How to form an LLC in Alabama

In addition to its many other advantages, a limited liability corporation (LLC) provides small enterprises with protection from legal responsibility and favorable tax treatment. 

Follow these easy steps to get your Alabama limited liability company up and going after you’ve decided that an LLC is the most suitable form of business for your requirements.

Note that you have the option of forming the limited liability company (LLC) yourself, or you may hire a reputable company incorporation firm to do all of the legwork on your behalf.

1. Naming Your LLC in Alabama

Choosing a name for your new Alabama limited liability corporation is the preliminary and most significant stage in the process. Make sure that you pick a name that not only satisfies the naming criteria of the state of Alabama but is also readily searchable by prospective customers.

Be sure to abide by the naming guidelines:

• You are required to have the word “limited liability corporation” or one of its acronyms included in the name of your business (LLC or L.L.C.)
• You are not allowed to use any terms in your company’s name that might lead to confusion with a public entity (e.g., FBI, Treasury, State Department)
• Words that are restricted, such as “bank,” “attorney,” and “university,” may need extra documentation and the participation of a licensed professional, such as a physician or lawyer, in your limited liability company.
• Your name must be unique among Alabama LLCs, corporations, limited partnerships, and LLPs.

Is it possible to register the name in Alabama? 

Conduct a Business Entity Search on the website of the Alabama Secretary of State to check whether the name you desire is already in use by another company or organization.

2. Pick a Registered Agent in the state of Alabama

A registered agent in Alabama is required of every limited liability company operating in the state. If the limited liability company (LLC) is taken to court, this refers to a person or company that has agreed to accept service of process on its behalf.

It is possible for the Registered Agent to be either a resident of Alabama or a legal entity that is permitted to do business in the state. The Registered Agent is required to provide evidence of a physical address in Alabama.

What exactly is the role of a Registered Agent?

A Registered Agent receives tax forms, legal paperwork, lawsuit notices, and formal government communication for your firm. Consider the role of your registered agent as that of the point of contact for your company with the state.

Who is eligible to serve as a Registered Agent?

A Registered Agent must either be an individual who resides in Alabama on a permanent basis or a corporation that is permitted to carry out operations in the state of Alabama, such as a company that offers Registered Agent services. You have the option of selecting anybody who works for the organization, including yourself.

3. Submit an application for the Certificate of Formation

The Certificate of Formation is a document that lays forth fundamental information about your limited liability company and is responsible for formally establishing your LLC. Because this form serves as the legal registration for your company with the state, it is essential that all of the details be accurate.

What information should be included on a Certificate of Formation?

When completing the Certificate of Formation for your Alabama LLC, you are required to give the following information:

• LLC’s name
• Term of the LLC is permanent or restricted.
• Address of the main office of the limited liability company Name and address of the registered agent for the limited liability company
• Location where the Secretary of State should send notifications to the limited liability company (LLC) through mail.
• How the Limited Liability Company (LLC) will be run: by its members or by its managers
• Whether or whether the limited liability company will provide business services
• Name and address of each person who organized the limited liability company, as well as the name and address of at least one member or management who has direct knowledge of the activities of the limited liability company.

Putting in an Application for Your Certificate of Formation

In the past, if you wanted to form a business in Alabama that was structured as a limited liability company (LLC), you were needed to file a copy of your application for a Certificate of Formation with the probate court in the county where you planned to locate your new company.

Act 2020-73, which became a part of the legislation of the state of Alabama on January 1, 2021, was responsible for removing this prerequisite from the statutes of that state.

Along with the Certificate of Formation, you are also required to present a copy of the Name Reservation Certificate issued by the Alabama Secretary of State. Mail is the only acceptable method for filing the certificate; filing it online is not an option.

Along with the certificate, you are required to submit payment for the following two filing fees:

• A filing fee of one hundred dollars with the Secretary of State
• A filing fee of $50 should be paid to the Probate Court.

The amount of time required to process orders will vary from place to place. The Judge will file and return a stamped copy of the Certificate of Formation and after that, the certificate will be handed over to the Secretary of State by the Probate Court.

4. Obtain a Certificate From the State Government

After the formation paperwork of the LLC has been submitted and authorized, the state will send you a certificate that proves the LLC’s official existence in response to a written request for a copy together with the appropriate amount of postage.

With this certificate, the limited liability company will be able to get an Employer Identification Number (EIN), as well as business permits and a bank account for the firm.

5. Document your Business Operations agreement

Although establishing a detailed LLC operating agreement is not a legally required step for incorporating a limited liability company in the state of Alabama, it is highly suggested for all new limited liability firms.

The following items should be included in the operating agreement:

• Describe the business structure of the limited liability company.
• Determine the specific duties and commitments that each member of the limited liability company (LLC) has 
• The operational structure of the LLC.

Significant legal and logistical challenges might await a limited liability company (LLC) in the absence of an operating agreement that defines the precise responsibilities of its members.

6. Obtain an EIN

A federal employer identification number, commonly known as a tax ID number, will be required of many limited liability companies (LLCs). An Employer Identification Number (EIN) is a nine-digit number that identifies your company to the Internal Revenue Service. 

You need an EIN in order to pay federal employer taxes, open a bank account (in most situations), or recruit staff.

On the website of the Internal Revenue Service (IRS), which is accessible without charge, you may check to see whether you need an EIN and submit an application for one online. 

Single-member limited liability companies, which are an exemption to the rule that most firms are required to acquire an EIN, may instead use the owner’s Social Security number.

Business Licenses

Depending on the nature of the business they conduct and the location of their operations in Alabama, some limited liability companies (LLCs) may be needed to get one or more business licenses or permits from the state or from their respective municipal governments.

Review the Alabama Start a Business Guide, which is made available by the Secretary of State, to get information on how to abide by the state’s regulations for obtaining a business license. The Alabama License Directory allows users to search for specific licenses that they need.

Contact a municipal or county clerk in the city or county where your limited liability company (LLC) is based to get information on the local licensing requirements.

7. Send in Annual Renewals

Each year, Alabama limited liability companies are required to submit a combined Business Privilege Tax Return and Annual Report to the state’s Department of Revenue. 

Each year, minimum tax payments of $100 are required to be made by all LLCs. Visit the website of the Alabama Department of Revenue for more information and tax forms.

You are required to register your business with the Alabama Department of Revenue if you will be employing people, collecting sales tax, or selling items in the state of Alabama (DOR). 

You have the option of registering electronically (by logging into the My Alabama Taxes (MAT) website) or manually (by filling out the Department of Revenue Form COM:101, Combined Registration/Application).

Fees and further action

Costs 

The state costs for incorporating an Alabama limited liability company may run anywhere from approximately $200 – $230, based on a variety of criteria such as whether or not you want to reserve the name of your firm.

It is important to be aware that costs may change over time; thus, consult the website of the Alabama Secretary of State for the most up-to-date fee schedule.

Consider the following additional fees that may be incurred by an LLC:

• Reserving a Name for an LLC
• Copy of certified documents with the DBA (Doing Business As) name
• Receiving Your Certificate of Existence

Further actions

When you register a limited liability company (LLC), you establish a legal basis upon which to operate your firm. Companies should make it a priority to maintain their limited liability company in compliance with state regulations and in an active position on the state’s website.

In addition, having a registered limited liability company enables you to perform the following:

• Register your company with the department of revenue in your state.
• Create a business checking account with a financial institution like Bluevine or Novo.
• Create a credit card account for your company.
• Invest in insurance coverage for your company.
• Create a trademark to protect both your company’s name and its logo.
• Obtain any permissions or licenses required to run your company, such as those issued by the health department, the zoning department, the department of home occupations, the department of professional licensing, and others. Some states need a seller’s permission to conduct sales

DIY company formation or hire the professionals?

To establish a limited liability company (LLC), you are not required by law to consult a lawyer. The majority of states enable the establishment of LLCs via the process of registering the business entity on the website of the secretary of state and with the Internal Revenue Service (IRS).

If you are not acquainted with the process of forming an LLC, your best bet may be to hire a professional LLC provider so that you can be certain that the creation will go smoothly and quickly.

When entrepreneurs start a new firm, they may save startup costs and save valuable time by using a professional company formation service that specializes in company forms. 

They can take care of the things that you may not have time to think about for a price ranging from $50 to over $500, and some examples of such things are as follows:

• Developing an operating agreement for an LLC that details your company and putting it into writing (required in some states).
• Putting together articles of incorporation that identify the management of the LLC, the registration agent, and the date the company was formed.
• Taking up the role of registered agent for your firm.
• Keeping careful records in the event that there are investigations or litigation.
• Payment of filing fees and registration with the appropriate parties.
• Registering the name of your firm and ensuring that the name you choose for your limited liability company is accessible.
• Finishing up and turning in all of the necessary legal and formation documentation.

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