If you’re planning to launch a business in Alabama, congratulations! You’re anticipating the excitement of crafting a business strategy, creating a brand, and finding your first customers. On the other hand, there are probably certain steps you’re not so enthusiastic about — like filling out official forms and figuring out your taxes.

At ZenBusiness, we understand this part of forming your business can be confusing. But until you put the paperwork behind you, you won’t be able to build the business of your dreams. For many new business owners, this means forming an Alabama limited liability company. We can make the process smoother and let you focus on what’s important — growing your business. Let’s take a closer look at how to form an LLC in Alabama and how we can help.

To show you how an Alabama LLC is created, we’ve broken down the formation process into five steps. These steps will show you how to start an LLC in Alabama and, are integral to registering your business with the Yellowhammer State. This means filing the right documents with the Secretary of State’s office, and also having the right tools to keep your business running smoothly.

There’s no need to feel overwhelmed by these requirements. At ZenBusiness, we offer a variety of formation and compliance services to help take some of the stress of forming an Alabama LLC off of your plate.

Step 1: Name your Alabama LLC

If you’ve already been brainstorming the perfect name for your business, there are a few things to keep in mind. First, you’ll need to comply with the state’s naming requirements. They are:

• Your name must include the words “Limited Liability Company” or the abbreviations “LLC” or “L.L.C.”
• Your name must not be in use by another business in the state of Alabama.
• Some words require special permission to use (e.g., “insurance” or “engineer” would require proof of specific licenses). 

How can you tell if the name you’d like to use is already taken? To find out, search for your preferred name using the Secretary of State’s Business Entity Search tool. If you’re unfamiliar with these systems, never fear. Take a look at our guide to Alabama business entity searches and we’ll walk you through the process.

Unlike other states, Alabama requires you to submit a “Name Reservation Request Form for Domestic Entities” with your Certificate of Formation (the official paperwork that creates your LLC with the state). If you’ve found the right name but aren’t quite ready to officially form your Alabama LLC, you can go ahead and submit that name reservation form prior to filing the Certificate of Formation. This will reserve the name with the state for up to a year. Previously, Alabama forced new businesses to file this name reservation form with the state a few weeks before even forming their business, but as of 2021, this form can be submitted along with your Certificate of Formation instead of submitting it ahead of time.

If you need help, we have a business name reservation service that can handle it for you. As part of the service, we also check to see if your desired name is available.

When you’re pondering the right business name, it’s a good idea to consider whether you can secure a matching domain name. We have a tool to help you do a preliminary domain name search, and our domain name registration service can help you secure the online name that will best serve your Alabama LLC. 

If the name you pick for your LLC doesn’t always convey the vision you have for your business, you can file an Alabama DBA, or “Doing Business As” name application with the state. This allows you to operate your business under a name other than the LLC’s official name, all while filing state formation and compliance documents under the official registered LLC name.

Step 2: Appoint a registered agent in Alabama

If you’re starting a business for the first time, you may not be familiar with the term registered agent. The state of Alabama requires appointing and maintaining a registered agent, who can be a person or business entity that accepts service of process on behalf of your LLC.

Because of the nature of their role, registered agents need a physical address in the state of Alabama (a P.O. box won’t work). This location is referred to as your “registered office.” Additionally, your Alabama registered agent must be available to receive official paperwork at that address during standard business hours (Monday to Friday, 9 a.m. to 5 p.m.).  

Many business owners assume they will serve as their own registered agent, using their business location as the registered address. Unfortunately, there are several reasons this choice might not prove advantageous in the long run:

• If you’re sued, you’ll be served paperwork at your place of business or your house. This could create embarrassment in front of your employees and customers.
• You’ll be required to stay at your registered office during standard business hours. This can be a tricky requirement if you plan to travel for work, let alone take a long vacation at any time in the future. Even the occasional sick day could cause a problem.

Thankfully, there’s an easy and affordable solution: You can hire a commercial registered agent service to perform this role for your LLC. We offer registered agent services in Alabama, offering the consistency and accountability you need.  We’ll receive any documents on your behalf and scan them to our online portal, where you can review and respond to them instantly. Forget worrying about always being available: Let us take on that responsibility, allowing you to focus on growing your business.

Step 3: File an Alabama Certificate of Formation

When forming an LLC in Alabama, one document makes your business official, a Certificate of Formation. Of all the red tape you’ll have to overcome, this is the paperwork that matters most.

• The name of your new LLC (be sure to attach the Name Reservation Certificate we discussed in Step 1).
• The name and address of your registered agent.
• The name of the person who prepared the form (either your name or someone else on your behalf).

In the past, starting an Alabama LLC required sending a copy of your application for a Certificate of Formation with the probate judge in the county where you’re starting your business. Thankfully, this requirement is now officially gone from Alabama law with the passage of Act 2020-73, which went into effect January 1st, 2021. The same act also changed the “Name Reservation Request Form for Domestic Entities” requirement, so all you need to do is to fill it out and file it along with your Certificate of Formation.

Filing official government documents like this can be intimidating and/or confounding for many people, which is why we’re here. With our business formation plans, our professionals handle the filing for you to make sure it’s done quickly and correctly the first time. If you do take advantage of our services, all of your LLC’s documents will be uploaded to your ZenBusiness dashboard, where you can keep it and other important paperwork digitally organized.

In addition, our customized business kits give you somewhere to make sure your physical paperwork like your operating agreement, member certificates, contracts, compliance checklists, transfer ledger, etc. are safely stored.

Finally, you need to supply an address for your new business. That can be unsettling for some business owners, especially those running their business from home. In instances where you’re not required to give the registered agent address or official principal address for your business, a virtual business address can come in handy. With our virtual business address service, we supply you with a physical street address where you can have your mail sent without divulging your real address to more people than necessary.

Step 4: Create an Alabama operating agreement

An operating agreement can be critical in helping LLCs succeed, both in the early stages of the business and throughout the company’s existence. In basic terms, this document lays out the rules by which the company will operate, including management procedures and the roles and responsibilities of specific members. 

Alabama does not ask new LLCs to submit their operating agreements to the state. But having a comprehensive operating agreement for your Alabama LLC can be extremely helpful, especially when changes and challenges arise. This is true even if you’re the only member of the LLC, positioning your new business for sustained success. Here are just a few ways that an operating agreement can help you and your new business:

• Operating agreements help substantiate your LLC as separate from your personal assets. This could come in handy if your business incurs debt or legal liabilities.
• Operating agreements can prevent and resolve conflict among LLC members by clearly specifying how decisions will be reached in the event of disagreement. In the absence of these clear rules, arguments can drag on destructively.
• Operating agreements can set clear protocols for adding or removing members. If someone wants to leave the business or a new partner wants in, you’ll have a fair process in place.
• Operating agreements can designate specific roles and ownership privileges and outline specific ownership stakes. Without one, all members are assumed to have equal ownership by default.

Moreover, without an operating agreement in place, your LLCs will be governed by the state’s default rules. These default rules may not reflect the reality of your business. If you’re unsure as to how to start creating an operating agreement for your Alabama LLC, we offer a customizable template to help get you started.

Step 5: Apply for an EIN

While you’ve filled out plenty of paperwork for Alabama’s government, you’ll probably still need to register your business with the federal government. The Internal Revenue Service (IRS) has a numeric system for tracking business entities, creating ID numbers for companies to use for tax purposes. This nine-digit number is called an Employer Identification Number (EIN), and you’ll more than likely need one, even if your LLC is single-member. But if you have other members (owners) in your LLC or hope to employ anyone, you’ll need to get an EIN as soon as possible. And even if you don’t technically need an EIN to meet your tax obligations, it could be a good idea to get one for the following reasons:

• You may need one to do business banking: Virtually any financial institution will require an EIN if you intend to open a bank account connected with your LLC.
• You may need one to obtain financing: If you ever need a business loan or hope to take on outside investment, you’ll have to have an EIN to receive any capital.
• EINs can prevent identity theft: If you don’t have an EIN for your business, you’ll need to provide your own Social Security number instead. Putting your Social Security number on a ton of forms could prove problematic.

You can get your Alabama LLC’s EIN through the IRS website, by mail, or by fax, but if you’re unfond of dealing with that particular government agency, we can get it for you. Our EIN service is quick and eliminates the hassle.

Once you’ve secured your tax ID number, you’ll be able to open a business bank account. Having separate accounts for your business and your personal banking is critical not only for taxes, but for liability purposes. Mixing the two can not only make your taxes more difficult, but it could also be used against you if someone takes you to court to challenge whether you and your LLC are truly separate entities.

The good news is that we offer a discounted bank account for new businesses. It allows unlimited transactions, online banking, a debit card, and more. When you want to authorize others in your business to use the account, we offer a banking resolution template to simplify the process. And for further help managing your new business’s finances, try the ZenBusiness Money App. It can help you create invoices, receive payments, transfer money, and manage clients all in one place.