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$199
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$499
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Comprehensive name check
Preparation of Articles of Incorporation
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Federal Tax ID (EIN) Obtainment Service
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Key Points of Alabama LLCs
Pass‑Through Default Treatment
Alabama treats LLCs by default as pass-through entities; the LLC itself does not pay state income tax, but members report income on personal returns.
Business Privilege Tax & Annual Report Combo
LLCs in Alabama must file a combined Business Privilege Tax Return & Annual Report with the Department of Revenue each year to maintain compliance.
Straightforward Formation Process
Formation is handled via the Secretary of State’s Certificate of Formation, with a $200 filing fee for domestic LLCs and $150 for foreign LLCs, along with name reservation and agent requirements.
Understanding Alabama LLCs
An Alabama LLC combines the liability protection of a corporation with the operational flexibility of a partnership. It’s a preferred choice for entrepreneurs seeking ease of setup, personal asset protection, and straightforward state compliance.
What is an Alabama LLC?
An Alabama LLC is a legal business entity that offers limited liability protection to its owners while allowing flexible management structures. It can be managed by members or appointed managers and aligns with federal tax classifications.
An Alabama LLC provides several benefits, including:
Asset protection, simplified reporting through the Business Privilege Tax return, flexible ownership structure, and minimal formalities compared to corporations.
Why choose an LLC in Alabama?
Forming an LLC in Alabama offers liability protection, tax pass-through treatment, and credibility in a regulated business environment. The formation process is efficient, and ongoing requirements are manageable for new and growing businesses.
Key Benefits Include:
Privacy Protection
No Double Taxation
Business Credibility
Legal Environment
Tax Flexibility
Clear Guidelines
Pros and Cons of an LLC in Alabama
Starting an Alabama LLC: Benefits
You get liability protection, governance flexibility, and the simplicity of pass-through taxation for most LLCs. The required filings are clear and consolidation of tax/reporting reduces duplication.
Taxation of an Alabama LLC
Alabama requires each LLC to file a Business Privilege Tax Return and Annual Report. The tax is calculated based on federal income and net worth, with a minimum payment (often $50). Pass-through treatment applies unless a corporate election is made.
Starting an Alabama LLC: Drawbacks
You must file the initial privilege tax soon after formation and every year thereafter. The combined tax/annual report requirement adds administrative overhead. Public records must list your registered agent and organizer.
Who Can Form an LLC in Alabama?
Any individual or business entity (resident or nonresident) may form an LLC in Alabama. You must designate a registered agent with a physical address in Alabama. The name must be unique and include “LLC” or “L.L.C.”
Types of LLCs in Alabama
Domestic LLC (Alabama‑based LLC)
Formed under Alabama law and operating within the state.
Foreign LLC (Out‑of‑state LLC registering in Alabama)
Formed elsewhere but doing business in Alabama; must file Application for Registration (Foreign LLC) and appoint an Alabama registered agent.
Series LLC
Alabama’s Certificate of Formation form allows checking “Series LLC,” but statutory support and practical treatment are limited.
Professional LLC (PLLC)
The Certificate of Formation form allows designation as Professional LLC for regulated professions. Members must comply with professional licensing requirements.
How to Start an LLC in Alabama
Choose a Business Name
Select a unique name that includes "LLC" or "L.L.C." and ensure it’s distinguishable from existing entities in Alabama. Use the Secretary of State’s name search tool to verify availability.
Appoint a Registered Agent
Designate a registered agent to accept legal documents. This can be an individual or a registered service company with a physical address in Alabama.
File the Articles of Organization
Submit Form LLC to the Alabama Secretary of State, providing LLC name, principal office address, and registered agent details.
Create an Operating Agreement
Though not required, it’s recommended to draft an Operating Agreement outlining ownership, governance, and profit distribution to reinforce liability protection and support tax compliance.
Alabama LLC Requirements
Age and Residency
Number of Members
Management Structure
Registered Agent and Office
Name Compliance
Alabama LLC Application
To form an LLC in Alabama, file the Certificate of Formation (Domestic) with the Secretary of State.
Required Information
- LLC name (must include “LLC” or “L.L.C.”)
- A Name Reservation Certificate must be attached
- Registered agent’s name and physical Alabama address (no P.O. Box for agent’s address)
- Organizer’s name and signature
- Indicate if the LLC is a Series LLC or Professional LLC
- Effective date (if delayed)
Filing Options
- Online: File through the Alabama Secretary of State’s online system
- By Mail / Paper: Submit certified forms with payment
Filing Fees
- Domestic Certificate of Formation: $200
- Foreign LLC registration: $150
Post‑Filing Requirements
- File Initial Business Privilege Tax Return within 2.5 months of formation
- Draft and maintain an Operating Agreement (internal document)
- Ensure registered agent continues to consent to service
Alabama LLC Taxation
Franchise Tax
Most Alabama LLCs that elect to be taxed as corporations must file and pay the Alabama Business Privilege Tax (BPT). This annual tax is based on the LLC’s net worth in Alabama and is required to maintain good standing with the state. LLCs classified as pass-through entities are still required to file an annual report even if they owe no tax.
Income Tax (Pass-Through Entities)
By default, Alabama LLCs are treated as pass-through entities. The LLC itself does not pay state income tax; instead, profits and losses pass through to individual members, who report them on their personal state tax returns. Members are subject to Alabama’s personal income tax rates.
Sales and Use Tax
LLCs that sell taxable goods or services must collect and remit Alabama state sales tax, currently set at 4%. Local jurisdictions may add additional rates, depending on the city or county. The use tax applies to goods purchased out of state and used within Alabama.
Payroll Tax Obligations
If an Alabama LLC has employees, it must register for employer withholding with the Alabama Department of Revenue (ADOR). The business must withhold state income tax from employee wages and remit it regularly. Employers must also comply with federal payroll requirements and register with the Alabama Department of Labor for unemployment insurance.
Alabama LLC Annual Filing (Annual Report & BPT)
What to File
Alabama LLCs must submit an Annual Report as part of the Business Privilege Tax return. It includes ownership information, business address, and financial details used to calculate the tax due.
Filing Deadlines
The initial BPT and report are due 2.5 months after formation (for most entities). Future filings are due annually on the same schedule, typically by April 15 for calendar-year taxpayers.
Penalties & Consequences
Late filings may result in interest, penalties, and potential administrative dissolution. Compliance ensures your LLC remains in good standing.
Expanding Your Alabama LLC
As your business grows, you may want to expand your Alabama LLC to operate in other states. This section outlines how to register your Alabama LLC as a foreign entity in another state and how out-of-state LLCs can register to do business in Alabama.
Registering a Foreign LLC in Alabama
LLCs formed in other states must register with the Alabama Secretary of State to operate in Alabama. This requires filing a Foreign LLC Application, providing a Certificate of Existence from the home state, and appointing a registered agent in Alabama.
Doing Business in Other States
If your Alabama LLC expands to other states, it must register as a foreign LLC in each state where it conducts business. This includes submitting formation documents, naming a local registered agent, and complying with each state’s tax and licensing rules.
Find The Right State To
Form An LLC
Every state has different rules, costs, and considerations for LLC formation.
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Doing Business in Missouri
Frequently Asked Questions
Yes, most states require you to have a registered agent to handle legal documents and notices during business hours.
While not always required by law, having an operating agreement is a smart move to outline your LLC’s rules and avoid disputes down the road.
An EIN is a federal tax ID; most LLCs need one to open a business bank account, file taxes, or hire employees.