form an LLC in alabama

How to Start an Alabama LLC

Alabama LLC Formation – Basics & Helpful Information

This article is meant to be a general overview of the LLC formation process in Alabama. This includes information about how to start an LLC and other basic issues related to LLCs in Alabama.

Initial Filing Fees | Filing Time Frame | Annual Compliance & Fees | Steps To Form An Alabama LLC

Initial Filing Fees

Alabama Filing Fees

The Alabama Secretary of State charges a $200 filing fee for the Certificate of Formation. You will need to file a name reservation before or at the same time as the Certificate of Formation is filed.

Filing Time Frame

Alabama Filing Time

It takes the Alabama Secretary of State 1-2 days to process Certificates of Formation that are mailed in. Online filings, on the other hand, are processed/approved instantly.

Annual Compliance & Fees

Alabama Annual Compliance Requirements

Every year the LLC must file Annual Report & Alabama Business Privilege Tax Return. Alabama does not charge a filing fee for the Annual Return. The Annual Report and Business Privilege Tax Return are due annually before April 15th (or 3.5 months after end of your fiscal tax year). The tax rate for the Alabama Business Privilege Tax is graduated, based on the entity’s federal taxable income apportioned to Alabama. The rates range from $.25 to $1.75 for each $1,000 of net worth in Alabama. The minimum tax is $100 and the maximum for most businesses is $15,000.

Read more on Alabama SOS website

Steps To Form an LLC in Alabama

You can use this checklist to help guide you through the process of forming an Alabama LLC:

Step 1: Decide on a Business Name

One of the first things a business owner does is select a name. If you are going to create an LLC in Alabama, you will need to make sure the name is available. We recommend a free search via the Alabama Secretary of State – Business Entity Search (do not include the “LLC” or any punctuation in your search) and then a another search of the Alabama Trademark Database. These searches should locate business names (and trademarks) that are unavailable in Alabama.

It is also highly recommended that you check the US Patent and Trademark Office to see if someone has a federal trademark of the business name you want (the Alabama SOS will not check other state’s databases or the federal trademark database). You can click here to have a comprehensive name availability search performed for you.

The legal name of an LLC must contain the words “Limited Liability Company” or the abbreviation “L.L.C.” or “LLC”.

If you are doing business under a name that is not the same as the LLC’s name, you will need to file an Alabama trademark. The trademark form can be found online at the Alabama SOS Trademark Division’s Webpage.

Step 2: Register your LLC with the State

Alabama Certificate of Formation

The Certificate of Formation (when filed with the Secretary of State) is what creates the LLC. In Alabama, unlike other states, you must file a Name Reservation prior to or along with the filing of the Certificate of Formation. While you can mail in the Certificate of Formation, we recommend filing online as it will be approved instantly.

The Alabama Certificate of Formation must include (at a minimum):

  • Name of LLC
  • Copy of the Name Reservation Certificate (previously filed with the AL SOS)
  • Name & address of Registered Agent
  • Effective Date of Filing (normally the date of filing, cannot be before the filing date or more than 90 days after filing date)

Registered Agent Information

LLCs must have a registered agent in the state of Alabama. A registered agent may be an individual who resides in Alabama or a business entity registered to conduct business in Alabama. The registered office must be in Alabama.

What is a Registered Agent?

Step 3: Create and Sign the LLC’s Governing Document

The governing document for an LLC is called the “company agreement” or sometimes the “operating agreement”. The company agreement is to an LLC like a partnership agreement is to a partnership (or bylaws to a corporation). The company agreement governs the internal operation of the LLC and is typically a private document that is kept in the company book and the principal place of business (it is NOT filed with the state). The company agreement can address many issues, some of the more common concepts found within a company agreement are:

  • Limitations on the members liabilities
  • The level of consent needed to take various actions (i.e. simple majority required to add new members)
  • The percentage of the LLC that each member owns
  • How profits and losses are allocated between the members (typically based on ownership percentages)
  • Limitations on transferability
  • What each member is contributing to the LLC and what happens is such contributions are not made.
  • The authority of the members, officers, managers, committees, etc.
  • How meetings are conducted

One of the reasons we recommend using an LLC formation company like IncFile is that they can provide you with a company agreement in connection with their LLC formation services.

Step 4: Get an EIN

After you form an Alabama LLC, you can get the EIN. There are a few different ways to get an EIN:

  1. Apply Online Yourself: The IRS has an online EIN Application you can use to get an EIN. The turn around time on the EIN using this method is only a few minutes.
  2. Use Form SS-4: You can get an EIN the old fashion way by completing Form SS-4 and mailing or faxing into the IRS. How long does it take to get the EIN this way? According to the IRS: if you mail in Form SS-4, it will take 4-5 weeks to get your EIN. If you fax in Form SS-4 you should have the EIN back in a week if you provide a fax number or 2 weeks if you don’t have a fax number.
  3. Have a Third-Party Obtain: All of the LLC formation companies have the ability to get the EIN for you. The EIN obtainment charge varies by company, but it is generally between $50 and $100. If you get one of the higher priced packages, they will sometimes throw in the EIN for free.
Does my LLC Need an EIN?

Step 5: Get Licenses and Permits

After you create your new LLC, you’ll need to determine if your business/profession requires any license or permits to conduct business.

Read more about Alabama business licenses

Registering a Foreign LLC in Alabama

If you have a non-Alabama LLC (aka Foreign LLC) and you are doing business in Alabama, you may need to register the Foreign LLC in Alabama. Each state has a different definition of “doing business”. Unfortunately, there is no statutory definition for “doing business” in Alabama. There is a case, however, that makes it clear that a non-Alabama LLC must first register as a foreign LLC before it files a lawsuit in Alabama court: CS Assets, LLC v. H&H Real Estate Dev., Inc., 353 F.Supp.2d 1187 (N.D. Ala. 2005).

The filing fee for the Foreign LLC Application For Registration in Alabama is $150 for standard processing (i.e. filing in paper form) and $250 for online filing or expedited service (approximately 24 hours after filing).

See more about registering a foreign LLC in Alabama