How to Create an LLC in Alabama

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How to Form an LLC in Alabama:
5 Simple Steps to Get Started
According to the IRS, each state may use different regulations around forming an LLC, and you should check with your state if you’re interested in starting a Limited Liability Company. To simplify the process of forming an LLC in the state of Alabama, we’ve put together a step-by-step guide to detail each step of the process and answer any questions you may have.

Step 1
Name Your Alabama LLC

Your first consideration when choosing a name for your LLC is that it be unique from any other business in the state of Alabama. You can quickly and easily do a name check on the Alabama Secretary of State business name database to verify the business name you want is available. You must file a Name Reservation Request Form for Domestic Entities that includes a mandatory $28 name reservation fee prior to filing organization paperwork. You can submit this form by mail only to the Alabama Secretary of State’s office.

In order to comply with Alabama state law, your company’s name must end with the words “Limited Liability Company” or one of two abbreviations, “LLC” or “L.L.C.” This can appear in three different formats, either the whole phrase written out or one of the following appropriate abbreviations: “L.L.C.” or “LLC.” Nothing in the LLC name can state or imply that it was formed for a purpose different from what is stated in the articles of organization.

Step 2
Appoint a Registered Agent in Alabama

The state of Alabama requires that any LLC have a registered agent for service of process. This means your LLC must have an entity that agrees to physically accept any legal papers on the company’s behalf should it be sued. This entity does not have to be an individual person. The registered agent can be any resident of the state of Alabama or a business entity authorized to do business in Alabama so long as the agent has a physical street address within the state.

Step 3
File Alabama Certificate of Formation
To officially create your LLC in the state of Alabama, you’ll need to complete the Certificate of Formation paperwork and file it with the Office of the Judge of Probate within the county where your LLC resides. The county court then files your Certificate of Formation with the Secretary of State and your $100 filing fee on your behalf. For an additional $100, you can file online. You can find a list of the names and addresses of the probate judges for every Alabama county at the Alabama Secretary of State website. To complete the paperwork you’ll need to know the following information:
  1. The name and address of your LLC
  2. Whether your company will be a series LLC, non-profit, or a professional LLC.
  3. The name and address of the company’s registered agent
  4. The name(s) and address(es) of any organizer/managers associated with your LLC

Step 4
Create an Operating Agreement

Much like the bylaws required by corporations, operating agreements outline the rules and operating procedures for the management of the LLC. Information like whether members have the right to admit additional members, an explanation of the terms and conditions, and the circumstances, if any, under which the cessation of membership of one or more members will result in the LLC’s dissolution should be included. This information is also required in order to file your Certificate of Formation.

Step 5
Apply for an Employer ID Number (EIN)

An IRS Employer Identification Number (EIN) is required of your LLC unless it is a single-member LLC with no employees. Obtaining an EIN is as easy as completing the application on the IRS website.

It’s possible your company will need to register with the Alabama Department of Revenue. Whether or not your company needs to follow this step will depend on the exact types of taxes it will be collecting and/or has been collecting from the state as well as whether you have employees. You can register online via the My Alabama Taxes (MAT) website or on paper using the Alabama Department of Revenue Combined Registration/Application (Form COM:101).

Additionally, the state of Alabama requires LLCs to pay a Business Privilege Tax each year. This will generally happen in conjunction with filing your annual reports. All Alabama LLCs are required to submit an annual PPT form, or privilege tax form for pass-through entities, before the third week of April. The tax will be from 0.00025% to 0.00175% of the net worth of your LLC. The exact tax rate is determined by your business's income during the previous taxable year, but the minimum tax is $100. The state provides more information on this tax here.

If your LLC will be selling a physical product, you’ll need to register for a sellers permit through the Alabama Taxation website. This will allow you to collect sales tax on taxable sales. Additionally, if you have employees, you’ll need to register for Unemployment Insurance Tax through the Alabama Department of Labor and also register for Employee Withholding Tax through the Alabama Department of Revenue website.

Alabama law says that LLCs must keep the following records in its principal office and make them available for inspection by its members:

  • Copies of any effective operating agreements, including any amendments
  • Copies of any financial statements of the LLC for the three most recent years
  • A current listing of the full name and last known business or residence street address of every LLC member and manager
  • A copy of the filed articles of organization and all amendments as well as executed copies of any powers of attorney pursuant to which any documents have been executed
  • Copies of the LLC’s federal, state, and local income tax returns and reports for the three most recent years

Other Considerations
Foreign LLCs and Business Licenses
Foreign LLCs

If your company is a foreign LLC, also referred to as an out-of-state LLC, wanting to do business in the state of Alabama, you’ll need to follow all the steps outlined above with a few minor differences.

You will need to file a Foreign Limited Liability Company Application for Registration with the Alabama Secretary of State Business Entity Division.

The filing fee is $260 if done online and $150 if done by postal mail.

Business Licenses

All Alabama businesses must purchase a business privilege license annually in order to operate. These are required in every county you do business in and can be obtained from each county’s probate judge.

Get federal licenses and perform a license and permit search to find out what is required for your business in Alabama, or use a professional service to do it for you.

Also note that Alabama has special licensing laws regarding LLCs providing services. Only one service is allowed per LLC and every manager must be licensed.

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