How to Start an LLC in Alabama
An Alabama limited liability company (LLC) is a business structure that offers liability protection, a straightforward management structure, and—by default—pass-through taxation. To legally form an LLC in Alabama, you must file a Name Reservation Certificate and Certificate of Formation with the Alabama Secretary of State. Filing these two documents will cost you $228 (or $236 if filed online). Before you can file the name reservation or formation paperwork, your LLC needs a business name and a registered agent. The LLC formation process in Alabama can take a few days or a few weeks, depending on filing method and the time of year. Keep reading and we’ll break down each step of the process to get your LLC ready for business.
Ready to Start an LLC in Alabama?Get Started
Reserve Your LLC Name
Designate a Registered Agent
Submit LLC Certificate of Formation
Write an LLC Operating Agreement
Get an EIN
Open a Bank Account
Fund the LLC
File reports + taxes
1. Reserve Your LLC Name
The first step in forming your LLC is coming up with your business name and promptly reserving it. Reserving your business name is required for Alabama LLCs and must be done before you file formation paperwork. The good news is you can apply to reserve your name online and get instant approval (if your desired business name is available). To reserve a business name in Alabama, you just need to provide your desired LLC name and contact information and pay the $25 filing fee. You can also reserve your name by mail, but the process is slower and someone else could reserve your business name online while your paperwork is en route.
Alabama spells out the naming guidelines for an LLC in ALA Code §10A-1-5.06. To summarize, your LLC’s name must:
- Include either “limited liability company,” “L.L.C.,” or “LLC.”
- Be one-of-a-kind among businesses registered in Alabama.
Already have a business name? Check to see if it’s available.
What’s the difference between my LLC’s name and an assumed business name?
Your LLC’s legal name is the one you list on the Certificate of Formation. An assumed business name, sometimes referred to as a doing business as name (DBA) or trade name, is any other other name your LLC uses to do business.
LLCs sometimes use an assumed business name for marketing or branding purposes. Doing so allows you to do business under a different name without forming a completely new LLC. Alabama requires LLCs to register assumed business names with the Secretary of State.
Thinking about using a DBA? Learn more about How to Get a DBA.
2. Designate a Registered Agent
The next step is choosing a registered agent in Alabama. A registered agent is a person or company appointed to accept state and legal mail for your business. Alabama requires all of its registered LLCs to have a registered agent. Once your registered agent is officially hired, you can list their name and address on your Certificate of Formation.
Learn why the pros use a registered agent service.
What does a registered agent do?
You can find an outline of Alabama registered agent duties and requirements in Alabama Code §10A-1-5.31. The basic duties of a registered agent are to:
- Have a physical address (no PO boxes or virtual offices) in the state of Alabama.
- Keep regular business hours.
- Accept legal mail and correspondence from the Alabama Secretary of State on behalf of your business and get them to you fast.
Can you be your own registered agent in Alabama?
Yes. However, being your own Alabama registered agent also means listing your name and address on the public record. You’ll be responsible for keeping regular business hours to accept any legal correspondence in person.
Can I change my registered agent after I start an LLC?
Yes. It’s possible to change your registered agent in Alabama by submitting the Change of Registered Agent form with the state’s Business Services Division for a fee of $25.
3. Submit LLC Certificate of Formation
To officially form your LLC, you’ll need to complete and submit the Certificate of Formation along with the Name Reservation Certificate to the Alabama Secretary of State either online, in person, or by mail.
Note: All of the information on this form will become part of the public record.
The form will ask you to provide the following information about your LLC:
- Company name. Include an indicator like “LLC.”
- Effective date. You can choose a specific date for your LLC filing to take effect (no more than 90 days after the signed date). Leave this blank and the filing becomes effective the day it’s received by the state.
- Registered agent. This is an individual or company appointed to accept service of process on behalf of your LLC.
- Series, professional, or non-profit. Check the appropriate box that may apply to your LLC.
- Optional attachments. If you or your members have any other matters you would like to include, attach them to this filing.
How can I keep my personal information off the public record?
It’s a fact that all the information provided in the Certificate of Formation will become part of the public record. When your personal information is accessible by anyone, it opens your business up to hassles like junk mail.
To keep your information off the public record, you can hire a registered agent company—like us. We’ll list our address on this form so you don’t have to. Your personal addresses will stay off the public record and away from prying eyes.
What’s a Series LLC?
A series LLC, or SLLC, is a unique form of LLC that can hold independent divisions within itself. Each division (or “series”) has individual assets, finances, and limited liability. A Series LLC is often used by holding companies that want to separate out assets like real estate investments.
Find out if a series LLC is a good fit for you by visiting our How to Start a Series LLC in Alabama page.
What’s the difference between a member-managed and manager-managed LLC?
If you choose a member-managed LLC, the members (owners) will be in charge of the day-to-day operations. If you choose a manager-managed LLC, members hire managers to run the LLC. These managers will be in charge of tasks like hiring and firing employees, managing credit and bank accounts, and signing agreements and contracts.
For help in choosing the best management structure for you, check out our page on LLC Member Vs Manager.
How do I file the Alabama Certificate of Formation?
You can submit your articles online, by mail, or in person.
Mail and in person:
Secretary of State, Business Services
P.O. Box 5616
Alabama Online Services
4. Write an LLC Operating Agreement
An operating agreement is a document outlining the rules and regulations for running your business. It dives into all the big-picture details of how your company will run, including functions like voting, transferring membership interest, and even eventually dissolving the business.
Check out our attorney-drafted Alabama LLC Operating Agreement.
Does Alabama require an LLC to have an operating agreement?
No. It’s not a legal requirement in Alabama for your LLC to have an operating agreement, consistent with Ala. Code 10A-5A-1.08.
Despite this law (or lack thereof), it’s essential for your LLC to have a custom operating agreement in writing. Otherwise, your LLC will be governed by the state’s default LLC laws. An operating agreement is arguably the most important document your business will keep. It’s internal, so you won’t need to file with the state or make it public.
What should be included in an operating agreement?
A custom operating agreement covers both the daily operation and big picture concerns of your company—everything from member duties to business dissolution. Here is a list of common topics covered by operating agreements:
- initial investments
- profits, losses, and distributions
- voting rights, decision-making powers, and management
- transfer of membership interest
- dissolving the business
Does a single-member LLC need an operating agreement?
Yes. Every corner of your business still needs the coverage of an operating agreement. Whether it’s opening a business bank account or showing the legitimacy of your LLC, an operating agreement helps to maintain limited liability.
5. Get an EIN
An employer identification number (EIN) is your business’s unique nine-digit number assigned by the IRS. This number allows you to submit both state and federal tax filings. It’s free to apply for an EIN, and we recommend doing so online for the quickest turnaround (apply by paper form if you don’t have a social security number).
Do I need an EIN for my Alabama LLC?
Yes. Technically, an EIN is only mandatory if you have employees or have elected for your LLC to be taxed as a corporation. However, having an EIN lets you open bank accounts and apply for business licenses, making it virtually impossible to run a business without an EIN. Providing an EIN lets you keep your SSN private during your business affairs, as well.
We’ll start your business off right when you hire us to form your LLC.
What To Do After Forming Your Alabama LLC
6. Open a Bank Account
Your LLC needs its own bank account. Why? You need to demonstrate that you and your LLC are separate financial entities in order to maintain the liability protection afforded by the LLC structure.
When you’re ready to open a bank account for your Alabama LLC, have the following documents ready to show:
- Alabama LLC Certificate of Formation (a copy is fine)
- the LLC’s operating agreement
- the LLC’s EIN
- an LLC Resolution to Open a Bank Account (if your LLC has more than one member).
If your LLC has more than one member, use our free LLC Resolution to Open a Bank Account.
7. Fund the LLC
Now that your LLC is equipped with its very own bank account, you’ll need to get some funds in there. The first contributions should be the membership interest paid by the members. This interest is usually paid for via check to the LLC’s bank account or as a contribution of property or services (which might also trigger a tax event).
What is LLC membership interest?
Membership interest in an LLC represents the percentage of ownership. The more you invest, the more membership interest you’ll own. For instance, if you invest $6,000 in the company while four other members invest $1,000 each, you’ll own 60% of the company while the members each own 10%. Membership interest correlates directly to voting power in most LLCs.
8. File State Reports & Taxes
As an Alabama LLC, you’ll need to file an annual report each year with the Alabama Department of Revenue. The report serves two purposes: to confirm or update your LLC’s contact information on file with the state and satisfy the privilege tax.
Unlike annual reports in other states, Alabama’s annual report is a combination of a report and a business privilege tax return, jointly referred to as the Alabama Business Privilege Tax Return and Annual Report. The cost depends on how much you make, but you can expect to pay a minimum of $100.
There is no standalone annual report in Alabama. When you file the Alabama Business Privilege Tax (ABPT), you’re also completing your annual report requirement.
Worried you’ll forget? Let us file your annual report for you.
When is the Alabama Annual Report due?
Alabama annual reports for LLCs are due by the 15th day of the 3rd month after the beginning of the taxable year. For most LLCs, this is March 15th.
How are Alabama LLCs taxed?
By default, every LLC in Alabama can expect to be classified as a pass-through tax entity. This means the net profits will “pass through” the LLC itself and fall onto the owners (members) to report on their personal tax return as earnings. Additionally, the state mandates an annual Business Privilege Tax (BPT) on all LLCs. The BPT varies based on income and has a $100 minimum tax. LLC owners have the option to file paperwork with the IRS to have their business taxed as a corporation instead of a pass-through entity.
Learn more about S-Corp Vs LLC tax designation.