Do you want to expand an existing LLC into Alabama with a foreign qualification, but you’re not familiar with the process?
This guide will outline important details when expanding your business and explain how to foreign qualify an LLC in Alabama.
Your business is growing, and you’re planning an expansion to other states. It’s a good problem to have!
But it’s not quite as simple as choosing another location. Because each state has different rules and requirements for business operations, you may need a “foreign qualification” in each state where you plan to do business.
It’s a common misconception that foreign qualification is only for businesses operating outside the U.S. But in this case, “foreign” refers to any business operating in a state that isn’t the state where the LLC was originally formed.
For example, if your LLC is registered in Mississippi and you are looking to open a second location in Alabama, you may need to complete a foreign qualification in Alabama before you can expand there.
Important Note: If you’d like to save time and have the foreign qualification paperwork taken care of for you, many of the best LLC services can handle this task for you.
Foreign qualifying is essentially asking permission to do business in the state of Alabama. And the notion that “it’s easier to ask forgiveness than permission” doesn’t apply here. Failing to foreign qualify before starting a business in Alabama yields consequences that are far costlier than registering in the first place. If you fail to foreign qualify, your business:
That’s a lot on the line. The fee required to foreign qualify your business in Alabama is totally worth maintaining good standing with the state, so before you begin transacting business, make sure to complete your foreign qualification. Otherwise, you could find yourself without business contracts and facing large penalties.
We’ve established why you shouldn’t do business without a foreign qualification. But what exactly does it mean to “do business” in Alabama? Consider the following questions.
If you answered “yes” to any of those questions, you are doing business in Alabama. Generally, if you have a physical presence, or nexus, in the state, you’re considered to be doing business there.
And let’s not forget about LLC taxes. All foreign LLCs are required to pay an Initial Business Privilege Tax Return (Form BPT-IN) within their first 2.5 months of operation and pay a minimum of $100 (possibly more, depending on your company’s net worth). Then, each year, you’ll have to file a Business Privilege Tax Return (Form PPT) by April 15th. Foreign registering in Alabama lets the state know that you’ll be filing these taxes each year. It’s important to always stay on top of your LLC’s taxation requirements to avoid any unwelcome surprises.
If you’re unsure whether or not you need to file for a foreign qualification in Alabama, we suggest seeking legal counsel.
The foreign qualification, however, isn’t a hard and fast rule for all LLCs performing any kind of action in Alabama. Not every action qualifies as doing business, but the state laws of Alabama do not list any specific exempt activities. However, the following are activities that most states do not consider business transactions:
It’s often safe to assume that performing one or more of the listed activities doesn’t qualify as doing business. But since Alabama law doesn’t state this explicitly, it’s best to either seek legal counsel or simply foreign qualify anyway to be completely sure.
Foreign qualification in Alabama is simple if you know where to find and send your forms. If you or your legal counsel has decided to foreign qualify your LLC in Alabama, you can do so by filing a “Foreign LLC Application for Registration” with the Secretary of State’s office via mail or email. Or, to get your paperwork processed quicker, you can file online.
No matter what, your first step in the process is to obtain a name reservation certificate and submit it with your foreign qualification materials. Reserve your LLC name in Alabama online or by completing and mailing a “Name Reservation Request” form.
Once your business name is reserved, you’re ready for your foreign qualification. Whether you’re filing by mail or online, you’re going to need the following information:
Phew. You’re almost done. Now that you’ve entered all your information, you just need to submit your form. If filing online, your form has already been sent. But to file by mail, send two copies of your completed form – along with other required documents – to:
Alabama Secretary of State, Business Services
P.O. Box 5616
Montgomery, Alabama 36103-5616
For an acknowledgment that your form has been received, include a postage-paid, self-addressed envelope.
You also have the option to submit via email by sending your completed form to email@example.com. Don’t forget to fill out the last page with your credit card information.
There is a $150 application fee for filing to foreign qualify by mail and email, with an additional $6 surcharge for online filing. You can pay your fees by personal check, money order, or any major credit card. Checks and money orders must be made out to the Alabama Secretary of State.
After your form is in and your fee is paid, sit back, take a deep breath, and pat yourself on the back. Your LLC is foreign qualified and you’re embarking on another chapter in the life of your business.
Since you need to reserve your LLC name in Alabama before foreign qualifying, be sure to review the state’s business entity name requirements. Alabama law states that you must register under a name that:
We think you should foreign qualify your LLC before you begin conducting business in a new state. If you don’t, your business could be subject to a broad range of fines and penalties for operating an LLC in a state where you don’t have permission to do so.
Alabama has some of the nation’s fastest turnaround times for business filings. In most cases, the state will process foreign qualifications within just 24 hours of receiving your documents.
Chances are, you’ll require at least one license or permit to operate your LLC in compliance with Alabama state law. For more information about business licenses and more in this state, check out Alabama’s convenient Business Licensing hub.
Yes. Whether you operate a domestic or foreign LLC in this state, you are required to file an Alabama LLC Annual Report.
The overall costs of operating an Alabama LLC can vary considerably based on the specifics of your business. However, we created a helpful guide to help you identify and plan for every expense your LLC will face in this state.
The answer to this question lies in your personal preferences, but we can give some general pointers. An attorney will cost the most by a mile, but also provides expertise you won’t find with the other options. The DIY route is free of charge but can require quite a bit of legwork and provides no peace of mind that the process is being completed correctly.
Using an LLC service means your business will be foreign qualified by professionals who know what they’re doing, while also costing significantly less than a lawyer. This “best of both worlds” attribute is what makes LLC services our preferred option.
Using an online LLC service removes much of the hassle from the foreign qualification process. With these services, all you need to do is provide them with the name, location, and industry your business operates in, along with some info about yourself and your Alabama registered agent.
The service then files your Application for Registration with the state to qualify your LLC to do business in Alabama.
Disclaimer: The content on this page is for informational purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
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