To start an LLC in Alabama, you must file a Certificate of Formation with the Alabama Secretary of State. The Certificate of Formation and required name reservation cost $228. Your filing formally creates your Alabama LLC. However, to actually ready the LLC to do business, you must complete several additional steps.
Everything You Need to Know About Alabama LLCs:
Alabama LLC Formation Options
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How to Start an LLC in Alabama
To start an LLC in Alabama, you’ll need to do three things: appoint a registered agent, choose a name for your business, and file a Certificate of Formation with the Alabama Secretary of State. The certificate and mandatory name reservation cost $228 or $236 if you file your certificate online. This filing formally creates your Alabama LLC.
According to the Code of Alabama § 10A-1-5.31, every Alabama LLC must appoint a registered agent. You don’t need to hire a registered agent, but if you do, make sure your registered agent will list their address on your filings wherever possible to ensure maximum privacy.
If you’re starting a new business, you probably already know what you want to name your LLC. But you’ll need to know if your preferred name is available. To find out, visit the Alabama SOS Business Entity Records and search through the existing business names until you find the perfect, unclaimed name for your LLC. Alabama is also the only state that requires a name reservation before filing. Getting your name reservation is included in the filing instructions below.
Once you know who your registered agent will be and what your LLC name is, you’re ready to file your Alabama Certificate of Formation. Follow along with our filing instructions below:
Filing the Alabama LLC Certificate of Formation
Learn more about each Certificate of Formation requirement below. Note that the information you provide becomes part of the public record—permanently.
Or skip the form entirely and hire us to form your Alabama LLC. We provide a free business address to list whenever possible throughout the filing to better keep your personal address private. And for the cheapest way to start a business? Pay just $47 out the door with our VIP monthly payment option.
1. Company Name
You have to include “Limited Liability Company” or an abbreviation like “LLC.” You can’t include words like “corporation” that would make people think you’re a different business entity.
2. Name Reservation
Name reservations are a unique requirement—Alabama is the only state that requires one. On the upside, they’re processed immediately online. On the downside, the reservation sets you back $28 (or $27 of you’re a subscriber to Alabama.gov). Include a copy of the Name Reservation Certificate with your formation paperwork. When you hire us, we’ll reserve your name for you as well.
3. Registered Agent and Office
You can either list the name of an individual Alabama resident (such as yourself) or an authorized business (like Northwest). Your registered office is the Alabama street address where your Alabama registered agent will be available to accept legal notifications during business hours. You also need to provide a mailing address if it’s different from the street address. Want to keep your personal address off public filings? Skip the mailing address section and just list our address when you hire Northwest.
4. LLC Members
You don’t need to list member names or addresses on your Certificate of Formation. The certificate simply states that your LLC has at least one member. Signing and submitting the filing confirms that this is true.
5. LLC Type
If you’re just making a regular LLC, you can skip over this section. If you want a Series LLC (common in real estate), a Professional LLC (think doctors and lawyers) or a Nonprofit LLC (like a nonprofit corporation but much harder to get federal tax-exempt status for), tick the appropriate box. Most LLCs aren’t any of these special types.
6. Effective Date
Want your business to begin right away? Skip this section. Prefer to start on a specific date? You can list an effective date up to 90 days in the future.
7. Alabama LLC Organizer
At least one organizer must sign your Alabama Certificate of Formation. An organizer is someone you authorize to sign and submit your filing, and it doesn’t have to be anyone within your LLC. When you hire Northwest to form your Alabama LLC, we’ll be your organizer.
Why Have a Registered Agent Form Your Alabama LLC?
Professionals in Alabama hire registered agent services like Northwest Registered Agent to start an LLC—but why?
Standard filing companies don’t have employees or offices in every state. But as a national registered agent, it’s a requirement for us, which is a benefit for our clients. Our office is in Dothan, AL. We’re on a first name basis with the people who work in the Office of the Alabama Secretary of State. We know all the fastest filing methods, which translates to fast, professional service—without extra fees.
As your registered agent, we list our Dothan registered office address on your LLC’s formation documents. Why? If you’re starting a business from your apartment in Birmingham, do you really want your apartment address as your business address? (Hint: the answer is no.) We’ll list our address, so you don’t have to list yours. Plus, we never sell your data. We don’t list your personal information on filings if we don’t have to. It’s all standard and part of our commitment to Privacy by Default®.
Free Mail Forwarding, Business Address and More
At Northwest, we do everything a registered agent should do and more. You can list our address as your business address on your state filings. We include limited digital mail forwarding with registered agent service (up to 5 pieces of regular mail per year; $15 a doc after that).
Plan on accepting credit cards? We also offer a Free Credit Card Processing Consultation. Our specialists work with processors to negotiate low rates and better contracts for our clients.
And now, try our in-house Northwest Phone Service for 60 days, free of charge with our formation service. Get a virtual phone number with your choice of area code, make and receive calls from any device, and more—for just $9 a month.
We know the in’s and out’s of each state—and we use this knowledge to help you when you need it most. Our team of Corporate Guides® has over 200 local business experts. You can call or email us for answers to all your questions about your LLC in Alabama. Our Corporate Guides are dedicated solely to helping you with your business—not selling you services or meeting quotas.
What Do I Do After My Alabama LLC Is Formed?
After your Alabama Certificate of Formation is approved, you still have a few more important steps to take, including getting an EIN, drafting an operating agreement, opening a bank account, funding the LLC and learning about state reporting and tax requirements.
Get an EIN
An EIN (“Employer Identification Number”) is a federal tax ID assigned to your business by the IRS. The IRS uses your EIN to easily identify your business on tax filings.
Does an Alabama LLC need an EIN?
Absolutely. All Alabama businesses are required to pay a Business Privilege Tax, and the state requires you to have an EIN in order to file. You’ll need an EIN if you have employees, too. You may also need your EIN to open a bank account or apply for local permits or licenses.
How do I get an EIN for my LLC?
You can apply for an EIN directly from the IRS at no cost. Most businesses are able to apply online, but if you don’t have a social security number, you’ll need to apply with a paper form. Want one less thing to do? Add on EIN service when you hire us, and we’ll get your EIN for you. Or choose our VIP service—an EIN is included.
Write an LLC Operating Agreement
Operating agreements put into writing how your business actually operates—how much each member invested, how profits and losses will be allocated, how voting works, and what happens if there’s a dispute or if the whole business (knock on wood) falls apart.
Do I need an operating agreement for an Alabama LLC?
Alabama doesn’t legally require an operating agreement. According to state statute Alabama Code § 10A-5A-1.08, members may enter into an operating agreement—or limited liability company agreement, as the statute calls it. If members do not provide their own agreement, or do not detail how to respond to all matters that arise, the statute will illustrate the proper response.
That said, you shouldn’t wait for the state to determine how to run your LLC. An operating agreement isn’t just annoying paperwork. It’s one of your LLC’s most important internal documents, and creating one can help your LLC with everything from opening a bank account to handling major events like mergers and dissolution.
What should be in an operating agreement?
An operating agreement should explain how the business will handle “big picture” situations—everything from allocating profits and losses to dissolving the business. Below is a list of common topics that operating agreements should cover.
Profits, losses, and distributions
Voting rights, decision-making powers, and management
Transfer of membership interest
Dissolving the business
Your operating agreement can cover pretty much anything as long as it isn’t contrary to Alabama law. Topics not allowed to be changed in the operating agreement are listed in the Alabama Code § 10A-5A-1.08, which forbids actions such as restricting the rights of former or non-members, or waiving the statute’s general requirements. These things may seem obvious, but the specificity of the statute proves just how important it is to get things in writing.
How do I write an operating agreement?
To write an operating agreement, you need to address how your business will handle money, members, votes, management, and more. Not sure how to get started? At Northwest, we’re here to help your LLC get off on the right foot. When you hire us, we provide your business with a free LLC operating agreement, specific to your management style. We’ve spent years developing these agreements and other free LLC forms—which have been used by over a million LLCs.
Open an LLC Bank Account
Your LLC needs its own bank account. Why? An LLC gets its limited liability from being a distinct entity, separate from its members. If you mix personal and business finances, you could lose your liability protections.
How do I open a bank account for my Alabama LLC?
To open a bank account for your Alabama LLC, you will need to bring the following with you to the bank:
A copy of the Alabama LLC Certificate of Formation
The LLC operating agreement
The LLC’s EIN
If there are multiple members in the LLC, you may also want to bring an LLC resolution to open a bank account that states that the person going to the bank is authorized by the members to open the account in the name of the LLC. Northwest can help with this as well—LLC bank resolutions are one of the many free legal forms we provide to ensure you can get your LLC started fast.
Fund the LLC
Time to put some money in that new LLC bank account. What money? For starters, your initial contributions to your LLC’s capital. LLC members are owners, and each owner needs to pay for their membership interest to fund the LLC.
What is membership interest?
Membership interest is your percentage of ownership of the LLC. Membership interest is normally proportionate to your investment. So how does this work?
Imagine your LLC has 5 members. 4 members each invest $1,000 in the business. One member invests $6,000. The total contribution of all members is $10,000. The 4 members each own 10% of the business. The moneybags member who shelled out $6,000 owns 60% of the business.
Typically, this also means that the 4 members would each get 10% of any profits, and moneybags would get 60%. Exactly how profits and losses are allocated, however, can be adjusted in the operating agreement as long as changes are in line with IRS requirements and Alabama laws.
File Alabama Reports & Taxes
Alabama LLCs are required to file a state annual report each year. This report is basically an information update you file so the state knows who currently runs things and how to contact your business. Alabama LLCs are also subject to state tax filing requirements. To make matters especially confusing, your annual report and Business Privilege Tax share a form and are due together each year.
How much is the Alabama Annual Report fee?
The fee for the Alabama LLC Annual Report is $10. However, it must be filed with the Business Privilege Tax Return—in Alabama, you should always think about annual reports alongside the Business Privilege Tax—which costs a minimum of $100. Ultimately, the amount of tax you owe is based on a percentage of your LLC’s Alabama net worth.
When is the Alabama Annual Report due?
Your Alabama Annual Report is due 2.5 months after the beginning of the taxable year. Usually, this date falls around March 15.
When you sign up for Northwest, we send you reminders for your annual report due dates. Want one less thing to worry about? With our business renewal service, we can complete and submit your annual report for $100 plus the state fee.
What is the Alabama Business Privilege Tax?
All Alabama corporations, limited liability companies, limited liability partnerships, and limited partnerships must file a Business Privilege Tax Return annually. For your LLC, the tax rate you pay will be based on how much revenue your entity brings into Alabama each year. (Tax rates range from $0.25 to $1.75 for each $1,000 of your entity’s Alabama net worth.) This means the rate you pay will vary from year to year, depending on how much money your LLC makes in Alabama. The minimum amount you can pay is $100.
Since most LLCs are taxed as either partnerships or S corporations, you won’t have to worry about corporate net income taxes in Alabama. In its place, just worry about the Business Privilege Tax.
Do I have to file an Initial Report in Alabama?
Yes. Your first Alabama LLC Annual Report and Business Privilege Tax filing is due within 2.5 months of forming your LLC. Note that this first filing uses a different form from later filings. The initial report form is Form BPT-IN. For your annual report, you’ll file Form PPT-IN (unless your taxed as a C-corp, in which case you’ll file Form CPT-IN).
What else should I know about Alabama LLC taxes?
The Alabama personal net income tax rate tops out at 5% for those making more than $3,000. The rate drops to 4% for those making $500 to $$3,000, and drops again to 2% for individuals making $0 to $500.
Alabama also has a general sales tax of 4%—in addition to local sales tax rates—which vary by city and county. The highest possible sales tax is 11.5% in Tuskegee, but the average total sales tax Alabama is 7.792%
If you’re planning to buy property for your LLC in Alabama, you’re in luck. Alabama has one of the lowest property tax rates in the country. Though exact rates vary by county and property value (and there are even some exemptions), the median rate is $3.33 per $1,000 of real property value. The national median is $10.35. Ready to buy property for your LLC in Alabama yet? At Northwest, we can free you up to property hunt while we form your Alabama LLC for as low as $461. Or pay just $47 out the door with our VIP monthly payment option.
Do LLCs have to register with the Alabama Department Of Revenue?
Yes. Alabama is determined to make sure businesses meet all of their tax obligations. All Alabama entities must register with the Alabama Department of Revenue. More specifically, register online with My Alabama Taxes (MAT).
Alabama LLC FAQs
How can I submit the Alabama LLC Certificate of Formation?
You can file the Alabama Certificate of Formation online or by mail. Mailed filings must be submitted in duplicate (one signed original and one copy) to the Alabama Secretary of State at this address:
Secretary of State
P.O. Box 5616
Montgomery, AL 36103-5616
Online filings can be submitted via the Secretary of State Online Services portal.
How much does it cost to start an Alabama LLC?
Combined filing costs for your Alabama LLC are typically $228 if you file your certificate by mail and $236 if you file online. The mandatory name reservation costs $28 if submitted online. The Secretary of State filing fee is $200 if you file by mail and $208 if you file online (the extra $8 is a 4% convenience fee), so your overall total depends on how you file.
Hire Northwest for a one-time fee of $461. This includes the $236 in state fees, a full year of registered agent service, limited mail forwarding and loads of useful forms and tools to help get your Alabama LLC up and running. Or, pay just $47 out-the-door with our VIP monthly payment option.
How long does it take to start an Alabama LLC?
The state processes online filings quickly, typically within 2 business days. The processing time is pretty much the same for mail filings, at least once the Alabama Secretary of State’s office receives your filing, but the sending and receiving of documents through the mail could tack on an extra few days. Expedited services are no longer available in Alabama.
If you hire Northwest to start your LLC, we file online and typically have your Alabama LLC formed within 48 hours.
Does an Alabama LLC need a business license?
Yes. All LLCs are required to obtain a Business Privilege License in every county where business is conducted. Business Privilege Licenses are granted through county probate offices or licensing commissions. These requirements are listed in the Code of Alabama (Title 40 Chapter 12).
Cities and towns often have their own municipal licensing requirements as well. For example, Birmingham requires those conducting business in city limits to get a general business license.
Need an EIN or a certified copy of your formation docs for your license applications? Northwest can help. You can easily add on these items to your LLC formation order.
Can an Alabama LLC help me live more privately?
Yes. While you can’t remove all ownership information from Alabama public filings (like you can in states like New Mexico, Delaware, and Wyoming), an Alabama LLC can still help you reduce your public footprint. For example, you can better maintain address privacy by listing our address on public docs instead of your own. Check out our page on living privately with an LLC to learn more.
What is a foreign Alabama LLC?
A foreign Alabama LLC is any LLC formed outside of Alabama but registered to do business in the state. For example, if you formed an LLC in Georgia but wanted to conduct business in Alabama as well, you would register as a foreign LLC in Alabama by filing a Foreign Limited Liability Company Application for Registration with the Alabama Secretary of State. Like domestic LLCs, foreign LLCs in the state have to file Business Privilege Tax Returns. Northwest can register your foreign Alabama LLC for you today!
What is an Alabama initial return?
An initial return describes the first time an Alabama entity files its Business Privilege Tax Return. The initial return is due within 2.5 months of your LLC’s formation. Yes, you read that right. It’s a quick turnaround. The tax rate is determined by your LLC’s net worth—the minimum tax is $100.
How can I get an Alabama phone number for my LLC?
It’s a conundrum: you need a local number to display on your website and give to customers, but you don’t want to make your personal number quite so…public. We get it. And we’ve got you covered with Northwest Phone Service. We can provide you with a virtual phone number in any state—plus unlimited call forwarding and tons of easy-to-use features. You can try Phone Service free for 60 days when you hire us to form your LLC, and maintaining service is just $9 monthly after that. No contract required.
How to Order LLC Formation Service
Our Alabama LLC formation service is designed to be fast and easy—signing up takes just a couple minutes. Here’s how it works:
With Northwest, we give you flexibility on how to pay. You can pay all the fees up front (this includes one full year of registered agent service). Or, pay just $47 out-the-door with our VIP monthly payment option. With our VIP option, we also include an EIN. Just choose one of the buttons below, answer a few easy questions about your business and submit your payment.
We’ll prepare your Alabama Certificate of Formation and send it to the Alabama Secretary of State. In the meantime, you’ll have immediate access to your online account, where you can find useful state forms, pre-populated with your business information.
Once the Alabama Secretary of State have approved your filing, we notify you that your Alabama LLC has been legally formed. You can now take any necessary next steps, like getting an EIN and opening a bank account.