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How to Form an LLC in Alabama
Quick Start Guide ← you are here
This Quick Start Guide is a brief overview of how to form an LLC in Alabama.
Alabama LLC Costs:
Alabama LLC filing fee: approximately $183 (varies by county)
Alabama LLC annual report fee: $100 minimum
We’ve put together a free guide on how to form an LLC in Alabama. We hope you find it helpful!
To form an LLC in Alabama, you can either follow the 7 lessons above (which are more detailed and step-by-step), or you can follow the Quick Start Guide below (which is a brief overview of all the steps).
If this is your first time setting up an LLC in Alabama, we recommend that you follow the more detailed lessons above. Please make sure to follow them in order.
An Alabama Limited Liability Company (LLC) is an entity created by state law that can be used to run a business or own assets, such as real estate, vehicles, boats, and aircraft.
Think of an Alabama LLC as a “hybrid entity” offering the benefits of both a Partnership (pass-through taxation) as well as a Corporation (personal liability protection).
Just like a Partnership, any income created by your Alabama LLC will not be taxed at the corporate-level by the IRS (known as double taxation), but instead, it will flow through to your personal tax return and be paid at your individual tax rate.
And just like a Corporation, your personal assets (like your home, cars, and bank accounts) are protected in the event your Alabama LLC is sued.
Along with the benefits of pass-through taxation and personal asset protection, Alabama LLCs are also very easy to manage (less complicated than a Corporation). For these reasons, LLCs are the most popular business structure in the state.
Forming an LLC in Alabama:
– follow the Quick Start guide below (brief overview), or
– follow the 7 lessons above (more detailed and step-by-step)
Northwest ($39 + state fee) or LegalZoom ($149 + state fee)
1. Alabama LLC Name Reservation
• Before filing your Alabama Certificate of Formation (the document which creates your LLC), you need to make sure your desired LLC name is unique and available to use (known as being “distinguishable upon the records”).
Once you find an LLC name that is available to use, you need to file a Name Reservation with the state and pay a small fee. The Name Reservation filing is a required step in the process of forming an Alabama LLC.
• Alabama LLC Name Search:
• LLC Designator: Under Alabama law, section 10A-1-7.07, your desired LLC name must end with a proper designator. These are the only three options which you can choose from:
– LLC (most popular)
– Limited Liability Company
• Name Reservation: Once you’ve found a desired LLC name that is unique and available to use, you can now reserve it with the Alabama Secretary of State (again, this is mandatory).
• Method of filing the Name Reservation: You can file your Name Reservation by mail or you can file it online. The mail filing costs $10, but takes 1 week for the state to process your Name Reservation and mail you back the approval. Instead of filing by mail, we recommend filing your Name Reservation online. Although it’s more expensive ($28), your Name Reservation will be instantly processed online and you can download the approval letter right away. The information below is for the online Name Reservation steps, but if you prefer to file by mail, please see this lesson.
• File your LLC Name Reservation online
– Click on “Non-Subscriber” towards the bottom of the page
– Enter your contact information
– Enter your desired LLC name exactly as you would like it
– Choose “Domestic” at the top and then “Limited Liability Company (LLC)”
– Click “Name Reservation Only”
– Select “Individual” and enter your contact information
– Review all the information and agree to the terms at the bottom
– Enter your billing information and pay the $28 filing fee
– You’ll then be able to download your Name Reservation Approval Letter
2. Alabama Registered Agent
• All LLCs in Alabama are required to maintain a Registered Agent.
• An Alabama Registered Agent is a person or company who is responsible for accepting “Service of Process” for your Alabama LLC. More specifically, your Registered Agent is responsible for receiving subpoenas, notices, and any other legal documents sent to your LLC.
• Your Alabama Registered Agent will also receive tax-related notices and reminders from the Alabama Department of Revenue.
• Alabama Registered Agent Requirements: A Registered Agent can either be a person or an existing company. If your Alabama Registered Agent will be a person, they must be at least 18 years old and be a resident of the state. If your Alabama Registered Agent will be a company, that company must be authorized to do business in the state.
Your Registered Agent must have a physical street address located in Alabama. A PO Box address is not allowed.
• Who can be your Alabama LLC’s Registered Agent: You, your friend or family member can be your Alabama LLC’s Registered Agent if you/they meet the requirements above. Also, you/they should be available during normal business hours (9am to 5pm, Monday – Friday).
• Commercial Registered Agent: If you, your friend, or a family member don’t have a street address in Alabama (or prefer not to be the Registered Agent), then you can hire a Commercial Registered Agent.
A Commercial Registered Agent is a company that specializes in receiving Service of Process and other documents on behalf of your Alabama LLC. Most Commercial Registered Agents will scan and email your documents, but some will forward them by mail instead. Both of the companies we recommend below will scan and email your documents.
• Privacy: The Registered Agent address will be listed on the state’s website and public records. For this reason, many people choose to hire a Commercial Registered Agent for privacy. Hiring an Alabama Commercial Registered Agent will keep your address off of public records
• Commercial Registered Agent: If you need to hire a Commercial Registered Agent in Alabama, we recommend Northwest Registered Agent ($125 per year).
Northwest has been in the business for over 20 years and they have great customer support. Any mail that is sent to your LLC will be scanned by them and uploaded to your online account.
3. Alabama LLC Certificate of Formation
• Alabama LLC filing form: Certificate of Formation (Form SOSDF-8)
• Download the Certificate of Formation: http://sos.alabama.gov/sites/default/files/2017-03/sosdf-8.pdf
• Overview: Unlike most states, where you file your LLC forms with the Secretary of State, in Alabama, you’ll be filing your LLC forms with the Probate Judge.
There are 67 Probate Judges located in Alabama; one for each county. You’ll need to mail your Certificate of Formation to the Probate Judge located in the same county as your Registered Agent.
Once the Probate Judge receives your Certificate of Formation, they will record that information in their office and then forward your Certificate of Formation to the Secretary of State for final approval.
You’ll need to pay a filing fee to the Probate Judge (varies by county) as well as pay a filing fee to the Secretary of State.
• Alabama LLC Filing Fees: The filing fees will vary depending on the county where your LLC’s Registered Agent is located, but on average, the total cost to form an LLC in Alabama comes out to about $183.
Here’s the break-down:
– $100 for the Secretary of State
– $55 (on average) for the Probate Judge
– $28 for the Name Reservation
The Probate Judge fees will vary by county. Please see the following table: https://www.llcuniversity.com/alabama-llc/probate-judge-fees/
• Method of Filing: The Certificate of Formation can only be filed by mail (there is no online filing at this time).
Also, the Alabama Certificate of Formation must be typewritten. It cannot be handwritten. This means you’ll need to fill out the PDF on your computer.
• Where to Mail: You must mail your Certificate of Formation to the Probate Judge (again, not the Secretary of State).
You must mail your Certificate of Formation to the Probate Judge that is located in the same county as your Registered Agent.
• Documents you must mail to the Probate Judge:
– Certificate of Formation (1 signed original + 2 copies)
– Cover Letter for Probate Judge
– Name Reservation Approval Letter
Tip: We recommend getting a larger envelope for all your documents and mailing them to your Probate Judge’s office via USPS or UPS. We also recommend getting tracking or delivery confirmation.
• Alabama LLC Approval times: Once the Probate Judge’s Office receives your documents, they will process them in their system within 1-2 business days. From there, they will forward your Certificate of Formation to the Secretary of State for final processing (which takes about 1-2 weeks).
Unfortunately, the Secretary of State’s office does not send back any type of confirmation after your LLC filing has been processed and approved.
In order to find out if your LLC was approved, you’ll need to search the state’s online database. We recommend doing so about 1-2 weeks after you’ve mailed your documents to the Probate Judge. Here is the state’s online database: http://arc-sos.state.al.us/CGI/CORPNAME.MBR/INPUT
So once you find out that your LLC is approved, that’s great news… but, you still need a “stamped and approved” copy of your Certificate of Formation in order to open an LLC bank account.
This is called a Certified Copy (of your Certificate of Formation). In order to get a Certified Copy, go back to the state’s online database (link above) and search your LLC’s name. Then towards the bottom, under the “Scanned Documents” section, click on “Purchase Document Copies”. A Certified Copy just costs a few dollars and you’ll be able to download it right away after paying online with a debit or credit card.
Northwest ($39 + state fee) or LegalZoom ($149 + state fee)
4. Alabama LLC Operating Agreement
• An Operating Agreement is essentially your Alabama LLC’s “Constitution”. It contains all the rights, duties and obligations of the LLC owners (called Members), the structure and management of the business, and any other provisions as agreed to by the LLC Members.
• Your LLC’s Operating Agreement will also spell out how much money each person puts into the LLC, much of the LLC each person owns, how profits are distributed, how taxes are paid, and more.
– it helps maintain your liability protection (serves as proof your LLC is being run as a separate entity);
– it makes operating the business easier, and;
– it can help prevent or resolve any potential disputes among the LLC Members.
• An Operating Agreement is an “internal document”, meaning you don’t need to send a copy to the Probate Judge, the Secretary of State, or any state or federal agency for that matter. Just keep a copy with your business records and make sure to give a copy to any other LLC members (if you have a Multi-member LLC).
Instructions on how to fill out your LLC Operating Agreement can be found here.
5. Federal Tax ID Number (EIN Number)
• After forming your Alabama LLC, the next step is to get a Federal Tax ID Number from the IRS.
• A Federal Tax ID Number is like your LLC’s “Social Security Number”. The IRS uses it to identify and document your Alabama LLC for tax purposes.
• It’s also known as an Employer Identification Number, EIN, Federal Employer ID Number, FEIN, and Federal Tax Number. They all mean the same thing.
• Uses of a Federal Tax ID Number: Allows your LLC to open a separate bank account, apply for certain business licenses/permits, and handle employee payroll taxes (if applicable).
The IRS does not charge any fee for obtaining a Federal Tax ID Number. The application (whether by mail or online) is free.
• Important: Make sure you wait for your Alabama LLC be approved before applying for your Federal Tax ID Number. If you’ve obtained your Federal Tax ID Number before your LLC was approved (and there were errors), you can cancel that Federal Tax ID Number and then just apply for a new one.
Mailing Address: Internal Revenue Service, Attn: EIN Operation, Cincinnati, OH 45999
Fax number: 855-641-6935
We recommend applying online as the processing time is much quicker. However, you can only apply online if you have an SSN (Social Security Number) or ITIN (Individual Taxpayer Identification Number).
• Note: The online application is not available for foreigners who don’t have an SSN. The online application is also not available for LLCs which are owned by an existing company. However, in both cases, you can still obtain a Federal Tax ID Number, you just have to apply by completing Form SS-4 and then sending it to the IRS by fax or mail.
• If you don’t have an SSN: On Form SS-4, where it asks for your SSN, ITIN, or EIN (line 7b), just write “Foreign”. Your EIN application will then be approved without the need for having an SSN.
• Alabama statute:
Section 10A-5A-1.07 of the Code of Alabama
6. Alabama LLC Annual Report and Business Privilege Tax Return
• All LLCs in Alabama (regardless of income or activity) must regularly file an Annual Report and a Business Privilege Tax Return. This is an ongoing requirement and it is filed every year with the Alabama Department of Revenue.
• A Business Privilege Tax is essentially an annual report, a business license, and tax all rolled into one. It keeps the authorities updated on your Alabama LLC’s activities, and it’s a license and tax on the privilege to do business in the state.
• After your Alabama LLC is formed, you have to file your first return called the Initial Business Privilege Tax Return. This must be filed within 2 months and 2 weeks of your LLC’s formation date.
• Afterward, you must file the Annual Report and Business Privilege Tax Return every year. It is due by April 15th.
• Fees: $100 minimum. The amount can go up depending on the value of your business, its income, and the number of LLC Members.
The following forms can be searched for downloaded from this page on the Department of Revenue’s website:
– Form BPT-IN (Initial Business Privilege Tax Return)
– Form PPT (Business Privilege Tax Return and Annual Report)
– Form BPT-V (Business Privilege Tax Voucher)
• Mailing Address:
Alabama Department of Revenue
Business Privilege Tax Section
PO Box 327320
Montgomery, AL 36132-7320
• Recommendation: Along with the Business Privilege Tax and Annual Report, your Alabama LLC may also have to pay other taxes, depending on its location and the nature of its business. Figuring out the tax details for your LLC can be complicated, and if done improperly, can negatively affect your Alabama LLC. For that reason, we recommend you get help from a tax professional. Please see our how to find an accountant guide.
• Alabama statute:
Title 10A, Chapter 40 of the Code of Alabama
7. Business Licenses and/or Permits
• Aside from the Business Privilege Tax and Annual Report, your Alabama LLC must also apply for any necessary business licenses and/or permits. The kind of business license(s) or permit(s) your Alabama LLC needs depends on its location and the nature of its business.
• Business Privilege License and Store License:
– A Business Privilege License is a license to do business in the county where your Alabama LLC is located.
– A Store License is a license for businesses which buy and sell physical goods or merchandise.
Both of the above are issued by the County Probate Office or County Licensing Commission having jurisdiction over your Alabama LLC.
• For more information on both licenses, you can contact the county or municipality located in the same county as your LLC’s Registered Agent using the links below:
• Municipal Business License: This is a license from the state board or agency which regulates the business or industry your Alabama LLC is engaged in.
Not all Alabama LLCs will require a Municipal Business License, but some will. You can get in touch with the proper board or agency below:
• Need to save time? There are over 20,000 licensing and permit jurisdictions in the United States. If you want to save time, we recommend hiring a professional service company (like IncFile) to do the research and prepare the applications for your Alabama LLC.
8. Alabama LLC Bank Account
• The next step after getting a Federal Tax ID Number for your Alabama LLC is to open a business bank account.
• A separate bank account for your Alabama LLC is important for two reasons: it makes bookkeeping easier, and avoids mixing your personal assets with your LLC’s assets.
• Required Documents: A Certified Copy of your LLC’s Certificate of Formation, Federal Tax ID Number, and 2 valid IDs (driver’s license, SSN, passport, etc.)
• Tip: Call the bank ahead of time to find out if they require additional documents. Also, call as many banks as you can to widen your choices. Some banks charge monthly maintenance fees, but there are a few that do not.
• DBA: A DBA/Doing Business As (called “Trade Name” in Alabama) simply means your LLC does business under a name other than the one registered with the Secretary of State. In case the bank representative asks for your LLC’s DBA/Trade Name (and you’re not using one), just tell them it has none and that you’ll be opening the bank account under the LLC’s original name.
• Debit card: The bank will issue you (and any other account signer) with a debit card. You can also obtain a credit card for your LLC by searching on www.creditcards.com
9. Business Phone Number
Instead of using your home telephone number or your cell phone, you can purchase an affordable “virtual business number” specifically for your Alabama LLC. You can set this virtual business phone up to forward to your cell phone, go through voice prompts, or configure it any way you’d like.
We recommend using Phone.com as they have the cheapest plans and their customer service is excellent.
They offer local phone numbers as well as 1-800 toll-free numbers. You can easily setup call forwarding, pre-recorded prompts, and get voicemail messages forwarded to your email.
Getting a separate business phone number for your Alabama LLC is also a good idea in order to keep your actual number private from those pesky “public record” websites.
Alabama State Agencies
Alabama Secretary of State (Business Services Division)
Hours: 8am to 5pm, Monday – Friday (Eastern), except holidays
Alabama Department of Revenue (Business Privilege Tax)
Hours: 8am to 5pm, Monday – Friday (Eastern), except holidays