How to Start an LLC in Alabama

How to Form an LLC in Alabama

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 (in some counties) 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 How to Start an LLC in Alabama guide below to get started today.

STEP 1: Name Your Alabama LLC

Choosing a company name is the first and most important step of forming an LLC in Alabama. 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 (e.g., 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.
• Your name must be distinguishable from any other Alabama limited liability company, corporation, limited partnership, or registered limited liability partnership.

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

3. Reserve the name. You must complete the Name Reservation Request Form for Domestic Entities. This can be done online or by mail with the Alabama Secretary of State. The fee is $25.

4. Is the URL available? We recommend that you check online 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

Not sure what to name your business? Check out our LLC Name Generator. Then, create a logo with our Free Logo Generator.

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 tax forms, legal documents, notice of lawsuits, and official government correspondence on behalf of your business. Think of your registered agent as your business's 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.

Recommended: ZenBusiness provides the first year of registered agent service free with LLC formation ($39 + State Fees)

FAQ: Nominating an Alabama 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 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 a limited liability company (LLC) 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, attach a copy of the Name Reservation Certificate, list the services your LLC will offer, and pay the state filing fee.

After you file the Certificate of Formation, we recommend you obtain an Employer Identification Number (EIN) if you plan to hire employees and open a business bank account. 

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

How to File Online

Select "non-subscriber" and fill out the online form. If your county does not support online filing, the website will let you know after you choose your principal county.

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
• A copy of the Name Reservation approval letter.
• $100 check payable to the Secretary of State
• An additional check made payable to the Judge of Probate's Office in your registered agent's county. 
  • Exact fees 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.

Filing as a Foreign LLC

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

FAQ: Filing Alabama LLC Documents

STEP 4: Create Your Alabama LLC Operating Agreement

An operating agreement is not required for an Alabama LLC, 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 Alabama LLC Operating Agreement

STEP 5: Get an Alabama LLC EIN

What is an EIN? EIN stands for Employer Identification Number. EINs are a nine-digit number assigned by the Internal Revenue Service (IRS) to help identify businesses for tax purposes. It is essentially a Social Security number for a business.

An EIN is sometimes referred to as a Federal Employer Identification Number (FEIN) or Federal Tax Identification Number (FTIN).

Why do I need an EIN? An EIN is required to:

• Open a business bank account
• File and manage federal and state taxes
• Hire employees

What if I already have an EIN for my sole proprietorship? The IRS requires that sole proprietorships get a new EIN when converting to an LLC.

Where do I get an EIN? You can get an EIN for free from the IRS. Getting an EIN is an easy process that can be done online or by mail.

FOR INTERNATIONAL EIN APPLICANTS: You do not need a SSN to get an EIN. For more information, read our How to Get an EIN as a Foreign Person guide.

FAQ: Getting an Alabama LLC EIN

Important Steps After Forming an LLC

Separate Your Personal and Business Assets

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

You can start protecting your LLC in Alabama with these steps:

1. Opening a business checking account:

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

Need help finding your EIN for your bank application? Visit our EIN Lookup guide for help.

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 (e.g., small business loans) later on.

For other important steps to protect your corporate veil, like properly signing legal documents and documenting company business, please read our corporate veil article.

Find a Business Accountant

One of the main reasons that LLC’s make great business structures is the benefits of pass-through taxation and the ability to write off business expenses. Having a business-savvy accountant to help you with your small business accounting and take advantage of these benefits can literally save you and your business thousands of dollars in taxes each year.

Along with the obvious benefit of massive tax savings, a business accountant can help you to:

• Track business expenses and reconcile your bank accounts
• Discover areas of unforeseen loss or extra profit in your business
• Run payroll for you and your employees
• Prepare and submit your quarterly tax filings
• Advise on advanced business strategies for even deeper tax savings
• Avoid costly errors and ensure your business stays on the good side of the IRS

Starting a relationship with an accountant gives you a head start when it comes to running your business and keeps your finances clean in the future.

However, if you would like to run your own accounting, read our review of the best accounting software for small business.

Get Business Insurance for Your Alabama LLC

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 (e.g., consultants, accountants, etc.) that covers 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.

Read our review of the best small business insurance companies.

Send Out a Press Release

Press releases are among the easiest and best ways to promote your business. They are also one of the most cost-effective strategies as they:

• Provides publicity
• Establish your brand presence on the web
• Improve your website’s search engine optimization (SEO), driving more customers to your website
• Are a one-time cost in terms of effort and money
• Have long-lasting benefits

Read our review of the best press release distribution services.

Keep Your Company Compliant

Alabama LLC Business Permits and Licenses

Does my Alabama LLC need business licenses and permits?

To operate your Alabama 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 US Small Business Administration (SBA) guide.
• State: Use the Alabama Department of Revenue's Licensing Section.
• Local: Contact your local county clerk and ask about local licenses and permits.

Alabama LLC Tax Filing 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.

Alabama 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 Alabama sales tax guide to find out more.

Alabama 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 Filing 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)

How you pay yourself as an owner will also affect your federal taxes. Visit our guide to learn more about how to pay yourself from your LLC.

Alabama LLC 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 your local county Probate Judge.

Alabama LLC 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's 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.

Hiring Employees in Alabama

If you plan to hire employees for your Alabama LLC, 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 workplace compliance posters and place them in visible areas of your workspace

Find more information at the Alabama Department of Labor.

FAQ: Hiring Employees in Alabama

Small Business Resources

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 - (i.e., grants, investors, loans)
• Events - (i.e., conferences, meetups)
• Guides - (i.e., business formation, personal growth)
• Support - (i.e., 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.

Free LLC Legal Forms

TRUiC offers a number of free LLC legal forms to help with creating documents like:

• Operating agreements
• LLC resolutions
• Hiring documents, including:
  
  • Employment contracts
  • Independent contractor service agreements (ICSA)
  • Non-disclosure agreements (NDA)

All you’ll need to do to download the forms is sign up for the TRUiC Business Center, which is also free, forever.

How to Make a Website

Check out our how to build a website guide to learn how creating a website isn’t as difficult as it might seem. With the right tools, a good guide, and a bit of patience, you can learn how to make a website for your business in no time.

How to Build Business Credit

Learning how to build business credit can help you get credit cards and other business funding options in your business's name (instead of yours), with better interest rates, higher lines of credit, and more.

TRUiC’s Small Business Tools

TRUiC believes business tools should be free and useful. Our tools help solve business challenges, from finding an idea for your business, to creating a business plan, writing an operating agreement for your LLC, and more.

Check out TRUiC’s small business tools:

• Business Name Generator
• Business Idea Generator
• Free Logo Maker
• Operating Agreement Tool
• Business Plan Generator
• Entrepreneurship Quiz

More Alabama LLC 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.

How to Obtain a Certificate of Good Standing in Alabama

A Certificate of Good Standing, known in Alabama as a Certificate of Compliance, verifies that your Alabama 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.

How to Dissolve an LLC in Alabama

If at any point in the future you no longer wish to conduct business with your Alabama 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 Alabama LLC, there are three broad steps:

• Follow your LLC operating agreement
• Close your business tax accounts
• File the Alabama Articles of Dissolution

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