How to Start an LLC in Alabama | 2023 Guide


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Start a LLC in Alabama

If you would like to start an LLC in The Yellowhammer State, there are a few things that you should consider. In Alabama, putting up a limited liability company (LLC) will benefit you and your business. Starting an LLC is attractive for many entrepreneurs looking to establish a new business. Protecting your assets and maintaining good standing in Alabama is vital.

An LLC combines the benefits of a partnership’s flexibility with the limited liability protection of a business. This business structure is particularly popular among small business owners because it offers a simplified tax structure and reduced legal formalities compared to traditional corporations. 

For you to attain and create the most vital LLC in Alabama, Webinarcare Editorial Team has published the following steps to see what we can do to help you launch your business venture. By following these steps, you’ll be well on your way to launching a successful LLC and enjoying this business structure’s advantages. Look through and digest the steps so we can make your business a success. To learn everything about starting an LLC in Alabama, I recommend reading the whole article until the end.

Steps on How to Start an LLC in Alabama

To form an LLC for your Alabama 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. To keep the name, you must file a name reservation application in Alabama Secretary of State

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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 a 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. for an easier way. However, before filing a DBA, you should know that you need to renew your DBA 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. 

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

  • Availability: The Alabama Resident Agent must be available during regular business hours to receive and process legal documents and official correspondence.
  • Physical Address: The Alabama 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 Alabama 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: The Resident Agent must be at least 18 years old.
  • Good standing: The 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 a 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 Alabama 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. It is not required to draft an operating agreement in most states. Yet, having one as an internal document is strongly advised. The Alabama operating agreement includes information like-

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

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Step 5: Get an EIN

After documenting the Alabama 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).

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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 before establishing your LLC in Alabama. Alabama 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 or an Alabama in State 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.

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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 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. 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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