How to start an LLC in Alabama 2024
If you are looking to start an LLC in Alabama then you are in the right place In this comprehensive guide I will teach you how to form an LLC in Alabama by yourself.
This is a step-by-step guide and I will cover all steps.
Cost and how much time will it take
The cost to form an LLC in Alabama is $200 and it takes only one day for approval.
Starting an LLC in Alabama
There are six steps to start an LLC in Alabama.
I'd like to discuss these steps in detail. This is a free guide and will help you form an LLC in Alabama.
If you are looking to do it yourself continue reading this article. If you feel the process is complicated you can always hire help there are numerous LLC formation companies however, I Recommend Registered Agents Inc. ?because they are the best. (This is an affiliate link I may earn a commission if you purchase through it. It will not cost you anything extra but will help me keep providing you with the free guides).
Registered Agents Inc. is the company I chose after extensive research. They provide full privacy and can create an LLC in Alabama without much hassle. Also for the first year, the registered agent services are free.
How much does it cost to start an LLC in Alabama?
As I mentioned above the cost is $200 it is for filing the certificate of formation which will create your company. Additionally, you have to pay a minimum of $50 every year. The $50 or more per year is a Business privilege tax or annual report. Note that it is a mandatory fee and this will keep your company in good standing.
How long does it take to get an LLC in Alabama?
The normal processing time is one to two business days if you file via mail. Note that there will be extra mail time as well. However, if you file an LLC online it will be approved immediately.
Steps to forming an LLC in Alabama
As I said I will share all the details below let's check out every step you need to follow to form an LLC by yourself.
1. Search LLC Name (limited liability company)
You need to search the LLC name to know if it is available in the state. You should know that this step is essential because there cannot be two businesses with the same name in a single state.
You need to ensure that your LLC name is unique and does not match with other businesses. You can do that by using the Secretary of State business entity tool.
You also need to learn about Alabama naming rules. So, you can form your LLC without any hassle.
2. Choosing a Registered Agent
An Alabama Registered Agent is a company or a person who can receive notices and legal mail from the state. let me explain the Registered agent will receive all the legal documents and mails from state on the behalf of your LLC.
Who can be a Registered Agent of Your LLC?
There are three options, The first one is that it can be you if you have a physical address in Alabama also know that the PO boxes are not allowed. It must be a Physical address.
The second option is that someone from your family or friend can be a registered agent of your LLC if they have a physical address in the state of Alabama.
The Third option is hiring a company that offers Registered agent services.
Before deciding the option you should know that the name and address of the Alabama Registered agent will be listed in the public records. So, if you don't want the public to see your address I would recommend hiring a registered agent services.
So, If you don't have an address in Alabama or want privacy hire a registered agent.
I recommend Registered Agents Inc. (affiliate link) The reason I recommend them is that they use their physical address and keep your info off the records. They are very private and take the privacy of clients very seriously. Moreover, they scan and upload mail and notices as soon as they receive them. So, there would be no delays. You will get a private online account where you can manage everything. So, If you want them as your registered agent for your LLC go to this link. (affiliate link)
3. File an Alabama LLC Certificate of Formation
This is the most important step because filing a Certificate of formation is the thing that will create your LLC. You need to file it with the secretary of state. It will cost you $200 if you file it online note that this is a time fee and it will create your LLC.
You can file it by yourself however if you are not familiar with it or think that you can make an error hire a company. It will cost you but you will have peace of mind as they are expert in filing the certificate of formation.
If you hire Registered Agents Inc. It will cost you $300. The $100 is their fee and $200 is the filing fee. Note that you will also get a free registered agent for the first year which costs $200 per year. So, for only 300 bucks you can form An LLC in Alabama. However, if you want to save money and can file it by yourself that's good as well it will save you money. If you are interested in hiring a company just start here. (affiliate link)
I want to clarify one thing here. I am not recommending them for just the sake of commission I am recommending them because they are the best. Also i am transparent I disclouse that these are affiliate links because it would be very unethical and non-professional thing to do to promote something just for the sake of money.
Note: You can check my review of Registered Agents Inc. And you will know why I recommend them.
4. LLC operating agreement
Alabama LLC's operating agreement delivers the support to the Certificate of formation. They work side by side. Alabama LLC certificate of formation creates the LLC while the operating agreement shows who owns the LLC. You need to create the operating agreement even if it is a single-member LLC.
Moreover, an operating agreement is required when you open a bank account for your LLC. Also, it helps you if your LLC is sued or you end up in court for some case related to your LLC. It shows you are running your company smoothly and legally.
You should note that the operating agreement is an internal document you don't have to publicize it to the secretary of the state or IRS. You just need to store it with you. Keep the copy in hand so, you will not run into any issues if legal issues arise.
5. Obtaining EIN
This is the fifth step. As your Alabama LLC is ready you need to obtain the Alabama EIN from IRS. You should know that it is also known as the federal tax number and federal employer identification number.
What is the purpose of EIN?
Does EIN cost anything?
No, it is totally free to obtain EIN from the IRS.
How long does it take to get EIN?
There are three ways to obtain EIN. The first one is online, the second option is by mail and the third option is by fax.
The online method takes only fifteen minutes. But know that if you do not have iTIN and SSN you cannot obtain EIN online. This applies to non-residents. The non-resident can obtain an EIN by mail or fax. However, if you have ITIN or SSN you can obtain EIN in just 15 minutes by applying online. Note that the EIN by mail or fax can take up to 1 to 3 months.
6. You Need to file an Initial Business Privilege Tax
BPT (business privilege tax) needs to be paid every year. However, there is an initial business privilege tax that needs to be paid right after 2.5 months after the formation of an LLC in Alabama. The cost is $50 however, it can vary depending on your net worth and federal taxes.
To understand BPT and how much you owe you should consult a tax professional.
Note: For example, if your company is formed on August 18th you need to pay initial BPT on the 1st November.
How to file the initial BPT?
You can easily file the initial BPT online or by mail. I would recommend online because it is easy.
What to do After Getting An LLC Approved from the State of Alabama?
After the LLC is approved you need to do the following things.
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Open an LLC business bank account
I highly recommend opening a business bank account for your LLC because it will keep your personal and business finances separate. You will also have personal liability protection if you keep your LLC and personal finances apart.
Business permits and licenses
The good news is that Alabama doesn't have general business permits statewide. You need to obtain permits and licenses from the city or county where your business is located. If you have a barber shop it is located in Auburn. You need to obtain a business license from Auburn not from the state of Alabama.
You need to file an annual report and BPT
Just creating an LLC is not enough you need to file an annual report and BPT every year to get the good standing certificate for your LLC.
The cost of the annual report and BPT is $50 which is the minimum. It can be more depending on your federal taxes and net worth. You must consult a tax professional for that.
You need to pay taxes
The LLC does not pay federal taxes itself the owner or members have to pay it. In simple terms, the owner or owners of the LLC pay the taxes in their personal tax returns.
How My LLC has been taxed?
The taxation of the LLC by default according to the IRS based on the number of members the LLC has.
However, You have the option to pay your taxes as a C-Corporation or S-Corporation to the IRS the state of Alabama will have no objection.
You have to pay federal income taxes, and state income taxes. Moreover, there are additional taxes like sales tax. Also, local and state taxes. You should consult a tax professional to understand what you owe.
How to start An Alabama LLC FAQs
I am going to answer the top 3 asked questions.
1. Can I start An Alabama LLC online?
The answer is Yes. You can Start An Alabama LLC online. The charges are 200 dollars for filing a certificate of formation. The formation of an LLC online is not only easy but also get approved immediately
2. What are the benefits of An LLC?
There are numerous benefits but the one that stands out is the protection of your personal assets. In case of a lawsuit, your LLC will be sued and your personal assets like home, bank accounts, and cars will be protected. They will not be taken away in damages.
The protection is for all LLC owners also known as LLC members. Everyone is protected from business debts and liabilities.
Note that the protection LLC provides is not available to those who choose other types of formation like sole proprietorship or partnership. In these types of business structures, the owner or owners are not protected and they will have to pay from their own pockets in case of lawsuit. So, registering an LLC is a wise choice.
The second benefit that stands out is pass-through taxation. The LLC does not pay the federal taxes however, it is passed to the members or members and they file it in their own personal tax returns. Also, the state income taxes are the same and they honor the federal income tax system for your LLC.
Is Alabama a good state to start an LLC?
The answer is yes and no. You need to understand that if you live in Alabama or doing business in Alabama then yes getting an Alabama LLC is a good thing. However, if you do not conduct business in Alabama then you should not form an LLC there.
let me explain it with an example. For example, if you register your LLC in Texas but live and do business in Alabama you have to register your Texas LLC as a foreign LLC in Alabama as well. If you do that you have to pay extra fees. The taxation will be double and you will only have headaches nothing else.
so, If you are doing business in Alabama only then register your LLC there.
One exception which only applies to real estate. And that if you are buying property outside of Alabama only then you should start an LLC in the state where your property is situated.
Wrapping it up!
In this article, I have mentioned everything from A to Z that will help you start an LLC in Alabama. You can form an LLC by yourself. However, if you want to avoid complications and money is not the issue for you I would recommend hiring a professional company to do all the work.
If you need full formation services visit Start Your Business Today with Registered Agents Inc.
If you only need a Registered Agent Get A Registered Agent Today!
Disclosure: Both are affiliate links. I may earn a commission if you hire them through my links. At no additional cost to you. It will be my reward for giving you a ton of information for free :).