withheld amounts and tax deposits.

Plan for estimated and quarterly tax payments

For many small businesses, estimated taxes are due on a quarterly basis. Figure out what your projected taxable income will be, and pay estimated amounts on time so you don’t incur penalties. Keep a separate big time liability account for your estimated tax payments and record the adjustment redeemed, so that there is no year-end reconciliation to do.

Keep an eye on deductible expenses and inventory statements

Maintain accurate information on deductible business expenses including supplies, repairs, utilities, travel and professional fees. If you're a business with merchandise to sell, find inventory tracking solutions that work well for your accounting method and the way in which you calculate cost of goods sold. Precise expenses and inventory tracking cuts down on the danger of missed deductions, and enhances your analysis of gross margin.

Process payments to and information returns for contractors

Of course, when you pay 1099 contractors be sure to keep good records and give the required tax forms at year-end (if necessary). Monitor payments to all contractors over the course of the year for proper reporting before you are surprised come tax time.

Monitor fixed assets and depreciation

Record purchases of long-term assets – equipment, vehicles and furniture – in property accounts and monitor accumulated depreciation. Set capitalization thresholds for when purchases are depreciated or expensed right away. Depreciations also help in accurate valuation of taxes and give more transparent financial statements.

Maintain strong internal controls

Establish basic internal controls to avoid errors and fraud: divide duties when possible, mandate approvals for large disbursements, and reconcile accounts on a monthly basis. Maintain good documentation on all major transactions and check your bank reconciliations and financial reports often.

Get ready for annual reports and state filings

Even with the clouded ownership, most companies are required to file periodic reports with state authorities and pay filing fees. Maintain a record of filing deadlines, license renewal and report due dates. Filing on time will also avoid potential late penalties and administrative headaches.

All records should be kept neatly for any possible audit.

Keep records and tax returns in an organized fashion for the time periods indicated above. If there is ever an audit, a well-kept accounting system with all the proper documentation will make the process shorter and safer.

Check your financial reports and pivot as necessary.

Evaluate performance with monthly P&L (profit and loss), balance sheet, and cash flow statements. Analyze actual versus budget results and implement pricing, cost monitoring or staffing changes as appropriate. Financial check-ins allow you to make decisions from a place of proactive planning rather than reaction.

Seek periodic professional guidance

Although there’s plenty of the checklist owners can do themselves, an accountant or tax adviser should also take a look at your approach to make sure it remains tax-efficient and meets all current and future rules. Schedule reviews at significant levels of business: start-up, first year profitable, and/or bringing on payroll or change in ownership.

Final checklist summary (quick reference)

• Legal structure in place and registrations filed
• EIN was secured and business bank account set up
• Book keeping Schedules and reconciliations set up
• Tracking of local tax duties and obligations
• Maintaining Payroll and worker classifications are set
• Quarterly estimated tax plan established
• Keep statistical records of deductible expenses and inventory methods applied
• Contractor payments documented
• Tangible fixed assets at historical cost and provision for depreciation including technical/ industrial know-how.
• Internal controls established
• Record of filings and renewals kept
• Records kept and available for review
• Monthly financial reviews scheduled

Starting with this Alaska business accounting checklist will minimize other compliance risk, inform you about how your business is performing and allow you to focus more on making it grow. Indeed, solid recordkeeping and proactive tax planning transform accounting from a chore to a tool for smarter decision-making.