Alabama LLC (7 Step Guide) – How to Form an LLC in Alabama

Create Your Alabama LLC Quick & Easy With Professional Help

If you are starting a business venture, there are a few different things to consider, such as what your business will do, who you want to run it with, and what type of business entity you want to be. Each business type comes with its own pros and cons, but one of the most popular is an LLC, and this guide will take you through the process of forming an LLC in Alabama, as well as some of the pros and cons.

What is an LLC?

An LLC is a popular business entity in the United States. The term stands for Limited Liability Company, and offers a lot of flexibility when it comes to how it is run.

Unlike many other business entities, an LLC offers a lot of benefits, including liability protection, a flexible management structure and certain tax benefits. Some people would describe it as a combination of all the best parts of the other business structures put together.


Why Would You Want an Alabama LLC?

An LLC is relatively easy to run and also relatively easy to form, which is why so many businesses in the state of Alabama are deciding to form an LLC as their chosen business entity. They can be the entity type for almost all types of business, and can be sued for businesses of almost any size.

Pros and Cons of Alabama LLCs

Like all states, there are different pros and cons relating to forming an LLC in Alabama, let’s take a look at them.

Pros

  • The state of Alabama has a very lost cost of living, which makes it a relatively affordable place to base yourself and start a new business.
  • Alabama is one of the few states in the US that doesn’t require a full disclosure of the LLCs members in the incorporation paperwork. This is good if you want to remain private.
  • Unlike most other states, if you have an LLC in the state of Alabama, you don’t have to file an annual report, which can save a lot of time and money. The only thing you have to file annually is an annual state tax return.

Cons

  • In general, the state of Alabama is not the most business-friendly. There are various fees required when it comes to filing the formation documents, and then the tax structure is very complicated that starts with a minimum payment of $100.
  • The average household income in the state is lower than the average in the US, which means that people have less money to spend on your business. The state also has a higher poverty rate than the average.

7 Step Guide on Forming an LLC in Alabama


Step 1: Name Your Alabama LLC

Choose-Your-Business-Name

Like most LLC formation processes, the first step is to name your LLC.  It is very important that you think about the name of the LLC carefully, as this is what your potential customer will know you by, so it needs to be something memorable and ideally give an indication of the type of business that you provide.

Before coming up with your dream business name, it is always worth taking a look at the Alabama naming requirements, as there are a few restrictions that need to be followed.


Alabama Naming Guidelines

  • Your Alabama LLC name needs to be distinguishable from any other Alabama LLC, as well as corporations, limited partnerships or registered limited liability partnerships.
  • There are a number of restricted words that you are not allowed to use in your LLC name, if you use any of them, your request will be rejected. There are a few words that you cannot include, such as those that might confuse your company with a government agency, such as FBI or Treasury. Or some restricted words like Bank of University may mean a lot more paperwork for yourself, and may also mean that you need a licensed individual to be a part of your LLC.
  • When coming up with your name, make sure it includes the term Limited Liability Company. If this is too long, you also have the option of using an abbreviated version of the term, such as just LLC.

Checking If the Name is Available

If you have come up with your dream name and want to find out if it is still available for you to use, there is an easy process to follow. Do a free Business Entity Search on the Alabama Secretary of State’s website. If your chosen name is current in use, you’ll have to conduct search for a different name, so it can be a wize idea to have a backup.

Reserving your Business Name

If you have come up with the perfect name for your business and found that it is still available, but you don’t want to register your LLC just yet, then you can reserve your name for up to a year for a small fee. This will stop someone else from taking it before you get the chance.

Look at the URL

It now may also be a good idea to see if the URL for your chosen name is still available. It is a good idea for your business web address to be the same as your business name so that it is easy to find even if you don’t plan on making a business website right away, it is sometimes worth making this small investment in advance.


Step 2: Choose a Registered Agent in Alabama

Registered-Agent

All LLCs in the state of Alabama need to have their own registered agentThe job of a registered agent is to receive important communications from the state on behalf of your business. These could be tax forms, legal documents, notices of lawsuits, and other official government communications. A registered agent could be another business agent, or an individual. The terms are quite flexible when it comes to who can be a registered agent, in fact, you could even be your own registered agent, although this is often quite time consuming.

Restrictions

There are not that many requirements about who can be a registered agent. One of the most important, however, is that they must be a resident of the state of Alabama, or alternatively a corporation that is authorized to conduct business in the state.  If you don’t want to hire someone but also don’t want to be a registered agent yourself, you can always elect another individual within your company.


Step 3: File the Certificate of Formation for Your Alabama LLC

Certificate-of-Formation

This is the part where you actually file your LLC, therefore it is likely the part where many people might get confused.  There are two ways you can make the filling, either online or by mail. Online is the most straightforward method, as you’ll be filing both your Certificate of Formation and the name registration online. If you are filing by mail, then a little more forward planning is needed, as you’ll need to first mail in your name reservation request form for domestic entities a few weeks prior to registering your business. A few weeks after sending the request, if the name has been approved, you’ll be sent a name reservation certificate from the state in a further few weeks, when you have this, you can begin the next part of the process. You should then mail both your Certificate of Formation and the Name Reservation Certificate off together.

Unlike the majority of states, in Alabama, you don’t actually have to file your forms with the Secretary of State. Instead, you must file it to the Office of the Judge of Probate in the county where the LLC’s initial registered office is located. They will file the form and give you a stamped copy, and then transmit it to the Secretary of State for you.

Filing the form may be time consuming but should be pretty straightforward. There is certain information that it must include such as:

  • The name of your LLC
  • The name and address of the registered agent that you have chosen
  • The date that the LLC will begin if this is different from the filing date
  • The signature of organizer or attorney-in-fact

No matter whether you post or use the online service, you’ll have to also pay the state filing fee, which for Alabama this is $200. This is quite an expensive filing fee.

Be aware, if you are choosing to file online, there is a section where you have to insert what county you are in. In some counties, online filing is not acceptable, and you will be notified about that at this point.


Step 4: Create Your AL LLC Operating Agreement

Operating-Agreement

The next step is to create your operating agreement. Alabama is not one of the states where you are strictly required to have an operating agreement for your LLC, but it is certainly good practice to have one in place. An operating agreement is the document that is used to outline how a business is run, therefore contains important information such as the ownership and operating procedures.


Why is it good to have an operating agreement?

There are several reasons why an operating agreement is a good idea. But one of the main ones is that it could help to prevent future conflict, as it shows that all the business owners are on one page. If there is a disagreement at some point in the future after the operating agreement has been written, this document can then be referred to, to see what everyone has agreed upon, be it the dissolving of the business or the division of profits.

What to do with operating agreement

As previously mentioned, it is not stictly necessary to have an operating agreement, therefore, it does not have to be filed with your other documents to the state. Instead, it should be filed internally with all your other important business documents, where it can be referred back to easily if needed.


Step 5: File State Tax Return/Annual Report in Alabama

Annual-Reports

In the state of Alabama, it is a requirement to file a combined Annual Report and a Business Privilege Tax Return with the Department of Revenue annually. Once you have formed your LLC, the initial report is due in two and one half months. Every year you will have to pay a minimum of $100 in tax.


Step 6: Get an EIN for Your Alabama LLC

EIN-Employee-Identification-Number

The next step is relatively simple, as it is time to get your business an EIN. This stands for a business identification number. The number is used to recognize your business for tax purposes.

It is completely free to do and can be achieved by applying with the Internal Revenue System. If you make the request online, you’ll get your 9 digit number almost instantly, whereas if you apply by post, it will take a little longer.

There are several reasons you would need an EIN for your busienss, for a start, if you’re planning on opening a business bank account, then it is a must. You will also need one if you are planning on hiring any employees.

Federal law dictates that some types of business entities must register for an EIN. These are businesses that have an employee, even if it is owned by one person, any business with more than one member, or a partnership.


Step 7: Separate Business Assets By Opening a Business Bank Account

Business-Bank-Account

One of the biggest benefits of having an LLC is personal protection, and the next step of achieving this is to separate your personal and business assets.

The first step in doing this is to open a business checking account. This is an effective step to separate your company’s assets from your personal assets. Not only will this help to protect your personal assets, but will also make accounting and tax filing easier.

The next step is to get a business credit card, as this will not only make it easier to separate the business expenses from your own, but can also help to build up your company’s credit history, which will come in handy if you ever want to take out a small business loan.

One of the last things you can do, although this will come at a cost, is to hire a dedicated business accountant. This will help with your bookkeeping and payroll, while also preventing you from repaying taxes and will help to avoid any tax related fines.


Get Insurance For Your New Alabama Business

Business-Insurance

If you are starting a new business, it is important to work or what type of business insurance is going to be beneficial for you. There are a few different types of business insurance that can be used for different things and types of business. One of the most common types of small business insurance is General Liability Insurance. This type of insurance is very broad and can be used to protect your business from lawsuits. A bit more niche is Professional Liability Insurance, and this is used by professional service provider businesses, such as a consultant or an accountant. This type of insurance will help to cover claims of malpractice.

The third common type of business insurance is Workers Compensation Insurance, which is used to provide coverage for employees job related illnesses, injuries or deaths. In the state of Alabama, if your business has 5 or more employees, then you are required to have this type of insurance by law.


Form an Alabama LLC With Professional Help Today

In some cases, you might want to form your LLC yourself, however many people choose to get professional help when forming their LLC. This could be for a number of different reasons, be it convenience, time saving, or because they find the process too confusing or complicated to do themselves. If you decide you want to go with a third party formation service, the next decision would be which company to go with. There are plenty of formation services to choose from, all of which offer a little something different,  be it excellent customer service, a low price or lots of optional extras. Some even have a combination of all of these. Let’s take a look at two of the best.

#1: Form an AL LLC With Zenbusiness

Zenbusiness is one of the most popular companies that can be used to help you form your LLC. They have not been around for the longest but have already helped form thousands of businesses successfully and have positive reviews online to prove it. They are one of the cheapest services, with their basic package coming up at just $39, plus they have a helpful customer service team, and are not pushy when it comes to adding any extra services.

$49

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Rating: 4.8/5
Review count: 4500+

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Form an LLC today with ZenBusiness for only $49. They Have 98% customer satisfaction rating and over 4500+ verified reviews.


#2: Form an AL LLC With Northwest

Northwest is an LLC formation company in very good standing. Although they are by far from the cheapest, they definitely do a good job, and in some cases, you get what you pay for. One of their biggest selling points is their excellent customer service team, which is mentioned time and time again on the many great customer reviews that can be found online.

Use our special promo and get an LLC today with Northwest & get Registered Agent 1 year for free! Hassle-free and quick.


FAQs About Alabama LLCs

How long does it take to get an LLC in Alabama?

The time that it takes to form an LLC in Alabama can vary from case to case, dependent on a number of factors. On average, it will take around 10-14 days to process all the paperwork needed.

If you need the work done quicker, you can always opt to expedite the process for a small fee, which means that yours will take priority over other cases.

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About the Author
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Founder & author

Ian Broderick is an avid author and owner of LLCGuys.com. He's been involved with the LLC formation field for over 4 years. On top of that, he has worked in several well-known LLC formation service providers. Now he decided to share his knowledge and advice with everybody. Since there are a lot of questions and concerns surrounding this field - his aim is to make LLCGuys a top-notch information provider in regards to LLC creation, service reviews and etc..

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