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How to Start an LLC in Alabama: If you’re looking to start an LLC in Alabama, you’ve come to the right page. Setting up an LLC is easy and cost-effective. To form an LLC, you must follow a few steps that include naming your LLC, hiring a registered agent, filing your formation documents, doing the operating agreement, and finally obtaining the EIN. You can easily set up your LLC at a very low cost in Alabama. Though, you must pay the mandatory state filing fee. These fees and charges can be tax deductible, making the LLC formation cost almost negligible.
On this page, You’ll find all the steps that must be taken to ensure that your Alabama LLC has been correctly formed. We recommend you read the whole article very carefully, word by word, don’t miss anything 🙂
How to Start an LLC in Alabama
An LLC (aka Limited Liability Company) is a hybrid business entity combining a corporation’s characteristics with a partnership or sole proprietorship. It separates your personal assets from your business assets, thus giving you personal asset protection. For an LLC, members’ personal assets are not affected by business debts. However, in some cases, if the LLC is sued for business debts, courts might pierce the corporate veil and use the owner’s personal assets to meet their corporate liabilities.
If you wish to start an LLC in Alabama, you must file your Certificate of Formation with the State and pay a filing fee of $200. While it’s the most important step, it’s not the only one. There are 4 other crucial steps to follow to get your LLC formed in Alabama. Below are all 5 steps that explain everything you need to do to start an Alabama LLC in 2024. Let’s get started! You can always hire a professional LLC formation service in Alabama to set up your LLC instead of doing it alone; a Pro service will ensure everything is done properly.
Step 1: Decide a Name for Your Alabama LLC
The first step while forming a limited liability company in Alabama is to give a proper name to your LLC. Before you name your business, you must know that the name should be easy to remember, available in the state, and follows all the LLC naming guidelines.
Alabama LLC Naming Guidelines
There are a few specific requirements all the LLCs in Alabama have to follow while naming their Company. Some of the most important requirements are as follows:
- Your business name should be available and no other existing business in Alabama can have the same name. ZenBusiness offers unlimited business name searches without any hassle.
- “Limited Liability Company”, “LLC”, and “L.L.C.” – any one of these has to be used as a suffix in your business name.
- You cannot use any name for your business that is confusing or misleading. Terms such as “Treasury”, “State Department”, “FBI”, “CIA”, etc. shouldn’t be included.
- Terms like “Bank“, “University“, “Attorney“, “Doctor“, etc can be added only after the additional requirements by Alabama State Government are fulfilled.
- In Alabama, the name reservation has to be done at least 15 days (2 weeks) before the LLC registration process.
- (Optional) It’s better to name your business something for which your desired domain is available.
| Important Links – | Submit Offline Form to – |
|---|---|
| Alabama Business Entity Search – Online Name Search Name Reservation Form – PDF Name Reservation Form – Online Alabama LLC Name Search Guide – Instructions | Secretary of State P.O. Box 5616 Montgomery, AL 36103 |
Reserve Business Name for Future
If you do not wish to file your LLC right now but want to hold the name you have decided on, then you can reserve your LLC name for 1 year. To keep the name, you must file a name reservation application and pay $25 to reserve your name with the Alabama Secretary of State.
Doing Business As (DBA) or Trade Name
Once you have a legal name for your LLC, you can register it. However, it is not mandatory. You can, instead, use DBA, Fictitious Name, or Trade Name. In that case, you must register your name with the Alabama Secretary of State by submitting an Application to Register or Renew Trademark, Service Mark, or Trade Name in Alabama, along with the filing fee of $30.
Recommended: You can do name search, business domain, website, emails, and a lot more in one place by hiring a professional service. We recommend using –
ZenBusiness – ($0 for LLC Formation)
Apart from LLC formation, ZenBusiness offers customized website templates and business emails at a very reasonable price. If you plan to get a website, then it is wise to have a “.com” domain for your business, but these days you can also use other TLDs like “.io”, “.company”, “.xyz,” etc. Here you can get everything you need for your business in one dashboard.
It is not legally mandatory to use the word LLC in your domain name or email. If you want, you can use it. However, it is recommended not to use LLC in the domain name. A domain name should be short and easy to remember.
Step 2: Assign a Registered Agent in Alabama
The second step to forming an LLC in Alabama is to appoint a Registered Agent. A registered agent is a person or business entity working on your LLC’s behalf. This person or business will receive important tax forms, legal documents, all notices of lawsuits, and other official government correspondence in Alabama. Hence, hiring a competent Alabama Registered Agent for your LLC is necessary.
Make sure your registered agent is a resident of Alabama or has a physical street address. This address will be used as the principal address of your LLC to receive any legal documents. Most LLC formation companies also provide registered agent services. Below are two great LLC formation services; even if you buy their cheapest plan (normally $0), you also get registered agent service and other services at a very reasonable price.
LLC Service | Our Rating & Pricing | Top Features | Learn More |
#1 TOP PICK  | $0 + State Fees |
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 | $0 + State Fees |
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These two are our top recommendations for registered agent service, as they are competent and authorized to conduct business in Alabama. Some LLC formation services also offer standalone Alabama registered agent services. You can purchase only Registered Agent services without purchasing any other LLC formation services. This standalone service might become handy if you are doing it yourself and don’t want to disclose your home address or you don’t want to pierce the corporate veil.
A person above 18 years of age and has a physical address in the state of Alabama can be a Registered Agent. A Registered Agent can be an independent person or can be a business entity. One is responsible for handling all the legal documents on the LLCs behalf.
Yes, you can be your own registered agent if you are a resident of the state of Alabama and you are above 18 years of age. To become a registered agent, you must have the authority to conduct any type of business in Alabama.
There are a few reasons why you shouldn’t be your own registered agent. The address of the registered agent is used to communicate with the SOS or for any legal activities. If you are your own registered agent, you might have to upload your personal address to the public forum. Besides, the registered agent must be at the address during business hours. It won’t be easy for you as you also have to take care of other things in your LLC. Hence, it is wiser to appoint a separate entity as your registered agent.
If an LLC is sued in Alabama, in some cases, courts might decide to lift the corporate veil, which means the owners of the LLC will be personally liable for their business debts. They might have to forgo their personal assets to repay their business debts. This is called piercing the corporate veil, where personal and business assets are not separated anymore. Your personal assets can be protected if you have enough capital and all your LLC documents are properly filed.
Registered Agent Consent Application
In Alabama, there is no separate Consent Letter to be produced to the Secretary of State. At the time of change of Registered Agent (or the name or address), the new Registered Agent has to sign the consent letter. It comes with the Application form to Change the Registered Agent. The filing fee of $25 should be paid for it. Read more on how to change a registered agent in Alabama.
Step 3: File Certificate of Formation in Alabama
The third and most important step in forming an Alabama LLC is to file the Certificate of Formation. This Alabama Certificate of Formation is a legal document that is required to register your business with the Alabama Secretary of State. It costs $200 (by mail and $208 online) to file your formation certificate in Alabama.
The Certificate of Formation includes details like the name of the LLC, the registered agent’s name, address, employees’ details, and the company’s structure (member-managed or manager-managed). Before hiring employees in Alabama LLC, one should know about the rules and regulations thoroughly. Also, if you are expanding your existing business (an LLC) in other states to Alabama, you must register as an Alabama Foreign LLC.
How to File Online
Go to the Secretary of State Online Service. You will get the online service page. If you are already a subscriber then click on the “log in to Subscribe Account” option and log in with your credentials. If you’re not subscribed, then you can directly start filing your LLC by clicking on the “Online Filing” button below. Read more about the Alabama Certificate of Formation for online registration.
Processing Time: Normally, it takes around 10 business days (approx) to get your LLC formed in Alabama. The processing time for online filing might be a little faster than offline filing. With an additional cost, you can get expedited filing as well. However, the document processing time can be changed due to various factors.
Recommended: Online LLC Formation service can provide all these documents way faster than usual time with lifetime customer support and 100% accuracy. We recommend using –
ZenBusiness – ($0 + State Fees) Online LLC Setup
Every LLC owner has to pay the filing fees to register their business in Alabama. This fee is mandatory but also tax deductible. If you’re doing it yourself (filing on your own), it will not cost you any additional service fee. However, it is not feasible to do that as the DIY process might be delayed, complicated, and messy, especially if you’re a novice entrepreneur. Hence, it is recommended to get professional guidance to get your LLC formed in Alabama.
Step 4: Create Your Alabama LLC Operating Agreement
Moving on to the fourth step, filing your operating agreement. An operating agreement is a document that legally outlines the proprietorship and operating procedures of your LLC. This document is vital as it ensures that all business owners are on the same page regarding how they operate, thus reducing future conflicts.
When it comes to filing an Alabama LLC Operating Agreement, the state does not require you to have a comprehensive operating agreement, but it is ideal to have one that contains all the details of your business operation that helps in taking future business decisions, especially if you decide to dissolve Alabama LLC later. Hence, having an operating agreement may not be necessary, but it is surely ideal.
Recommended: You can get a professionally made operating agreement for very less cost with ZenBusiness. You don’t need to worry about drafting it as they will take care of it on your behalf. We recommend using –
ZenBusiness – ($0 + State Fees) Online LLC Setup
The operating agreement draft can be created for free if you don’t hire a professional. However, there is an advantage to appointing a proficient person/service. You will get a businesslike quality operating agreement at a very cheap fee, which will help you in the future. Hiring a professional service means you can sleep well at night 🙂
Step 5: Filing an Alabama LLC EIN
The Employer Identification Number (aka EIN) is a nine-digit number given by the Internal Revenue Service (IRS) to make it easier to identify the type of business for tax purposes and taxes in general. The EIN is necessary for any active business or any form of business.
EIN application in Alabama is needed when the LLC hires employees. Hiring employees in Alabama LLC requires following specific rules and regulations. On the other side, EIN for Alabama foreign LLC should be obtained if your LLC is based in other states.
To obtain EIN (aka FEIN), one must fill up a form (Online or by mail) and submit it to the IRS. Enter details of your LLC, and finally, complete the form and send it to the address given. You can also get an EIN Assistant to help you with the process.
Mail to: Internal Revenue Service, Attn: EIN Operation, Cincinnati, OH 45999
Fax: (855) 641-6935 | Fee: Free
Recommended: This hassle will be reduced when you hire an LLC formation service. They take care of obtaining EIN and all other things for your LLC. We recommend using –
ZenBusiness – ($0 + State Fees) Online LLC Setup
Note: You don’t need a Social Security number when getting an EIN. You can proceed to fill out I.R.S. Form SS-4 and leave section 7b blank. You must then call the IRS at (267) 941-1099 to complete your application. Agents or employees will help you with that.
Congratulations, you are now done with all the necessary steps to form your Limited Liability Company in Alabama. If you do it yourself, it should take you a long time to understand and do all the steps properly.
However, if you use ZenBusiness, it should be way faster. You will always have a live chat option and phone support with experts for any help you need. Their worry-free service will make things easier for you.
After Starting Your Alabama LLC
After forming your LLC, there are still some things that you will need. The most important thing is to separate your business and personal assets. LLCs have limited liability protection that protects your personal assets from business liability. This is called a corporate veil. However, the corporate veil can be lifted or pierced by the court if the LLC is sued. In that case, the owners of the LLC become personally liable for their corporate debts. A few things like appointing a legit registered agent, having enough capital, and filing all the major documents with the state can save the LLCs from being pierced into the corporate veil.
BOI Report Filing
According to the Corporate Transparency Act, every LLC, corporation, and other type of business that is registered with the Alabama SOS or similar authority, must file the BOI report with FinCEN. From January 1, 2024, it is mandatory to file a BOI report for every business entity. In this report, LLCs have to share information about the beneficial owners (having equal or more than 25% share). LLC owners can file BOI reports online or offline.
LLCs in Alabama that are created before January 1, 2024, should file their BOI report by January 1, 2025. LLCs that are created in 2024, must file the BOI report within 90 business days of finishing the LLC formation process. Missing out on filing the BOI report may lead to a monetary penalty of $500/day.
Apart from that, there are a few things you need to take note of,
- Get a company business bank account
- File Alabama business permits & licenses
- Get general liability insurance and professional liability insurance with coverage for employees.
- File an Alabama LLC annual report or biennial report
This page has provided you with steps to LLC formation and filing processes. You now have to remember upcoming filing deadlines and filing fees or filing costs, including fees for late filings, to make sure your LLC is up-to-date.
The LLC formation processing time in Alabama is 1-2 business days if filing offline (by mail). The process starts immediately if filed online. Check how long it takes to form an LLC to know about the tentative timelines.
Cost of Alabama LLC
LLCs can be formed by spending a very low price. Apart from the mandatory state filing fees, you don’t have to bear huge charges if you do it yourself. Following are the fees and taxes LLCs in Alabama must pay to register and run a business in the state. Forming an LLC is no doubt cost-effective compared to other business structures. Because LLCs have pass-through taxation that saves the company from double taxation. However, the fees and charges (tax-deductible) that you must pay to the state, such as name reservation fee, name filing fee, LLC filing fee, and Franchise Tax & Sales Tax (If applicable). Here are the main fees and taxes you must pay while forming your limited liability company in Alabama,
| Fees/Tax | Amount to be Paid |
|---|---|
| Name Reservation Fee (online) | $25 |
| Name Reservation Fee (By mail) | $28 |
| Certificate of Formation Fee | $200 (by mail and $208 online) |
| Business Privilege Tax | $100 (minimum) |
| LLC Annual Fee | $100 |
| Sales Tax | 4% |
In Alabama, an LLC name reservation is mandatory and should be done at least 2 weeks before your LLC registration. You can register your LLC name at the time of registering your LLC. If you wish to hold the name for some time without registering your LLC, then you can do that online. Your LLC name will be reserved for 1 year without registering your LLC. It can be renewed by paying $25.
In Alabama, an Annual Report has to be produced every year. It costs $100. Also, the State of Alabama requires the Business Privilege Tax each year on the third week of April. The amount of BPT depends on the LLC’s revenue. The amount is a minimum of $100. Read our guide on LLC costs in Alabama for more information.
Alabama Foreign LLC
If you are interested in forming a Foreign LLC in Alabama then you need to file the Certificate of Foreign LLC to the Alabama Secretary of State. Foreign LLCs allow you to operate your business in more than one state. Along with the Certificate of Foreign LLC, you need to submit some more documents like the Certificate of Good Standing, etc. to the Alabama SOS to form your foreign LLC in Alabama. To know more in detail, check out our guide on Alabama Foreign LLC.
Reasons to Start an LLC in Alabama
Alabama state is located in the southeast part of the United States. It is popularly known as the Cotton State. Having states like Florida, Georgia, and Tennessee bordered around. With remarkable diversification in the economy, Alabama has witnessed a post-world war II boom in finance, technology business, manufacturing, and so on.
Having a limited liability company in the United States brings out a handful of benefits. Alabama, among all other states, offers its own sets of advantages. It is much easier and reasonably cost-effective to have an LLC in Alabama, especially for foreign entrepreneurs. Following are the advantages of starting an LLC in Alabama,
Tax Credit
Starting an LLC or start-up in Alabama gives you several tax benefits. Read more here on Alabama’s classification of LLC tax. There are some major tax credits that an entrepreneur can expect while setting up their business in the state of Alabama.
- Investment Credit – Businesses can get up to 1.5% credit for the total qualified capital investment in a year. As much as investments take place in Alabama, it leads to more job creation and employment opportunities.
- Small Business and Agribusiness Credit – Under Section 40-18-390, the small businesses and agribusinesses in Alabama may receive income tax credits up to $1,500. Corporations having less than 75 employees will be qualified for this tax credit in Alabama.
- Dual Enrolment Tax Credit – Any business in Alabama that encourages education or technical employment programs will be eligible to have this tax credit. A business investing in education and a career-oriented field may get a 50% tax credit in Alabama.
No Residencial Requirement
To start an LLC in Alabama, entrepreneurs do not have to reside in the state. This is extremely helpful for foreign LLCs. All they need is a registered agent having a permanent address in Alabama.
Alabama Enterprise Zone Act
Under this act, any LLC located in Enterprise zones in Alabama will receive local tax benefits. Places like Monroe, Bullock, Greene, Winston, and others fall under the Enterprise Zone in Alabama.
Other than these advantages, the state offers easy and affordable filing, compliances, management, and such. You will separate personal assets from business assets and liabilities while having an LLC in Alabama.
Top 5 Businesses in Alabama
When we talk about starting an LLC in Alabama, we look for businesses that make a significant contribution to the state’s economy. Here’s a list of the Top 5 Businesses in Alabama:
1. Technology
Technology is the topmost business sector in Alabama that grows every day. The state hosts a bunch of tech companies in the past few years. From cybersecurity, and data centers to the production of hardware, the state has become the heart of the technology business compared to the neighboring states. About 300 tech companies are running their business in Alabama currently.
2. Automotive
Another topmost business in the state of Alabama is the Automotive industry. The state has grabbed the 5th position in the USA for manufacturing light-weighted trucks and small cars. Be it car manufacturing or production of the automotive spare parts sector, Alabama has it all. More than 900,000 companies are operating in Alabama, according to a report published in 2013.
3. Chemicals
The chemical industry in Alabama has also significantly grown in recent past years. More than 200 chemical manufacturing units are operating in Alabama today. Alabama is in the second position in exporting chemicals like chlorine, stabilizers, oxidants, and so on.
4. Aeronautics
The Aeronautics business is another sector to look forward to. The growing sector started in the year 1910 with the establishment of the Civilian Flight School by the Wright Brothers. Since then, the state is hosting several aeronautics manufacturing companies.
5. Forestry
Finally, Forestry Business is the last but not the least sector in our top-5 list. Being at the top position in producing Paper and Pulp, the forestry industry produces around $15 billion in products every year. Timberland in the state is the largest in the whole United States of America.
Some low-cost profitable businesses in Alabama for startups:
- Online selling
- Tourism
- Digital Marketing – SEO consulting
- Graphic Designing
- Website building
Apart from these, some other options are Garden maintenance, pet care, cleaning, and taxi service can be good options for low-cost businesses.
Alabama LLC Formation Review
Time needed: 5 minutes
Just to recap, here are the easy steps again when forming an LLC in Alabama. Click on the steps in this list to read the full detail.
- Name your Alabama LLC
The first thing you must do is to choose a company name, which should be unique, easy to find, and available in the state.
- Choose a Registered Agent
In Alabama, it is mandatory to select a registered agent for your LLC. Get a professional Registered Agent from LLC formation services to get things done hassle-free.
- File a Formation Certificate
Filing a formation certificate is necessary when forming an LLC in Alabama. Depending on the state, it could be called any of the following: Certificate of Formation, Articles of Organization, or Certificate of Organization.
- Create an Operating Agreement
An operating agreement is not a strict requirement in Alabama but something encouraged when you start an LLC to avoid future conflicts.
- Get an EIN
The Employer Identification Number (EIN), also called Federal Tax Identification Number, serves to identify a business entity like a social security number but for a company.
F.A.Qs
If you are a resident of Alabama, then you can file your LLC by yourself. However, it is always worth having a professional than doing it yourself to handle legal complexities, paperwork, and other documentation.
Apart from the formation fee of $200 (domestic LLC) and $156 (foreign LLC), LLC costs in Alabama include $100 for Annual Reports every year. LLCs are liable to pay sales tax of 4% every year.
It takes 10 business days to get an LLC in Alabama if you file it online. If you hire a professional LLC service, then it might take less than that. We recommend TailorBrands, which has an impeccable turnaround time.
Every year all the LLCs have to submit an Annual Report and pay $100 to the Alabama Secretary of State and renew the LLC. It is mandatory to renew your LLC every year.
Generally, for the LLCs, it is a default tax structure. Once you will obtain the EIN, you will get the various tax structure options to select. Sometimes LLCs choose S Corp to reduce federal tax burdens. Read more on the Alabama Classification of LLC Tax.
In Conclusion
When it comes to forming an LLC in Alabama. It is much simpler than other business structures. In Alabama, starting a small business or a start-up is easy because of its diverse resources. For small budget holders, forming a limited liability company is desirable. The steps explained in this article are generic steps for starting a business in Alabama. It is recommended to consult an attorney or service provider.
In Alabama, while establishing an LLC, make sure you check with the local bodies like the city council and district office to get updated with local regulations. We recommend ZenBusiness, one of the best LLC services that offers LLC formation at $0 (+ state filing fees). Hiring a professional service would make things easier. From having a registered agent to complying with the local and state government, everything will be smoother than doing things all by yourself.