Alabamians are a hard-working bunch, and if you’re thinking about starting your own business, you’ll need to put in the same type of effort. One of the first things you’ll need to do is form an LLC or Limited Liability Company. Fortunately, the process for starting an LLC in Alabama is relatively straightforward. Below are the steps you’ll need to take.
Before we dive in, here’s a really good explanation video on starting an LLC in Alabama for those who prefer a video guide.
Benefits of starting an LLC in Alabama
There are many benefits to starting your LLC in Alabama. As expert start-up guides will advise you, it has the advantage of limited liability protection for its members. It’s more compact than a Corporation or S Corporation.
Limited Liability Protection
One of the most significant benefits of starting your Alabama business as an LLC is that it offers limited liability protection, which means that if a lawsuit arises from a customer or client for something you did while operating your business – it won’t follow you home. Rather than the people who own it, the business itself is liable for paying out any damages.
Your personal assets, such as your car or house, are separated from your Alabama business assets and aren’t at risk of being taken away if someone sues your business for something you did wrong. Many entrepreneurs start their businesses as LLCs because of this benefit.
An LLC in Alabama has the choice of being taxed as a Sole Proprietorship, Partnership, or Corporation. It’s a good deal for start-ups since they don’t have to worry about finding an accountant or anything like that just yet.
Note: Single-Member LLCs are treated as Sole Proprietorships by default.
Minutes of meetings not required
Lastly, one of the benefits of starting your LLC in Alabama is that no minutes are required for meetings. People don’t have to travel for monthly meetings or anything like that. They need to follow the operating agreement, which doesn’t take too many hours out of the day.
Alabama LLC Rules & Requirements
This is a quick summary of the most important rules and requirements that this article will go through in-depth.
To apply for permission to form an LLC in Alabama, the company must have a in Alabama. Your LLC’s name must include “Limited Liability Company,” or their abbreviation, “LLC.” It can’t be something that resembles another already existing business. Ensure you as a business owner keep accurate records and reports of your business transactions.
Best Alabama LLC Formation Services
If you’re thinking about starting your LLC in Alabama, it’s a good idea to use a professional service that can handle the process for you. These services will ensure you get all the necessary paperwork filed correctly and timely so that you don’t have to worry about anything going wrong with your business registration.
Finding the Best LLC Formation Services in Alabama
Choosing the best LLC formation services in Alabama is an essential first step for anyone looking to start their own. Here are some of the most critical factors you’ll want to consider:
- Customer service/communication
- Integration with accounting software (if necessary)
These factors will help you narrow down your list of potential providers to find the one that provides you with the professional service you need at an affordable price. We have reviewed some of Alabama’s best LLC formation services here: Best LLC Formation Services.
As mentioned above, it’s usually recommended that if you’re unfamiliar with this kind of thing, then you should consider allowing LLC formation service providers to help you start your own business here in Alabama. These services will ensure that you comply with state law and all the rules and requirements. If anything goes wrong, they’ll have your back so that you don’t have to worry about it.
However, if you’re looking to do it on your own, then you can continue reading our guide on how to start an LLC in the state of Alabama.
The following is a step-by-step guide of what you can expect when forming an LLC in Alabama:
5 Steps to Starting an LLC in Alabama
- Name your Alabama LLC
- Choose your Alabama Registered Agent
- File your Alabama LLC Certificate of Formation
- Create your Alabama LLC Operating Agreement
- Get an EIN for your Alabama LLC
Step 1: Name your Alabama LLC
Choosing your name can be one of the most challenging parts of starting your Alabama LLC. You’ll have to choose a name that’s not already in use by another Alabama LLC or restricted by the state.
The rules for naming your Alabama limited liability company are as follows:
- Your name cannot mislead people into thinking the Alabama LLC was set up by the government or is a federal government agency.
- The name can’t be too similar to another Alabama company’s
- Your name has to end with an LLC designator (LLC, LTD., etc.)
- You may need to fill out additional paperwork if you want to use certain words in your Alabama LLC name, including bank, trust, trustee, incorporated, Inc., and corporation.
- If you want to see if a specific LLC name is available, you can run a business name search on the Business Entity Search page of the Alabama state website.
After choosing the perfect name for your new Alabama business, you can also secure a good domain name. A domain name is also helpful if you want a business email address @yourllc.com.We recommend using Namecheap to register your domain. They have great prices, fast service, and an easy-to-use website.
Step 2: Choose your Alabama Registered Agent
Before you form your LLC in Alabama, you’ll need to appoint a registered agent with a physical street address in the state of Alabama. This person or entity would be responsible for receiving essential documents on your behalf if anything happened that would require that sort of thing (lawsuits, etc.). You can name yourself as your Alabama registered agent, but that isn’t advisable because you would not be able to claim any anonymity.
What is a Registered Agent?
An Alabama registered agent is an individual or business entity that agrees to accept the service of process on behalf of a Limited Liability Company.
When you create a Limited Liability Company in Alabama, the State of Alabama requires that this registered agent be appointed for your LLC to become effective. The Alabama Secretary of State’s Office will not file your Certificate of Formation unless you designate a registered agent on your application form.
Who can be a Registered Agent in Alabama?
For a registered agent, you can select a person or an organization. The individual can be an Alabama resident, an Alabama corporation, or a non-Alabama corporation with a business presence in Alabama.
You can also use an Alabama registered agent service to appoint a registered agent and obtain a business address. Services such as Zenbusiness and Northwest Registered Agent offer this service as a feature of some of their packages when you register an Alabama company with them.
What does a Registered Agent in Alabama do?
A registered agent in Alabama is available during normal business hours to accept important documents and notices on behalf of your LLC. These can be official court papers such as lawsuits or service of process documents that will require the registered agent’s signature.
A registered agent is not responsible for the management of your Alabama LLC, nor are they required to do anything with the documents once they are received at their business address except for filing them under Alabama law.
Step 3: File your Alabama LLC Certificate of Formation
You’ve chosen your Alabama name and appointed a registered agent, and now it’s time to create your LLC and become a recognized legal entity.
Before filing, you will need to decide between a member-managed and manager-managed LLC. The members run a member-managed LLC, while a designated manager runs a manager-managed LLC.
To start an LLC in Alabama, you’ll need to file your Certificate of Formation with the Alabama Secretary of State, which can be done online. The online filing fee is $200, and a person must file this with authority to do so on behalf of the Alabama LLC.
File your Alabama LLC Certificate of Formation Online
You’ll need the following documents to submit your papers:
- The official name of your Alabama LLC
- A brief description of the purpose of your Alabama LLC
- Your Alabama LLC’s street address
- Your Alabama registered agent’s name and address
- The signature of your registered agent
- Your LLC’s authorized person’s signature
- Your return address
You can submit your Certificate of Formation through Alabama’s online business filing system.
File your Alabama LLC Certificate of Formation by Mail
If you choose not to file online, you can also mail your Certificate of Formation to the Secretary of State. The filing fee is $200 and a person must sign the formation documents with authority to do so on behalf of your Alabama LLC. It is also required to attach the Name Reservation certificate from the office of the Secretary of State if you choose to file by mail.
You’ll need the download the filing form and mail it.
Secretary of State
P.O. Box 5616 M
Montgomery, Alabama 36103-5616.
Step 4: Create your Alabama LLC Operating Agreement
After filing your Alabama LLC Certificate of Formation, you will want to create an Operating Agreement.
An operating agreement is an internal document that sets out the internal rules of your Alabama LLC. These rules address issues such as how LLC owners will spend the money, whether voting takes place within your business, what happens if someone wants to sell their interest in the company etc.
Alabama does not require an LLC to have an operating agreement, but it is recommended that you create one. An operating agreement ensures that all members know and understand their roles within the company. If they ever need to take legal action, they will show a court of law that the company functions as more than just an unincorporated association.
This operating agreement should be thorough but concise, outlining everything you want to include regarding the membership responsibilities of your Alabama LLC, so there are no misunderstandings down the line.
The operating agreement will also be necessary when you open a business bank account in Alabama.
Step 5: Get an EIN for your Alabama LLC
An EIN, or Employer Identification Number, is a unique number that the IRS issues to businesses for tax purposes. An EIN is like your business’s social security number. You can use it to file state or federal-level tax returns and financial statements with different government agencies or open a business bank account.
An EIN is required for several reasons. First, as mentioned above, it is needed to open a business bank account for your Alabama LLC. You will also need an EIN to hire employees, as it is used on employment tax forms. Finally, an EIN is often required when filing your business taxes.
After you receive your EIN, you will be informed of your Alabama LLC’s various tax classification options.
Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999
Applying for an EIN for your business is free of charge.
Alabama LLC Processing Time
Online filings are immediately approved for the state of Alabama to process your Certificate of Formation and approve your LLC.
If you choose to file by mail, the processing time is approximately 1-2 business days.
Alabama LLC Frequently Asked Questions
How much does it cost to start an LLC in Alabama?
The online filing fee is $200, and the mail filing fee is $200 in Alabama.
How do I set up an LLC in Alabama?
Step 1: Choose a name for your Alabama LLC
Step 2: Choose an Alabama Registered Agent
Step 3: File the Certificate of Formation
Step 4: Create an Operating Agreement
Step 5: Get an EIN
Is there an annual fee for LLC in Alabama?
The annual filing fee is $0 in the state of Alabama.
How long does it take to start an LLC in Alabama?
It takes 1-2 business days to start an LLC in Alabama when filing by mail and are immediately approved when filing online.