Annual Report and Business Privilege Tax Requirements for Alabama LLCs

What are the Alabama LLC Annual Report and Business Privilege Tax?

Every Alabama LLC operating in the state is required to file Annual Reports, known as the Business Privilege Tax Return and Annual Report, on an annual basis.

In Alabama, unlike most other states where the Annual Report is submitted to the Secretary of State, it is filed with the Department of Revenue.

You need to file two types of returns one is a one-time filing, and the other is an annual filing required every year.

The initial one-time filing is called the Initial Business Privilege Tax.

The ongoing filing is referred to as the Business Privilege Tax Return and Annual Report.

Both of these annual obligations are taxes paid to the Department of Revenue. In Alabama, there is no annual filing fee required to be paid to the Secretary of State.

Why is the Alabama Business Privilege Tax necessary?

The Business Privilege Tax and Annual Report are legal requirements for operating a business in Alabama. Essentially, this tax represents the privilege of conducting business within the state.

In short, there's no avoiding it. You must file and pay this tax annually to maintain your LLC's good standing.

How is the Business Privilege Tax rate determined?

The Business Privilege Tax is calculated based on your business's federal tax return. You determine the amount by multiplying your federal taxable income by your apportionment factor.

Next, you use this figure to reference the rate schedule and calculate the total taxes owed. Your federal taxable income is the amount reported to the LLC members.

Initial Business Privilege Tax Return (Form BPT-IN)

• Amount Due: $50 minimum
• Due By: 2.5 months after LLC formation
• Form Name: BPT-IN
• Ongoing: No, filed only once

All new LLCs are required to file an Initial Business Privilege Tax Return and pay the business privilege tax within 2.5 months of their formation. The formation date is indicated next to the signature on your Certificate of Formation.

A minimum tax of $50 is required, but you may owe more based on your federal taxable income and net worth. It is advisable to consult with a tax professional for assistance.

Before 2023, the minimum tax was $100, but it was reduced to $50 for the 2023 tax year. This means that for any amount owed of $100 or less, you will only need to pay $50.

If your Initial Business Privilege Tax Return is due in 2023 if you owe $20 or $70, you’ll pay $50. However, if you owe $101, you’ll pay the full $101.

Business Privilege Tax Return (Form PPT)

• mount due: $50 minimum
• Due by: April 15th (first filing due the year after your LLC is formed)
• Name: Form PPT
• Ongoing: Yes, due by April 15th every year
• Attachments: Federal Tax Return, Schedule BPT-NWI, Form BPT-V

All LLCs are required to file the Business Privilege Tax Return and pay the business privilege tax annually. The deadline for this annual report is April 15th, so both the return and the tax must be submitted by April 15th each year.

Your initial filing of the Business Privilege Tax Return (Form PPT) is due the year following your LLC's formation.

For instance, if your LLC was approved on July 20th, 2024, your first filing of the Business Privilege Tax Return will be due by April 15th, 2025.

A minimum tax of $50 is required, but you might owe more based on your federal taxable income and net worth. It is advisable to consult with a tax professional for guidance.

The Name of Form PPT is Confusing

At the top of Form PPT, you’ll see the title "Alabama Business Privilege Tax Return and Annual Report."

This name can be confusing, as most Alabama LLCs do not need to attach a separate Annual Report form. This requirement only applies to Alabama Corporations and LLCs taxed as C-Corporations and S-Corporations.

Even though LLCs are not required to attach a separate Annual Report, you will still file your Business Privilege Tax using the "Alabama Business Privilege Tax Return and Annual Report form."

Download Business Privilege Tax Forms

In the upper right corner of the table, you'll find a "Search" box. Enter the bold terms provided and ensure you select the correct tax year, which is listed in the far right column.

• Form BPT-IN (Print Only)
• This is the Alabama Business Privilege Tax Initial Privilege Tax Return.
• Form PPT
• This is the Alabama Business Privilege Tax Return and Annual Report for Pass-Through Entities Only.
• Form BPT-V
• This is the Business Privilege Payment Voucher.

Alabama's Terms: "Limited Liability Entity" vs. "Disregarded Entity"

These terms are simply tax classifications used by the Alabama Department of Revenue.

(From a legal standpoint, you remain a Limited Liability Company.)

• "Disregarded Entity" = Single-Member LLC
• "Limited Liability Entity" = Multi-Member LLC

What other taxes are required in Alabama?

Additional taxes may apply depending on your type of business, including Income Tax, Franchise Tax, Corporate Tax, Sales and Use Tax, and others.

You may also need to file additional taxes if your business has employees.

For more details, please visit the Alabama Department of Revenue.

Calculating your Alabama LLC's taxes can be complex, and errors in the process may negatively impact your business.

Our Recommendation for Filing Your Alabama Taxes

We advise hiring an accountant who has expertise with LLCs to manage your Alabama and Federal taxes.

A seasoned tax professional will not only ensure your LLC adheres to Alabama’s regulations but also offer expert advice on a range of other business matters.

The best way to find a reliable tax professional is often through a referral from a friend or someone you trust.

Look for a tax professional who is a good fit for your company, makes you feel at ease, and is open to answering all your questions. They should be someone you like both personally and professionally.

Finding the right tax professional can take time, so we advise talking to at least 2-5 candidates before making your final choice. We hope you find an excellent professional!

Alabama Department of Revenue Contact Information

334-242-1170 (option 8 for Business Privilege Tax)
Alabama Department of Revenue
Alabama Department of Revenue: Contact Us