Alabama LLC
An LLC in Alabama is a great choice for entrepreneurs. Learn how to form and maintain an active LLC in the state of Alabama by reading this guide.
$200
Formation fees
$25
Name reservation fees
None
Annual report fees
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Why we like StartGlobal?
My genuine thoughts
Willy Justin
Founder, Statepedia
StartGlobal: Legal + Taxes + Bookkeeping for solopreneurs
Product
For small businesses, managing taxes, accounting and everything legal is just a pain. Nobody wants to do it, but they have to. Instead of working with CPAs, attorneys and others separately, Start brings all of them under a single subscription. It’s just smooth.
Team
I know the team behind StartGlobal very well. It’s a very hardworking group of individuals who are genuinely passionate about small businesses. They are backed by successful founders like Balaji Srinivasan, Biz Stone(Twitter) and others.
Price
Getting a CPA or attorney is a matter of thousands of dollars. It’s just unfair to pay so much when you’re a small business. Start has a single subscription that covers it all. It is a definite money saver.
$599 one-time
What is an LLC?
Limited Liability Company
LLC is a business entity in the U.S that provides limited liability to its members. It has characteristics from both corporation and sole proprietorship. LLCs are permitted under State statutes of each US state.
Limited liability
Personal assets are protected for people with limited liability when they are sued.
Corporation
A business entity that can issue shares and give limited liability to shareholders.
Members
Owners of an LLC are referred to as members. They own membership interest in the LLC.
Sole proprietorship
Where an individual engages in business activity without formal organization.
Types of LLC
Depends on the number of members and whether it has elected to change its IRS classification.
Single-member LLC
Has only a single member. IRS considers it as a sole proprietorship for tax purposes.
LLC as C-corp
Owners of an LLC are referred to as members. They own membership interest in the LLC.
Multi-member LLC
Has two members. IRS considers it as a partnership for tax purposes.
LLC as S-corp
A special election for a maximum of 100 US shareholders.
Actions
Here are some possible actions to take in an Alabama LLC. Click below to read in detail:
How to form an LLC in Alabama?
Follow these 7 steps:
1. Name your LLC
Consider some names for your business that your customers would find appealing. Show those names to your friends and some of your customers, and get their feedback. If you already have a few names in mind that you like, great!
To check if those names are available in the state of Alabama, go to the official entity search tool on the Secretary of State website. It’s free to search.
You can reserve a corporate name with your state by paying a small fee. You need not reserve a name separately if you are filing the certificate of formation.
Reservation fees
$200
Reservation duration
10 days
Every LLC needs to be identified with a designator. At the end of your LLC’s name, you should include the words ‘Limited Liability Company’ or its abbreviations such as ‘LLC’.
Make sure you follow LLC naming guidelines specified by Alabama state as per AC §10A-1-5.06. This includes not using names similar to existing companies, etc.
2. Get a mailing address
If your business has an office or factory in Alabama, you can use it as your official company address. Note that the address will be made public and is even available on the Internet.
Another option is to choose a virtual office address. This way, you pay a company for a street address, and they handle all your mailing. You can then share this address with the state.
3. Hire a registered agent
If you are a resident of Alabama, you can act as the registered agent for your LLC. However, your details will be made public and you must be available during all business hours to receive service of process.
Alternatively, you can opt for a registered agent service. With a registered agent, your privacy is protected and you can move freely without worrying about compliance.
4. File Certificate of Formation
Once you have a registered agent and an official office address, you can register your business with the state. You can file the Certificate of Formation online.
Filing fee
$200
Processing time
10 days
Address
Secretary of State
Business Services
P.O. Box 5616
Montgomery, AL 36103-5616
5. Create an Operating Agreement
Operating agreements are not mandatory in Alabama, but it is highly recommended to have one. There are online websites where you can create an operating agreement. Create one and get it signed by your LLC members.
6. Get Employer Identification Number (EIN)
The IRS uses the EIN to identify business entities. You can create an EIN for free at the IRS website.
7. Open a business bank account
You can open business checking accounts at traditional banks like Chase, Wells Fargo, etc. There are several other modern banking solutions that offer plenty of benefits to entrepreneurs. It is important to get one to separate your business and personal transactions
Entity name
Every LLC should have a unique name in Alabama. Alabama maintains a list of names of entities in the state. Go through it to check if your chosen name is available.
Search for names
Go to the official website of the Alabama business entity tool to see if the name you want is available.
Searching fee
Free
Reservation
You can reserve a name for your LLC for a specific duration by paying reservation fees to the Alabama business services. You will have to file your LLC formation documents within this period to keep the name. Alternatively, you can directly go ahead with the LLC formation without any reservation. That's fine too.
Reservation fee
$25
Reservation period
1 year
LLC naming guidelines
The name you choose for your LLC must follow the official naming guidelines.
AC §10A-1-5.06
Visit
Here are some of the guidelines in simple language:
- 1
Must have the phrase "Limited Liability Company" or the abbreviation "L.L.C." or "LLC" as the last words of the name.
- 2
Don’t include terms that indicate that you are doing an activity that you are not authorised to do.
- 3
Your name should be ‘distinguishable’ in the Secretary of State records. Adding a punctuation or ‘the’ does not make it distinguishable.
- 4
Don’t use words that makes it seems like you are a governmental entity or has an affiliation.
Certificate of Formation
In Alabama, Certificate of Formation is the form you file with the Secretary of State to form an LLC. It contains the articles of formation for the LLC.
Filing Certificate of Formation
There are a couple of ways to file.
You can file it online on Alabama Secretary of State website
Visit
You can mail a form to Alabama Secretary of State
PDF
Address
Secretary of State
Business Services
P.O. Box 5616
Montgomery, AL 36103-5616
Online & mailing fee
$200
Online & mailing processing time
10 days
Note
When you file by mail, you should attach the Name Reservation certificate from the Office of the Secretary of State.
LLC Annual Report
LLCs file the annual report as part of the business privilege tax return every year in Alabama.
Filing initial business tax return
Every LLC has to file the Alabama business initial privilege tax return within 2.5 months of formation in the state.
Mail it to Alabama state
PDF
Due
2.5 months after formation
File annual business tax return
For the privilege of doing business in Alabama, LLCs and other entities have to pay a business privilege tax annually in proportion to their net worth. It is to be filed when the federal tax form is due; generally on April 15th.
Address (not paying electronically)
Alabama Department of Revenue
Business Privilege Tax Section
PO Box 327320
Montgomery, AL 36132-7320
Due
April 15th
LLC elected as Corporation
LLCs that are elected as corporations file a tax return Form-CPT annually. They do not file Form-PPT (that normal LLCs file).
Registered agent
A registered agent is an agent of your LLC on whom any notice, process or demand may be served. Every LLC in Alabama needs to have a registered agent located in the state.
Requirements
According to Alabama Code § 10A-1-5.31:
- 1
Registered agent can be an individual or an authorised organisation.
- 2
Registered agent must have a street address where they can personally receive service of process.
- 3
Office of Registered agent cannot be just a mailbox service of a telephone answering service.
EIN
An Employer Identification Number, also known as Federal Tax Identification Number, is used to identify a business entity.
Who must have an EIN?
Single member LLC elected to be taxed as C-corp or S-corp
Single member LLC with an employee
All multi-member LLC
Operating agreement
Operating agreement is an internal business document that outlines the general rules and policies of the LLC.
Importance
It is not a legally mandatory document. However, it is recommended to have one since many courts, banks and financial institutions use it for verification. It is also nice to clearly outline the duties and relations between multiple members of an LLC—so you avoid any confusion in the future.
Format
There is no ‘required’ format for an operating agreement. You can include anything reasonable in it. In general, it has the following sections:
Basic Business information
Contains name, address, names and details of members, purpose
Member relationship
Contains membership interest, decision making process, powers, duties.
Membership transfer
Contains details on how to add or remove members and managers.
Accounting and tax
Contains details on how company records and distributions are maintained.
Dissolution
How to dissolve, wind up and terminate, due process to follow and exceptions.
LLC in Alabama
Similar to LLCs, there are other business entities that are considered by businesses in Alabama.
Alabama Business search
Alabama LLC add member
Alabama LLC remove member
Page sponsorWhy we like StartGlobal?
My genuine thoughts
Willy Justin
Founder, Statepedia
StartGlobal: Legal + Taxes + Bookkeeping for solopreneurs
Product
For small businesses, managing taxes, accounting and everything legal is just a pain. Nobody wants to do it, but they have to. Instead of working with CPAs, attorneys and others separately, Start brings all of them under a single subscription. It’s just smooth.
Team
I know the team behind StartGlobal very well. It’s a very hardworking group of individuals who are genuinely passionate about small businesses. They are backed by successful founders like Balaji Srinivasan, Biz Stone(Twitter) and others.
Price
Getting a CPA or attorney is a matter of thousands of dollars. It’s just unfair to pay so much when you’re a small business. Start has a single subscription that covers it all. It is a definite money saver.
$599 one-time