Starting an Alabama LLC, step-by-step
Starting an Alabama LLC costs $200. And it takes 1 day to get an LLC in Alabama.
Here are the 6 steps to forming an LLC in Alabama:
- Choose an LLC Name
- Select a Registered Agent
- File a Certificate of Formation
- Create an Operating Agreement
- Get an EIN
- File the Initial Business Privilege Tax
If you want to form your LLC yourself, follow our free guide below.
If you want someone to take care of it for you, we recommend hiring Northwest Registered Agent
(We recommend Northwest. We've reviewed all the top companies in the industry. And Northwest is our #1 pick for prices, customer support, and address privacy. Check out Northwest vs LegalZoom to learn more.)
How much does it cost to start an LLC in Alabama?
It costs $200 to start an LLC in Alabama.
And then it costs a minimum of $50 per year.
What are these fees for?
- The $200 is to file the Certificate of Formation – the document that creates an LLC.
- The $50 or more per year is for your Annual Report and Business Privilege Tax – a mandatory filing that keeps your LLC in good standing.
To learn more about LLC Costs, see LLC Costs in Alabama.
How long does it take to get an LLC in Alabama?
If you file your LLC by mail, it will be approved in 1-2 business days (plus mail time).
But if you file online, your LLC will be approved immediately.
Please see How long does it take to get an LLC in Alabama to check for any delays.
Here are the steps to forming an LLC in Alabama
1. Search your Limited Liability Company (LLC) Name
Search your Alabama LLC Name to make sure it’s available in the state.
You need to do this because two businesses in the state can’t have the same name.
First, search your business name and compare it to existing businesses in Alabama. You can make sure the LLC Name you want is unique from existing businesses using the Secretary of State’s Business Entity Search tool.
Second, familiarize yourself with the naming rules in Alabama (so your Alabama LLC gets approved).
We’ll explain both in more detail here: Alabama LLC Name.
2. Choose a Registered Agent
The next step is to choose an Alabama Registered Agent.
An Alabama Registered Agent is a person or company who accepts legal mail and state notices on behalf of your Alabama Limited Liability Company.
Who can be an LLC Registered Agent?
You have 3 options for who can be the Registered Agent:
- A friend or family member
- A Registered Agent Service
The Registered Agent for your LLC must have a physical street address in Alabama. PO Boxes aren’t allowed.
And the Registered Agent’s name and address will be listed on public records.
If you don’t have an address in Alabama, or you want more privacy, you can hire a Registered Agent Service for your LLC.
We recommend Northwest Registered Agent
Our favorite feature about Northwest is they’ll let you use their office address throughout your LLC filing. This way, you can keep your address off public records.
They’ll also scan any mail sent to your LLC and upload it to your online account.
Northwest has excellent customer service, and they’re who we trust to be our own Registered Agent.
3. File an Alabama LLC Certificate of Formation
To start an LLC, you need to file the Alabama Certificate of Formation.
This gets filed with the Alabama Secretary of State.
The Alabama Certificate of Formation costs $200 if you file online.
This is a one-time fee to create your LLC.
If you want to file this yourself, see our step-by-step guide: Alabama Certificate of Formation.
Or, you can hire a company to do it for you.
4. Create an Alabama LLC Operating Agreement
An Alabama LLC Operating Agreement serves as a “companion” document to the Certificate of Formation.
The Certificate of Formation creates your LLC, and the Operating Agreement shows who owns the LLC.
Additionally, some banks require an Operating Agreement when you open an LLC bank account.
And having an Operating Agreement will be very helpful if you ever end up in court. Reason being, it helps prove that your LLC is being run properly.
That’s why we recommend that all LLCs have an Operating Agreement – including Single-Member LLCs.
Furthermore, Operating Agreements are “internal documents“. Meaning, you don’t need to file it with any government agency like the Alabama Secretary of State or the IRS (Internal Revenue Service).
Just keep a copy with your business records.
You can download a free template below.
Then, learn how to fill it out by watching our step-by-step Alabama Operating Agreement video.
5. Get an EIN for your LLC
The next step is to get an Alabama EIN Number from the IRS for your LLC.
Note: An EIN Number is also called a Federal Tax ID Number or Federal Employer Identification Number.
An EIN Number is used to:
- identify your LLC for tax purposes
- open a business bank account
- apply for business licenses and permits
How much does an EIN cost?
Getting an EIN Number from the IRS is completely free.
How long does it take to get an EIN?
If you apply online, it takes 15 minutes.
If you apply by mail or fax, it can take 1-3 months.
How can I get an EIN?
US Citizens/US Residents: If you have an SSN or ITIN, you can apply for an EIN online. Follow these instructions: Apply for an EIN online.
Non-US Residents: You can’t get an EIN online, but you can still get one by fax or by mail. Follow these instructions: How to get an EIN without an SSN or ITIN.
6. File your Initial Business Privilege Tax Return
All LLCs must file a Business Privilege Tax (BPT) Return (and pay the business privilege tax) every year. And the first one is due 2.5 months after forming your LLC.
This first filing is referred to as the Initial Business Privilege Tax Return.
How much does an LLC Initial BPT Report cost?
The Initial BPT is a one-time fee that costs a minimum of $50.
That said, you may owe more than that, depending on your federal income taxes and net worth.
We recommend consulting a tax professional for help.
When is the Initial BPT due?
The Initial BPT is due within 2.5 months of forming your LLC.
For example, if your Alabama LLC was approved on March 15, 2024, your Initial Business Privilege Tax is due by May 29, 2024.
You only have to pay this fee once.
How do I file my Initial BPT?
You can file your LLC’s Initial Business Privilege Tax online or by mail. We recommend the online filing because it’s easier to complete.
Learn more about the Initial BPT here: Alabama LLC Annual Report & Business Privilege Tax.
What do I do after my LLC is approved?
After your Alabama LLC is approved, there are some additional steps.
LLC business bank account
You’ll want to open a business bank account for your LLC.
This makes accounting and record-keeping much easier for your business finances.
Having a separate business bank account also maintains your personal liability protection. This is because it keeps your business finances separate from your personal finances.
Get Alabama business licenses and permits
Good news, Alabama doesn’t have a state general business license.
However, depending on where your LLC is located, you may need a local business license or permit.
For example, if you want to start a daycare, you may need a business license from the city or county.
You can learn more on our Alabama Business License page.
File your Alabama Business Privilege Tax & Annual Report
All Alabama LLCs must file a Business Privilege Tax (BPT) and Annual Report every year.
The BPT and Annual Report keep your LLC in good standing with the state.
How much does a BPT & Annual Report cost?
The BPT and Annual Report costs a minimum of $50 per year. That said, you may owe more than that, depending on your federal income taxes and net worth.
We recommend consulting a tax professional for help.
When is the Business Privilege Tax & Annual Report due?
The BPT Return and Annual Report filing is due every year by April 15.
When is my first Business Privilege Tax & Annual Report due?
Your first Business Privilege Tax Return and Annual Report is due by April 15, the year after your LLC is approved.
For example, if your LLC was approved on March 15, 2024, your first Business Privilege Tax Return & Annual Report will be due by April 15, 2025.
Note: Remember, you have to file the Initial Business Privilege Tax 2.5 months after forming your LLC.
After that, you’ll file the Business Privilege Tax & Annual Report every year, starting the year after your LLC is approved.
How do I file my BPT & Annual Report?
You can file your LLC’s Business Privilege Taxes and Annual Report online or by mail. We recommend the online filing because it’s easier to complete.
Learn more about filing your BPT and Annual Report here: Alabama LLC Annual Report & Business Privilege Tax.
LLCs don’t pay federal taxes. Instead, the LLC Members pay the taxes for the LLC.
Said another way, the owners pay taxes for the LLC as a part of their personal tax return.
How will my LLC be taxed?
By default, an Alabama LLC is taxed by the IRS based on the number of owners your LLC has:
- A Single-Member LLC is taxed like a Sole Proprietorship.
- A Multi-Member LLC is taxed like a Partnership.
Alternatively, you can ask the IRS to tax your LLC like a C-Corporation or S-Corporation.
And the Alabama Department of Revenue will honor the tax treatment you use with the IRS.
Besides federal and state income taxes, there are additional state and local taxes – including sales tax.
Learn more in Alabama LLC Taxes.
How to Start an LLC in Alabama FAQs
Can I start an LLC online in Alabama?
Yes, you can file your LLC online in Alabama. The Certificate of Formation filing fee is $200.
When you start your LLC online, it will be approved immediately.
What are the benefits of an LLC (Limited Liability Company)?
The first benefit of an LLC is protecting your personal assets. Meaning, if your business is sued, your personal assets – like your home, cars, and bank accounts – are protected.
This protection applies to all LLC owners (called LLC Members). It doesn’t matter if you have a Single-Member LLC or Multi-Member LLC. All of the LLC owners are protected from the business debts and liabilities.
This type of protection wouldn’t apply if you operate as a Sole Proprietorship or Partnership. With these types of informal business structures, the owners aren’t protected in the event of a lawsuit. For that reason, Limited Liability Companies (LLCs) are a much more popular business structure.
Another benefit is LLC pass-through taxation. This means the LLC itself doesn’t pay federal income taxes. Instead, the profits “pass through” to the LLC Members. And the Members pay the taxes on their personal tax return.
And Alabama state income taxes are very similar, since the state honors the federal tax treatment of your LLC.
To learn more, please see How are LLCs taxed.
Is Alabama a good state to start an LLC?
Whether Alabama is a good state to start an LLC depends on where you live – and where you’re doing business.
Meaning, if you live in or do business in Alabama, then you should start your LLC in Alabama. While many websites talk about tax rates and advantages of certain states, none of that applies if it’s not the state where you live and do business.
For example, if you form an LLC in Delaware, but live in and conduct business in Alabama, you’ll also need to register your Delaware LLC in Alabama (and pay extra fees). And you’ll end up paying Alabama taxes anyway. This ends up leading to more costs and more headaches with no advantages.
In summary, if you live in and conduct business in Alabama, then yes, Alabama is a good state to start a business. If you don’t live in and do business in Alabama, then no, Alabama isn’t a good state to start a business.
Real estate exception: If you’re purchasing real estate outside of Alabama, you should form your LLC in the state where the property is located.
For more information, please see Best State to Form an LLC.
Matt holds a Bachelor's Degree in business from Drexel University with a concentration in business law. He performs extensive research and analysis to convert state laws into simple instructions anyone can follow to form their LLC - all for free! Read more about Matt Horwitz and LLC University.