An Alabama professional corporation is owned and operated by licensed professionals. Only those who perform services that require a state license may form an Alabama PC. If you fall into that category, here’s how to form one.
Steps to Form an Alabama PC
- Choose a name for your Alabama PC
- Select an Alabama registered agent
- Complete your Alabama Certificate of Incorporation
- Establish a corporate record in Alabama
- Designate an Alabama PC board of directors
- Create Alabama corporate bylaws
- Hold your first board meeting
- Handle tax obligations
- Obtain all necessary business licenses and permits
- Acquire insurance for your Alabama PC
- Open a business account
Is an Alabama PC structure the right one for you?
There are a lot of options when it comes to opening your own business. Should you go with a limited liability company (LLC)? Maybe a professional limited liability company (PLLC) is better? Who owns the company, and how’s ownership going to be divided? Who’ll manage the company? Is your head spinning yet? Ever thought about a professional corporation (PC)? Before giving up read on to find out if an Alabama PC structure is right.
Here’s a quick overview of the options. A PLLC is a company run by licensed professionals. Members aren’t liable for any debts or lawsuits. An LLC is easier to set up and costs less to form. They also provide the same liability protection as a corporation. A PC is a group of professionals within a specific industry. A PC has liability protections and favorable tax benefits.
Step 1: Choose a name for your Alabama PC
Naming your business is one of the most important parts of the incorporation process.
Your company’s name must be unique from any other business operating in Alabama. You can use the Alabama Secretary of State‘s Business Entity Records website to see if the name you want is already taken.
Alabama requires PCs to include the words “professional service corporation” or “PSC” in their names. The name also cannot include any words or abbreviations used by other business types, such as “LLC.” Finally, you also can’t use words that indicate other business types (such as “doctor” or “accountant”) unless your business fits that type.
When you find a name that fits, you have the option of reserving it ahead of time until you can file the paperwork. You can do this via the Secretary of State website for a fee. They’ll hold your name for a year. You can also save yourself the time and use the ZenBusiness name reservation service.
After you’ve picked a name you might want to get a domain name while you’re at it to start working on your internet presence. ZenBusiness offers a domain registration service to make things easier for you.
Step 2: Select an Alabama registered agent
A registered agent is a person or entity that receives legal notices on behalf of a company. The registered agent must have a physical address within Alabama and always be available during standard business hours. Because of this regulation, it can be difficult for an individual to act as their own registered agent. Many companies instead choose to hire a service to perform this task instead.
ZenBusiness offers a service that can connect you with a registered agent in the state of Alabama. This offers many benefits like freeing up your time so you can leave the office, and any legal notices won’t be delivered in front of potential customers.
Step 3: Complete your Alabama Certificate of Incorporation
Your Certificate of Incorporation is the most important document your corporation will submit. It’s important to understand how it works regardless of how you do it.
When you have the Certification of Incorporation form filled out, don’t forget it needs to be typed. You’ll need to mail it along with a copy of your Name Reservation Certificate from the Secretary of State.
The form itself will ask for:
- Name of the corporation: must include the word “incorporation,” “corporation,” “corp,” inc.””
- Street address of the principal office
- Name of the registered agent (P.O. Boxes not allowed)
- County of your registered agent
- Purpose of corporation
- Amount of stock the corporation is allowed to issue and its par value
- Period of duration if not perpetual
- Name and address of Incorporators
Mail the document along with the processing fee paid via check, money order, credit card, or prepaid account. Make checks and money orders payable to the Secretary of State. Include a self-addressed, stamped envelope.
Secretary of State
P.O. Box 5616
Montgomery, AL 36103-5616
Step 4: Establish a corporate record in Alabama
Once your Certificate of Incorporation is accepted but the Secretary of State, you officially exist! But that’s not all, there’s more to be done to create your PC.
Alabama requires all companies to keep a permanent record of all company decisions. This record can be kept physically or digitally but must be safely stored to prevent loss or tampering.
Step 5: Designate an Alabama PC board of directors
The PC’s next task is to select the initial director(s). Whoever is chosen, these appointments must be recorded for the corporate record, and be accompanied by a statement assigning the rights of a director(s)/owner to the named individuals.
These directors can include any number of people, even the incorporator themselves. They do not necessarily need to be located in Alabama to serve in the role. The only stipulation is that each director must share the same profession as the one the PC was created for.
Step 6: Create Alabama corporate bylaws
Bylaws are the rules and regulations that determine how your PC will operate day to day. You will cover a variety of important topics, including how often the board of directors meets and ratifying the bylaws.
Bylaws must be recorded in your corporate record, but they do not need to be filed with the state of Alabama. There are no particular rules as to how bylaws are determined, but they do need to follow the law.
Step 7: Hold your first board meeting
After all the above has been handled, it’s time for your PC to hold its first board meeting. During this initial meeting, you should plan to ratify your bylaws, designate officers, and set up a bank account. The minutes of this meeting, and all meetings afterward, should be kept track of in your record.
Step 8: Handle tax obligations
To operate your PC, you’ll need to get it set up for taxes. On the federal level, this means applying with the IRS for an Employer Identification Number (EIN), which is free. Or you can use the ZenBusiness EIN service to save yourself the time.
On the state level, Alabama doesn’t require any special registration. Your corporation will be subject to both corporate income tax and Alabama business privilege tax. You may also be subject to other taxes depending on your business, such as sales or use tax.
Some city or county jurisdictions may have taxes that apply to your business, as well.
Step 9: Obtain all necessary business licenses and permits
Since all corporations require a privilege license, that should be at the top of your list. After that, it’s up to city and county officials to determine what licenses and permits your PC will need. Then you’ll have to check out which ones you need on the federal, state, and local levels. Then there are the industry-specific ones. Since there’s no one place you can look to make sure you have everything lined up to start your PC off on the right foot, let ZenBusiness prevent the headache and use our business license report service.
Step 10: Acquire insurance for your Alabama PC
Insurance is important for the continued operation of any business. By law, PCs in Alabama must have workers’ compensation insurance coverage, unless the corporation employs fewer than five people.
You will also need to set up general liability insurance, as well as any industry-specific insurance that applies to your corporation. It’s especially important to see if professional liability insurance is necessary.
Step 11: Open a business account
Legally, you need to keep your personal assets separate from your business assets. Therefore, it’s important to have a business bank account.
Ready to launch your business?
At ZenBusiness, we are proud to support small businesses through a variety of different tools and services. Whether you need a registered agent service, want to reserve a business name, or looking to register a domain, our goal is to help you stay on the road to success. Check out our services, and contact us today to see how we can help you grow your company.
Alabama PC FAQ
- What are the filing fees for an Alabama PC?
Fees are always subject to change, so check the Alabama SOS’s website for the most current fee schedule.
- Do I need a lawyer to form an Alabama PC?
Although it’s not required to have a lawyer, it may be a good idea to hire one to prevent any mistakes.
- Does Alabama have a professional limited liability company (PLLC) entity?
Alabama allows professionals to form an LLC, but doesn’t have a separate PLLC entity. Any professionals looking to form an LLC must first receive approval from their state licensing board.
- Can professionals from different fields form an Alabama PC together?
No, everyone involved in forming a PC must belong to the same profession.
- Will I be taxed as an S corp or C corp in Alabama?
All corporations are designated as C corps upon filing. If you want to be taxed as an S corp you’ll have to file this form with the IRS. If they approve your application, you’ll be designated as an S corp and taxed as such.