Interested in forming an LLC or Alabama Series LLC, but don’t know where to start?
In this article, we’ll talk about how to form an Alabama LLC, paying attention to practical aspects such as the LLC application and required fees. In addition, here are some useful LLC resources and key requirements to keep your company in good standing with the state. Just follow this LLC guide and you can open an LLC in Alabama in full compliance with state law.
Let’s get started!
Choosing a name is one of the earliest and most important steps to form an LLC, which has a great impact on its growth and development. Your Alabama LLC name must reflect the specifics of the company, meet its philosophy, and, of course, be legal. The basic criteria the state imposes on LLC names are as follows:
There are hundreds of LLCs operating in Alabama, so you can use a convenient free search to check the availability of your desired name. Visit the Business Entity Records page on the Secretary of State’s website and enter the necessary information.
When the results of your search show that your chosen option is available, then you can operate in Alabama by filing Formation Documents. However, if the search shows any matches, you should either choose the business name again or make significant changes, which include the following:
However, there are some minor changes, which do not increase the uniqueness of the name:
The Alabama legislation requires all LLCs to submit a “Name Reservation Request Form for Local Entities” along with the Formation Documents. Previously, this form had to be filed several weeks before the official registration, but since 2021, the new rules have been applied.
You can also apply for the name reservation if you have the perfect name but don’t plan to start an LLC yet. For a reasonable fee, the state will retain your chosen name for one year.
The cost of the mandatory processing fee for the name reservation form depends on how it is submitted.
This is the quickest option, as your application will be processed immediately. Visit the Secretary of State’s Online Services page, select “Name Reservation,” and enter all the necessary information.
The mandatory fee is $28.
In addition, you can mail a printed and completed Name Reservation Request Form along with a $10 check to the Secretary of State:
Office of the Secretary of State
PO Box 5616
Montgomery, Alabama 36103
An Operating Agreement is an LLC internal document designed to set forth its management structure, basic principles, and procedures.
Although an Alabama Operating Agreement is optional for an LLC, it provides the following benefits to business owners:
There is no universal form for the Operating Agreement, but it often includes the following points:
You can get an Operating Agreement in two ways:
Opening an Alabama business checking account is an important step in setting up a company since it provides the following opportunities:
You can open a business bank account at any bank you like. Generally, it requires the following documents:
To conduct LLC business in Alabama, you need to appoint and maintain a registered agent. This person is the representative of your company in the state and ensures its stable interaction with the government.
The main functions of a registered agent include obtaining and handing over to the owner of the LLC such important official papers as:
The registered agent information is listed in the company’s formation documents and is also public. The business owner has the right to designate any individual or legal entity that meets the statutory criteria for this role.
A professional Alabama registered agent is the most reliable and efficient option. By choosing one of the Best Registered Agent Services, you will get quality service and flawless documentation of the company at an affordable price. Some of these websites, like IncFile, are not only willing to provide one year of free registered agent service with the purchase of any package, but also open your business for $0.
Any person over the age of 18 with a physical address in the state can become a registered agent for an LLC, regardless of experience or education. Please note that a mailbox is not enough. Furthermore, a registered agent should be available during normal business hours at the address of the LLC’s registered office.
To effectively start a new LLC in Alabama, you have to apply for an EIN, which is a unique 9-digit code used to identify an LLC in the IRS records.
Although there is no legal requirement to obtain an Employer Identification Number to run an Alabama LLC, most companies need one. In particular, the EIN comes in handy if you:
You can apply for an EIN for Alabama LLC free of charge by mail, fax, or online.
To get your EIN within about four business days, download Form SS-4 to your computer, fill the form out, print it out, then send it to:
The IRS accepts the online EIN application between 7 a.m. and 10 p.m. EST, Monday through Friday. Your EIN number will be available as soon as you fill out the form. Keep in mind though, you need a valid individual taxpayer number, such as a Social Security Number, to complete the process.
Ready to wait about four weeks? Then print the completed Form SS-4 and mail it to the address:
Internal Revenue Service Operation
Attn: EIN Operation
Cincinnati, OH 45999
The key element in the Alabama LLC registration process is the filing of the Certificate of Formation with the Secretary of State. Remember to include a completed “Name Reservation Request Form for Local Entities” with the Formation Documents.
Until 2021, you had to file a copy of your Alabama LLC Certificate of Formation with the county’s probate judge, but Act 2020-73 eliminated that requirement.
Usually, you need to enter the following basic information to fill out the Certificate of Formation:
To formally commence business in Alabama, you can submit a Certificate of Formation and Name Reservation Request Form in one of the ways below:
Download the original application to your computer, fill it out following the instructions, and then print the form out. There is a mandatory Certificate of Formation and Name Reservation Request Form processing fee of $228, which can be paid by check. All materials should be sent to:
Alabama Secretary of State
600 Dexter Ave S- 105,
Montgomery, AL 36130, U.S.
Online filing is a more convenient and faster method, allowing you to open a business in two business days. However, in this case, the state fee will be $236.
Tax flexibility allows the owners to choose how the company is taxed, but most of them stick with the default option. This assumes that the LLC acts as a “pass-through” tax unit. In this case, the obligation to pay federal taxes is transferred to the owners, who put the profits and losses from the business into personal 1040 tax returns and/or Schedule C.
As for LLC taxes in Alabama, all state-registered companies are required to file a Business Privilege Tax Return and Annual Report with the Department of Revenue. This way, your Annual Report is already included in the Business Privilege Tax, which makes it easier to comply with the annual reporting requirement.
According to Alabama LLC Tax Filing Requirements, the deadline for paying tax is the first three and a half months of the company’s tax year. The rate is determined by federal taxable income but cannot be less than $100.
The first filing of the Business Privilege Tax Return and Annual Report must be made within two and a half months of the LLC’s incorporation. The Form BPT-IN should be used for this purpose.
In all other cases, LLC businesses in Alabama file a Business Privilege Tax Return and Annual Report with Form BPT-V. If you don’t make the payment, the document should be sent to the address below:
Alabama Department of Revenue
Business Privilege Tax Section
PO Box 327431
Montgomery, AL 36132-7431
For return and payment:
Alabama Department of Revenue
Business Privilege Tax Section
P.O. Box 327320
Montgomery, AL 36132-7320
In addition to Alabama State Taxes, there are taxes that vary depending on the nature of your business. The most common ones include Unemployment Tax, as well as Sales and Use Taxes, which require registration with the Department of Revenue website. Besides, most LLCs also need to pay Withholding Tax through the Department of Labor website.
For your company to officially start operating, it is usually necessary to obtain licenses or permits. Their type, number, and cost depend on the specifics of your business and its location. The most popular types of LLC licenses in Alabama are as follows:
The Business Privilege License is only valid for one year. It expires on September 30, so it is important to apply for renewal in a timely manner.
There may also be additional specific or professional licenses available at the city or county level. To learn more about this, visit your local government website.
Now you know how to launch an LLC in Alabama and can easily handle the entire process yourself by following this guide.
Nevertheless, if you want to save time or just don’t like paperwork, consider hiring one of the professional online formation services. Their prices are affordable even for small businesses, and their high-quality services have been confirmed by thousands of clients. Any of these online companies will make setting up your business quick and efficient, as well as provide a wide range of useful value-added services. For example, an LLC setup service, such as IncFile, includes a free registered agent for an Alabama LLC for one year in all its formation packages and the cheapest one costs only $0.