If you are looking to start an LLC in Alabama then you are in the right place because, in this free guide, I have covered everything that can help you form an LLC by yourself. My guide is free if you follow it till the end you will be able to form an LLC in Alabama by yourself.
So, let’s get started
Cost and approval time of Alabama LLC
The initial cost is $200 for filing a certificate of formation. And it can take from 1 business day to 3 weeks to get your LLC approved. Learn more about Alabama LLC’s Cost
You can also learn about Alabama LLC approval time
Starting An LLC in Alabama
To form an LLC in Alabama you need to go through six main steps which are the following:
- Choose a name for your Alabama LLC
- Appoint a registered agent
- File certificate of formation with the state of Alabama
- Make an operating agreement
- Obtain the EIN from the IRS
- Submit the initial business privilege tax
The above-mentioned steps are the outline I am going to discuss them in detail below. If you want to form it yourself follow this guide till the end.
However, if you want help I would recommend hiring an LLC formation company. I recommend 2 companies for that purpose you can choose any according to your budget and requirements.
If you are interested in more companies I have listed the top 4 LLC services after doing in-depth research for 2 months.
- My number choice is Regisered Agents Inc. They charge a $100+ state fee and the registered agent is free for the first year.
2. The second choice is the Northwest Registered agent they charge only a $39+ state fee and the registered agent is free for the first year.
Steps in detail to form an LLC in Alabama
Let’s see the steps in detail.
1. Choose a name for your Alabama LLC
When you name your Alabama LLC, you have to follow certain rules to make sure the name is legal in Alabama. Here is a step-by-step guide: 
1. Need for a unique name
The name can’t be the same as that of any other listed organization in Alabama, such as an LLC, a corporation, or another type of business structure.
The webpage for the Alabama Secretary of State lets you see if the name you want is available. Do a name search to make sure the name you want isn’t already taken.
2. Use of Designators That Are Needed
For your LLC to be recognized as a limited liability company, one of the following must be in its name:
“Limited Liability Company” “LLC” “L.L.C.”
In your LLC name, you can’t use words like “Incorporated,” “Corp,” or “Inc.” because those are only used by companies.
3. Words that aren’t allowed or are limited
Some words, like “FBI,” “Treasury,” or “State Department,” could make it sound like your LLC is part of the government or works in a controlled field, so you need to get permission or more paperwork before you can use them.
If you use limited words like “Bank” or “Attorney,” you might need to file extra paperwork or make sure that your LLC has a qualified member.
4. Name Reservation Must Be Made
In Alabama, you need to reserve the name of your LLC before you file the Certificate of Formation. You can’t skip this.
You can reserve a name online or by mail. The fee to file is $25 if you do it online and $28 if you do it on paper.
You can reserve the name for one year.
5. No information that isn’t accurate
Your LLC name shouldn’t give anything away. It should correctly describe the type of business you run without implying actions that the LLC isn’t allowed to do.
6. Extra Instructions
Stay away from names that might be hard to tell apart from other Alabama businesses. The state can turn down names that sound too much like those of other businesses, even if there are only small changes, like plural vs. single forms.
Once your name has been protected, you can file the Certificate of Formation to make your Alabama LLC official.
2. Appoint A Registered Agent
The second step is selecting a registered agent for Alabama LLC
A registered agent in Alabama for an LLC is a person or business that is authorized to receive official government papers and legal warnings on behalf of the LLC. If the listed person is in Alabama, they must have a real address (not a P.O. box) and be open during normal business hours to receive court papers, tax notices, and other important mail.
Some important facts about an Alabama registered agent are listed below:
Legal Requirement: When filing creation papers with the state of Alabama, every LLC must name a listed agent.
Who can apply: This person can be the registered agent:
It could be a person who lives in Alabama or a company that is allowed to do business in Alabama, like a professional registered agent service.
The registered agent’s job is to make sure that the LLC can be reached consistently for legal issues like filings with the state or lawsuits. If you don’t keep a listed agent, you could face fines like having your LLC administratively dissolved.
Responsibilities: It is the registered agent’s job to promptly send any papers received to the LLC.
A lot of businesses hire professional registered agent services to do this job for them so they always follow the rules set by the state.
Who can be an LLC Registered Agent?
In Alabama, the registered agent for an LLC may be one of the following:
An Individual Resident of Alabama: This might be a member, manager, or anybody else who lives in Alabama. The applicant must have an actual street address in the state (a post office box is not allowed).
A Business Entity Permitted to Do Business in Alabama: This might be a local or international company or LLC that is registered and in good standing with the state. The entity must have a physical office in Alabama and be permitted to act as a registered agent.
The registered agent is in charge of receiving legal papers and official notices on behalf of the LLC.
Is the Alabama Registered Agent address public?
When you incorporate an LLC in Alabama, the address of the registered agent becomes a public record. This information is contained in the LLC’s Certificate of Formation, which is submitted to the Alabama Secretary of State and made publicly available. As a result, if you operate as your own registered agent and use your home or business address, that address will appear in the public record.
To ensure anonymity, some LLC owners opt to employ a professional registered agent service, which uses their address instead of yours.
I recommend four companies to act as your registered agent. You can choose any according to your budget.
3. File certificate of formation with the state of Alabama
To file the Certificate of Formation for an LLC in Alabama, complete the procedures below:
Name Reservation: Before filing, you must reserve your LLC’s name. The charge is $28 and can be paid online or by mail to the Secretary of State. This reservation is valid for one year.
File the Certificate of Formation online or via mail. The online charge is $208, while filing by mail is $200. This paper is sent to Alabama’s Secretary of State.
This is a one-time fee and not refundable. However, it will create your LLC if filed properly.
If you are worried you will mess it up. I recommend hiring LLC formation services. The top two companies I recommend are:
Registered Agents Inc. charges a $100+ State fee and the registered agent is free for the first year or you can hire Northwest Registered Agent which charges a $39+ State fee and the registered agent is free for the first year. They both provide equally good privacy and customer support.
4. Make an Operating Agreement
Although not legally mandated by the state, an Alabama LLC’s operating agreement services numerous critical functions. This is the reason why possessing one is advantageous: 
Internal Governance: The operating agreement delineates the management of the LLC. It specifies the roles, decision-making processes, and processes by which members will vote on significant matters, including the admission of new members and the dissolution of the company.
Ownership Structure: It specifies the ownership percentage of each member, their contributions (cash, property, services), and the manner in which profits and losses will be allocated among them.
Member Responsibilities and Rights: The document delineates the responsibilities, rights, and obligations of each member or manager, thereby preventing misunderstandings and conflicts.
Liability Protection: Although the formation of an LLC offers limited liability protection, an operating agreement serves to reinforce the distinction between personal and business assets, thereby fortifying the liability shield.
Dispute Resolution: It establishes a framework for resolving internal disputes, which can prevent costly litigation by defining the manner in which disagreements will be resolved.
Succession Planning: The agreement frequently includes provisions that ensure the business continues in the event that a member departs the LLC or passes away.
Operational Flexibility: The members’ preferences may not be in accordance with Alabama’s default LLC regulations. The operating agreement enables you to adjust the rules, including profit sharing, voting authority, and management structure, to better align with the needs of your business.
Legal and Banking Requirements: In order to establish a business bank account, numerous banks mandate an operating agreement. Additionally, investors may request to review one prior to contributing capital.
In Alabama, an operating agreement is not mandatory; however, it is strongly advised to formalize the internal structure and safeguard the interests of the LLC’s members.
5. Obtain the EIN From the IRS
An Employer Identification Number (EIN) is crucial for an Alabama LLC for various reasons:
The EIN acts as the LLC’s identifier for federal tax filing with the IRS, akin to the role of a Social Security Number for individuals.
To open a business bank account for your LLC, most banks will require an EIN.
Hiring Employees: If the Alabama LLC intends to employ individuals, obtaining an EIN is essential to adhere to federal and state employment laws.
The EIN might be necessary for submitting specific state taxes in Alabama, such as sales tax or payroll taxes.
Establishing Business Credit: An EIN facilitates the development of business credit distinct from personal credit, which is crucial for obtaining loans and various financial products.
Even if the LLC is a single-member entity without employees, obtaining an EIN is still recommended to streamline tax reporting and other business operations.
How to obtain EIN as a US Resident as well as Non-US Resident
In the U.S., getting an Employer Identification Number (EIN) is pretty much the same whether you live in the country or not. There are a few key changes for people who don’t live in the country. In either case, here’s what to do:
Residents of the U.S.
Anyone who lives in the U.S. can get an EIN online, by phone, by fax, or in the mail. How to do it:
What to Do to Apply:
Online (best for people in the U.S.):
Click on the link to go to the IRS EIN Assistant page.
Fill out the application by giving information like your name, the type of business you run, and your Social Security
Number (SSN) or Individual Taxpayer Identification Number (ITIN).
You’ll get your EIN right away after sending in your application.
Through the mail:
It’s called IRS Form SS-4, and it asks for an Employer Identification Number.
Send the filled-out form by mail to the IRS office that handles your area.
It takes about 4 to 6 weeks to process.
By fax:
Fill out the SS-4 form and send it to the IRS by fax.
It takes four working days to fax something, and you’ll get your EIN back by fax.
Calling:
People who live in the United States can call the IRS Business & Specialty Tax Line at 1-800-829-4933.
When you call, make sure you have all the details from the SS-4 form ready.
2. Not living in the U.S.
People who don’t live in the U.S. can also apply for an EIN, but they have to do things a little differently because they usually don’t have an SSN or ITIN.
What to Do to Apply:
By phone (recommended for people who don’t live in the U.S.):
The IRS can be reached at 1-267-941-1099, which is not a toll-free line.
You will have to give all the necessary information over the phone, such as how your business is set up, why you are applying, and information about the person who is responsible.
During the call, the IRS will give you your EIN.
By mail or fax:
Give the IRS Form SS-4 all the information it needs.
You can leave the “SSN/ITIN” field empty if you don’t have one.
Send the filled-out form by fax or mail to the right IRS office:
You can send it to 1-855-641-6935. It takes about 4 business days to process.
Mail: For places outside of the United States, send the form to the IRS office listed on the form. The working time is usually between 4 and 6 weeks.
More information for people who don’t live in the U.S.
To get an EIN, you don’t need to live in the U.S.
When you apply for an EIN, you can give a foreign address.
Leave that part of the SS-4 form blank if you don’t have a U.S. SSN or ITIN.
Applicants who are not residents of the United States cannot use the IRS’s online EIN application site. Instead, they must apply by phone, fax, or mail.
Information Needed to Apply for an EIN:
- Legal name of the person or business applying
- Name of the responsible party (the person who runs the business)
- Name of the business (for example, LLC, company, partnership)
- Why do you want to apply (for example, to hire people, open a bank account, etc.)
Address (for people who don’t live in the country)
You can file taxes, use business banking, hire workers, and file tax returns once you have your EIN.
6. Submit the initial business privilege tax
To submit the initial business privilege tax for your Alabama LLC, follow these steps:
Calculate the Tax Amount: The initial business privilege tax is determined by the capital employed by the company in Alabama. The minimum tax for LLCs is generally set at $100, while the maximum tax can reach up to $15,000.
Complete the Necessary Form: Utilize the “Business Privilege Tax Return” form (Form CPT) found on the Alabama Department of Revenue’s website. Make sure you possess the appropriate form for the year you are submitting.
Please fill out the form: Please complete the form by providing your LLC’s details, such as the name, address, and tax year. It is also necessary to calculate your taxable capital.
Submit your payment along with your tax return. Payment can be made via check, money order, or electronically through the online portal of the Alabama Department of Revenue.
Submit the Return: Please submit the completed form along with the payment to the Alabama Department of Revenue. You have the option to file it either by mail or online if you are utilizing their electronic services.
Maintain Documentation: Once you have submitted the form, ensure you retain a copy of the filed document and the payment confirmation for your records.
Be sure to verify the exact deadlines for filing, as submitting late could result in penalties. If you have any particular inquiries or require help with the forms, feel free to reach out!
When initial business privilege tax is due for Alabama LLC?
In Alabama, the initial business tax, referred to as the Business Privilege Tax, is payable on the 15th day of the 3rd month following the conclusion of your LLC’s fiscal year. For the majority of LLCs that adhere to the calendar year, this indicates that the tax will be due on March 15th. If you are submitting your initial return, it is typically due within 2.5 months following the formation of your LLC. Furthermore, it may be necessary to submit an annual report fee by the same deadline.
What do I do after my Alabama LLC is approved?
After getting your Alabama LLC approved, here are some things you might want to do:
Get an EIN: Go to the IRS and ask for an Employer Identification Number (EIN). For tax reasons and if you want to hire people, you need to do this.
Set up a business bank account. To keep your business and personal funds separate, make a bank account just for your LLC.
Make an Operating Agreement. You don’t have to have one in Alabama, but it’s a good idea to have one that spells out who owns your LLC and how it will be run.
Sign up for state taxes: Depending on what you do for a living, you may need to sign up for state taxes like sales tax or workplace taxes.
Get licenses and permits for your business: Check the rules in your area to see if you need any licenses or permits to officially run your business.
Annual Report: If you want to keep your Alabama LLC in good order, you must file an annual report and pay any fees that go along with it.
Stay Compliant: Keep track of what your business does, make sure you have the right paperwork, and follow any other state rules that are still in effect.
Think about getting business insurance. Depending on your field, you may want to look into different types of insurance to protect your company from possible lawsuits.
By following these steps, you can help your LLC run easily and stay in line with state rules!
How will my Alabama LLC will be taxed?
In Alabama, LLCs are usually taxed as pass-through companies. This means that the members’ personal tax returns show the income and losses of the LLC. Here are some important facts about taxes:
State Income Tax: Alabama has a state income tax that all people, including members of an LLC, must pay. At the corporate level, LLCs don’t pay income tax. However, members of the LLC report their share of the income on their personal tax forms.
Business Privilege Tax: Alabama charges an LLC and other businesses that do business in the state a Business Privilege Tax. This tax is based on the organization’s total income and is due every year. The amount changes based on the level of income.
Sales Tax and Use Tax: If your LLC sells things or certain services, you may have to receive sales tax and send it to the state.
Federal Taxes: In addition to state taxes, LLCs also have to pay federal taxes. If the LLC has active members, these taxes may include self-employment taxes.
Talking to a tax expert or lawyer who knows Alabama’s tax laws is a good idea to make sure you’re following them and to talk about your LLC’s unique needs.
How to start an LLC in Alabama FAQs
I have answered the frequently asked questions here.
How much does it cost to start an LLC in Alabama?
There are several parts to the cost of starting an LLC in Alabama:
Fee for Filing: The fee to file the Certificate of Formation for the first time is $200.
Name Reservation: It takes $25 to reserve the name of your LLC ahead of time.
Annual Report: LLCs in Alabama have to pay $100 to make an annual report.
Business License Fees: You may need to get a business license, which can cost different amounts depending on the type of business you have and where it is located.
Setting up an LLC would cost around $200, and that doesn’t include any other licenses or permits you might need.
Do I need a business license for my LLC in Alabama?
In Alabama, most LLCs do need to get a business license in order to properly run their businesses. What you need to do may depend on where your business is located and what kind of business you run. You may need to get a business license from both the state and the city. Before starting your business, you should check with your city or county government to see if there are any other permits or licenses you may need.
Is Alabama a good state to form an LLC?
If your business wants and circumstances allow it, Alabama may be a good place to start an LLC. Here are some things to think about:
Cost: Compared to some other states, Alabama’s filing fees for starting an LLC are pretty low. The fee to file the first time is about $236, and the fee to file a yearly report is also fair.
Convenience: Setting up an LLC in Alabama is a simple process. It’s easy to file important papers with the state because they offer online services.
Business environment: Alabama has been trying to make its business environment better by, for example, giving small businesses and entrepreneurs tax breaks.
Tax Structure: Alabama’s tax structure can be helpful. For example, there is no franchise tax for LLCs, but businesses may have to pay other taxes, such as sales and income tax.
Regulations: Alabama doesn’t have as many rules as some other states, which can be good for business owners.
But you should also think about the people you want to do business with because starting your LLC in the state where you plan to do business can sometimes be better.
Perhaps you should talk to a lawyer or financial expert to find out how Alabama’s specific rules and laws will affect your business.
Wrapping it up!
I am going to conclude this article by saying that I have covered everything in this guide. If you are here reading this you have more knowledge about Alabama LLC. You can form it yourself if you want. However, if you still feel the help is needed. I have shared the best LLC services with you in this guide you can count on them.
If you liked my free guide please share it with others.
Disclaimer:
The material on this website is intended for general information purposes only and should not be construed as legal, tax, or financial advice. Laws and regulations vary by jurisdiction and might change over time. It is critical to obtain specialized guidance that fits your individual situation. The opinions presented here are purely those of the writers and should not be considered professional advice. For any legal or tax-related issues, it is best to speak with a certified specialist who can give specialized advice based on your specific circumstances.
