Alabama Annual Report + Business Privilege Tax

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Alabama LLC Annual Report
& Business Privilege Tax

How to form an LLC in Alabama
This Quick Start Guide is a brief overview of how to form an LLC in Alabama.

Detailed Lessons:

 

Alabama LLC Costs:
Alabama LLC filing fee: approximately $183 (varies by county)
Alabama LLC annual report fee: $100 minimum

Need to save time?
Hire a professional to form your LLC in Alabama:
Northwest ($39 + state fee) or LegalZoom ($149 + state fee)

(check out Northwest vs LegalZoom)

Overview

Unlike most other states where the Annual Report is filed with the Secretary of State, in Alabama, the Annual Report is filed with the Department of Revenue.

You have two returns to file. The first is a one-time filing and the second one is an ongoing filing due every year.

The one-time filing is known as the “Initial Business Privilege Tax”.

The ongoing filing is known as the “Business Privilege Tax Return and Annual Report”.

Why do I need to pay the Alabama Business Privilege Tax?

The Business Privilege Tax is a legal requirement for operating a business in the state of Alabama. Think of it as the “privilege” to be doing business in the state. In short, there’s no way around it. You need to file and pay this tax every year in order to keep your LLC in good standing.

How is the rate for the Business Privilege Tax determined?

The Business Privilege Tax is based off of your federal taxable income. You’ll multiply your federal taxable income by your “apportionment factor”. You’ll then take this new number and use it to reference the rate schedule to determine the total taxes due. Your federal taxable income is the amount passed through to the LLC member(s).

Initial Business Privilege Tax Return (Form BPT-IN)

  • Amount due: $100 minimum
  • Due by: 2.5 months after LLC formation
  • Name: Form BPT-IN
  • Ongoing: No, just filed once

All new LLCs must file an Initial Business Privilege Tax Return (and pay the business privilege tax) within 2.5 months of their formation. The formation date is the date next to the signature on your Certificate of Formation.

A minimum tax of $100 is due, but you may owe more depending on your federal taxable income and your net worth. We recommend consulting with a tax professional for help.

Note: The LLC needs to have their EIN from the IRS before filing any returns with the Department of Revenue.

If Northwest Registered Agent is your LLC’s Registered Agent:

The Initial Business Privilege Tax Return requires your Registered Agent’s Federal Tax ID Number. Please call Northwest Registered Agent to confirm, but we have their Federal Tax ID Number listed as 26-4375596.

Business Privilege Tax Return (Form PPT)

  • Amount due: $100 minimum
  • Due by: April 15th (first filing due the year after your LLC is formed)
  • Name: Form PPT
  • Ongoing: Yes, due by April 15th every year
  • Attachments: Federal Tax Return, Schedule BPT-NWI, Form BPT-V

All LLCs must file the Business Privilege Tax Return (and pay the business privilege tax) each year by April 15th.

Your first filing of the Business Privilege Tax Return (Form PPT) is due the year after your LLC is formed.

For example, if your LLC was formed (approved) on July 20th of 2018, your first filing of the Business Privilege Tax Return (Form PPT) will be due by April 15th of 2019.

A minimum tax of $100 is due, but you may owe more depending on your federal taxable income and your net worth. We recommend consulting with a tax professional for help.

The Name of Form PPT is Confusing

At the top of Form PPT, you’ll notice the title “Alabama Business Privilege Tax Return and Annual Report.”

This name is a little confusing as LLCs are not required to attach an Annual Report (only C-Corp, LLCs taxed as C-Corp, and LLCs taxed as S-Corp).

Although LLCs do not need to attach an Annual Report, you will still be filing your Business Privilege Tax on the form titled “Alabama Business Privilege Tax Return and Annual Report”.

(related article: how are LLCs taxed)

Download Business Privilege Tax Forms

Visit this page: https://revenue.alabama.gov/forms/?d=individual-corp

In the upper right side of the table you’ll see a “Search” box. Enter the bold terms below and make sure to select the proper tax year (which you’ll see in the far right column):

Form BPT-IN (Print Only)
(“Alabama Business Privilege Tax Initial Privilege Tax Return“)

Form PPT
(“Alabama Business Privilege Tax Return and Annual Report for Pass Through Entities Only“)

Form BPT-V
(“Business Privilege Payment Voucher“)

Alabama’s Terms: “Limited Liability Entity” vs “Disregarded Entity”

These terms are just “tax classifications” used by the Alabama Department of Revenue.

(In the eyes of the law you are still a Limited Liability Company.)

“Disregarded Entity” = Single-Member LLC

“Limited Liability Entity” = Multi-Member LLC

What other Alabama taxes are due?

Additional taxes will be due depending on your type of business. Taxes such as Income Tax, Franchise Tax, Corporate Tax, Sales and Use Tax, and more.

You may also need to file more taxes if your business has employees.

You can visit the Department of Revenue to learn more:
https://www.revenue.alabama.gov

Calculating your Alabama LLC’s taxes can be quite confusing and if done improperly can negatively affect your business.

Our Recommendation for filing your Alabama taxes

We recommend hiring a tax professional/CPA to help, not only with your Alabama taxes, but also with your Federal Taxes.

Hiring a tax professional will not only help keep your LLC in compliance with Alabama, but it will also give you an advisor to go to for other business questions.

A referral from a friend or someone you trust is usually the best way to find someone to do your taxes.

You can also use our favorite service, Thumbtack, or search on Yelp.

You want to find someone who is a good fit for your company, makes you feel comfortable, and is willing to answer all of your questions. It should be someone you like personally as well as professionally.

It may take time to find the right person, so we recommend talking with at least 2-5 people before making your final decision. We hope you find a great tax professional!

Alabama Department of Revenue Contact Information

334-242-1170 (option 8 for Business Privilege Tax)
https://revenue.alabama.gov/ (main)
https://revenue.alabama.gov/contact/ (contact page)

Matt Horwitz
Founder & Educator, LLC University®
Forming an LLC shouldn't be so complicated. Our step-by-step guide will make the process a breeze – and no complex legal jargon! LLC University® teaches people how to form an LLC for free in all 50 states. We hope you find our free guides and resources helpful in your business journey.
Disclaimer: Nothing on this page shall be interpreted as legal or tax advice. Rules and regulations vary by location. They also change over time and are specific to your situation. Furthermore, this comment section is provided so people can share their thoughts and experience. Please consult a licensed professional if you have legal or tax questions.

22 Comments

  1. Dr. Jettie P. Davis August 11, 2017

    You have made my life so much easier. I honestly couldn’t not have done this on my own without you help. Thank you so very, very much.

    reply
    • Matt Horwitz August 13, 2017

      Hi Dr. Jettie, thank you so much for the lovely comment! So happy to hear we were able to help :-)

      reply
  2. Monte Easterling March 8, 2018

    Great tutor for filling out operating agreement, best Ive seen…Thanks

    reply
    • Matt Horwitz March 10, 2018

      Thanks Monte! You’re very welcome :)

      reply
  3. George March 15, 2018

    Hi Matt, I have a question about business privilege tax. So if I formed my LLC on march of this year, I still have to file both initial business privilege tax return( Form BPT-IN) and business privilege tax return(Form PPT) due April 15? Or just the Form BPT-IN? Thanks again for your help!

    Thanks,
    George

    reply
    • Matt Horwitz March 22, 2018

      Hi George, great question. Your first filing of the Business Privilege Tax Return (Form PPT) is due the year after your LLC is formed. So in your case, it’ll be due by 04/15/2019.

      Your Initial Business Privilege Tax Return (Form BPT-IN) will be due within 2.5 months of your LLC being formed. So if your LLC was formed on March 15th, 2018 (for example), Form BPT-IN must be filed by May 31st, 2018. Hope that helps. And thanks for your comment. We’ve since updated this lesson to make this more clear :)

      reply
  4. Princess April 1, 2018

    Hi Matt,

    So, I have a question about the fees due when it comes to filing the tax forms (BPT-IN/PPT). I just formed my LLC in February and filed the BPT-IN form however, when reading over this section, I noticed that it said a minimum of $100 was due? Could you further explain this

    Thanks,
    Princess

    reply
    • Matt Horwitz April 2, 2018

      Hi Princess, all Alabama LLCs must pay a minimum tax of $100, regardless on income or activity. That’s the minimum amount due in your first payment, filed with BPT-IN, as well as on an ongoing annual basis, filed with Form PPT. The Alabama Business Privilege Tax is simply the “cost of doing business” in the state. However, depending on your federal taxes filed with the IRS, you may owe more than $100. We highly recommend working with an accountant to not only file your BPT-IN and your Form PPT (ongoing every year), but also any and all other state-level, local-level, and federal-level tax returns. Hope that helps!

      reply
      • Princess April 2, 2018

        Matt, thanks so much for your prompt response. I have one more question for you. I sent in (mailed) the BPT-IN form already without any payment attached to it. Can I still send that in? And if so, do I mail it to the same place? Also, is there a deadline that the payment has to be due by?

        reply
        • Matt Horwitz April 8, 2018

          Hi Princess, I’m not sure about this one. I definitely recommend calling the Alabama Department of Revenue though and asking them how to best proceed. Hope that helps.

          reply
          • Princess April 9, 2018

            Ok, thanks again Matt. You’re the best!! Keep up the awesome work; you make getting your llc a piece of cake :)

            Princess

            reply
            • Matt Horwitz April 9, 2018

              Thanks for the rockin’ comment Princess! Will do :)

              reply
  5. SONRISE April 9, 2018

    I cannot thank you enough for how easy you have made this process of starting a new business. If it had not been for you, I don’t know how I would have made it through. It definitely would have taken MUCH more time. Thank you!

    reply
    • Matt Horwitz April 9, 2018

      Hey Sonrise! Thank you for such a nice comment. You’re so very welcome :) Best wishes with your business!

      reply
  6. Deanna Hill August 22, 2018

    I just opened my own Real Estate office at my house in Alabama. I am the Broker/Owner. I have an agent working under my Brokers License but is not an employee, she is a Realtor and is basically self-employed. Would I be considered a disregarded entity.
    Thank you for your Help
    Deanna

    reply
    • Matt Horwitz August 31, 2018

      Hi Deanna, whether or not an LLC is a Disregarded Entity has to do with who owns the LLC, not the employees/independent contractors or the industry. Hope that helps!

      reply
  7. H Hayes October 1, 2018

    I established an LLC for liability purposes only covering my real estate investments — each is a separate Series LLC. I am concerned that this is not a “business” in the traditional sense and confused about the annual reporting to Alabama since my Federal tax return is much more than my State because of my State tax-free income (Soc Sec & Federal pension). Only my investment, interest, and RMD is State taxed. Am I required to file an annual report?

    reply
    • Matt Horwitz October 25, 2018

      Hi H, we’re pretty sure that you need to, but we recommend running things by an accountant or two in Alabama to double-check.

      reply
  8. Dee October 12, 2018

    How do I mark a PPT form for Alabama as “Final”?

    reply
    • Matt Horwitz October 12, 2018

      Hi Dee, since there isn’t an ‘final return’ checkbox on the PPT, usually you can just write “FINAL RETURN” at the top. However, we’re not 100% sure on this, so it’s a good idea to call the Department of Revenue to double-check. Hope that helps.

      reply
  9. Wade January 13, 2019

    I failed to submit my form PPT last April. I am in the process of doing it now and need to know how to pay the interest on it since it is late. Any help would be much appreciated!

    reply
    • Matt Horwitz January 13, 2019

      Hi Wade, you’ll need to speak with the Alabama Department of Revenue and/or an accountant.

      reply

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