How to Start an LLC in Alabama

Forming an LLC in Alabama is easy

To form an LLC in Alabama, you will need to obtain a Certificate of Name Reservation, then file a Certificate of Formation with the Alabama Secretary of State through your local Judge of Probate Office. You can apply online for $200 or by mail for $100, plus probate office fees. The Certificate of Formation is the legal document that officially creates your Alabama Limited Liability Company. 

Follow the step-by-step guide below to start your Alabama LLC today and get your business up and running.

STEP 1: Name your Alabama LLC

Choosing a company name is the first and most important step in starting your Alabama LLC. Be sure to choose a name that complies with Alabama naming requirements and is easily searchable by potential clients.

1. Follow the naming guidelines:

• Your name must include the phrase “limited liability company” or one of its abbreviations (LLC or L.L.C.).
• Your name cannot include words that could confuse your LLC with a government agency (FBI, Treasury, State Department, etc.).
• Restricted words (e.g. Bank, Attorney, University) may require additional paperwork and a licensed individual, such as a doctor or lawyer, to be part of your LLC.

2. Is the name available in Alabama? Make sure the name you want isn't already taken by doing a name search on the State of Alabama website.

3. Reserve the name. You must complete the name reservation request online or by mail with the Alabama Secretary of State. (Fee: $28 online, $10 by mail).

4. Is the URL available? We recommend that you check to see if your business name is available as a web domain. Even if you don't plan to make a business website today, you may want to buy the URL in order to prevent others from acquiring it.

FAQ: Naming an LLC

STEP 2: Choose a Registered Agent in Alabama

You are required to nominate an Alabama Registered Agent for your Alabama LLC.

What is a Registered Agent? A registered agent is an individual or business entity responsible for receiving important legal documents on behalf of your business. Think of your registered agent as your business' point of contact with the state.

Who can be a Registered Agent? A registered agent must be a resident of Alabama or a corporation, such as a registered agent service, authorized to transact business in Alabama. You may elect an individual within the company including yourself.

TIP

Recommended: Incfile provides the first year of registered agent service free with LLC formation ($0 + State Fees)

FAQ: Nominating a Registered Agent

STEP 3: File the Alabama LLC Certificate of Formation

To register your LLC in Alabama, you will need to obtain a Certificate of Name Reservation, then file a Certificate of Formation with the Alabama Secretary of State through your local Judge of Probate Office. You can do this online, in-person, or by mail. Some states refer to the Certificate of Formation as the Articles of Organization or Certificate of Organization.

The Certificate of Formation for an LLC (limited liability company) in Alabama is a legal document to officially form your business. You’ll be expected to provide the name of your LLC, choose a registered agent, include a copy of the Name Reservation Certificate, list the services your LLC will offer, and pay the state filing fee. After you file the Articles of Organization, we recommend you obtain an Employer Identification Number (EIN) if you plan to hire employees and open a business bank account. 

When filing the Certificate of Formation for your Alabama LLC, you will need to state whether your LLC will be member-managed or manager-managed. Read our guide about member-managed and manager-managed LLCs before you file.

How to File Online

Select "non-subscriber" and fill out the online form.

Note: If you wish to subscribe to Alabama Interactive, the annual fee is $95. However, this service is designed for attorneys, serial entrepreneurs, and real estate investors who need to track many LLCs simultaneously. It is not recommended for most LLC owners.

How to File by Mail

Mail the following to the Office of the Judge of Probate in your Registered Agent's county:

• One (1) signed original Certificate of Formation document
• Two (2) completed copies
• $100 check payable to the Secretary of State
• Additional check payable to the Judge of Probate's Office in your Registered Agent's county. Exact fee varies by county. Contact your local Probate Office for more information.

Note: DO NOT mail any of these documents or payments directly to the Secretary of State. Your local Probate Office will submit all payments and paperwork on your behalf.

If you’re expanding your existing LLC to the State of Alabama, you will need to form a Foreign LLC.

FAQ: Filing LLC Documents

STEP 4: Create Your Alabama LLC Operating Agreement

An operating agreement is not required in Alabama, but it's a good practice to have one.

What is an operating agreement? An operating agreement is a legal document outlining the ownership and operating procedures of an LLC.

Why are operating agreements important? A comprehensive operating agreement ensures that all business owners are on the same page and reduces the risk of future conflict.

For more information on operating agreements, read our Alabama LLC operating agreement guide.

FAQ: Creating an Operating Agreement

STEP 5: Get an EIN

What is an EIN? The Employer Identification Number (EIN), or Federal Tax Identification Number, is used to identify a business entity. It is essentially a social security number for the company.

Why do I need an EIN? An EIN is required for the following:

• To open a business bank account for the company
• For Federal and State tax purposes
• To hire employees for the company

Where do I get an EIN? An EIN is obtained from the IRS (free of charge) by the business owner after forming the company. This can be done online or by mail.

NOTE

FOR INTERNATIONAL APPLICANTS: you do not need an SSN to obtain an EIN. For more information, read our guide on how to obtain an EIN as a foreign LLC.

FAQ: Getting an EIN

Protect Your Business & Personal Assets

Business Banking for Personal Asset Protection

Using dedicated business banking and credit accounts is essential for personal asset protection.

When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your LLC is sued. In business law, this is referred to as piercing your corporate veil.

You can protect your business with these two steps:

1. Opening a business bank account:

• Separates your personal assets from your company's assets, which is necessary for personal asset protection.
• Makes accounting and tax filing easier.

2. Getting a business credit card:

• Helps you separate personal and business expenses.
• Builds your company's credit history, which can be useful to raise capital later on.

Get Insurance

Business insurance helps you manage risks and focus on growing your business. The most common types of business insurance are:

• General Liability Insurance: A broad insurance policy that protects your business from lawsuits. Most small businesses get general liability insurance.
• Professional Liability Insurance: A business insurance for professional service providers (consultants, accountants, etc.) that covers against claims of malpractice and other business errors.
• Workers' Compensation Insurance: A type of insurance that provides coverage for employees’ job-related illnesses, injuries, or deaths.In Alabama, businesses with five or more employees are required by law to have workers' compensation insurance. Note that officers and LLC members are counted as employees. Get a free quote with ADP.

Properly Sign Legal Documents

Improperly signing a document as yourself and not as a representative of the business can leave you open to personal liability. When signing legal documents on behalf of your company, you could follow this formula to avoid problems:

1. Formal name of your business
2. Your signature
3. Your name
4. Your position in the business as its authorized representative

See the image below for an example.

This ensures that you are signing on behalf of your LLC and not as yourself.

Keep Your Company Compliant

Alabama Business Permits and Licenses

Do I need business licenses and permits?

To operate your LLC you must comply with federal, state, and local government regulations. For example, restaurants likely need health permits, building permits, signage permits, etc.

The details of business licenses and permits vary from state to state. Make sure you read carefully. Don't be surprised if there are short classes required as well.

Fees for business licenses and permits will vary depending on what sort of license you are seeking to obtain.

• Find out how to obtain necessary licenses and permits for your business or have a professional service do it for you:
• Federal: Use the U.S. Small Business Administration (SBA) guide.
• State: Use the State of Alabama's Licensing Section.
• Local: Contact your local county clerk and ask about local licenses and permits.

Alabama LLC Tax Requirements

Depending on the nature of your business, you may be required to register for one or more forms of state tax. This can be done online through the Alabama Department of Revenue.

Sales Tax

If you are selling a physical product, you’ll typically need to register for a seller's permit through the Alabama Taxation website.

This certificate allows a business to collect sales tax on taxable sales.

Sales tax, also called "Sales and Use Tax," is a tax levied by states, counties, and municipalities on business transactions involving the exchange of certain taxable goods or services.

Read our sales tax guide to find out more.

Employer Taxes

If you have employees in Alabama, you will need to register for Unemployment Insurance Tax through the Alabama Department of Labor. You will also need to sign up for Employee Withholding Tax through the Alabama Department of Revenue website.

Federal LLC Tax Requirements

Most LLCs will need to report their income to the IRS each year using:

• Form 1065 Partnership Return (most multi-member LLCs use this form)
• Form 1040 Schedule C (most single-member LLCs use this form)

Alabama Business Privilege License

In Alabama all businesses are required to purchase an annual license to do business known as the Business Privilege License. You must purchase a license in every county where you do business. Licenses can be purchased from the local County Probate Judge.

Alabama Business Privilege Tax

Every LLC that conducts business in Alabama is required to submit an annual PPT form, or privilege tax form for pass-through entities, before the third week of April. This tax is between 0.00025% - 0.00175% of the net worth of your LLC. The exact tax rate depends on your business' income during the previous taxable year. The minimum Business Privilege Tax amount is $100.

Avoid Automatic Dissolution

LLCs may face fines and even automatic dissolution when they miss one or more state filings. When this happens, LLC owners risk the loss of limited liability protection. A quality registered agent service can help prevent this outcome by notifying you of upcoming filing deadlines and by submitting reports on your behalf.

Make Running Your Business Easier

After starting a business, two of the most important things you can do are get professional accounting and hire the right employees. Streamlining these processes can save you time and money as your business grows.

Hiring Employees

If you plan to hire employees, stay compliant with the law by following these steps:

• Verify that new employees are able to work in the US
• Report employees as "new hires" to the State
• Provide workers' compensation insurance for employees
• Withhold employee taxes
• Print compliance posters and place them in visible areas of your work space

Find more information at the Alabama Department of Labor.

FAQ: Hiring Employees

Accounting For Your LLC

It’s critical to get your books in order-- even if you haven’t officially opened for business. A well-managed accounting system will help you:

• Track your business finances, including bills, expenses, and income.
• Simplify your annual tax filings.

The right software makes accounting easy. Look for software that:

• Syncs with your bank automatically.
• Matches transactions to invoices, bills and purchase orders.
• Can be accessed from your phone.

Women in Business Tools and Resources

If you have a woman-owned business, many resources are available to help you concentrate on your business’s growth:

• Funding - (ie. grants, investors, loans)
• Events - (ie. conferences, meetups)
• Guides - (ie. business formation, personal growth)
• Support - (ie. advice, communities, business strategies)

Our information and tools will provide educational sources, allow you to connect with other women entrepreneurs, and help you manage your business with ease.

More Information

Alabama Foreign LLCs

Forming a foreign LLC allows your company to operate as one entity in multiple states. If you have an existing LLC and want to do business in Alabama, you will need to register as a foreign LLC. This can be done online or by mail.

Register as a Foreign LLC in Alabama

Forming a foreign LLC allows your company to operate as one entity in multiple states. If you have an existing LLC and want to do business in Alabama, you will need to register as a foreign LLC. This can be done online or by mail.

How to Obtain a Certificate of Good Standing

A Certificate of Good Standing, known in Alabama as a Certificate of Compliance, verifies that your LLC was legally formed and has been properly maintained. Several instances where you might need to get one include:

• Seeking funding from banks or other lenders
• Forming your business as a foreign LLC in another state
• Obtaining or renewing specific business licenses or permits

You can order an Alabama LLC Certificate of Compliance online.

Dissolve Your Alabama LLC

If at any point in the future you no longer wish to conduct business with your LLC, it is important to officially dissolve it. Failure to do so in a timely fashion can result in tax liabilities and penalties, or even legal trouble. To dissolve your LLC, there are two broad steps:

• Close your business tax accounts
• File the Articles of Dissolution

When you are ready to dissolve your LLC, follow the steps in our Alabama LLC Dissolution Guide.