How to Form an LLC in Alabama
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This guide to starting an LLC in Alabama provides step-by-step instructions on filing formation documents, obtaining tax IDs, and setting up company records.
LLCs are the most popular business structure because they are inexpensive to form, provide flexibility to the owners, and are easy to run. Forming your LLC legally establishes your business, limits your personal liability, and gains tax flexibility. The following step-by-step will help you as you undertake this process.
Fast Facts: Your Budget and Timeline
Here is an overview of the total paperwork, cost, and time it takes to form an LLC in Alabama. Be sure to read the final step in this guide - "Ongoing Filings" - to understand your ongoing costs to maintain a compliant Alabama LLC.
- Name Reservation Certificate
- Form SOSDF-8: Domestic LLC Certificate of Formation
- Operating Agreement
- IRS Form SS-4: Obtain an EIN
- Form COM-101: Alabama Department of Revenue Combined Registration/Application
- BPT-IN: Initial Business Privilege Tax Return
- Name reservation: $28
- Formation: $100 + minimum $50 Office of the Judge of Probate fee + optional $100 expedite fee
- Alabama business privilege tax: Minimum $100
- Formation: ~7-10 business days at the probate's office. Then ~6 months at the secretary of state unless you pay the $100 expedite fee for ~10-14 day turnaround.
Step-by-Step Alabama LLC Instructions
Check Name Availability
The legal name of your LLC may not conflict with any other registered name. Check availability of your desired name by conducting a name search. Your name must be "distinguishable" from all registered business entities.
Name Search: Alabama Secretary of State - Business Services Division
The words "Limited Liability Company" or the abbreviation "L.L.C." or "LLC". These words or their abbreviation shall be the last words of the name.
Next, check availability of your desired name against trademarks registered with the Alabama Secretary of State and the USPTO.
Alabama Trademark: Alabama Secretary of State trademark search Federal Trademark: USPTO trademark search
Finally, use your common sense to search use of your desired business name in the public domain. Common law rights to a name arise from actual use, not registration. Search the internet, telephone directories, trade magazines, business or professional license records, and so on.
Obtain a Name Reservation
In Alabama, a name reservation is mandatory.
Submit to: Alabama Secretary of State
Filing Method: Mail, courier, or online. Fax and email are NOT accepted. Fee: $10 mail standard processing. $25 mail less than 3 business days processing. $28 online 24hr processing. Turnaround: Standard mail: in order received. Expedited mail: less than 3 business days. Online: less than 24 hours. Notes:
- We recommend filing online.
- The state will issue a Name Reservation Certificate that you will need to submit with your Certificate of Formation.
- Names using a professional designation in the name (i.e., engineering) require evidence of licensing.
Appoint a Registered Agent
Identify the LLC’s Alabama registered agent. This individual or company receives notice of lawsuit and other legal service for the LLC.
File Alabama Articles of Organization
Alabama calls the articles of organization the "certificate of formation". File this document to create your limited liability company.
Establish Company Records
Your filed articles of organization are the first document for your limited liability company records. Your LLC will generate many other official records such as your operating agreement, meeting minutes, and your EIN.
Office supplies intended for an LLC will help you stay organized and save time. Membership certificate templates should come with your company record book. Each owner receives a membership certificate as evidence of his or her ownership in the LLC.
Create the Operating Agreement
Draft an Operating Agreement (potentially using a template) which is the governing document for the LLC. It defines the formalities of how the LLC will run itself such as holding an annual meeting. You will review and adopt the agreement at your organizational meeting.
Hold the Organizational Meeting
The first meeting of the members of the LLC is the organizational meeting. You will need your filed articles of organization and your operating agreement in order to conduct this meeting. Keep minutes of this meeting and store them in your company record book.
Get a Federal Employer Identification Number (EIN)
If your LLC has more than one member or will hire employees, it must obtain an EIN. An EIN is also often required to open a bank account.
Agency: Internal Revenue Service (IRS) Form: Filing Method:
Mail, phone, fax, or online.
Immediately online or by phone. 4 business days by fax. 4-5 weeks by mail.
The IRS website is only available during certain hours. Print your EIN before closing your session. For additional guidance, see IRS Pub 1635: Understanding Your EIN.
Fact Checked: 8/28/19
Get Alabama State Tax Identification Numbers/Accounts
Alabama offers a consolidated state tax registration application.
Submit to: Alabama Department of Revenue
Form: Form COM-101: Alabama Department of Revenue Combined Registration/Application Filing Method: Mail or online Fee: $0 Turnaround: ~3-5 business days online
File Initial Business Privilege Tax Return
The Code of Alabama §40-14A-29 requires new LLCs to file an initial Business Privilege Tax Return and to pay the business privilege tax within two and one-half months after formation.
Submit to: Alabama Department of Revenue
Form: BPT-IN: Initial Business Privilege Tax Return Instructions: Instructions for the Preparation of Alabama Department of Revenue Alabama Business Privilege Tax Initial Privilege Tax Return Filing Method: Fee: Minimum $100
Consider Electing S-Corp or C-Corp Taxation
By default, your LLC receives pass-through taxation and the vast majority of LLCs keep this tax classification. Some LLCs benefit from electing S-Corp or C-Corp tax treatment:
- S-Corp treatment can help owner-employees who earn more than ~$75,000 per year save on self-employment taxes. File Form 2553: S-Corp Election.
- C-Corps suffer from double taxation: the corporation pays taxes on profits then members pay taxes on their distributions. If profits exceed $250,000 per owner, you provide employee benefits, or you will re-invest most of your profit in the business, you may benefit from the low tax rates on retained earnings under C-Corp treatment. File Form 8832: C-Corp Election.
Obtain Business Licenses & Permits
To run your business legally, you must obtain applicable licenses and permits. The easiest way to navigate the wide range of federal, state, and local requirements is to search by your business type and locality using the Small Business Administration Business License & Permit look-up tool.
In Alabama, a privilege license is required in every county where the LLC conducts business. Apply in each county where the business is located:
Submit to: County Probate Judge or License Commissioner. See County Probate Office Contact Information. Guidance: Alabama Department of Revenue - Business & License Tax FAQs Law: Title 40, Chapter 12, Code of Alabama 1975
- The Alabama Department of Revenue requires payment of Business Privilege Tax annually. File Form PPT (or Form CPT if you elected C-Corp taxation) by April 15th. The minimum tax is $100. For more details, see Alabama annual report.
- Privilege licenses are effective 10/1-9/30 and must be renewed annually with the Probate Judge or License Commissioner in each county where the LLC is engaged in business.
You must file federal and state tax returns. You must also file: