Alabama has seen a significant increase in new businesses, with more companies opening up during and after the pandemic compared to before. In 2021 alone, the state brought in $7.7 billion in new investments and created over 10,000 new jobs. This strong growth makes starting a business in Alabama very appealing.
Setting up an LLC in Alabama is simple if you’re prepared. To help you through the process, we’ve compiled an easy-to-follow guide for starting your Alabama LLC.
Step 1: Name your Alabama LLC
Step 2: Choose a Registered Agent
Step 3: File the Certificate of Formation
Step 4: Received a Certificate From the State
Step 5: Create an Operating Agreement
Step 6: Get an Employer Identification Number
Step 1: Name your Alabama LLC
Before you can register your LLC, you’ll need to select a name to include in your articles of organization. When starting a business in Alabama, keep these naming requirements in mind:
- Name Requirements: Your LLC name must include “Limited Liability Company,” “LLC,” or “L.L.C.”
- Uniqueness: The name must differ from any existing business name in Alabama. You can check if the name is available on the Secretary of State’s website.
- Restrictions: The name cannot include words that suggest affiliation with a government agency (e.g., State Department, CIA, FBI, Treasury).
- Unique Words: Certain restricted words, such as “bank,” “lawyer,” “attorney,” or “credit union,” may need extra documentation and licensing.
Refer to the Secretary of State’s guidelines for a complete list of Alabama’s naming rules.
Additional considerations:
Reserve your Name: Alabama law requires you to submit a Name Reservation Request Form for Domestic Entities to register your business name before filing your certificate of formation. The processing fee is $25. This reservation holds your name for up to one year, with the option to renew. If you reserve the name online, the state fee is $28.
Reserving a name doesn’t guarantee final approval, but it keeps others from using the name while you process your application.
Website Domain: Securing your domain name is brilliant, even if you need more time to create your website. Before you finalize your LLC name, check if the domain name you want is available and matches your business, which ensures consistency and makes it easier for customers to find you online.
Step 2: Choose a Registered Agent
In Alabama, you must choose a registered agent for your LLC. Resident agent is responsible for receiving legal documents and official notices for your LLC.
The registered agent can be an individual (such as yourself or an employee) or a business entity that offers registered agent services. To be eligible, the registered agent must:
- If applicable, be a company that provides registered agent services.
- I have a physical address in Alabama.
- Be available during regular business hours to accept documents.
Additionally, a registered agent must be present and available to accept documents during regular business hours to ensure that important legal notices are received and handled promptly.
Step 3: File the Certificate of Formation
After you get your name reservation certificate, you can file your this certificate with the state. The forms for both domestic and foreign LLCs are on the Secretary of State’s website.
To file by mail:
- For Domestic LLCs: Send your certificate of formation with a copy of your name reservation certificate. The fee is $200. You need to include the original form and one copy.
- For Foreign LLCs: Send in your application for registration with two original copies of the certificate of formation. The fee is $150.
To file online:
- For Domestic LLCs: File through the Secretary of State’s Online Services for a fee of $208.
- For Foreign LLCs: File online for a fee of $156.
You will need to provide:
- Your business name and attach a copy of your name reservation certificate
- The name and address of your registered agent
- Optional: Indicate if your LLC will be a series LLC (one company with multiple separate LLCs), a professional LLC (for service providers like lawyers and doctors), or a nonprofit LLC.
Once you receive confirmation that you’ve processed and paid for your certificate of formation, the state will officially register your LLC in Alabama.
Step 4: Received a Certificate From the State
Once the state approves your LLC’s formation documents, it will issue a certificate confirming that your LLC is officially registered.
This certificate will enable you to:
- Obtain an Employer Identification Number (EIN)
- Apply for business licenses
- Open a business bank account
Step 5: Create an Operating Agreement
This agreement is a document that explains how your LLC will operate.
Even though Alabama doesn’t require an operating agreement, it’s still essential. It helps solve problems related to financial issues and other disputes. Without it, state law will decide how to handle things that might not be in your LLC’s and its members’ best interest.
Your operating agreement can include:
- The LLC’s name and main address
- How long the LLC will exist
- The name and address of the registered agent
- Information about the articles of organization
- The purpose of the business
- Names of members and their contributions
- How you will share profits and losses
- How to add or remove members
- How you will manage the LLC
- Rules about liability and protection
Step 6: Get an Employer Identification Number
After forming your LLC, you must get an Employer Identification Number (EIN) from the IRS. This number, also known as a federal tax identification number, is essential for tax purposes and is necessary for opening a business bank account. If you converted another type of business to an Alabama LLC, you may need to get a new EIN.
Check the state requirements for starting an LLC. If you hire employees in Alabama, you will also need an Alabama income tax withholding number. You can register with My Alabama Taxes to get this.
LLC State Guides
FAQs
What is the cost of forming an LLC in Alabama?
To form an LLC in Alabama, you’ll pay a $200 fee to the Secretary of State and at least $50 for Probate Court. Reserving a business name costs $28 online or $10 by mail. Alabama LLCs must also file an annual state tax return with a minimum $100 tax. Filing on your own is cheap but complicated while hiring a lawyer is costly. Nolo’s Online LLC formation service offers a more direct, affordable option starting at $49.
Do LLCs in Alabama have to pay taxes?
Yes. LLCs must pay a Business Privilege Tax of at least $100 annually.
Do LLCs in Alabama need to file an annual report?
Yes. Alabama LLCs must file a yearly report, which costs $10 and is usually due by April 15.
