Starting an Alabama LLC
An Alabama Limited Liability Company (LLC) is a legal business structure used to protect your personal assets (home, car, bank account) in the event your company is sued.
An LLC can be used to operate a business, or an LLC can be used to hold your assets (such as real estate, vehicles, boats, and aircraft).
1. Alabama LLC Name Reservation
The first step to forming an LLC in Alabama is to search your desired LLC name to make sure it’s available to use. Then you’ll file an Alabama LLC Name Reservation to secure your business name.
Alabama LLC Name Search:
Business Entity Search: By Entity Name
LLC Designator: As per Section 10A-1-5.06 of the Alabama Code, your LLC name must have one of the following designators at the end of its name:
- LLC (most common)
- Limited Liability Company
Comma: You can place a comma before the “LLC” or you can leave it out. Both are acceptable.
Distinguishable: Your LLC name must be distinguishable (unique) from other businesses registered in the state.
Name Reservation: Once you find an LLC name that is available to use, you need to file a Name Reservation. In most states, LLC name reservation is optional, however, it’s required in Alabama.
Methods of filing: Name reservation can be filed by mail or online, however we recommend filing online as the name is approved instantly. If you would like to file online, you actually no longer need to file the Name Reservation separate and apart from the Certificate of Formation. Due to changes in 2021 affecting Alabama LLCs, both of these forms can be filed together online with the Alabama Secretary of State.
Name reservation fee: Name Reservation costs $25 if filed by mail and $28 if filed online.
2. Alabama Registered Agent
All LLCs in Alabama are required to maintain an Alabama 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.
Special offer: If you hire Northwest to form your LLC ($39 + state fee), they’ll include their Registered Agent service free for the 1st year.
3. Alabama LLC Certificate of Formation
2021 changes: Act 2020-73 changed the way Alabama LLCs are filed. Alabama LLCs used to have to file with the Probate Judge’s office and there was no online filing. Alabama LLCs no longer need to file with the Probate Judge. Filings are now made directly with the Secretary of State and can be done online.
The Alabama Certificate of Formation (Form SOSDF-8) is the form that, once approved, creates your Alabama LLC.
Alabama LLC fee: The fee to create an LLC in Alabama is $200. This is the fee to file the Certificate of Formation.
Methods of filing: The Certificate of Formation can be filed by mail or online. We recommend the online filing as it includes the Name Reservation and your LLC will be approved instantly.
Approval time: If you file the Certificate of Formation by mail, it will be approved in 4-7 days. If you file the Certificate of Formation online, it will be approved instantly.
Note: Filing times may take longer due to the current global situation and government delays. Please see how long does it take to get an LLC in Alabama.
File by mail: Download the Certificate of Formation: Alabama Domestic LLC Certificate of Formation
File online: Alabama Secretary of State: Domestic Filing
Name reservation: You can either file an LLC Name Reservation before the Certificate of Formation filing, or you can do them together online.
4. Alabama LLC Operating Agreement
An Alabama LLC 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).
5. Federal Tax ID Number (EIN Number)
After forming your Alabama LLC, the next step is to get an Alabama EIN 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 a Federal Tax ID Number, Employer Identification Number, 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 to 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 non-US residents 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.
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 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)
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.
7. Business Licenses and/or Permits
Aside from the Business Privilege Tax and Annual Report, your Alabama LLC must also apply for any necessary Alabama 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 give you a debit card when you open the account.
Credit card: You can also get a business credit card to earn points, miles, and other rewards.
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 Secretary of State: Business Services
Alabama Secretary of State: Contact Us
Alabama Department of Revenue (Business Privilege Tax)
Hours: 8am to 5pm, Monday – Friday (Eastern), except holidays
Alabama Department of Revenue
Alabama Department of Revenue: Contact Us