How to Start LLC in Alabama Step-by-Step Guide
Starting an Alabama LLC, step-by-step
Starting an Alabama LLC requires a cost of $200 and typically receives approval within 1 day.
Here are the steps to forming an LLC in Alabama:
- Choose an LLC Name
- Select a Registered Agent
- File a Certificate of Formation
- Create an Operating Agreement
- Get an EIN
- File the Initial Business Privilege Tax (BPT)
If you want to form your LLC yourself, follow our comprehensive guide below at no cost.
For further details on LLC expenses, Explore the specifics of LLC costs in Alabama.
See "How Long Does It Take to Form an LLC in Alabama" to find out how long it will take to get your LLC approved and to make sure there are no delays.
Need to save time?
Consider hiring a professional to set up your LLC: Northwest Registered Agent offers LLC formation services starting at $39 plus the state fee.
(Find out why Northwest is the top choice for LLC formation)
Here are the steps to forming an LLC in Alabama
1. Search for your Limited Liability Company (LLC) Name
Take the following actions to make sure your Alabama LLC name is accessible and satisfies state requirements:
First, search your business name. Entity Search tool to ensure it's unique and not already in use.
This is necessary because two businesses in the state cannot share the same name.
Second, check domain availability for an online presence Select a name that is memorable to the customer and best suited for the brand.
We'll explore the specifics of naming an LLC in Alabama in greater detail.
How do I check if my desired LLC name is available?
You can check the availability of your desired LLC name by searching the Alabama Secretary of State's online database.
What are the naming requirements for an Alabama LLC?
The name must include "Limited Liability Company," "LLC," or "L.L.C." It must be distinguishable from other business names registered in Alabama and should not contain restricted words without approval.
Can I reserve a name for my LLC?
You can reserve a name for up to 30 days by filing a Name Reservation application with a $28 cost.
2. Find a Registered Agent in Alabama
The next step is to select the Alabama Registered Agent.
A person or organization appointed to accept official notices and legal communications on behalf of your LLC may function as your LLC's registered agent in Alabama. To carry out this function efficiently, they must have a physical address inside the state.
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Who is eligible to serve as an LLC Registered Agent?
Your LLC's registered agent can be you.
- A trusted friend or family member
- A professional Registered Agent Service
- You
They must have a physical address in Alabama, as PO Boxes are not acceptable.
The Registered Agent's details are available to the public in state records.
If you prioritize privacy or lack a physical Alaska address, a Registered Agent Service could be beneficial.
What is a Registered Agent?
A Registered Agent is a person or entity designated to receive legal documents and official government communications on behalf of the LLC.
Who can be a Registered Agent in Alabama?
The Registered Agent can be an individual resident of Alabama or a business entity authorized to do business in Alabama. The agent must have a physical street address in Alabama (no P.O. boxes).
Can I act as my Registered Agent?
Yes, if you meet the residency and physical address requirements, you can act as your Registered Agent.
3. File an Alabama LLC Certificate of Formation
The Certificate of Formation must be submitted to the Secretary of State. The $200 online filing fee is a one-time charge for creating your LLC.
Guide to complete the certificate formation process. Having a professional service handle all the details is one approach to streamline the process.
Need to save time?
Consider hiring a professional to set up your LLC: Northwest Registered Agent offers LLC formation services starting at $39 plus the state fee.
(Find out why Northwest is the top choice for LLC formation)
What is the Certificate of Formation, and why do I need to file it?
The Certificate of Formation is a document filed with the Secretary of State to formally establish your LLC in Alabama. It outlines essential details about your business, such as its name, registered agent, and management structure. Filing this document is required by law to legally recognize your LLC.
Can I file the Certificate of Formation online, and what is the cost?
Yes, you can file the Certificate of Formation online through the Alabama Secretary of State's website. The filing fee is $200, which is a one-time expense for setting up your LLC. This cost covers the administrative costs associated with processing your application and officially registering your business entity.
4. Create an Alabama LLC Operating Agreement
An LLC Operating Agreement: Understanding its Importance
An Alabama LLC Operating Agreement is like a companion document to the formation of LLC certificates. The certificates create your LLC, while the Operating Agreement explains who owns it.
Banks may require it to open your LLC business bank account, and it is important in court to prove your LLC is running correctly.
That's why we recommend that all LLCs, including Single-Member LLCs, have an Operating Agreement.
Operating Agreement is essential in legal proceedings because it serves as evidence that your LLC operates by proper governance practices, bolstering your defense in court.
An Operating Agreement is an internal document, so you don’t need to file it with the IRS. Just keep a copy in your business records for your reference.
What is an Operating Agreement?
An Operating Agreement is a document that outlines the ownership, management structure, and operating procedures of the LLC.
Is an Operating Agreement required in Alabama?
While not legally required, it is highly recommended to have an Operating Agreement to establish clear rules and prevent disputes.
What should be included in an Operating Agreement?
The Operating Agreement should include details on member roles and responsibilities, voting rights, profit distribution, management structure, and procedures for adding or removing members
5. Get an EIN for LLC
Getting an Alabama EIN from the IRS for LLC
An EIN (Employer Identification Number) is needed for:
- Identifying tax purposes
- Open the business bank accounts
- Apply for licenses and permits
How do I apply for an EIN?
You can apply for an EIN online through the IRS, by mail, or by fax.
How much does an EIN cost?
Obtaining an EIN from the IRS comes at no cost. The application process is free.
How much time does it take to receive an EIN?
When applying online, it takes around 15 minutes.
If you choose to apply by mail or fax, it can take between 1 to 3 months.
Why do I need an EIN for my LLC?
An EIN is required for federal tax purposes, hiring employees, opening a business bank account, and fulfilling other business-related requirements.
How can I obtain an EIN?
Regarding US citizens or residents: If you have an SSN or ITIN, you can apply online for an EIN. Simply complete these steps: Apply for an EIN online.
For Non-US Residents: You can still get an EIN by mail or fax, but you cannot get one online. To obtain an EIN without an SSN or ITIN, follow these instructions.
6. File the Initial Business Privilege Tax Return in Alabama
All LLCs in Alabama are required to file a Business Privilege Tax (BPT) Return annually and pay the corresponding business privilege tax. The first filing, known as the Initial Business Privilege Tax Return, must be submitted within 2.5 months after forming your LLC."
When is the Initial BPT due?
The Initial Business Privilege Tax (BPT) for your Alabama LLC is due within 2.5 months of its formation date. For instance, if your LLC was approved on March 15, 2024, the Initial BPT is due by May 29, 2024. This cost is a one-time payment.
How do I file my Initial BPT?
You can submit your LLC’s Initial Business Privilege Tax either online or by mail. We recommend online filing as it is generally more convenient and user-friendly.
For more information about the Initial BPT, visit Alabama LLC Annual Report & Business Privilege Tax.
How much does an LLC Initial BPT Report cost?
The Initial Business Privilege Tax (BPT) for an Alabama LLC is a one-time fee that costs a minimum of $50.
When do I need to file the Initial Business Privilege Tax Return?
You must file your Initial Business Privilege Tax Return within 2.5 months after the formation of your LLC or within 2.5 months after qualifying your LLC to do business in Alabama.
How do I calculate the amount owed for the Initial Business Privilege Tax?
The amount of Initial Business Privilege Tax you owe is determined based on your LLC's federal taxable income and net worth. Alabama provides guidelines and forms to help you calculate this amount accurately.
What Should I Do after the LLC is Approved?
Business bank account for Alabama LLC
Opening a business bank account for your Alabama LLC is essential to keep personal and business finances separate. This separation helps maintain accurate financial records, simplifies tax filing, and protects your assets in case of legal issues.
Alabama Licenses and Permits
Alabama LLCs may require various licenses and permits depending on their location, industry, and business activities.
Taxes for Alabama LLC
Alabama LLCs are subject to several taxes, including federal and state income taxes, sales taxes (if applicable), and payroll taxes if the LLC has employees. Understanding and complying with these tax obligations is crucial to avoiding penalties and maintaining good standing with tax authorities.
Annual Report Requirement
Alabama LLCs must file an Annual Report each year to the Alabama Secretary of State. This report updates the state with any changes to the LLC's business details and requires payment of a filing fee. Keeping this report current ensures that your LLC remains in good standing and compliant with state regulations.