Having an LLC in Alabama is a better and cheaper option than having other business structures. A limited liability company (LLC) reduces the owners’ personal liability and protects their personal assets. One can start an LLC in two ways, domestic LLCs or foreign LLCs (LLCs in more than one state). By following some basic steps, you can easily form an LLC in Alabama.
On this page, you’ll learn about the following:
- How to Start an LLC in Alabama
- After Starting Your Alabama LLC
- Alabama Foreign LLC
- Why Start an LLC in Alabama
- Top 5 Businesses in Alabama
- Alabama LLC Formation Review
How to Start an LLC in Alabama
An LLC or a Limited Liability Company is a hybrid business entity combining a corporation’s characteristics with a partnership or sole proprietorship. It separates your personal assets from your business assets, thus giving you personal asset protection. This section gives you a step-by-step guide on how to start an LLC in Alabama.
Step 1: Decide a Name for Your LLC
Deciding on a business name is the first step to start an LLC. In Alabama, before you name your LLC, it is important to note a few things. Firstly, make sure the name is available to use. If the name is available, then check if the name complies with all the Alabama business naming requirements. Once you pass through them, you can successfully name your business.
Why do you need a proper business name?
If you want your LLC to have special identification, your company name is essential. However, many people face lots of issues by avoiding focus on choosing a business name for their LLC business formation filings.
Because of this, here are some of the major benefits of choosing the best LLC corporate names.
- To help establish a company’s presence in the market, a proper business entity type will help you. This also creates a new identity that will resemble your LLC.
- After you’ve properly chosen the name for your LLC, you will have no problems finishing the registration process and government filings.
- You can only get the EIN number when you have your name registration certificate with you.
Requirements when deciding a name for your LLC
LLC Name Search: A business name search is required to check if the desired name is available or not. If the name is available then the business owner has to fill up a name reservation form and send it to the Secretary of State, Alabama. To do the name search, one has to visit the Business Entity Search page on the official Secretary of State website. Send the name reservation form to the below address by mail to reserve your LLC name in Alabama. The cost of a name reservation is $10.
Important Quick Links:
Secretary of State
P.O. Box 5616
Montgomery, AL 36103
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Step 2: Assign a Registered Agent in Alabama
A registered agent could be a person or business entity that will act or work on your behalf. This person or business will receive significant tax forms, legal documents, a notice of lawsuits, and other official government correspondence in the registered office in Alabama. Choosing an Alabama registered agent for your LLC is required.
Make sure your registered agents are residents of Alabama. It could also be a business. Here are the recommended agents and employees for you:
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Note that availing of the services of professional registered agents would be your best option since you are guaranteed that whoever is handling your legal affairs knows their stuff well. You will enjoy peace of mind and focus only on running your business, as the ‘professionals’ take care of all legal matters.
These LLC formation services are recommended registered agent services as they are authorized to conduct business in Alabama. Compare them to check the best yet cheapest option for you. Besides, they can guarantee you professional services like compliance service, business license report service, and business name reservation service, because they have been in the business for years.
Step 3: File Certificate of Formation in Alabama
A Certificate of Name Reservation is needed to file your Alabama formation certificate or what is also called Certificate of Formation. You need to make reports of this certificate with the Alabama Secretary of State. You may file them online or by mail. You will incur a one-time cost of $200, which makes up the majority of the LLC cost in Alabama. That is topped with other expenses, of course.
This Certificate of Formation is a legal document needed to form your business officially. It will indicate details about your LLC in Alabama, like if it is a member-managed or managers-managed.
Before you start filings, you must already have your LLC name and registered agents or employees. You will attach a copy of your Name Reservation Certificate along with a list of the services that your Alabama LLC will offer.
How to File Online
Go to the Secretary of State Online Service. Select “non-subscriber.” Fill out the online form. The website will alert you if your county does not support online filings after selecting your principal county. To know more about online filing, visit the Alabama Certificate of Formation.
How to File by Mail
Download Alabama Limited Company Certificate of Formation. Mail it along with the following to the Office of the Judge of Probate:
- Signed original Certificate of Formation document + 2 completed copies
- One copy of your Name Reservation approval letter
- A check for $100 payable to the Secretary of State
- Another check payable to the Judge of Probate’s Office is needed. Fees could vary per county, so contact your local Probate Office for more information.
Mail To: Secretary of State
P.O. Box 5616 M
Montgomery, Alabama 36103-5616
Step 4: Create Your Alabama LLC Operating Agreement
An operating agreement is a document that legally outlines the proprietorship and operating procedures of your LLC This document is vital as it ensures that all business owners are on the same page regarding how they operate, thus reducing future conflicts.
You are not required to have a comprehensive LLC operating agreement in Alabama when starting an LLC, but it is ideal to have one that contains all details of your business operation. This document would be useful if you decide to dissolve Alabama LLC later.
Step 5: Filing an Alabama LLC EIN
The Employer Identification Number or, simply, the E.I.N. is a nine-digit number given by the Internal Revenue Service (IRS) to make it easier to identify types of business for tax purposes and taxes in general. It is like a Social Security number dedicated to a business’ taxes. The EIN is necessary for any active business or any form of business for that matter.
To obtain EIN (aka FEIN) one has to fill up a form (Online or by mail) and submit it to the IRS. Before sending the form, ask for EIN Assistant. Enter details of your LLC, and finally complete the form and send it to the address given.
Mail to: Internal Revenue Service, Attn: EIN Operation, Cincinnati, OH 45999
Fax: (855) 641-6935 | Fee: Free
Note: You don’t need a Social Security number when getting an EIN. You can proceed to fill out I.R.S. Form SS-4 and leave section 7b blank. You must then call the IRS at (267) 941-1099 to complete your application. Agents or employees will help you with that.
And that’s all! Congratulation, you are now done with all the necessary steps to form your Alabama LLC. If you still haven’t used a professional service from here, I strongly recommend having one to handle the remaining tasks.
After Starting Your Alabama LLC
After forming your LLC, there are still some things that you will need. Take note of the following:
- Get a company business bank account
- File Alabama business permits & licenses
- Get liability for business and professional liability insurance with coverage for employees
- File a Alabama LLC annual report or biennial report
- Already existing LLCs that wish to operate in Alabama must register as Alabama foreign LLC.
This page has provided you with steps to LLC formation and filing processes. You now have to remember upcoming filing deadlines and filing fees or filing costs, including fees for late filings to make sure your LLC is up-to-date.
Alabama Foreign LLC
To register an Alabama foreign LLC, one has to file the foreign LLC formation certificate with the Secretary of State, Alabama. Forming a foreign LLC allows you to operate your business in more than one state in the USA as a single business entity. Check Alabama Foreign LLC to know more about having a foreign LLC.
Why Start an LLC in Alabama
Alabama state is located in the southeast part of the United States. It is popularly known as the Cotton State. Having states like Florida, Georgia, and Tennessee bordered around. With remarkable diversification in the economy, Alabama has witnessed a post-world war II boom in finance, technology business, manufacturing, and so on.
Having a limited liability company in the United States brings out a handful of benefits. Alabama, among all other states, offers its own sets of advantages. It is much easier and reasonably cost-effective to have an LLC in Alabama, especially for foreign entrepreneurs. Following are the advantages of starting an LLC in Alabama,
Starting an LLC or start-up in Alabama gives you several tax benefits. There are some major tax credits that an entrepreneur can expect while setting up their business in the state of Alabama.
- Investment Credit – Businesses can get up to 1.5% credit for the total qualified capital investment in a year. As much as investments take place in Alabama, it leads to more job creation and employment opportunities.
- Small Business and Agribusiness Credit – Under Section 40-18-390, the small businesses and agribusinesses in Alabama may receive income tax credits up to $1,500. Corporations having less than 75 employees will be qualified for this tax credit in Alabama.
- Dual Enrolment Tax Credit – Any business in Alabama that encourages education or technical employment programs will be eligible to have this tax credit. A business investing in education and a career-oriented field may get a 50% tax credit in Alabama.
No Residencial Requirement
To start an LLC in Alabama, entrepreneurs do not have to reside in the state. This is extremely helpful for foreign LLCs. All they need is a registered agent having a permanent address in Alabama.
Alabama Enterprise Zone Act
Under this act, any LLC located in Enterprise zones in Alabama will receive local tax benefits. Places like Monroe, Bullock, Greene, Winston, and others fall under the Enterprise Zone in Alabama.
Other than these advantages, the state offers easy and affordable filing, compliances, management, and such. You will separate personal assets from business assets and liabilities while having an LLC in Alabama.
Top 5 Businesses in Alabama
When we talk about starting an LLC in Alabama, we look for businesses that make a significant contribution to the state’s economy. Here’s a list of the Top 5 Businesses in Alabama:
Technology is the topmost business sector in Alabama that grows every day. The state hosts a bunch of tech companies in the past few years. From cybersecurity, data centers to the production of hardware, the state has become the heart of the technology business compare to the neighboring states. About 300 tech companies are running their business in Alabama currently.
Another topmost business in the state of Alabama is the Automotive industry. The state has grabbed the 5th position in the USA for manufacturing light-weighted trucks and small cars. Be it car manufacturing or production of the automotive spare parts sector, Alabama has it all.
More than 900,000 companies are operating in Alabama, according to the report published in 2013.
The chemical industry in Alabama has also significantly grown in recent past years. More than 200 chemical manufacturing units are operating in Alabama today. Alabama is in the second position in exporting chemicals like chlorine, stabilizers, oxidants, and so on.
The Aeronautics business is another sector to look forward to. The growing sector has started in the year 1910 with the establishment of Civilian Flight School by the Wright Brothers. Since then, the state is hosting several aeronautics manufacturing companies.
Finally, Forestry Business is the last but not the least sector in our top-5 list. Being at the top position in producing Paper and Pulp, the forestry industry produces around $15 billion products every year. Timberland in the state is the largest in the whole United States of America.
Some low-cost profitable businesses in Alabama for startups:
- Online selling
- Digital Marketing – SEO consulting
- Graphic Designing
- Website building
Apart from these, some other options are Garden maintenance, pet care, cleaning, and taxi service can be good options for low-cost businesses.
Alabama LLC Formation Review
Time needed: 5 minutes.
Just to recap, here are the easy steps again when forming an LLC in Alabama. Click on the steps in this list to read the full detail.
- Name your Alabama LLC
The first thing you must do is to choose a company name, which should be unique, easy to find, and available in the state.
- Choose a registered agent
In Alabama, it is mandatory to select a registered agent for your LLC. You can check out our list of our 5 Best LLC Services in the United States.
- File a formation certificate
Filing a formation certificate is necessary when forming an LLC. Depending on the state, it could be called any of the following: Certificate of Formation, Articles of Organization, or Certificate of Organization.
- Create operating agreement
An operating agreement is not a strict requirement but something encouraged when you start an LLC.
- Get an EIN
The Employer Identification Number (EIN), also called Federal Tax Identification Number, serves to identify a business entity like a social security number but for a company.
How Fast Can I Form an LLC in Alabama
How fast can I form an LLC in Alabama? The process is much like that of any other state. The owner must register the business with the state and obtain the proper licenses and permits. Next, the owner must designate a Registered Agent and set up a tax filing system. Aside from that, the owner must get an EID for tax purposes. After completing all these steps, the LLC can be formally incorporated.
The process of forming an LLC in Alabama is quite simple. The first step is to sign and file an Alabama LLC certificate. Then, you must submit a name registration certificate and an appointment schedule to the state’s Department of Revenue. Then, you must file a report with the state to show that your LLC is operating correctly and is registered. Finally, you must submit an annual report to the IRS within 2.5 months after the formation date.
In order to register your LLC, you must file your articles of organization with the Alabama Secretary of State. The Alabama Department of Revenue will issue a certificate of formation to the new business within a few weeks. You must submit the balance sheet of the business as well as the Alabama Form BPT-IN within 2.5 months after you’ve formed your LLC. You’ll also need to pay a $200 fee to file your LLC in Alabama.
If you are a resident of Alabama, then you can file your LLC by yourself. However, it is always worth having a professional than doing it yourself to handle legal complexities, paperwork, and other documentation.
Apart from the formation fee of $208 (domestic LLC) and $156 (foreign LLC), LLC costs in Alabama include $100+ for Annual Reports every year. LLCs are liable to pay sales tax of 4% every year
It takes 10 business days to get an LLC in Alabama if you file it online or via mail. With additional charges, this can be done sooner.
Every year all the LLC have to submit an Annual Report and pay $100+ to the Alabama Secretary of State and renew the LLC. It is mandatory to renew your LLC every year.
Generally, for the LLCs, it is a default tax structure. Once you will obtain the EIN, you will get the various tax structure options to select. Sometimes LLCs choose S Corp to reduce federal tax burdens.