Form Your US Company in Alabama
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An LLC (Limited Liability Company) is one of the most popular business structures in the US and around the world because it offers the owner(s) personal legal protection in the event of the company getting sued.
If you live and/or plan to operate in Alabama, you’ll need an Alabama LLC. Below, we’ll guide you step-by-step through how to start an Alabama LLC so the process is as easy as possible for you.
How to Start an Alabama LLC
Step 1: Choose Your LLC’s Name
Before you can start filing any forms, you need to make sure you have a name ready to use for your LLC. Your LLC’s name cannot already be in use by another company in Alabama, so you need to do a search to check that your desired LLC name is available.
Keep in mind that your chosen name must include a designator at the end, identifying it as an LLC. For example, instead of registering your name as “Golden Golf”, you would register it as “Golden Golf LLC.” The designators you can choose from are:
- LLC (this is the most popular option)
- Limited Liability Company
(Note that you can add a comma before “LLC” if desired.)
Your name also cannot include any abbreviations that would make it look affiliated with a government agency (such as CIA, IRA, or State Department). You may also need additional information if you want to use a protected term such as “lawyer” or “bank” in your name.
While you want to get a good name, don’t panic if you aren’t completely sure what name you want to use in your branding. You can register a “trading as” name later, if necessary. If you’re determined to have all of your business assets under one name, make sure to check the domain (website address) availability of the name you want, too.
To find out if your LLC name is available, click here. If it’s taken, brainstorm some other options until you find one that’s available.
Step 2: Reserve Your Business Name
This step is a little bit of a misnomer because you don’t actually need to do this step until step 4 if you’re actively forming your LLC now, but since it’s related to your business name, we’ll talk about it here.
Alabama is the only state that requires you to file a Name Reservation by mail or online before you can get your Certificate of Formation. Until 2021, this was an entirely separate step you had to file separately, but now you can do both online and your name reservation is instant.
This step costs $28 ($25 if you mail in your name reservation – you can find the form you need here, but note it can take 1-3 weeks to get your name reserved) and you can still do this separately from your company formation. Your name reservation lasts for one year and you can renew it if you want to continue holding it without officially forming your company.
To reserve your business name online, click here.
Step 3: Choose a Registered Agent
A registered agent is someone (or a company) who is responsible for receiving “Service of Process” on behalf of your Alabama LLC. “Service of Process” are legal documents such as tax notices and mail you hope not to receive, such as a subpoena.
The Registered Agent is required to have a physical address in Alabama and needs to be available to receive mail during normal business hours (9 AM – 5 PM, Monday to Friday). If you live and work in Alabama, this person can be you. You can also elect a friend or family member.
If you can’t commit to being your own registered agent, you can pay another company to be your registered agent. A Commercial Registered Agent is a cost-effective way to receive your mail and meet the Registered Agent requirements (costs around $15 per month for basic services).
(If you’re not sure whether or not you should be your own registered agent, see our guide here.)
Most Commercial Registered Agents will forward or scan your mail and email it to you as a part of their basic fee. Another benefit of having a commercial Registered Agent is it provides you with more privacy because the address of your Registered Agent will be available on public records.
Step 4: File Your Certificate of Formation
This is the big one! This is the step where you form your business and get your official Certificate of Formation (called “Articles of Organization” in other states). You can complete this step by mail (you can find the form you need to do that here), but formation will be easiest (and instantaneous) if you complete it online.
Filing a domestic LLC in Alabama costs $200, and you can pay online (or by check if you’re mailing in your form). The information you’ll need to file is:
- Your contact information
- The name of your LLC
- The name and contact information of your registered agent (whether that be you, a friend, or a company)
- Principle address (this is your base of operations, whether it be a rented office or your own home)
- Knowledge of whether your LLC is a series LLC (will serve as an “umbrella” company for smaller companies), professional LLC (designed for professionals such as lawyers and doctors), non-profit LLC (a charity), or not – most will not be, and so when the form asks you, do not tick any boxes
- Whether your LLC is member-managed or not (if you are managing it as an owner, and thus a member, it is member-managed)
- An “Effective From” date if you do not want your company to be able to start trading immediately (or enter the current date)
- Your business purpose – this is just a simple statement that gives a general overview of what your company will do (for example: The purpose of Purple Please LLC is to provide hair salons with hair care products.)
Once you’ve completed the online form, your company will receive its Certificate of Formation. This is usually automatically generated for you and made available to download. Once you’ve got your Certificate of Formation, you can move on to the other steps in this guide. (Note that all files expire after 15 days, so make sure you download them and save them to the cloud!)
To start the formation of your Alabama LLC online, click here.
Filing a foreign LLC in Alabama follows a very similar process, and costs $150. To start forming a foreign LLC in Alabama, click here.
Step 5: Create Your Operating Agreement
An operating agreement is not a legal requirement by the state, but it is a good idea to have one for your LLC and is essential if there’s more than one member (AKA owner) of your LLC. An Operating Agreement is an “internal” document, which means you don’t need to share it with anyone outside the LLC.
An Operating Agreement is a document that outlines the duties, rights, and obligations of the LLC’s owners, called “members”. It should include:
- The LLC’s name and main address
- Name and address of the registered agent
- The names of your members and their roles
- details about how much money each member of the LLC invested in the company
- how the ownership of the LLC is distributed
- how taxes will be paid
- How profits and losses will be handled and divided
- The duration of the LLC if there will be a predetermined end
- The purpose of the business
- Procedures for onboarding new members
- Procedures for members leaving the company
- Any meeting schedules and voting rights and procedures
- and anything else that needs to be put down in writing to prevent problems later.
Step 6: Get Your EIN Number
With your formation complete, it’s time to register for your Federal Tax ID number, otherwise known as your EIN. Your EIN is essentially your business’s social security number.
Your EIN will allow you to open a business bank account, apply for licenses and permits, and handle payroll.
To apply for your EIN, click here.
When you complete the application, you’ll receive your EIN instantly. (Helpful note: if you aren’t a US resident, write “Foreign” on line 7b where it asks you for your SSN/ITIN/EIN.)
Alternatively, you can apply by mailing in Form SS-4, but it can take 4 weeks for you to receive your EIN.
Step 7: Annual Report and Business Privilege Tax Return
Don’t skip this step if you’re forming your business now! While the Annual Report and Business Privilege Tax Return are yearly requirements, you need to file an Initial Business Privilege Tax Return within the first 2 months and 2 weeks of your company’s formation.
You’ll then be required to file both each year before the end of the fiscal year, which is April 15 unless there are unusual circumstances that mean they extend the date.
Don’t forget to register for the taxes you need to pay – you can register your LLC with the Alabama Department of Revenue here.
Step 8: Apply for Necessary Licenses and Permits
One of the final steps you need to take before you start trading is to apply for any licenses and/or permits your business needs. The most common requirements are:
- Business Privilege License – you need this to do business in the county you live in
- Store License – you need this if you are a business that buys and sells physical products
- Municipal Business License – this is necessary if you’re operating in a regulated industry
For more information or to file for a necessary license, follow the links below:
Step 9: Get Your Business Bank Account
As an LLC, you’ll need to have a separate business bank account. While it’s not a legal requirement in the US, it is essential, even if you’re the only person owning and operating the business. A business bank account will allow you to avoid mixing up your personal and business assets, which can leave them more vulnerable if you were to get into legal trouble. Wasn’t protecting your assets the reason you chose an LLC in the first place?
Instead, use your newly acquired business and EIN to create a new business bank account so you can keep your business and personal finances separate.
Step 10: Keep Essential Documents On-Site
If you’re the only member of your LLC, this step won’t take much thought, but you need to be aware that it is a legal requirement to keep the following documents at your business’s registered office:
- An up-to-date list of names and addresses of the LLCs members
- A copy of the Certificate of Formation and any amendments and actions
- An up-to-date copy of the Operating Agreement
- Any recent financial statements
With all 10 steps completed, your business is formed and you’re ready to start trading!
Let Us Do the Hard Work For You
While this process may be straightforward, it certainly is time-consuming! It requires a lot of ticking boxes and filling in forms, and if you’re not certain about what information you should put where, it can take you hours or even days that can be better spent in those early startup days ensuring your services, products, and marketing is ready to go.
The good news is that forming LLCs and corporations is what we do all day every day – if you’d rather do the exciting tasks involved in setting up your new business and avoid form-filling at all costs, we’ll do it for you. Just spend a few minutes filling in this short form and we’ll handle everything for you, registering your LLC name, filing for your Certificate of Formation, and even acquiring your EIN for you.
Why not start your new business feeling like a CEO instead of a secretary? To get started, click here.