LLC in Alabama: Want to form an LLC in Alabama but not quite sure how? Don’t worry, forming an LLC in Alabama is similar to forming LLC in any other state. But of course, it differs in certain rules and regulations. So for the Successful formation of an LLC in Alabama, you’ll have to fulfill the state’s requirements. Just follow these simple 7 steps and you’ll be good to go.
An LLC in Alabama basically links an organization’s limited liability with the pliability and shortage of formalities. All these are offered by any sole proprietorship or association.
We would recommend setting up an LLC in AL for any entrepreneur whose objective is to restrict liability for professional lawsuits and debts.
Not from Alabama? Learn to form an LLC in any other State.
Tip of the Day: Alabama LLC formation by yourself is mostly hectic and time taking. Hiring a reliable LLC formation service is not only a good choice, but saves you from overspending. Therefore we recommend you to:
Now, what is an LLC? A Limited Liability Company (LLC) unites the best of partnerships, sole ownerships, and corporations into one organizational entity providing full protection against liabilities, tax incentives or flexible business structures, etc.
It only costs almost 200 USD to initiate an LLC in Alabama.
All you’ve to do is to submit a certificate of your new business to the State Minister. An entrepreneur can either apply online, drop a mail, or visit the office in person to build a new LLC.
In this article, we will explain the LLC formation method in Alabama. So let’s get started!
Outlining the LLC Formation Process
- Pick a Name for Your Alabama LLC
- Find a Registered Agent
- Submit the Articles of Organization
- Establish an LLC Operating Agreement
- Follow the Tax and Other Administrative Requirements
- Fulfill Your State Tax Commitments
- Submit Annual Reports
Next, we are going to discuss the steps one by one to make it clear for all of the viewers and new entrepreneurs.
#1: Pick an LLC Name
The first and foremost part of building an LLC in AL is to pick up the right name for the company. Try to select a name that corresponds to Alabama standards and is conveniently accessed by prospective customers.
What Instructions Should Be Followed While Naming an LLC?
- Every business owner should include “Limited Liability Company” in his new company or the abbreviation of it, LLC.
- Avoid using words that can mystify your LLC name with the government agencies, such as State Organizations, Treasury, FBI, etc.
- Make sure to choose a unique name from other corporations, Alabama LLCs, or limited liability parties.
- If you want to fit in a few confined words like an attorney, bank, university, etc., it might demand hiring a licensed lawyer or doctor for additional documentation.
The next step is to verify access to your chosen name in Alabama. Make sure if the name is still available or utilized by another entity.
You can visit Alabama’s official state website to check on Business Registry Search. Furthermore, one can also generate a name through an LLC Name Generator online.
#2: Find a Registered Agent
Another vital step is to find a reliable Registered Agent to form an LLC in AL.
There are some limitations when choosing a registered agent in Alabama. The person should be an Alabama inhabitant who would be able to perform your business tasks from within the state.
You may also nominate yourself for the official documentation, but we personally recommend going for ZenBusiness. Besides offering a free first year of their registered agent services, the company will form your Alabama LLC only for $100 plus $50 as the state filing fees.
#3 File an Articles of Organization
During the formation of an LLC in AL, it’s crucial to submit your AL articles of organization linked with the Secretary of State. A general article should cover the following:
- Name and web address of your LLC’s planner
- The official name and address of Alabama LLC
- Details of your LLCs registered entity
- Details of your company members
- The official LLC emails
- Entrepreneur’s signature
To file your certificate of organization online you need to complete the online application at the secretary of the state website. You can also download the certificate of formation form and send it to the following mailing address:
Secretary of State,
P.O. Box 5616 M2,
Montgomery, Alabama 36103-5616.
Whether you are applying online or filing the certificate of formation through the mail, you need to reserve the name for domestic entities. In the case of filing your LLC online, you can complete the name reservation after completing the online certificate of the formation process.
However, for filing through the mail, you need to complete the name reservation process first. Once you get your company’s name reserved, you can mail the certificate of formation.
DIY Cost of Forming an LLC in Alabama ($200)
The main LLC formation cost through the DIY route is the state filing fee of your Article of Organization. Currently, the state of Alabama charges you $200 for filing your LLC and it may be subjected to revision by the state. The filing fee for articles of organization is the same, regardless you submit them online or through the mail.
#4: Establish an LLC Operating Agreement
An LLC operating agreement is constitutional paperwork that sketches the rules and regulations for a new company and also outlines the entrepreneur’s operating procedures to form a new LLC in AL.
Although not necessary, creating an operating agreement will benefit a company for sure.
This legal agreement guarantees all entrepreneurs remain in the same boat, which ultimately lessens further business clashes.
#5: Follow the Similar Tax and Other Administrative Requirements
A few extra taxes and other administrative requirements might implement in your new LLC that includes:
Employer Identification Number – It is just like a Social Security Number, so if your company has more than one employee, you can get this EIN by paying extra. This nine-digit code will check into your tax issues and assist you in creating a new bank account, hiring new staff, etc. One can submit an online form at the IRS website to get an EIN for his company.
Official Licenses – Sometimes, your new LLC in Alabama might demand official state licenses or other approvals, depending on the business type and its location. So, there are Economic Resource Units in Alabama leading you to authorities to guarantee proper licensing, registration, or permissions within the state.
#6: Fulfill Your State Tax Commitments
After getting an Alabama LLC, there are several responsibilities of a business entity that should be fulfilled. For instance, in a few cases, one has to check with the Alabama Department of Revenue (ALDOR) for selling products or assembling sales tax, etc.
For your convenience, ALDOR has an online platform, so you can register yourself from there through Business Taxes Registration Application. For more information, you can review detailed LLC articles on our website.
#7: Responsibly Submit Annual Reports
All limited liability companies in Alabama, after their creation, are obliged to submit their annual (or biennial) reports. For more details on how to file an annual report, read our article on LLC annual (or biennial) reports or state-specific fees.
Due Date: In the State of Alabama, you are required to file an annual report as part of your state Business Privilege Tax return. These reports are due no later than 2.5 months after the beginning of the taxpayer’s taxable year which is usually March 15th.
Annual fee Amount: The exact tax rate in Alabama depends on your business’s income during the previous taxable year. The minimum Business Privilege Tax amount is $100 and it is calculated at a rate between 0.00025% and 0.00175% of the net worth of your LLC. Failure to file a biennial report in Alabama could result in the dissolution of your LLC.
Additional Information on Forming an LLC in Alabama
Registering as a Foreign LLC in Alabama
Entrepreneurs often form an LLC in a state other than the state of their residence to have some tax benefits and reduce LLC formation costs. Moreover, some business owners have their LLC franchises in multiple states. In such cases, they register their LLCs or franchises as foreign LLCs in all states where they operate their business.
If you have an LLC in any other state and wish to open a franchise in Alabama or want to form an LLC in Alabama while you are a non-Alabama resident, you can register your business as a foreign LLC online or mailing Foreign LLC Application at the Office of the Secretary of State, P.O. Box 5616, Montgomery, AL 36103.
Hiring Employees in Alabama
To run your business in a compliant manner, you have to follow the guidelines of the Alabama Department of Labor while hiring employees for your existing business or new LLC. Some of the major points are stated below;
- Verify the employment status of individuals such as whether the potential employee is a US resident if not then are they permitted to work in the US, are they of a certain age to work for that particular job, etc
- Report new hiring to the state
- File quarterly reports on wages and taxes
- Report job refusal
Acquiring Relevant Business Licenses and Permits to Operate in Alabama
To successfully operate your LLC in Alabama you must acquire permits and license to comply with federal, state, and local government regulations. For instance, to operate a pest control business, you need to acquire a license from the department of agriculture and fulfill the state’s certification requirement, etc.
The requirements and fees for business licenses and permits vary from state to state. Work thoroughly on prerequisites and compliance-related information for your business before officially filing your LLC with the state. However, the following resources may help;
- Hire a reliable service like ZenBusiness to do a license and permit search for you. Many LLC formation services do this as a part of their LLC formation packages.
- Visit the US Small Business Administration (SBA) guide for federal license and permit information.
- Alabama Department of Revenue’s Licensing Section helps you learn the state’s license requirements.
- Visit your local county clerk’s office and seek information about local licenses and permits.
Obtaining a Certificate of Good Standing in Alabama
A Certificate of Good Standing Alabama, aka Certificate of Compliance in Alabama, verifies that your LLC has been legally formed and is being operated and maintained in a compliant fashion. This document is needed for;
- Filing your business as a foreign LLC
- Seeking funding and investments from banks or other people
- Acquiring or renewing relevant business licenses or permits
You can request an online certificate of compliance from the Alabama Department of Revenue.
Dissolving Your LLC in Alabama
In case you no longer wish to continue your LLC in Alabama at any point in the future you must officially dissolve it otherwise you may face tax liabilities, penalties, and legal troubles. In Alabama, you can dissolve your LLC by following 3 basic steps:
We hope this article has helped you in every aspect of forming an LLC in Alabama. If you still have any questions or confusion, please ask in the comment section.
Alfie Wilson, Esq., is a legal content writer with expertise in business formation, criminal law, veterans disability, family law, DUI law, personal injury, animal welfare, and legal writing. He holds a J.D. from Emory University School of Law and has experience in appellate advocacy and regulatory matters. Alfie’s passion lies in breaking down complex legal topics for a non-lawyer audience. He currently writes for law firms and non-profits on various issues and resides in Arlington, Virginia.