Are you thinking about starting an LLC in Alabama? In this article, we’ll discuss the top advantages of an LLC and how it will benefit your business in the short and long term. After that, I will walk you through the entire registration process if you decide it is the right business structure for you.
However as a quick note, if you are nervous about the filing process and would rather professionals handle it to make sure everything is filed properly, look into a service like IncFile (for $49) or LegalZoom (for $149). Both services use online questionnaires that take you less than 15 minutes to fill out and they take care of the rest.
If you’d like to handle the incorporation process yourself, keep reading for our step-by-step guide. Otherwise look into one of the incorporation services mentioned above. Do what you feel most comfortable with.
Here are the 5 reasons why forming an Alabama LLC is highly beneficial. This list is based on state and federal standards.
Once you start your business operations or even hire just one employee – you will automatically be subject to legal liabilities. If you are operating as a Sole Proprietorship you are less likely be protected, since you are one with your business.
However, when you incorporate your Alabama business into an LLC, you are creating a separate entity. A separate entity is subjected to different laws apart from its owner. Owners’ personal assets in turn are protected from any legal issues that may arise related to the business.
By creating an LLC for your business, you can take advantage of numerous tax deductions that will save you a lot of money. Tax benefits that you can take advantage of include medical expenses and pension plans.
The Internal Revenue Service (IRS) offers more tax deductions to LLC businesses than any other type of business.
In addition to your own business tax deductions, your employees will also be able to enjoy many tax deductions while working for your LLC. They will be able to deduct for health insurance, travel, their personal automobile, and much more.
Since lawsuits are unavoidable in the business world, why not reduce your personal liabilities and protect your personal assets by forming an Alabama LLC? If your business is sued or you are sued in relation to your business, your personal assets are protected because your business is considered a separate entity.
Owning valuable possessions (such as business, property, or even your own bank account), opens the door to lawsuits.
Lawyers generally conduct an asset search, however if you formed your business into an LLC, your personal assets will remain private. Litigations will be avoided because no assets can be traced under your name.
IncFile is $100 more affordable than other LLC filing services & twice as fast
Incorporating your business as an LLC in Alabama can be a little complicated, and to make things easier for you, we’ve organized an easy-to-follow 5 step process on how to incorporate your business.
Naming your Alabama LLC is the first step that you need to take care of. When choosing a business name, consider something unique that represents your company.
The business name you select should not be used by any other business registered through the Alabama Secretary of State. Upon filing, it is required that you place the abbreviation LLC after your business name. You may check for name duplication through the Alabama Secretary of State’s website.
A Registered Agent plays a big role in forming your Alabama LLC. He or she is your business representative, and is in charge of receiving any legal documents and forms handed to you by the state. Since you are forming an LLC in Alabama, your Registered agent must be a resident of Alabama and must have a street address.
You can hire a Registered Agent service and pay up to $160/year, or get an Alabama Registered Agent free of charge when you incorporate your LLC with IncFile.
While many states require filing your Articles of Incorporation in the Secretary of State’s office, Alabama law requires that you file for a Certificate of Formation to the Judge of Probate Court Office.
You can do this through mail. You must file the Certificate of Formation to the office of the county where your Alabama LLC is located. The Probate Court Office will take charge of forwarding your documents to the Secretary of State.
Aside from the basic information contained in the Certificate of Formation, you also need to include the following additional information.
Alabama LLC filing fee is $100 for the Alabama Secretary of State. A separate fee is given to the Probate Court.
It is a legal requirement when forming an Alabama LLC to get an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). The EIN is important because it allows the federal government to monitor your business activities.
Additionally, the EIN is also used to monitor your taxes and business reports while you conduct your business operations. Visit the IRS website on how to obtain the EIN – no fee is required for this.
Although not a legal requirement in forming your Alabama LLC, creating an Operating Agreement will benefit your business in the long run. Many experienced entrepreneurs and business professionals recommend that small business owners make one for their Alabama startup.
An Operating Agreement will protect your business from unnecessary legal liability. If you need help drafting a customized Operating Agreement, here is a good resource.
Now that you’ve already completed incorporating your Alabama small business into an LLC, it’s time to take care of additional requirements which are also very important in running your business.
Most successful businesses started with a concrete and well-made business plan. If you want your business to grow and succeed long term, best practice is to plan it out!
A business plan is not a mandatory requirement, nor is it required by the state. However, we highly suggest that you take extra care on this step. Starting an LLC can be difficult, but a plan simplifies the process.
Starting an Alabama LLC means that you are required to pay all fees that may be required by the state – including taxes. By paying your taxes on time, you are following the laws approved by the Secretary of State of Alabama.
Paying your taxes is a mandatory requirement. You must be compliant to ensure that your LLC stays in business. Here is a quick guide for understanding your requirements.
In order to be fully operational, you must comply with necessary tax requirements and permits.
There are numerous Alabama licenses and permits and we highly recommend that you visit the concerned office in your state to explain to your how each license/permit can be obtained. You can also check out this quick guide for the license obligations you should take care of.
As mandated by Alabama law, every business in the state must file an annual report so that the state government can keep track of your business activities. You have to do this on the first day of your anniversary month every year.
File on time and stay compliant every year so you won’t be sanctioned or fined with extra fees.