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 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 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 (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.
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
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. An LLC is one of several business structures, such as a sole proprietorship, partnership, and corporation (C-Corp and S-Corp). For more information, read our What is an LLC guide.
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.
To Learn more about DBAs in your state, read our How to File a DBA guide.
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.
TIPRecommended: ZenBusiness provides the first year of registered agent service free with LLC formation ($39 + State Fees)
FAQ: Nominating an Alabama registered agent
Can I be my own registered agent in Alabama?
Yes. You or anyone else in your company can serve as the registered agent for your Alabama LLC.
Read more about being your own registered agent.
Is a registered agent service worth it?
Using a professional registered agent service is an affordable way to manage government filings for your Alabama LLC. For most businesses, the advantages of using a professional service significantly outweigh the annual costs.
For more information, read our article on Alabama registered agents.
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, 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.
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
What is the processing time to form my Alabama LLC?
10 days online or by mail, but can be expedited for an additional fee.
What is the difference between a domestic 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.
Read our What is a Foreign LLC article to learn more.
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.
Recommended: Download a template or create a Free Operating Agreement using our tool.
FAQ: Creating an Alabama LLC Operating Agreement
Do I need to file my operating agreement with the state of Alabama?
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: Get an Alabama LLC EIN
What is an EIN? The Employer Identification Number (EIN), Federal Employer Identification Number (FEIN), or Federal Tax Identification Number (FTIN), is a nine-digit number issued by the Internal Revenue System (IRS); an Employer ID Number is used to identify a business entity and keep track of a business’s tax reporting. It is essentially a social security number (SSN) 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.
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 Alabama LLC EIN
What tax structure should I choose for my Alabama 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 the S corporation (S corp) status. We recommend consulting with a local accountant to find out which option is best for you.
Considering Using an LLC Formation Service?
We reviewed and ranked the top 5 LLC formation services.
Find out which is best for you.
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 Alabama 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.
Recommended: Learn more about the best small business credit cards.
Get 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 (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.
How much will the right insurance cost you? Click here to find out.
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:
- Formal name of your business
- Your signature
- Your name
- 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.
Learn more on how to protect your business & personal assets by reading our article - How to Maintain your LLC Corporate Veil.
Keep Your Company Compliant
Alabama LLC 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 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.
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.
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.
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 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 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)
Read our LLC Tax Guide to learn more about federal income taxes for LLCs.
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 the local County Probate Judge.
Get a Business Privilege License
Get an Alabama Business Privilege License
Fee: Varies by County - Dependent on Population (Nonrefundable)
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' 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.
Recommended: ZenBusiness offers a reliable registered agent service and excellent customer support.
Get Help Starting a Business in Alabama
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:
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 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 compliance posters and place them in visible areas of your work space
Find more information at the Alabama Department of Labor.
Recommended: Check out our Hiring for your Small Business Guide for resources like sample job descriptions, payroll service reviews, and more.
FAQ: Hiring Employees in Alabama
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 in Alabama?
There are no regulations specified in Alabama on pay frequency.
Accounting For Your Alabama 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.
Recommended: QuickBooks has all the accounting features your small business will need.
Try QuickBooks for free
Interfacing with Clients and Customers
In the day-to-day of running a business, it's hard to be readily available for new clients or customers who want to contact you. For service-based businesses that don’t already have a brick-and-mortar location, a virtual office can solve this problem. You can get a dedicated business mailing address and a business phone number with call-forwarding so that you never need to worry about losing a potential customer.
Recommended: Opus Virtual Office can set up your businesses with a live receptionist and all the perks of a virtual office for a great price of $99/month. Plus, as a visitor of HowToStartanLLC, you can save $200 today.
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.
TRUiC has created video guides to support and reinforce our on-page guides. These videos help to visualize the ideas and lessons that you need to know to create and run a successful business.
Check out our growing library of small business videos on the TRUiC YouTube channel.
Foreign LLCs 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
How to Obtain a Certificate of Good Standing
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.
Order a Certificate of Compliance
Request a Certificate through the Alabama Department of Revenue
Fee: $10 (Nonrefundable)
Dissolve Your Alabama LLC
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 two broad steps:
- 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.