Step 1) Verify & Reserve Your Corporation's Name
Before you can move forward with your Alabama business venture, you need to complete the very first step of branding your company: giving it a name. Of course, you want to choose a name that captures your mission, but it also has to meet a few other guidelines. For example:
- It can’t be the same as, or too similar to, the name of any existing business in Alabama.
- It must end with the word “corporation” or “incorporated,” or an abbreviation of either.
- It cannot contain any prohibited words. The terms “bank,” “engineer” and “olympic” are either forbidden in Alabama business names, unless you’ve gotten approval from the state.
Once you find your perfect business name, you’ll need to reserve it. In most states this is optional, but in Alabama it’s mandatory -- you’ll even need to submit a copy of your name reservation form along with your Certificate of Formation.
What To Do:
First, do a business entity name search to find out if your ideal name is available. If it is, reserve it online for $28 or by mail for $10. If you find that your name is quite similar to an existing Alabama business, consult with a professional to find out if you need to tweak it before submitting a name reservation.
While you’re at it, head over to GoDaddy and find out what domain names are available for your business. If a good domain is available, it’s a wise idea to buy it -- even if you’re not planning on launching a website right away. Having an intuitive, memorable URL will make it easier for customers to find your business.
Quick Note: Before you commit 100% to a name, you may also want to check that there’s a decent URL available for your business. Use WEEBLY to search your options. If there’s a quality domain name for purchase, we advise buying it right away. Even if launching a business website isn’t on your radar right now, it’s going to be soon, and you might as well nail down a domain name that’ll make it easy for customers to find you!
Step 2) Appoint A Registered Agent
The last thing you need to do before you can officially form an Alabama corporation is choose a registered agent to represent your business. Your registered agent will be responsible for:
- Maintaining normal business hours at an Alabama address.
- Receiving legal documents like tax forms and service of process notices on your behalf.
- Alerting you of important notices and deadlines.
Your Alabama registered agent can be an individual or a company. If they’re an individual, they need to be a resident of Alabama who’s able to provide a local address (not a PO Box). If they’re a company, they need to be legally authorized to represent businesses in the state.
You are allowed to act as your own registered agent in Alabama, but you may not want to make your personal address public or risk being served in front of your family or coworkers. Plus, if you’re unable to commit to being present at your home or business address from 9 am - 5 pm every day, you won’t be able to swing it.
What To Do:
If you’re thinking about serving as your corporation’s registered agent, read through our registered agent guide first to get a better idea of the duties it will entail. If you decide that taking over this responsibility won’t seriously impose on your life and workstyle, go for it! Many business owners choose to go this route to save some money.
That said, there are several reasonably priced registered agent providers out there, and the amount of time and stress you’ll save by appointing a professional might be worth a few bucks a month. We think the best way to get a registered agent is through an incorporation service like IncFile -- they provide a full year of registered agent service for free when you incorporate with them.
Step 3) File Certificate Of Formation
One of the most exciting steps in forming an Alabama corporation is filing your Certificate of Formation. Why? Because after this, you’ll be an officially-recognized Alabama business entity!
The Certificate of Formation is Alabama’s version of Articles of Incorporation, and it’s where you’ll disclose the following information to the state:
- The name and purpose of your business.
- The street & mailing address of your principal office.
- Your registered agent’s name and street address.
- The number of shares your corporation will be allowed to issue.
- Your initial directors’ names and street addresses.
You’ll also have to include a copy of your name reservation certificate and a $100.00 check made out to the Secretary of State. Alternatively, you have the option to pay by credit card, but call your local Judge of Probate’s Office first to confirm that they accept this type of payment.
Keep in mind you’ll be mailing your Certificate of Formation to the local Judge of Probate, not the Alabama Secretary of State.
What To Do:
If you decide to file your Certificate of Formation on your own, make sure you do all the necessary research to fill it out completely and correctly. That said, our professional opinion is that all corporations should work with a lawyer or use an online incorporation service during this step and beyond.
Step 4) Obtain EIN
Now that you’ve registered your corporation in Alabama with the state, it’s time to get an EIN, or Employer Identification Number. An EIN is basically a Social Security Number for your business, and all corporations are required to have them.
You’ll need an EIN for pretty much every move you make from now on, so it’s a good idea to get it out of the way as soon as possible. Luckily, this step really isn’t too complicated, and it doesn’t have to be a financial burden, either.
What To Do:
Head over to the IRS website and fill out their free online application. This is by far the cheapest and most efficient way to get ahold of an EIN for your corporation.
It’s clear by now that we’re all for seeking out professional help, even if it means making a financial investment -- but we feel most folks are capable of taking care of this part independently. Take a look at our EIN guide for more information on how to get an EIN for free!
Step 5) Conduct Organizational Meeting
It’s come time to rally up your initial board of directors and hold your mega-important organizational meeting. This meeting is where you’ll:
- Divvy up shares of stock.
- Elect corporate officers.
- Write a banking resolution.
- Reach a consensus on S-Corp or C-Corp status.
It’s also when you’ll record your first meeting minutes and establish corporate bylaws. Corporate bylaws detail the responsibilities each board member has, describe how significant business decisions will be made, and outline the overall leadership structure of a corporation. The bylaws you establish at your initial board meeting will remain in place until they’re modified at your first shareholder meeting.
What To Do:
Given that your first board meeting is going to be jam-packed with big decisions, it’s a good idea to go into it as organized as possible. To get an idea of what your corporate bylaws and meeting minutes should include, you ought to peruse some online templates. We’ve ranked the best templates for corporate bylaws and meeting minutes to help you on your way.
Step 6) Start A Corporate Records Book
Frankly, this step can be done at any point, before or after your initial board meeting. The whole purpose of having a corporate records book is to keep all your legal documents in one place. This includes your:
- Certificate of Formation
- Permits and licenses
- Banking resolution
- Corporate bylaws
- Meeting minutes
It’s worth noting that Alabama business law doesn’t require you to have a corporate binder, but it does require you to have all the contents above. However, having a corporate binder or kit also allows you to assert the legitimacy of your business. Corporate kits include customized seals, stock certificates and other professional pieces that could make the difference between earning, or failing to earn, the trust of that sought-after investor.
What To Do:
Make sure to keep all your important documents in order. Trust us, you don’t want the headache of misplacing your business license, or the minutes from your organizational meeting. When you’re ready, check out some online filing services’ rates for corporate records books, or take a look at our favorite corporate kit.
Step 7) Tackle Taxes & Licensing
Taking care of your taxes and getting ahold of any licenses you need to do business in Alabama are next on your agenda. Depending on what your business sells, what county you’re located in, and a few other factors, you may be required to obtain permits or pay special taxes on a federal, state, and local level. Here are some tips for each:
- Federal: The Small Business Association is a pretty comprehensive resource for business licenses and permits. They provide a list of business types that require special authorization and direct you to the proper department website accordingly. For federal business tax requirements, the IRS website is the best resource you have at your disposal.
- State: For information on state-specific taxes, permits and licenses, go to the Alabama Department of Revenue FAQs page. Keep in mind that you’ll have to log in to your My Alabama Taxes account in order to apply for anything.
- Local: Reach out to your local Chamber of Commerce for municipal requirements in your area.
What To Do:
You have two options here: 1) do your research, making sure to be thorough, and apply for all your business permits and licenses independently, or 2) pay a service to do the research for you, so all you have to do is sign the applications.
If your Alabama corporation only needs a general business license, this investment really isn’t necessary. If you find yourself juggling several applications because your business deals with highly monitored products or activities, on the other hand, you could probably benefit from using a business license service.
Step 8) Open a Business Bank Account
On to the final step: opening a business bank account! Ideally you’ll have decided on a bank during your organizational meeting, but if you haven’t committed to one yet we recommend shopping around. Consider:
- Local options, like North Alabama Bank and Alabama Credit Union. Local banks often have excellent customer service and perks for small businesses.
- National options, like Capital One and Chase. Despite their massive scale, many national banks are actually very small-business friendly.
You’d be wise not to rush into this decision. Discuss your options in-depth with your board of directors and come to a consensus on what’s most important for your business: customer service, online access, financial incentives, nationwide ATMs, etc.
What To Do:
Check out our top 5 business bank accounts to kick off your research. Once you narrow down your list, make some calls and visit a couple branches in-person to discuss your options. While you’re there, ask a representative about what documentation you need to bring in order to open an account (they’ll definitely want to see your Certificate of Formation and EIN).
Lastly, be prepared to sync your business bank account with an accounting software to start managing your financials right off the bat. We’ve ranked our favorite options for accounting software based on price, quality and customer reviews to help you choose one that will best suit your needs.
Need Help Incorporating?
Forming a corporation in Alabama is serious business, and not all entrepreneurs have the time and energy to do it all on their own.
If you’d like some assistance, we definitely recommend seeking professional help through an incorporation service. Here are three popular services:
– IncFile ($49 + state fees) = Best Price & Overall Value
– LegalZoom ($149 + state fees) = Most Popular
– Harbor Compliance ($499 + state fees) = Better Customer Service