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The Limited Liability Company (LLC) is a popular entity choice structure for many start-up businesses in Alabama. The business structure of the LLC provides personal liability protection and has the potential to save money on taxes. With a little research, you can learn how to form an LLC in Alabama without an attorney.

Unlike a sole proprietorship or partnership where the small business owner can be held personally liable for lawsuits against the business, the LLC is a separate legal structure, providing protection for the business owner’s personal assets.

Related: How Does an LLC Protect You?

In addition to the liability protection, the Limited Liability Company provides a number of other benefits over the sole proprietorship, partnership and corporation because of the multiple tax options, ease of administration and management flexibility.

Forming an LLC in Alabama is something most people can do on their own, but it’s nice to have some support in case you have questions or get stuck.  IncFile and Inc Authority provide LLC formation guidance for only the cost of the state fees!

Related: Should you use a Formation Service, Hire an Attorney or Do it Yourself?

To officially form an Alabama Limited Liability Company, the Certificate of Formation has to first be filed with the Office of the Judge of Probate and the Alabama Secretary of State.  The LLC files with the Probate Judge in the county where the LLC where your LLC is located.  The Alabama LLC filing fee varies by county from $50 – $73.25.  Here is a list of contact information for Alabama Probate Judges. There is an additional state filing fee of $100 for the LLC registration and an additional $10-$28 for the name registration that is paid to the Secretary of State.  The name registration must be done prior to filing the LLC.

Expect the LLC approval process to take around 2 weeks (3-4 days for the Judge of Probate and 10 days for the Secretary of State.  Expedited processing is available for an additional $100 which will reduce the Secretary of State’s filing time from 10 days down to 3 days.

If you have questions, contact the Alabama Secretary of State – Business Services Division. Their phone number is 334-242-5324. 

business.services@sos.alabama.gov
http://sos.alabama.gov/business-services

Step-by-Step Guide to Forming an LLC in Alabama

To form an Alabama LLC, follow the steps below:

Step 1: Fill out the Certificate of Formation

You can either download the Alabama LLC Certificate of Formation form (called the Articles of Organization in many states) or file online with the Alabama Secretary of State.  If you chose to fill in the PDF, note that it cannot be handwritten and must be typed out. 

Step 2: Enter the Name of the LLC

Here you will enter the legal business name of the LLC.  Each LLC in Alabama must have a distinctive LLC name that isn’t already registered.  Before filing, the LLC’s trade name has to be reserved by the Secretary of State.  If you haven’t checked to see if the name you want is available, first see how to do an LLC name search.  The name can be reserved by filling out the LLC Name Reservation Request Form for $10 with standard processing which will take about one week.  The other option is to file online, which will cost $28 and is processed immediately. Filing online also makes the Name Reservation certificate available immediately, which is required before filing the Certificate of Formation.

The company name chosen must contain the words Limited Liability Company or the abbreviation L.L.C. or LLC.

Be sure to attach the copy of the Name Reservation certificate that came from the Secretary of State.

Before selecting a name, you may also want to see if the domain name is also available.

Step 3: Enter the Form Preparer’s Information

Include the name and address of the individual or company preparing the Certificate of Formation.  This name does not have to be any of the LLC members.

Step 4: Enter the Name of the Registered Agent

To have an LLC in Alabama, there must be an person or entity, referred to as the registered agent, with a physical address in the state of Alabama who is available during normal business hours for service of process.  The agent will be the central point of contact to receive important legal documents, tax notices, summons, subpoenas, etc on behalf of the LLC.

The registered agent can be the business owner, a resident of Alabama with a physical address or a company that provides resident agent services.

Even though the business owner can be the registered agent, their name and address become public record and with that comes a loss of privacy. This is more important for some entrepreneurs, especially when they are doing business from home.

Related: Do I Need a Registered Agent in Alabama?

Remember the address has to be a physical street address since PO Boxes are not allowed.

Include the name of the Alabama registered agent, the physical street address and a mailing address if a different address is used for mailings.

Alabama LLC Registered Agent

Step 5: Certification

The next question asks the undersigned to certify that there is at least one member of the limited liability company.  There is nothing to do here.

Alabama LLC Certification

Step 6: Special Entity Selection

This question is optional and will only be used if the LLC intends to form as a Series LLC or a Professional LLC.

These are not common selections.  A Series LLC provides liability protection across multiple asset groups or business lines each of which should be protected from liabilities from the other series. The Series LLC is more common with real estate companies.  The Professional LLC is only for licensed professionals, like accountants, doctors, lawyers, etc.

Alabama LLC Entity Selection

Step 7: Effective Filing Date

This is an optional field should you want to delay the formation date of the LLC.  By default, the LLC is officially formed on the date the Judge of Probate files the Alabama LLC Certificate of Formation.  A common reason for a delayed effective date is when the LLC is being formed at the end of a calendar year and delaying the start will keep from having to file a tax return for only a few weeks of operation.

Most people will leave this section blank.

Alabama LLC Delayed Filing

Step 8: Additional Attachments

Last, include any additional attachments, often used to identify all of the members of the LLC.  This is optional and not used by most LLCs.

Alabama LLC Additional Attachments

Step 9: Sign and Date

Step 10: File the Certificate of Formation

  1. Make 2 copies of the signed Alabama LLC Certificate of Formation and attached Name Registration certificate.
  2. Either mail or drop off the original and two copies to the Recording Office of your county’s Judge of Probate office.  Do not send to the Secretary of State.
  3. Include payment with 2 separate checks or money orders.  The Secretary of State can be paid with the credit card form, but some counties will only take checks or money orders.
  4. Be sure to keep a copy for your records.

Tasks after forming your LLC

Once the LLC has been formed, there are a few additional steps to take care of. Below is a list of the most common tasks.

Prepare an Operating Agreement

The operating agreement is a document that governs the framework of an LLC.  This document covers items like ownership rights, member responsibilities, how profits and losses are distributed and more.

Most states do not require an LLC to have an operating agreement but it is still worth considering. Without an operating agreement:

  • The LLC could be subject to generic state rules that may be detrimental in the event of a lawsuit
  • Member’s personal liability protection may be diminished
  • Members may not have a full understanding of their roles and responsibilities which could lead to costly disputes in the future

Learn more about when an LLC needs an operating agreement and download an  Alabama operating agreement template

Obtain an EIN

The EIN or Employer Identification Number is a unique 9-digit number for a business. Similar to a social security number for an individual, the EIN identifies business entities for tax purposes.  

The EIN will be needed in order to open a bank account, register for business licenses and permits, file tax returns, pay payroll taxes and more. 

Related: How to Apply for an EIN

Open an LLC Bank Account

Opening a bank account for your LLC is important for liability protection as the account separates the business’s funds from the member’s personal funds.

Several documents will be needed to open a business bank account such as:

  • A banking resolution is a document that authorizes the members to open a business bank account on behalf of the LLC.
  • Copies of the original formation paperwork from the state showing the creation of the LLC.
  • Driver’s licenses of the members.
  • Depending on the age of the LLC, an Alabama Certificate of Compliance may be needed to prove the LLC is active and in good standing with the state.

Related: How to Open a Business Bank Account for your LLC 

Apply for Business Licenses and Permits

Depending on what your business does and where it is located, there will likely be a variety of business licenses and permits to register for before starting. Some common registrations include:

  • Business License – Some cities require businesses to obtain licensing before they can start. In some cases, even home-based businesses must have licensing in order to legally operate. 
  • Professional License – Certain services such as barbershops, accountants, salons and others must be licensed.
  • Sales Tax Permit – In order to sell products and certain services, registration with the Alabama Department of Revenue will be necessary.

Related: What Business Licenses are Needed in Alabama?

File the Initial Privilege Tax Return

Within 2.5 months of registering an LLC, the Alabama Initial Privilege Tax Return (Form BPT-IN), must be filed.  The Privilege Tax is assessed on businesses for the “privilege” of operating in the state of Alabama.  Learn more about the Business Privilege Tax from the Alabama Department of Revenue. 

File Annual Reports

Alabama LLCs are required to file the Alabama LLC Annual Report for (AL-CAR) and pay the privilege tax.

Related: How to File an Alabama LLC Annual Report