How to Start an LLC in Alabama | 2024 Guide

Start a LLC in Alabama

How to Start an LLC in Alabama: If you’re looking to launch a business in Alabama, starting a Limited Liability Company (LLC) may be the right choice for you. An LLC provides personal liability protection for its owners while giving them flexibility in managing and taxing the business. This guide provides a step-by-step process for starting an LLC in Alabama. From choosing a unique name to registering with the state and obtaining necessary licenses and permits, Webinarcare Editorial Team will walk you through setting up your new business entity. So grab a pen and paper, and let’s get started!

What is a Limited Liability Company?

A Limited Liability Company (LLC) is a type of business entity that combines a corporation’s limited liability protection with a partnership’s tax benefits. LLCs are popular among small business owners for their flexibility and ease of formation. In Alabama, an LLC must have a unique name and file Certificate of Formation with the Secretary of State. Depending on their business needs, LLCs may also elect to be taxed as a corporation or an S-corp. Owners of an LLC, called members, are not personally liable for the company’s debts and losses, and the company’s profits and losses are passed through to the member’s personal tax returns. This makes an LLC an attractive option for those seeking personal liability protection and simplified taxation.

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Steps on How to Start an LLC in Alabama

To form an LLC for your business, you must follow the guidelines that include naming your LLC, hiring a Resident Agent, filing your Certificate of Formation, creating your LLC operating agreement, getting an employer identification number, opening a bank account and getting business licenses and permits.

Step 1: Name your LLC in Alabama

After you have decided on the idea to form an LLC in Alabama, deciding the name for your LLC is significant. There is a complete guide on LLC name guidelines for you to have a proper LLC business name. Here are some regulations you must follow while naming your LLC,

  • The name should not be confused with a government entity.
  • The name should be unique.
  • The name should be available to use.
  • Any other business does not use the name.
  • The new name must include “LLC” if it is a limited liability company.

In Alabama, if you do not wish to file your LLC right away but want to hold the name that you have decided on, then you can reserve your LLC name for 1 Year. You must file a name reservation application in Alabama Secretary of State to keep the name.

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You can register your business under a different legal name if your preferred name isn’t available. Once you have chosen a name, you can submit an application for filing Alabama DBA (doing business as). In this manner, you can choose any name you desire for your business. A DBA allows a company to operate under the name of the person or entity who owns it. If you have decided to file for a DBA, you can file it in three methods, online, by mail, and in person filing. However, before filing a DBA, you should know that you need to renew your DBA from up to five years, which costs around $30.

Step 2: Hire a Resident Agent in Alabama

Hiring a Resident Agent in Alabama is a must since a Resident Agent is a person or business entity responsible for receiving important legal documents on behalf of your Alabama LLC. Most states require you to designate a Resident Agent when forming your LLC.

The qualifications of a Resident Agent vary depending on the jurisdiction. Still, generally, a Resident Agent must meet the following criteria:

  • Availability: A Resident Agent must be available during regular business hours to receive and process legal documents and official correspondence.
  • Physical Address: A Resident Agent must have a physical street address within the state where the LLC is registered. This address, known as the registered office, cannot be a P.O. Box.
  • Residency or Authorization: For individuals serving as Resident Agent, they must be residents of the Alabama where the LLC was formed. A business entity acting as a Resident Agent must be authorized to do business within that state.
  • Age: A Resident Agent must be at least 18 years old.
  • Good standing: A Resident Agent should not have any legal or financial issues that impede their ability to fulfill their duties.

Choosing a reliable and responsible Resident Agent is essential, as failure to receive and respond to legal documents can seriously affect your business. Some businesses use professional Resident Agent services to ensure compliance and proper handling of legal matters.

However, if you would like to have an easier process in filing the necessary documents, you can get Alabama Resident Agent Services.

Step 3: File your Certificate of Formation in Alabama

The Certificate of Formation for an LLC is an important document to start your limited liability company (LLC). Alabama Certificate of Formation is a simple document that contains the business name and address as well as the name and address of the person who received lawsuits on behalf of the organization.

Here are the guidelines and specific requirements in filing your Certificate of Formation in Alabama.

1. Obtain the Necessary Forms: Visit the Alabama’s business filing office website, usually the Alabama Secretary of State’s office, to download the required forms or file online.

2. Provide the Required Information: Fill in the necessary details in the form, which typically include:

  • The name of your LLC (must include an LLC designator such as “LLC,” “L.L.C.,” or “Limited Liability Company”)
  • The purpose of your LLC (a general statement or specific business activities)
  • The address of your LLC’s principal place of business
  • The name and address of your registered agent (the person or business entity responsible for receiving legal documents on behalf of your LLC)
  • The management structure of your LLC (member-managed or manager-managed)
  • The duration of your LLC, if not perpetual
  • The names and addresses of the LLC’s organizers or members

3. Sign and File the Form: Submit the completed form in the {state} state office, either by mail, in person, or online. You may mail it at Secretary of State, P.O. Box 5616, Montgomery, AL 36103.

4. Pay the Filing Fee: When you submit your Certificate of Formation, you’ll need to pay a filing fee of $200. Make sure to check and include the correct payment with your submission.

5. Receive Confirmation: After your Certificate of Formation have been filed and processed, you’ll receive a confirmation from Alabama, typically a stamped and approved copy of the document or a Certificate of Formation.

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Once you have successfully filed your Certificate of Formation and it has been approved, your Alabama LLC is officially formed. However, remember to complete additional steps, such as creating an Operating Agreement, obtaining an EIN, and registering for any required licenses and permits.

Step 4: Create Your Alabama Operating Agreement

An operating agreement is a document that contains all of your company’s organizational details. Drafting an operating agreement in most states is not required. Yet, having one as an internal document is strongly advised. An operating agreement includes information like-

  • About Business
  • Members and management
  • Capital contribution
  • Profit Distribution
  • Change of membership
  • Dissolution

To understand how an operating agreement works, you should check out how to create an operating agreement in Alabama.

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Step 5: Get an EIN

After documenting the operating agreement, you should get or request an Employer Identification Number (EIN) in Alabama. An EIN will serve as the tax ID for your professional corporation. EIN can be obtained from the Internal Revenue Service (IRS). It is a 9-digit number similar to Social Security Number. EIN, however, is distinct from SSN. It is only used for business-related activities, particularly for submitting general taxes. The form must be completed and uploaded to the IRS website.

The application of an EIN in Alabama can be through the following:

  • Apply Online- The online EIN application is the preferred method for customers to apply for and obtain an EIN.
  • Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that the Form SS-4 contains all of the required information.
  • Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is four weeks.
  • Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

In obtaining an EIN for your LLC, you should be aware to ensure that your LLC is eligible for an EIN. You need an EIN if you have employees, operate as a corporation or partnership, or meet other specific IRS criteria. Before applying, gather the required information, including your LLC’s name, mailing address, and the responsible party’s Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN). Also, you can apply for an EIN through various methods, including online, by fax, mail, or telephone (for international applicants).

Recommended: Professional services have the EIN included in their LLC formation package. We recommend using –

ZenBusiness($0 + State Fee for LLC formation)

Step 6: Open a Bank Account and Prepare for Taxes

After you have filed for and received your Employer Identification Number, you should open a bank account because you will use this account for yourself, your clients, and your employees.

Your business dealings in Alabama might be simpler with a US business bank account because it boosts your company’s legitimacy and liquidity. Most banks demand an EIN to create a business bank account for firms other than sole proprietorships. Also, having an EIN makes tax preparation easier. You can anticipate paying employment and corporate taxes with Alabama LLC.

Opening a bank account is necessary for Alabama business. If you are still wondering where to open an account in your Alabama, you should check the Best Bank for Small Business in Alabama.

Step 7: Get a Business and License Permit

You must get a business license in Alabama before establishing your LLC. A business license is a legal document granted by a state government body that permits you to conduct business within the area under its jurisdiction. The price of business licenses and permits in Alabama ranges from $50 – $300. If there is a requirement for a specific license or city-based permit, you must inquire with the Alabama Secretary of State.

Cost to Form an LLC in Alabama

Even if you have a business name and structure in mind, you should consider whether you can afford the costs of forming an LLC in Alabama. Certificate of Formation costs around $200. The initial filing fee is $200 (by mail and $208 online), and the annual fee is $100.

If you forget to pay the annual fee for your Alabama LLC, you will have a penalty of $25. However, you can check the Alabama LLC Cost for additional information.

Advantages of Creating Alabama LLC

Even though some people decide on what to do with their businesses, some choose to put it in their own individual name, while others still choose to set it up via LLC in Alabama. Important benefits will help you set up an LLC in Alabama.

  • Pass-Through Taxation: The pass-through structure will make the company not pay twice the tax. Most start-ups and entrepreneurs in Alabama apply for an LLC because of this structure. Pass-through taxation refers to how income and losses from an LLC (Limited Liability Company) are passed through to its members (owners) for tax purposes rather than being taxed at the business entity level. This means the LLC does not pay federal income taxes; the members’ profits and losses are allocated based on their interests. Each member then reports their share of the LLC’s income or losses on their personal tax returns and pays taxes at their individual tax rates.
  • Ownership Flexibility: If you need sole and primary control over your company’s operations, a sole proprietorship will allow you to do so. If you apply for an LLC in Alabama with flexibility, you will have default rules set by law and need an operating agreement.
  • Personal Liability Protection: Personal Liability Protection protects your business from damage, debts, or legal obligations. In personal liability protection, the company’s profits and earnings will stay as is even if your company is about to be sued. This protection of having an LLC in Alabama can also be extended to the company’s properties and assets. Many start-up companies will benefit from this since most are starting to build a company. Even if liability exists, the LLC in Alabama will protect its assets.

FAQs

What is an LLC?
LLC stands for Limited Liability Company, a type of business structure that combines the liability protection of a corporation with the simplified tax structure of a partnership.
Do I need to form an LLC in Alabama if I am already a sole proprietor?
No, forming an LLC is not required if you are already a sole proprietor in Alabama, but it may help to protect your personal assets from liability.
How much does it cost to start an LLC in Alabama?
The filing fee for LLCs in Alabama is $150.
What is the name availability check process for an Alabama LLC?
To make sure your LLC’s name is available in Alabama, you will need to check the state’s database and ensure it is not already taken.
Does my Alabama LLC need an operating agreement?
While Alabama does not require LLCs to have an operating agreement, it is highly recommended to help manage the LLC and protect personal assets.
What is a Registered Agent, and do I need one for my LLC in Alabama?
A Registered Agent is a person or entity that is designated to receive legal documents on behalf of an LLC. Alabama requires all LLCs to have a registered agent.
Can an LLC in another state do business in Alabama?
Yes, but the LLC must first register with the Alabama Secretary of State as a foreign entity.
How long does it take to form an LLC in Alabama?
The filing process for an Alabama LLC typically takes around 2-3 business days.
Can a business name be reserved in Alabama for future use in an LLC formation?
Yes, Alabama allows for name reservations for future LLC formations. The cost is $10.
What taxes does an LLC have to pay in Alabama?
Alabama LLCs are subject to a business privilege tax.
Can an LLC in Alabama have just one member?
Yes, Alabama allows for single-member LLCs.
Do I need to publish a notice of my LLC formation in Alabama?
Alabama LLCs do not require publication notice in the newspaper.
How do I dissolve an LLC in Alabama?
To dissolve an LLC in Alabama, file articles of dissolution with the Secretary of State and pay any outstanding debts or taxes.
What is the LLC annual report filing fee in Alabama?
The fee for filing the annual report for an Alabama LLC is $100.
Can an LLC in Alabama be taxed as an S Corporation?
Yes, LLCs can choose to be taxed as an S Corporation for federal tax purposes.
Do I need to file a foreign LLC form in Alabama if my business is registered in another state but doing business in Alabama?
Yes, foreign LLCs doing business in Alabama must register with the Secretary of State.
How long does an LLC formation last in Alabama?
LLC formation in Alabama is permanent unless dissolved or merged with another company.
Can a non-resident start an LLC in Alabama?
Yes, non-residents can start an LLC in Alabama.
Is there a publication requirement for Alabama LLCs?
No, there is no publication requirement for Alabama LLCs.
Can an LLC act as its Registered Agent in Alabama?
No, an LLC cannot act as its registered agent. Alabama requires a separate agent to receive legal documents on behalf of the LLC.
Can you use a PO Box instead of a street address when filing to create an Alabama LLC?
No, a PO Box is not accepted as a valid address when filing to create an Alabama LLC. A physical street address is required.
How do I make changes to my LLC’s registered agent in Alabama?
Changes to an LLC’s registered agent must be made by filing a Certificate of Change of Registered Agent form with the Alabama Secretary of State.
Are LLCs in Alabama subject to sales tax?
LLCs in Alabama may be subject to sales tax depending on the type of business conducted.
What is the requirement for other filings for a domestic LLC formation in Alabama?
Other filings for domestic LLC formation include the Certificate of Formation and Operating Agreement.
Is there a residency requirement for registered agents in Alabama?
No, there is no residency requirement for registered agents in Alabama.
How often does my Alabama LLC need to file an annual report?
Alabama LLCs need to file an annual report every year.
Can an Alabama LLC have multiple owners?
Yes, multi-member LLCs are allowed in Alabama.
Are Alabama LLCs required to adopt bylaws?
No, bylaws are not required for an Alabama LLC, although they can be helpful.
Are there any special naming requirements for LLCs in Alabama?
Alabama LLCs naming requirements include including “LLC” or “L.L.C.” in the official name.
What is an LLC in Alabama?
An LLC in Alabama is a limited liability company, which is a type of business entity that combines the benefits of a corporation with those of a partnership.
How do I form an LLC in Alabama?
To form an LLC in Alabama, you must file Articles of Organization with the Alabama Secretary of State.
What is the filing fee for Articles of Organization in Alabama?
The filing fee for Articles of Organization in Alabama is $166.
What are the requirements for naming an LLC in Alabama?
In Alabama, your LLC name must end with words or abbreviations that indicate the company is an LLC, such as “LLC,” “L.L.C.,” “Limited Liability Company,” or “Ltd. Liability Co.”
Can I reserve a name for my LLC in Alabama?
Yes, you may reserve a name for your LLC in Alabama by filing an Application for Reservation of Entity Name with the Secretary of State.
How long does the name reservation last in Alabama?
The name reservation in Alabama lasts for 120 days.
How many members can an LLC have in Alabama?
An LLC in Alabama may have any number of members.
What is a registered agent in Alabama?
A registered agent in Alabama is a person or entity appointed by the LLC to receive legal documents on its behalf.
Do I need a registered agent for my LLC in Alabama?
Yes, every LLC in Alabama must have a registered agent.
Can I be my own registered agent in Alabama?
Yes, you can be your own registered agent in Alabama if you have a physical address in the state to receive legal documents.
How much does a registered agent service cost in Alabama?
The cost of a registered agent service in Alabama varies, but it typically ranges from $50 to $300 per year.
What is an LLC operating agreement in Alabama?
An LLC operating agreement in Alabama is a legal document that outlines the management structure, ownership, and rules of an LLC.
Is an LLC operating agreement required in Alabama?
No, an LLC operating agreement is not required in Alabama, but it is recommended.
How do I obtain an EIN for my Alabama LLC?
You can obtain an EIN for your Alabama LLC by applying online through the IRS website or by submitting Form SS-4 by mail, fax, or phone.
What taxes does an Alabama LLC need to pay?
An Alabama LLC is required to pay state income tax, sales tax, and federal income tax.
What is the single-member LLC tax classification in Alabama?
Single-member LLCs in Alabama are automatically classified as disregarded entities for federal tax purposes.
Can an LLC in Alabama elect to be taxed as an S corporation?
Yes, an LLC in Alabama can elect to be taxed as an S corporation if certain eligibility requirements are met.
How does an LLC in Alabama dissolve?
An LLC in Alabama can dissolve voluntarily by following the procedures outlined in the operating agreement or by a majority vote of the members.
Can an LLC in Alabama be reinstated after dissolution?
Yes, an LLC in Alabama can be reinstated after dissolution by filing an Application for Reinstatement with the Secretary of State and paying any relevant fees.
What fees does an LLC in Alabama need to pay annually?
In Alabama, an LLC must pay a $100 annual fee for the privilege of doing business in the state.
What is the Alabama Department of Revenue?
The Alabama Department of Revenue is the state agency responsible for administering tax laws in the state.
Do LLCs in Alabama need to file an annual report with the Alabama Department of Revenue?
No, Alabama LLCs do not need to file an annual report with the Alabama Department of Revenue.
Can I form an LLC online in Alabama?
Yes, you can form an LLC online in Alabama by submitting Articles of Organization through the Alabama Secretary of State website.
Can I amend the Articles of Organization for my LLC in Alabama?
Yes, you can amend the Articles of Organization for your LLC in Alabama by filing an Amendment of Articles of Organization with the Secretary of State.
Can I add members to my existing LLC in Alabama?
Yes, you can add members to your existing LLC in Alabama by following the procedures outlined in the operating agreement or by a majority vote of the current members.
Can I change the name of my LLC in Alabama?
Yes, you can change the name of your LLC in Alabama by filing a Certificate of Amendment to the Articles of Organization with the Secretary of State and paying any relevant fees.
Can an LLC in Alabama have managers instead of members?
Yes, an LLC in Alabama can have managers instead of members if its operating agreement permits it.

Also Read

How Fast Can I Form an LLC in Alabama

Forming an LLC in Alabama is an exciting yet daunting task for many aspiring entrepreneurs. With the promise of limited liability protection and potential tax benefits, it’s no wonder why more and more individuals are opting to create their own limited liability company. However, one of the crucial questions that arise in this process is, “How fast can I form an LLC in Alabama?”

The answer to this question is not as straightforward as one might think. Forming an LLC in Alabama involves several steps that must be completed accurately and in a timely manner. Like in any other state, the process of forming an LLC in Alabama starts with selecting a business name that complies with the state’s regulations. Once a suitable name is chosen, the next step is to file the necessary paperwork with the Alabama Secretary of State’s office.

Filing the formation documents, which usually include the Articles of Organization, is a crucial step in the process of forming an LLC in Alabama. This document provides basic information about the LLC, such as its name, address, registered agent, and organizer. It is essential to ensure that the information provided in the Articles of Organization is accurate and up-to-date, as any errors or omissions could result in delays or rejection of the filing.

After filing the necessary paperwork with the Secretary of State’s office and paying the required fees, the LLC formation process moves forward when the Secretary of State reviews and approves the Articles of Organization. The review process can take varying amounts of time, depending on the overall workload of the office and any additional requirements specific to the LLC being formed.

Once the Articles of Organization are approved, the LLC is considered officially formed in the state of Alabama. However, there are additional steps that need to be taken to ensure that the business is in compliance with all state laws and regulations. These steps may include obtaining the necessary business licenses and permits, obtaining an employer identification number (EIN) from the Internal Revenue Service, and creating an operating agreement outlining the management and operation of the LLC.

Overall, the time it takes to form an LLC in Alabama can vary depending on several factors, including the accuracy and completeness of the formation documents, the workload of the Secretary of State’s office, and any additional requirements specific to the LLC being formed. While some LLCs may be formed in as little as a few days, others may experience delays that extend the formation process by several weeks or even months.

In conclusion, forming an LLC in Alabama is a process that requires careful attention to detail and patience. While some may be able to form their LLC quickly and efficiently, others may encounter delays that can prolong the formation process. By understanding the steps involved in forming an LLC and taking the necessary precautions to ensure compliance with all state laws and regulations, aspiring entrepreneurs can set themselves up for success in their business endeavors.

Conclusion

In conclusion, starting an LLC in Alabama is a strategic choice for entrepreneurs seeking a flexible, straightforward business structure with limited liability protection. By following the essential steps, including choosing a business name, filing a Certificate of Formation, appointing a Resident Agent, creating an Operating Agreement, obtaining an EIN, and securing the necessary licenses and permits, you can successfully establish your LLC. We recommend using ZenBusiness as they offer LLC formation at $0.

This business structure offers numerous advantages, such as pass-through taxation and ownership flexibility, making it an attractive option for small business owners looking to grow and protect their ventures. As always, consult legal and business professionals for guidance specific to your situation and state requirements.

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