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Choosing a Structure for Native American Tribal Businesses

by | Mar 25, 2021 | Uncategorized

Any person or group wishing to start a new business must make a variety of critical decisions. After all, the actions taken early in the process of forming a business will have long-lasting effects.

Native American tribes entering the business realm must also make decisions such as choosing a legal structure under which to operate.

What is a Legal Business Structure?

Selecting a business structure involves organizing the company or business in legal terms to address issues like tax liability. In many cases, individuals choose a limited liability company or sole proprietorship as their legal structures. For Alaska native organizations and native American Indian tribes, this process is a little different because these businesses are not owned by individuals but by a recognized tribe or group.

According to the U.S. Department of the Interior Indian Affairs, there are three basic structures from which to choose:

1. IRA Section 17 Corporation

The main pros of this include:

  • Preserves a tribe or group’s assets
  • Does not impose federal taxes
  • Allows companies to issue tax-exempt bonds

The main cons include:

  • Provides little flexibility
  • Has few statutory definitions

Naturally, this structure isn’t right for everyone.

2. Tribally Chartered Corporation

The main benefits of this structure include:

  • No state taxation or control
  • Very easy to form

The main cons include:

  • Hard to attract lenders
  • May impose federal tax liabilities

Some people prefer this option over others because of the ease of formation, but the other options are worth exploring.

3. State-Chartered Tribal Corporation

The main pros of this are that they are:

  • Easy to form
  • Provide transparency for lenders, creditors

The main cons include:

  • Minimal sovereign immunity
  • Federal tax obligations
  • Cannot issue tax-exempt bonds

In and around Anchorage, Alaska, economic development is a top priority for Alaska native leaders. Starting new businesses remains an effective way of increasing economic development.

Guidance from an attorney with knowledge of Alaska Native and Native American law can help tribes and leaders choose a legal structure that meets their needs and allows the business to thrive. Working with a lawyer also gives these entities access to an advocate who can help them manage other business-related legal matters.