Forming an LLC can be a little complicated as each U.S. state has its own checklist with minor procedural variations.

Here are the six essential steps to forming an LLC in Alabama:

  1. Choose a name
  2. Designate a registered agent
  3. File a Certificate of Formation
  4. Draft an operating agreement
  5. Obtain an EIN
  6. File an annual report

If you want to form your LLC on your own, follow the step-by-step guide below. If you want to hire someone to save time and do it for you, then we recommend the following services.

Our picks for LLC formation services

ZenBusiness
  • Low cost
  • Quick turnaround
  • Expert service and support
Visit ZenBusiness
northwest logo Northwest Registered Agent
  • Same-day filing service
  • Affordable pricing
  • Strict ethical code
Visit Northwest
LegalZoom Logo LegalZoom
  • Simple setup
  • Wide range of services
  • Technical support
Visit LegalZoom

FAQs

Why should I form an LLC?

For many new companies, forming an LLC is the best option as it is an uncomplicated business structure that affords business owners legal protection by separating personal assets from business debts. Additionally, LLCs often enjoy a lower tax rate than corporations.

When should I form an LLC?

If you have been operating as a sole proprietor and are starting to grow your business and want to form a more official business structure, it is a good idea to form an LLC.

If you haven’t officially started your business but have a solid idea of the type of business you want to start, forming an LLC early can help make your life easier since you will be able to streamline your business documents under the same business entity from the start.

Do Alabama LLCs need to file with a probate judge?

Alabama LLCs no longer have to file with a judge of probate thanks to ACT 2020-73, which has helped make the filing process much easier for Alabama corporations. In addition, the Alabama certificate of formation can now be filed with the Alabama Secretary of State online.

What is an Alabama Certificate of Good Standing?

An Alabama certificate of good standing is a document that an Alabama LLC files with the Alabama Secretary of State. The certificate of good standing is used to affirm that the company complies with the terms and conditions that formed it and reaffirm the information from the certificate of formation.

What is a sole proprietorship?

A sole proprietorship is a business owned and run by one person.

The sole proprietor is responsible for all aspects of the operation, including liability, profits or losses, and tax obligations. The Internal Revenue Service (IRS) calls a sole proprietorship an individual proprietorship if you are self-employed.

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Starting an LLC in Alabama Step-by-Step

1. Select a name for your Alabama LLC

Follow naming requirements

There are three major guidelines to follow when naming your LLC in the state of Alabama:

  1. Alabama law states that an LLC’s name must include the words “Limited Liability Company”, “LLC”, or “L.L.C.” in order to be created.
  2. An LLC’s name must be distinguishable from other Alabama business entities that have filed with the Secretary of State.
  3. Your LLC can not contain misleading words or phrases that suggest that it provides a service not mentioned in the LLC’s Certificate of Formation.

Need help coming up with a business name? Check out our free business name generator.

Reserve your name with the Secretary of State

After selecting a name for your LLC, you must reserve it with the Alabama Secretary of State in order to receive a Certificate of Name Reservation.

. There are two ways to complete this step:

1. Reserve your LLC name online for a fee of $28. The Alabama SOS website will automatically check the availability of your chosen company name.

2. Submit a Name Reservation Request Form via postal mail to the Secretary of State. You must enclose a $25 payment with the form. When using this method, you must confirm that you have searched the Alabama Secretary of State business name database and that your proposed LLC name is available.

Read more: How to perform an Alabama business name search

Register the domain name

Once you decide on a business name, check to make sure that the domain name is available. Sites like Namechk can show you which domain extensions are available for your business name. Although .com domain names are ideal, extensions like .net, .co, and .biz are becoming more commonplace.

Register social media profiles

It is vital to have a solid social media presence in today’s business environment. Be sure to register for your business name on the different social media platforms ahead of time so that no one can sign up for them.

2. Designate a registered agent

As with every U.S. state, forming an LLC in Alabama requires the appointment of a registered agent to handle state and federal legal documents and service of process on the business’s behalf.

If you are not personally going to be your Alabama LLC’s registered agent, find a substitute Alabama resident or registered agent service to serve in this role. Be sure that the registered agent’s address is included in all your business documents and correspondence if you intend to use a different registered office.

Alabama registered agent requirements:

  • Must be over the age of 18
  • Have a physical street address in the state of Alabama
  • Be available during normal business hours

Our picks of the best registered agent services

  • ZenBusiness: There’s no need to stress about filing paperwork when you work with ZenBusiness. This company offers a great variety of LLC services, the focus of which is to ensure your business is set up correctly with the proper paperwork filled out and delivered to the right branch of your state government. Of course, ZenBusiness does charge for their services, but customers say they get the most bang for their buck.
  • Northwest Registered Agent: Starting a business requires a lot of state-mandated paperwork, which can be confusing for new business owners. Northwest offers business services that can help entrepreneurs find the right documentation, fill it out, and file it on time with the right government agency. In addition to helping you set up an LLC, Northwest has a host of additional services, like registered agent services, that new owners will find useful too.
  • Bizee: Bizee offers a great library of material to help first-time business owners figure out what kind of business they should set up. From there, Bizee will aid with documentation and filing procedures and demystify terms like registered agent, articles of organization, and EIN. The company has a strong reputation and great reviews online, too.

FAQs

Why should I form an LLC?

For many new companies, forming an LLC is the best option as it is an uncomplicated business structure that affords business owners legal protection by separating personal assets from business debts. Additionally, LLCs often enjoy a lower tax rate than corporations.

When should I form an LLC?

If you have been operating as a sole proprietor and are starting to grow your business and want to form a more official business structure, it is a good idea to form an LLC.

If you haven’t officially started your business but have a solid idea of the type of business you want to start, forming an LLC early can help make your life easier since you will be able to streamline your business documents under the same business entity from the start.

Do Alabama LLCs need to file with a probate judge?

Alabama LLCs no longer have to file with a judge of probate thanks to ACT 2020-73, which has helped make the filing process much easier for Alabama corporations. In addition, the Alabama certificate of formation can now be filed with the Alabama Secretary of State online.

What is an Alabama Certificate of Good Standing?

An Alabama certificate of good standing is a document that an Alabama LLC files with the Alabama Secretary of State. The certificate of good standing is used to affirm that the company complies with the terms and conditions that formed it and reaffirm the information from the certificate of formation.

What is a sole proprietorship?

A sole proprietorship is a business owned and run by one person.

The sole proprietor is responsible for all aspects of the operation, including liability, profits or losses, and tax obligations. The Internal Revenue Service (IRS) calls a sole proprietorship an individual proprietorship if you are self-employed.

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3. File a Certificate of Formation

An LLC is officially formed in Alabama by filing a Certificate of Formation with the Secretary of State. There is a $200 filing fee. You must also provide a copy of the Name Reservation Certificate. The Alabama Certificate of Formation is referred to as Articles of Incorporation or Articles of Organization in other states.

The Certificate of Formation contains the following elements:

  • Name of LLC: Fill out the business entity’s name and be sure to include the words “Limited Liability Company” or the abbreviation “L.L.C. or LLC.”
  • Name of Registered Agent: Fill out the registered agent’s name that will be responsible for business correspondence. 
  • Registered Office Address of Registered Agent: Enter the registered office address and be sure not to use a P.O. Box as the Secretary of State will not process the certificate of formation.
  • A copy of the Name Reservation certificate form must be attached to the certificate of formation to file the new entity with the Secretary of State.
  • Filing date: At the bottom of the certificate of formation form, there is an option to delay the formation of the LLC by 90 days. It can be advantageous to delay the processing of an LLC until the start of the next calendar year if it is toward the end of the year to avoid having to file a tax return.

At the bottom of the Certificate of Formation form, there are options to designate the LLC as a Series or Professional LLC:

  • Series LLC: A Series LLC is a limited liability corporation that provides liability protection to multiple businesses under a single LLC filing. It is called a “series” because each series of the LLCs operates similarly to its own stand-alone business.
  • Professional LLC: A professional limited liability company (professional LLC) is an LLC with one or more members who are licensed professionals. To qualify for professional corporate status, the member or members must be engaged in the practice of law, accounting, architecture, chiropractic medicine, dentistry, optometry, osteopathic medicine, or another similar profession that requires the highest level of licensure. 

Foreign LLCs

LLCs formed outside of the state that plan on doing business in Alabama must follow the steps above and register using one of the following methods:

    1. Register your foreign LLC online for a fee of $156 (payable by credit card).
    2. Register your foreign LLC by postal mail by mailing two copies of the Foreign Limited Liability Company Application for Registration, the Certificate of Name Reservation, and a $150 fee payment (check, credit card payment, or money order) to the Alabama Secretary of State, Attn: Business Entities Division, P.O. Box 5616, Montgomery, Alabama 36103

4. Draft an operating agreement

Although not a legally mandated step for forming an LLC in Alabama, drafting a comprehensive LLC operating agreement is strongly recommended for all nascent limited liability companies. This document should describe the LLC’s business structure, establish the individual responsibilities and obligations of LLC members, and detail how the LLC will be run.

Without an operating agreement clarifying the specific duties of its members, an LLC may face significant legal and operational difficulties.

5. Obtain an IRS Employer Identification Number (EIN)

All newly formed LLCs in the United States must acquire an Employer Identification Number (EIN) from the Internal Revenue Service (with the exception of a single-member LLC). The nine-digit EIN is like a social security number for a business and is necessary to pay income tax, file tax returns, open business bank accounts, and perform a number of other important functions.

You can apply for an EIN via the IRS website without paying a filing fee.

 6. File an annual report and initial Business Privilege Tax Return

An Alabama-based LLC is required to file a combined Business Privilege Tax Return and Annual Report once a year with the state’s Department of Revenue. The first report must be filed 2.5 months after LLC formation. Afterward, the annual report must be filed 3.5 months after the start of every taxable year. The minimum tax that an LLC must pay is $100. Visit the Alabama Department of Revenue website for the necessary forms and additional information.

Read more: What is an annual report?

7. File a BOI Report

Effective January 1, 2024, the Corporate Transparency Act (CTA) mandates that most corporations, LLCs, and similar entities in the U.S. report their beneficial owners’ information to FinCEN. In Kansas, a beneficial owner is identified as someone with significant control or at least 25% ownership of the entity. Required information includes the owner’s name, birth date, address, and ID number from an approved document, along with its image.

Entities established or registered before the 2024 cutoff must file their initial reports by January 1, 2025.

For businesses formed in 2024, there is a 90-day window after confirmation of formation to file, while those established afterward have 30 days from their creation or registration date to comply. Filings are processed electronically via FinCEN’s BOI reporting portal.

Learn more about BOI Reporting.

FAQs

Why should I form an LLC?

For many new companies, forming an LLC is the best option as it is an uncomplicated business structure that affords business owners legal protection by separating personal assets from business debts. Additionally, LLCs often enjoy a lower tax rate than corporations.

When should I form an LLC?

If you have been operating as a sole proprietor and are starting to grow your business and want to form a more official business structure, it is a good idea to form an LLC.

If you haven’t officially started your business but have a solid idea of the type of business you want to start, forming an LLC early can help make your life easier since you will be able to streamline your business documents under the same business entity from the start.

Do Alabama LLCs need to file with a probate judge?

Alabama LLCs no longer have to file with a judge of probate thanks to ACT 2020-73, which has helped make the filing process much easier for Alabama corporations. In addition, the Alabama certificate of formation can now be filed with the Alabama Secretary of State online.

What is an Alabama Certificate of Good Standing?

An Alabama certificate of good standing is a document that an Alabama LLC files with the Alabama Secretary of State. The certificate of good standing is used to affirm that the company complies with the terms and conditions that formed it and reaffirm the information from the certificate of formation.

What is a sole proprietorship?

A sole proprietorship is a business owned and run by one person.

The sole proprietor is responsible for all aspects of the operation, including liability, profits or losses, and tax obligations. The Internal Revenue Service (IRS) calls a sole proprietorship an individual proprietorship if you are self-employed.

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What to do after LLC approval

Start a business bank account

A business bank account is required for LLCs to start conducting business. Therefore, it is highly recommended that you start a low-risk bank account to start receiving income and paying any start-up expenses.

After the LLC has been established, your business bank account will be used for payroll, payment of bills, a deposit of earnings from your business, and any other financial transactions your business may have.

Read more: How to Open a Business Bank Account

Apply for any required business licenses and permits

If you are planning on selling goods or services in the state of Alabama, be sure to check out the  Alabama Department of Revenue site to check for county requirements. The local country probate offices issue licenses, and requirements differ from county to county.

Read more: How to Get a Business License

FAQs

Why should I form an LLC?

For many new companies, forming an LLC is the best option as it is an uncomplicated business structure that affords business owners legal protection by separating personal assets from business debts. Additionally, LLCs often enjoy a lower tax rate than corporations.

When should I form an LLC?

If you have been operating as a sole proprietor and are starting to grow your business and want to form a more official business structure, it is a good idea to form an LLC.

If you haven’t officially started your business but have a solid idea of the type of business you want to start, forming an LLC early can help make your life easier since you will be able to streamline your business documents under the same business entity from the start.

Do Alabama LLCs need to file with a probate judge?

Alabama LLCs no longer have to file with a judge of probate thanks to ACT 2020-73, which has helped make the filing process much easier for Alabama corporations. In addition, the Alabama certificate of formation can now be filed with the Alabama Secretary of State online.

What is an Alabama Certificate of Good Standing?

An Alabama certificate of good standing is a document that an Alabama LLC files with the Alabama Secretary of State. The certificate of good standing is used to affirm that the company complies with the terms and conditions that formed it and reaffirm the information from the certificate of formation.

What is a sole proprietorship?

A sole proprietorship is a business owned and run by one person.

The sole proprietor is responsible for all aspects of the operation, including liability, profits or losses, and tax obligations. The Internal Revenue Service (IRS) calls a sole proprietorship an individual proprietorship if you are self-employed.

SHARE THIS POST