How to Form an LLC in Alabama

Begin checking availability of your desired name by conducting a name search against LLCs, corporations, and other business entities registered with the Alabama Secretary of State. Your name must be "distinguishable" from all registered business entities.

Name Search:

Alabama Secretary of State records search

Suffix:

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. AC §10-12-5

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.

In Alabama, a name reservation is mandatory.

Submit to:

Alabama Secretary of State
http://www.sos.alabama.gov/

Form:

Name Reservation Request Form for Domestic Entities

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.

Identify the LLC’s Alabama Registered Agent. This individual or company receives notice of lawsuit and other legal service for the LLC.

Alabama calls the articles of organization the "certificate of formation". File this document to create your limited liability company.

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.

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.

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.

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.

Submit to:

Internal Revenue Service
http://www.irs.gov/

Form:

IRS Form SS-4

Guidance:

IRS Pub 1635: Understanding Your EIN

Filing Method:

Mail, phone, fax, or apply online with the IRS

Fee:

$0

Turnaround:

Immediately online

Notes:

The IRS website is only available during certain hours. Print your EIN before closing your session.

Alabama offers a consolidated state tax registration application.

Submit to:

Alabama Department of Revenue
http://revenue.alabama.gov/

Form:

Form COM-101: Alabama Department of Revenue Combined Registration/Application

Filing Method:

Mail or online

Fee:

$0

Turnaround:

~3-5 business days online

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
http://revenue.alabama.gov/

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:

Mail

Fee:

Minimum $100

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.
• 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.

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

You must file federal and state tax returns. You must also file:

• 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.