How To Set Up An LLC In Alabama (2024 Guide)

In the early stages of forming an LLC, there are a few essential details you need to take care of first. Read the sections below to learn what you need to handle before filing your paperwork.

Reserve Your Preferred Business Name

Avoid a disappointing waste of time by double-checking that your intended LLC name is available for use within Alabama. You can visit the Secretary of State’s Government Records Inquiry System to browse business entity records. Please note that you will have to visit the archives for any businesses formed between 1949 and 2010.

If the name you want to use has not been taken, you must file a Name Reservation Request form, available to domestic (company located in Alabama) and foreign (company from outside of Alabama) entities. The process costs $25, which can be paid by check, money order or credit card payment. You can download and mail these forms.

There is also an option to file and pay online. Be forewarned that the state will not accept any emailed documents.

When registering and submitting your business name, you must either include the words “limited liability company” or an approved abbreviation such as “LLC” or “L.L.C.”

Get a Registered Agent

A registered agent receives and handles important legal documents, such as court orders or tax forms, on behalf of your LLC. You can be your own agent as long as you are 18 and have a physical Alabama address and are available there during business hours. Being your own agent could disrupt your privacy, so you might consider hiring a registered agent service.

The cost ranges between $49 and $300 on average, in addition to other charges for special services. Compare businesses and ask questions to get the best possible deal.

When ready, move forward with establishing your LLC in Alabama by filing documents online or downloading and turning in your forms by mail. A domestic entity must complete a Certificate of Formation; foreign entities, likewise, submit an Application for Registration. Remember to include the Name Reservation Certificate you previously received when submitting your documents.

In Alabama, domestic LLC filings cost $200. Meanwhile, foreign LLC formation is $150. Foreign LLCs must obtain a certificate of authority ahead of doing business within the state.

If you intend to mail your documents, remember to include two copies and a self-addressed stamped envelope. Mail to:

Secretary of State, Business Services
PO Box 5616
Montgomery, AL 36103

The length of the formation process depends on your method of submitting forms. If you handle everything online, it typically takes a couple of days. Otherwise, if you mail your documents, you may have to wait about a week.

After successfully setting up your Alabama LLC, the next part of the process is maintaining your business’s health and good standing. The following sections detail the next best steps to take beyond establishing an LLC.

Get an EIN

EINs are sometimes called federal employer identification numbers (FEINs) or federal tax identification numbers (FTINs). The IRS requires most businesses to have one, though single-member LLCs are exceptions. These companies can use the owner’s Social Security number if preferred. However, EINs are ideal alternatives to Social Security numbers for security and privacy. They are free; you can get one immediately through the IRS website.

File an Annual Report and Pay the Business Privilege Tax (BPT)

Alabama LLCs must file a yearly report with the Department of Revenue. Your report is due three and a half months into the new taxable year, typically by April 15. The filing fee is $10 for both domestic and foreign LLCs.

LLCs in Alabama pay the Business Privilege Tax, which fluctuates between 25 cents to $1.75 for each $1,000 of the business’s net worth within the state. The minimum tax is $100. Larger entities, such as banks and insurance companies, get capped at a $3 million yearly tax.

Create an LLC Operating Agreement

You are not required to write up an operating agreement in Alabama, but it is still a great idea. These documents lay out the purpose of your business and how you or the LLC members intend to run it. The agreement clarifies member roles and explains voting power and financial obligations. You should strongly consider developing this document to lend legitimacy and clarity to your company and avoid future confusion or legal issues.

If your filed LLC paperwork contains errors, you need to address them immediately. For instance, if your LLC name is incorrect, you must file a Correction to Name form. For LLC filing errors, submit a Certificate of Amendment or Statement of Correction. The sooner you fix mistakes, the more quickly you can do business within Alabama.