Form an LLC in Alabama

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Form an Alabama LLC

STEP 1: Name your LLC

Choosing a company name is the first and most important step in starting your 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.

After registering a domain name, consider setting up a professional email account (@yourcompany.com). Google's G Suite offers a business email service that comes with other useful tools, including word processing, spreadsheets, and more. Try it for free

FAQ: Naming an LLC

What is an LLC?

LLC is short for Limited Liability Company. It is a simple business structure that offers more flexibility than a traditional corporation while providing many of the same benefits. Learn more here.

Watch our 2 minute video: What is an LLC?

Do I need to get a DBA or Trade Name for my business?

Most LLCs do not need a DBA. The name of the LLC can serve as your company’s brand name and you can accept checks and other payments under that name as well. However, you may wish to register a DBA if you would like to conduct business under another name. Learn more here.

STEP 2: Choose a Registered Agent

You are required to nominate a 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 authorized to transact business in Alabama. You may elect an individual within the company including yourself.

Learn more about the role of a registered agent and why you should consider hiring a professional service.

TIP

Recommended: Incfile provides the first year of registered agent service free with LLC formation ($49 + State Fees)

FAQ: Nominating a Registered Agent

Can I be my own Registered Agent?

Yes. You or anyone else in your company can serve as the registered agent for your LLC. Learn more here.

Is a Registered Agent service worth it?

Using a professional Registered Agent service is an affordable way to manage government filings for your LLC. For most businesses, the advantages of using a professional service significantly outweigh the annual costs. Learn more here.

STEP 3: File the Certificate of Formation

To register your LLC, you will need to file the Certificate of Formation with the State of Alabama. This can be done online or by mail.

Now is a good time to consider whether your LLC will be member-managed or manager-managed. We recommend learning more about these two options before you file.

File the Certificate of Formation

OPTION 1: File Online with the State of Alabama

File Online


OR


OPTION 2: File by Mail

Download PDF


State Filing Cost: $200 online, or $100 by mail, payable to Secretary of State + a county probate judge fee. (Nonrefundable)

Instructions: See below.

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

What is the processing time to form my Alabama LLC?

10 days online or by mail, but may be expedited for an additional fee.

What is the difference between a domestic Alabama LLC and foreign LLC?

An LLC is referred to as a "domestic LLC" when it conducts business in the state where it was formed. Normally when we refer to an LLC we are actually referring to a domestic LLC. A foreign LLC must be formed when an existing LLC wishes to expand its business to another state. If you are filing as a Foreign Alabama LLC learn more here.

STEP 4: Create an 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.

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Recommended: Use our free Operating Agreement Tool to draft a customized operating agreement for your LLC.

FAQ: Creating an Operating Agreement

Do I need to file my operating agreement with the state?

No. The operating agreement is an internal document that you should keep on file for future reference. However, many states do legally require LLCs to have an operating agreement in place.

STEP 5: Obtain 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. Learn more here.

Get an EIN

Option 1: Request an EIN from the IRS

Apply Online


OR


Option 2: Apply for an EIN by Mail or Fax

Download Form

Mail to:
Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999

Fax:

(855) 641-6935


Fee: Free

FAQ: Getting an EIN

How do I get an EIN if I don’t have a social security number?

An SSN is not required to get an EIN. You can simply fill out IRS Form SS-4 and leave section 7b blank. Then call the IRS at 267-941-1099 to complete your application. Learn more here.

What tax structure should I choose for my LLC?

When you get an EIN, you will be informed of the different tax classification options that are available. Most LLCs elect the default tax status.

However, some LLCs can reduce their federal tax obligation by choosing S corporation status. We recommend consulting with a local accountant to find out which option is best for you.

Considering Using an LLC Formation Service?

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State Taxes for your Alabama LLC

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 sellers 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.

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Register for Alabama State Taxes

Sales Tax | Unemployment Insurance Tax | Withholding Tax

FAQ: Additional Taxes

What is the Alabama Business Privilege Tax?

There is a Business Privilege Tax for each LLC formed in Alabama which varies depending upon your LLC’s income, learn more here.

Critical Steps After Forming a Business

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.
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Recommended: Compare the best small business checking options in this review from Startup Savant.

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.

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.
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Recommended: Consider hiring a reliable service to help simplify your bookkeeping, accounting and tax filing. We recommend two accounting services:

Alabama Business Permits and Licenses

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.

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Recommended: If you are a first-time entrepreneur, consider having a professional service research your business’ licensing requirements. Our friends at Startup Savant have reviewed and ranked the top five license research services.

Insuring Your Business

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.
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How much will the right insurance cost you? Click here to find out. Analytics pixel

Hiring Employees

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

Find more information at the Alabama Department of Labor.

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Recommended: A payroll service saves you time and makes it easier to follow these requirements.

Gusto has a great payroll service for small businesses

FAQ: Hiring Employees

What is the minimum wage in Alabama?

The minimum wage in Alabama is $7.25 per hour

How often do I need to pay employees?

There are no regulations specified in Alabama on pay frequency.

We understand that creating an LLC and getting your business up and running comes with many challenges. To help you succeed, we compiled the best local resources in every major metro area in Alabama. You can get free assistance in the following areas:

Maintain your Alabama LLC

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.

Get a Business Privilege License

Get an Alabama Business Privilege License

List of Probate Judges

Alabama - Business Licensing Section


Fee: Varies by County - Dependent on Population (Nonrefundable)

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.

File your Alabama Privilege Tax

File by Mail with the Alabama Department of Revenue

Download Form


Fee: $100 or More Depending On Your Business' Income

Instructions: Follow the steps provided by the Alabama Department of Revenue which can be found here.

FAQ: Business Privilege Tax

Alabama Business Privilege Tax Brackets

  • If your LLC’s annual income is between $1 and $200,000, your BPT rate is .00100
  • If your LLC’s annual income is between $200,000 and $500,000, your BPT rate is .00125
  • If your LLC’s annual income is between $500,000 and $2,500,000, your BPT rate is .00150
  • If your LLC’s annual income is more than $2,500,000, your BPT rate is .00175
  • The Maximum BPT amount is $15,000 (except for business insurance companies or Financial Institution Groups).

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.

Order a Certificate of Good Standing

Request a Certificate of Compliance Online through the Alabama Department of Revenue

Order Online


Fee: $10 (Nonrefundable)

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.

More Information

Report LLC Income

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

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Read our LLC Tax Guide to learn more about federal income taxes for LLCs.

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 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.

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Recommended: Incfile offers a reliable registered agent service and excellent customer support.

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.

Register as a Foreign LLC in Alabama

OPTION 1: File Online with the State of Alabama

File Online

Select "Non-Subscriber", located down the page, to begin application


OR


OPTION 2: File by Mail

Download PDF


Fee: $150 by Mail, $250 Online (Nonrefundable)

Mail to:

Office of the Secretary of State

PO Box 5616

Montgomery, AL 36103

Read More About LLCs and How To Run A Business