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The Limited Liability Company (LLC) is a smart entity choice for most start-up businesses.  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.

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 can be both affordable and is simple enough for most people to start on their own.  That said, it’s not a bad idea to have a legal professional or formation service like IncFileLegalZoom or Filenow make sure the LLC is formed correctly. 

Read: 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.

The filing can be started online at the Secretary of State’s website or by filling out the pdf version of the Certificate of Formation.   If mailing, send one signed original and two copies of the Certificate of Formation along with the fees to the Office of the Judge of Probate in the county where the LLC will be located.  The County Probate Judge will file and then forward to the Secretary of State for final processing.  Filing online will be slightly faster, however, there are additional processing fees and most counties still require mailing the Certificate of Formation anyway.

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 LLC in Alabama, follow the steps below.

Step 1: Fill out the Certificate of Formation

You can either download the Certificate of Formation (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.

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.

Read more about registered agents 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.

That is all that is involved when forming an LLC in Alabama.  Remember even though you can do it yourself, there is more to an LLC than the filing.  If you have questions or concerns, work with an attorney or a specialized entity formation company such as IncFileLegalZoom or Filenow.

Next Steps After Forming the LLC

While not required by the state of Alabama, an LLC Operating Agreement is recommended in most cases.  Read more about when an LLC needs an Operating Agreement.

After the LLC is formed, you will likely need to apply for an Employer Identification Number or EIN (which is sometimes known as a Federal Tax ID Number) with the Internal Revenue Service (IRS).  The EIN is basically a social security number for a business and will be needed to get a bank account.  There is no cost to apply and it takes about 5 minutes to get.  Learn more about the EIN.

Before applying for an EIN, you will want to decide on how the LLC should be taxed. One of the great benefits of the LLC is the flexibility of how the profits of the business are taxed.  By default a single-member LLC will be taxed by the IRS as a sole proprietorship and a multi-member LLC as a partnership.  The IRS allows the LLC to elect to be taxed as an S-Corporation or C-Corporation.  There are pros and cons to each tax election so it is best to talk with an accounting professional (a free benefit when filing with IncFile).  If you aren’t sure yet, the IRS allows changing the tax election (within some limits).  As the business grows over time, you may be able to take advantage of additional tax savings. 

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. 

An LLC bank account should also be established in order to separate the finances of the business and member(s).  In order to do so, you will want to take the filed Certificate of Formation, EIN, Operating Agreement and two forms of ID for each of the members to the bank.

Be sure to set a reminder to file the Alabama LLC Annual Report Form (AL-CAR) and pay the Privilege Tax each year to keep the LLC active and in good standing with the state.  

Before starting a business in Alabama, you will likely still need to apply for Alabama business licenses, sales tax license, employment taxes and more.  See the Guide to Starting a Business in Alabama for more information.