How to Start an LLC in Alabama: If you’re interested in setting up an LLC in Alabama, you’ve come to the right place. Having an LLC not only protects your personal assets but also is less complicated than other business structures. Alabama laws make it easy to establish your LLC in Alabama. On this page, You’ll find all the steps that must be taken to ensure that your Alabama LLC has been correctly established. We recommend you read the whole article very carefully word by word, don’t miss anything 🙂
On this page, you’ll learn about the following:
- How to Start an LLC in Alabama
- After Starting Your Alabama LLC
- Alabama Foreign LLC
- 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.
If you wish to start an LLC in Alabama, mainly you have to file your Certificate of Formation with the State and pay a filing fee of $200. There are some more steps to follow to get your LLC established in Alabama. The following steps explain everything you need to create your LLC in Alabama in 2022. Let’s get started!
Step 1: Decide a Name for Your Alabama LLC
The very first step while forming an LLC in Alabama is to give a proper name to your LLC. Before you name your business, you must know that the name should be easy to remember, available in the state, and follows all the LLC naming guidelines.
Alabama LLC Naming Guidelines
There are a few specific requirements all the LLCs in Alabama have to follow while naming their Company. Some of the most important requirements are as follows:
- Your business name should be available and no other existing business in Alabama can have the same name. Perform a name search from the below-mentioned source to be sure your name isn’t taken already.
- “Limited Liability Company”, “LLC”, and “L.L.C.” – any one of these has to be used as a suffix in your business name.
- You cannot use any name for your business that is confusing or misleading. Terms such as “Treasury”, “State Department”, “FBI”, “CIA”, etc. shouldn’t be included.
- Terms like “Bank“, “University“, “Attorney“, “Doctor“, etc can be added only after the additional requirements by Alabama State Government are fulfilled.
- In Alabama, the name reservation has to be done at least 15 days (2 weeks) before the LLC registration process.
- (Optional) It’s better to name your business something for which your desired domain is available.
|Important Links –||Submit Offline Form to –|
|Alabama Business Entity Search – Online Name Search|
Name Reservation Form – PDF
Name Reservation Form – Online
Alabama LLC Name Search Guide – Instructions
|Secretary of State|
P.O. Box 5616
Montgomery, AL 36103
Reserve Business Name for Future
If you do not wish to file your LLC right now but want to hold the name you have decided then you can reserve your LLC name for 1 year. To keep the name, you have to file a name reservation application and pay $25 to reserve your name with the Alabama Secretary of State.
Doing Business As (DBA) or Trade Name
Once you have a legal name for your LLC, you can register it. However, it is not mandatory. You can, instead, use DBA, Fictitious Name, or Trade Name. In that case, you must register your name with the Alabama Secretary of State by submitting an Application to Register or Renew Trademark, Service Mark, or Trade Name in Alabama along with the filing fee of $30.
Recommended: You can do name search, get company logo, business domain, website, emails, and a lot more in one place by hiring a professional service. We recommend using –
Tailor Brands – ($49 + State Fees) Online LLC Setup
Tailor Brands offer DIY website templates and incredible logo designs. If you plan to get a website then it is wise to have a “.com” domain for your business but these days you can also use other TLDs like “.company”, “.xyz” etc. With Tailor Brands, you can get everything you need at an affordable price.
It is not legally mandatory to use the word LLC in your domain name or email. If you want you can use it. However, it is recommended not to use LLC in the domain name. A domain name should be short and easy to remember.
Step 2: Assign a Registered Agent in Alabama
The second step to forming an Alabama LLC is to appoint a Registered Agent. A registered agent is a person or business entity that will act or work on your LLC’s behalf. This person or business will receive important tax forms, legal documents, all notices of lawsuits, and other official government correspondence in Alabama. Hence, hiring a competent Alabama Registered Agent for your LLC is necessary.
Make sure your registered agent is a resident of Alabama or has a physical street address. Their business address or the principal address should be in Alabama. Most LLC formation companies also provide registered agent services. Below are two great LLC setup services, even if you buy their cheapest plan (normally $49/year) you also get registered agent service and other services at a reasonable price.
These LLC formation services are recommended registered agent services as they are authorized to conduct business in Alabama. Some LLC formation services offer standalone Alabama registered agent services. You can purchase only Registered Agent services from them without purchasing any other LLC formation services.
A person who is above 18 years of age and has a physical address in the state of Alabama can be a Registered Agent. A Registered Agent can be an independent person or can be a business entity. One who is responsible for handling all the legal documents.
Yes, you can be your own registered agent if you are a resident of the state of Alabama and you are above 18 years of age. To become a registered agent you must have the authority to conduct any type of business in Alabama.
Registered Agent Consent Application
In Alabama, there is no separate Consent Letter to be produced to the Secretary of State. At the time of change of Registered Agent (or the name or address), the new Registered Agent has to sign the consent letter. It comes with the Application form to Change the Registered Agent. The filing fee of $25 should be paid for it. For more information on the same, read our guide on Alabama Registered Agent.
Step 3: File Certificate of Formation in Alabama
The third and most important step in forming an Alabama LLC is to file the Certificate of Formation. This Alabama Certificate of Formation is a legal document needed to officially register your business with the Secretary of State. It costs $200 (by mail and $208 online) to file your formation certificate in Alabama. (Read more on LLC cost in Alabama).
The Certificate of Formation includes details like the name of the LLC, registered agent’s name, address, employees’ details, and structure of the company (member-managed or manager-managed). Before hiring employees in Alabama LLC, one should know about the rules and regulations thoroughly. Also if you are expanding your existing business (an LLC) to Alabama then you need to register as an Alabama Foreign LLC.
How to File Online
Go to the Secretary of State Online Service. You will get the online service page. If you are already a subscriber then click on the “log in to Subscribe Account” option and log in with your credentials. If you’re not subscribed, then you can directly start filing your LLC by clicking on the “Online Filing” button below. Read more about the Alabama Certificate of Formation for online registration.
How to File by Mail
If you prefer filing real-life forms for your Alabama LLC registration, then you can download Domestic LLC Formation Form. Read the form thoroughly, fill it out, and 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.
Secretary of State
P.O. Box 5616 M
Montgomery, Alabama 36103-5616
Processing Time: It takes around 10 business days to form an LLC in Alabama. By paying an additional fee, it can be expedited.
Recommended: Online LLC Formation service can provide all these documents within 6-8 days with lifetime customer support and 100% accuracy. We recommend using –
Tailor Brands – ($49 + State Fees) Online LLC Setup
Step 4: Create Your Alabama LLC Operating Agreement
Moving on to the fourth step, filing your 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.
When it comes to filing an Alabama LLC Operating Agreement, the state does not require you to have a comprehensive operating agreement, but it is ideal to have one that contains all the details of your business operation. Like Alabama, there are other states that do not have a mandatory rule to file operating agreements. But, this document would be useful if you decide to dissolve Alabama LLC later. Hence, having an operating agreement may not be necessary but it is definitely ideal.
Recommended: You can get operating agreement templates at only $29 with TailorBrands. You don’t need to worry about drafting it as they will take care of it on your behalf. We recommend using –
Tailor Brands – ($49 + State Fees) Online LLC Setup
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 the type of business for tax purposes and taxes in general. The EIN is necessary for any active business or any form of business for that matter.
EIN is needed when the LLC hires employees. Hiring employees in Alabama LLC requires following specific rules and regulations. On the other side, EIN for Alabama foreign LLC should be obtained if your LLC is based in other states.
To obtain EIN (aka FEIN) one has to fill up a form (Online or by mail) and submit it to the IRS. Enter details of your LLC, and finally complete the form and send it to the address given. You can also get an EIN Assistant who can help you with the process.
Mail to: Internal Revenue Service, Attn: EIN Operation, Cincinnati, OH 45999
Fax: (855) 641-6935 | Fee: Free
Recommended: This hassle will be reduced when you hire an LLC formation service. They take care of obtaining EIN and all other things for your LLC. We recommend using –
Tailor Brands – ($49 + State Fees) Online LLC Setup
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.
Congratulation, you are now done with all the necessary steps to form your Alabama LLC. If you do it yourself it should take you a long time to properly understand and do all the steps.
However, if you use TailorBrands it should take fewer hours and you always have live chat with expert support for any help you need.
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 general liability insurance and professional liability insurance with coverage for employees
- File an Alabama LLC annual report or biennial report
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.
Cost of Alabama LLC
Forming an LLC in Alabama is no doubt more cost-effective than other structures of a business. There are some fees and charges one has to bear to form an Alabama LLC. LLCs have pass-through taxation. Hence, your Alabama LLC won’t bring you a massive tax burden. Here are some of the fees and taxes are needed to be paid while forming an LLC in Alabama,
|Fees/Tax||Amount to be Paid|
|Name Reservation Fee (online)||$25|
|Name Reservation Fee (By mail)||$28|
|Certificate of Formation Fee||$200 (by mail and $208 online)|
|Business Privilege Tax||$100 (minimum)|
|LLC Annual Fee||$100|
In Alabama, an LLC name reservation is mandatory and should be done at least 2 weeks before your LLC registration. You can register your LLC name at the time of registering your LLC. If you wish to hold the name for some time without registering your LLC, then you can do that online. Your LLC name will be reserved for 1 year without registering your LLC. It can be renewed by paying $25.
In Alabama, an Annual Report has to be produced every year. It costs $100. Also, the State of Alabama requires the Business Privilege Tax each year on the third week of April. The amount of BPT depends on the LLC’s revenue. The amount is a minimum of $100. Read our guide on LLC costs in Alabama for more information.
Alabama Foreign LLC
If you are interested in forming a Foreign LLC in Alabama then you need to file the Certificate of Foreign LLC to the Alabama Secretary of State. Foreign LLCs allow you to operate your business in more than one state. Along with the Certificate of Foreign LLC, you need to submit some more documents like the Certificate of Good Standing, etc. to the Alabama SOS to form your foreign LLC in Alabama. To know more in detail, check out our guide on Alabama Foreign LLC.
Reasons to 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. Read more here on Alabama’s classification of LLC tax. 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, and data centers to the production of hardware, the state has become the heart of the technology business compared 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 a 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 started in the year 1910 with the establishment of the 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 in 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. Get a professional Registered Agent from LLC formation services like NorthWest Registered Agent to get things done hassle-free.
- File a Formation Certificate
Filing a formation certificate is necessary when forming an LLC in Alabama. Depending on the state, it could be called any of the following: Certificate of Formation, Articles of Organization, or Certificate of Organization.
- Create an Operating Agreement
An operating agreement is not a strict requirement in Alabama but something encouraged when you start an LLC to avoid future conflicts.
- 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
Setting up an LLC in Alabama usually takes 10 business days via mail or online. Taking the help from online services can speed up the process.
If you’re thinking about starting a business, you might be wondering, “How fast can I form an LLC in Alabama?” The first step in forming an LLC in Alabama is choosing a name for your new company. Make sure the name is unique and catchy to prevent copycats. You can file your LLC documents online or by mail, but be aware that the process can take a few days longer than if you choose to submit them by mail.
If you have decided to form a limited liability company in Alabama, you must first complete a Certificate of Formation. This document is the legal appointee of the business. You can also appoint a registered agent, who must be located in Alabama and be available to receive notices from the government and courts. Once you have a name for your LLC, you need to choose a registered agent. If you choose a registered agent, you can submit that person’s name and business address in the form of a certified document.
After you have selected a name for your LLC, you must also choose a registered agent, who is an Alabama resident and has a physical street address. Many LLC formation services also offer this service. Two excellent LLC setup services offer this service as part of a package. Both of these services are licensed to do business in Alabama, and can provide other valuable services like a registered agent service. You’ll also need to create a certificate of formation, otherwise known as the Articles of Organization, in order to operate an LLC in Alabama.
After selecting a name for your LLC, the next step is filing the Certificate of Formation with the Alabama Secretary of State. You can find this certificate on the state’s website. The Certificate of Formation must be signed in ink and submitted with all required attachments. You’ll then need to correspond with a Probate Judge regarding the legal documents and must pay additional fees to expedite the process. You should anticipate waiting a minimum of six months before the Certificate of Formation is approved.
The process of forming an LLC in Alabama is similar to forming an LLC in any other state. You’ll need to register your LLC with the state, obtain the required licenses and permits, designate a registered agent, set up a tax filing system, and get an EID (EIN) for tax purposes. Fortunately, the process is straightforward and fast in Alabama. If you’re not comfortable with the process, consider hiring a lawyer.
The Secretary of State website provides step-by-step instructions on forming an LLC in Alabama. The filings are processed electronically, so the process is simple and fast. Make sure the name you choose for your LLC is available and distinguishable. You can also reserve your business name online. The Alabama Secretary of State website has a database of available business names. Once you have selected the name for your LLC, you’ll need to pay a small filing fee to reserve it.
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 $200 (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. If you hire a professional LLC service, then it might take less than that. We recommend Tailor Brands which has impeccable turnaround time.
Every year all the LLCs 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. Read more on the Alabama Classification of LLC Tax.
LLCs are easier to establish than other business structures. Small businesses, especially start-ups can easily start an LLC in Alabama at a bare minimum cost. LLCs have a ‘pass-through taxation’ advantage for which they are excluded from certain taxes. The formation of limited liability companies requires much lesser documents and legal processes. Share your queries with us, and leave a comment below.