How to Form an LLC In Alabama

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How To Use This Guide

It’s easy to form an LLC, just follow these steps:

  1. Name Your LLC
  2. Choose A Registered Agent
  3. File Formation Documents
  4. Create an Operating Agreement
  5. Get an EIN

Use A Professional Service

A professional LLC service will handle the entire formation process on your behalf, allowing you to focus on the other needs of your new business.

4.7 out of 5 stars ZenBusiness ($39 + state fee) for basic & quick LLC formation.

3.6 out of 5 starsLegalZoom ($79 + state fee) for the most popular LLC service available.

Forming an LLC in Alabama is Easy

You can start an Alabama LLC (Limited Liability Company) yourself by filing the Alabama Certificate of Formation with the Secretary of State through your local Judge of Probate Office. The cost to set up an LLC in Alabama is $100 + a county probate judge fee.

Follow our free How to Form an LLC in Alabama guide below to get started today.

If you are thinking about hiring a professional service to form an LLC, read our Best LLC Formation Services review.

Steps to form an L L C in Alabama

Step 1: Create a Name For Your Alabama LLC

First off, in order to launch a successful Alabama LLC, you need to give it the right name. Your business name needs to be catchy for branding purposes and legitimate for legal purposes. We go into depth on this topic in our LLC naming guide, but we’ll go over the legal basics below.

Legally, your business name must:

  • Contain the words limited liability company or limited company, or the abbreviation LLC or L.L.C.
  • Not contain restricted words or phrases (these often include words like bank, attorney, and university) without proper approval.
  • Not contain any word that indicates or implies that the LLC is engaged in a business that is not authorized by law to pursue.
  • Be distinguishable from any other entity (corporation, partnership, etc.) or trade name registered in Alabama.

For a complete list of naming rules, you can visit the Alabama Secretary of State's website.

If you’re having trouble coming up with a name that captures your brand, don’t let that stop you from forming your Alabama LLC. For now, you can focus on the legal requirements and consider applying for a trade name after you’ve nailed down your branding.

What To Do:

Once you’ve decided what you’d like to call your LLC in Alabama, search the Business Entity Records to find out whether or not it’s in the cards. Keep in mind that Alabama requires LLCs to take the additional step of reserving a business name before it is registered. If your business name is available, you’ll be able to lock it down when you file your Certificate of Formation.

Need help naming your LLC? Check out our LLC name generator to find the best name for your LLC.

Quick Note: Before you commit 100% to a name, you should see if there’s a decent URL available. Use GoDaddy to search for your options. If there’s a quality domain name for purchase, we advise buying it right away because even if launching a business website isn’t on your radar right now, it’s going to be soon.

Find a Domain Now

Service provided by GoDaddy.com

After registering a domain name, consider setting up a professional email account (@yourcompany.com). Google's G Suite offers a business email service that comes with other useful tools, including word processing, spreadsheets, and more. Try it for free

Step 2: Appoint an Alabama Registered Agent

Before you can officially form your business, you need to appoint an Alabama registered agent.

Your registered agent will be responsible for receiving important legal documents like tax forms and service of process notices on behalf of your Alabama LLC. They can be an individual who’s a resident of the state, or a company that’s legally authorized to represent businesses in Alabama.

Alabama state business law does give you the option to act as your own registered agent, but many business owners choose to appoint a professional instead.

Here are a few things to think about before you decide to act as your own:

  • You must maintain normal (9 am - 5 pm) business hours at the address you provide.
  • If you run your business from home, you’ll be required to make your personal address public.
  • You might risk missing important notices, or accidentally tossing them out with the junk mail.
  • You could be served in front of your family or coworkers.

What To Do:

If you’re considering acting as your own registered agent, start your research with our registered agent guide. If you decide you’re up for the task, go ahead and list your own name and address on your Alabama LLC Certificate of Formation. You can also change your registered agent at a later date with the Alabama Secretary of State.

If you’re leaning toward hiring a professional, we recommend using an LLC formation service as your registered agent. Many registered agent services offer up to one year of registered agent service free when you form your Alabama LLC with them. 

Step 3: File the Alabama LLC Certificate of Formation

Now that you’ve decided on a registered agent, it's time to file your Alabama Certificate of Formation online or by mail. This document will ask for your business name, LLC type (series, professional, or nonprofit), the name and address of your registered agent, and a few other details about your business.

Make sure to read all of the instructions carefully. Alabama has particular rules for submitting the Certificate of Formation, and filing incorrectly may result in extra fees and delays. As outlined in the form instructions, you must:

  • Type all of your responses — don’t write them by hand.
  • Provide one signed original and two copies of your completed certificate of formation.
  • Obtain and submit a Certificate of Name Reservation.
  • Include a check for $100 made payable to the Secretary of State.
  • Contact your local Judge of Probate’s office about county filing fees (in addition to the $100 state fee), and ask whether or not they accept payment by credit card.
  • Mail everything above to your local Judge of Probate’s office, NOT the Alabama Secretary of State.

What To Do:

Registering an LLC with the state is a hugely important step toward bringing your business to life and if it’s not done with attention to detail there could be serious consequences.

Since Alabama’s requirements are more involved than other states, we recommend consulting with an attorney or using an LLC Formation service like ZenBusiness to help you through the formation process. From our perspective, the number of details you’ll have to handle can be distracting and time-consuming — taking time away from starting your business.

Step 4: Create an Alabama LLC Operating Agreement

While not legally required, creating an Alabama LLC operating agreement is the only way for you and your members to fully define your roles and lock down your LLC’s management and ownership structure. Having this document in place will also give you all something to return to if a dispute or lawsuit ever arise.

Your operating agreement should at least outline the following:

  • each member’s responsibilities
  • how new members will be admitted
  • how existing members may transfer or terminate their membership
  • how profits and dividends will be distributed

From there, you can add as many provisions as you want, provided they are not in conflict with Alabama business law. To learn more, check out this guide to Alabama LLC operating agreements.

Quick Note: Download a template or create a custom Free Operating Agreement using our tool on How to Start an LLC. No credit card required, ever.

Step 5: Obtain An EIN For Your Alabama LLC

The Employer Identification Number (EIN), Federal Employer Identification Number (FEIN), or Federal Tax Identification Number (FTIN), is essentially a Social Security number (SSN) for your company. State and federal agencies use this number to track your business activity.

Your EIN will also come in handy when it’s time to:

  • Open a business bank account
  • File Federal and State taxes
  • Hire employees

We think the best way to get an EIN for your LLC in Alabama is by using the free online application on the IRS website. We prefer this method because it's the most efficient, but you can apply by phone, fax, or mail. You can read through our How to Get an EIN guide to find out how.

Maintain Your Alabama LLC's Personal Asset Protection

Using dedicated business banking and credit accounts is essential for personal asset protection.

Now that you’ve made it through the formation process for your Alabama LLC, you’ll need to take steps to protect your personal assets and establish your business as an independent entity.

When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your Alabama LLC is sued. In business law, this is referred to as piercing your corporate veil.

You can go a long way in protecting your assets with these three steps:

1. Open a business bank account.

A business bank account separates your personal assets from your company's assets, which is necessary for personal asset protection. A designated business bank account also makes accounting and tax filing easier.

Recommended: Find the right bank for you. Read our review of The 5 Best Banks for Startups and Entrepreneurs

2. Get a business credit card.

A business credit card helps you separate personal and business expenses. A business credit card will also build your company's credit history, which can be useful to raise capital later on.

Learn about the best small business credit cards here.

3. Designate an authorized representative.

Make sure all documents are signed by a representative of your Alabama LLC and not by you (or other LLC members) directly. This will help separate you from liability incurred by the LLC.

Reduce the Liability of Your LLC in Alabama

Business Insurance

Business insurance helps you manage risk and focus on growing your LLC in Alabama. Carrying the right coverage protects your Alabama LLC from liability and keeps you safe in the event of a loss.

The most common types of business insurance are:

  • General Liability Insurance: A broad insurance policy that protects your business from lawsuits. Most small businesses get general liability insurance.
  • Professional Liability Insurance: A business insurance for professional service providers (consultants, accountants, etc.) that covers claims of malpractice and other business errors.

There are free services available that quickly assess your business’s insurance needs. These services suggest customized policies with various insurance carriers so that you can choose the best value. One such reliable service is CoverWallet.

Labor Laws

You can reduce your Alabama LLC’s liability by being fully compliant with employment laws such as:

  • Verifying new employees are allowed to work in the US.
  • Reporting employees as "new hires" to the state.
  • Withholding employee taxes.
  • Printing workplace compliance posters and placing them in visible areas of your workspace.

If you plan to hire employees, you might also be required to invest in Workers' Compensation Insurance. This type of policy provides coverage for employee job-related illnesses, injuries, or loss of life.

Find out more information from Alabama's Department of Labor.

Stay Compliant

As a new LLC in Alabama, you will need to stay compliant with permits, licenses, taxes, and state filings. This is serious business; failure to comply can lead to fines, tax penalties, and dissolution (the end) of your Alabama LLC.

Alabama Business Licenses and Permits

To operate your Alabama LLC, you must comply with federal, state, and local government regulations. The details of business licenses and permits vary from state to state, so make sure you research carefully and plan accordingly.

Find out how to obtain necessary licenses and permits for your business or have a professional business licensing service do it for you:

Sales Tax

If you are selling a physical product, you’ll typically need to register for a seller's permit through the Alabama Department of Revenue website.

This certificate allows a business to collect sales tax on taxable sales.

Sales tax, also called "Sales and Use Tax," is a tax levied by states, counties, and municipalities on business transactions involving the exchange of certain taxable goods or services.

Here’s a sales tax guide to find out more.

Employer Taxes

If you have employees in Alabama, you will need to register for Unemployment Insurance Tax through the Alabama Department of Labor. You will also need to sign up for Employee Withholding Tax through the Alabama Department of Revenue.

Annual Report

Alabama requires all LLCs to file an annual report and privilege tax form. If you miss state filings like the annual report, you could face fines or even automatic dissolution. A quality registered agent service, like ZenBusiness, can help protect your assets by keeping track of filing requirements for you.

If you are NOT making a payment, mail to:

Alabama Department of Revenue Business Privilege Tax Section
P.O. Box 327431
Montgomery, AL 36132-7431

If you ARE making a payment, mail to:

Alabama Department of Revenue Business Privilege Tax Section
P.O. Box 327320
Montgomery, AL 36132-7320

Due Date: Due each year by April 15th.

Fee: Minimum of $100 with the total, depending on income.

Reduce Administrative Burden

There will be lots of demands on your time once you start your business. With that in mind, it’s a good idea to streamline your workflow and reduce administrative overhead from the get-go.

Accounting For Your Alabama LLC

It's important to get your books in order — even if you haven't officially opened for business. A well-managed accounting system will help you:

  • Track your business finances, including bills, expenses, and income.
  • Simplify and file your annual taxes.

You can maintain your accounting in two ways:

  • Use a DIY accounting software. This can come with an increased risk of errors especially when starting a new business.
  • Hire an accounting service. They can provide comprehensive advice to help optimize your bookkeeping and taxes as well as additional services such as payroll etc.

Recommended: For most small businesses, we recommend using a reputable accounting service. Schedule a free tax consultation for your business now to avoid costly errors in the future.

Employee Payroll

If you have employees for your Alabama LLC, a payroll service will save you a lot of time and also save you from having to become an expert on state compliance or employee tax withholdings and filings.

Gusto is a reliable and good payroll service for small businesses.

Need Help With Alabama LLC Formation?

Have a Professional Service Form Your Alabama LLC For You

If you’ve got too much on your agenda to worry about all the paperwork and state-requirements, there are a handful of LLC formation services that can take care of everything for you.

Here are the two most popular:

ZenBusiness ($39 + state fee) = Best Price & Overall Value

LegalZoom ($79 + state fee) = Best For Brand Recognition

Useful Links for your Alabama LLC