A limited liability company (LLC for short) is a way to legally structure a business. It combines the limited liability of a corporation with the flexibility and lack of formalities provided by a partnership or sole proprietorship. Any business owner who seeks to limit his or her personal liability for business debts and lawsuits should consider forming an LLC.
Here are the steps you need to take to form an LLC in Alabama. For more information on how to form an LLC in any state, see Nolo's article How to Form an LLC.
Under Alabama law, an LLC’s name must contain the words “Limited Liability Company” or the abbreviations “LLC” or “L.L.C.” Your LLC’s name may not contain a word or phrase which indicates or implies that it is organized for a purpose not contained in its articles of organization.
Your LLC’s name must be distinguishable from the names of other business entities already on file with the Alabama Secretary of State. You must reserve your LLC's name with the Secretary of State before filing your LLC formation documents. You may do so online for a $28 fee. Your proposed name will be automatically checked for availability and you'll receive your name reservation immediately at the end of the process. Alternatively, you can submit a Name Reservation Request Form for Domestic Entities form by postal mail to the Alabama Secretary of State’s office. This requires payment of a $10 fee. Before submitting the form, you should search the Alabama Secretary of State’s business name database to be sure the proposed name is available.
Every Alabama LLC must have an agent for service of process in the state. This is an individual or corporation that agrees to accept legal papers on the LLC’s behalf if it is sued. The agent should agree to accept service of process on behalf of the limited liability company prior to designation. The registered agent may be (1) an individual residing in Alabama, (2) an Alabama business entity, or (3) an out-of-state business entity with an office in Alabama. The Secretary of State has a link to a list of Alabama registered agents here.
An Alabama LLC is created by filing a Certificate of Formation. Unlike most other states, the certificate is not filed with the Secretary of State. Instead, you must file it by postal mail with the Office of the Judge of Probate in the county where the LLC’s initial registered office is located. The Probate Court files the form and provides you with a stamped copy. The court then transmits the certificate to the secretary of state along with your fee. A list of the names and addresses of the probate judges for every Alabama county can be found at the Alabama Secretary of State website.
The certificate of formation must include the following information:
A copy of the Name Reservation certificate from the Secretary of State must be attached.
The filing fee is $100 to the Secretary of State plus a separate Probate Court filing fee which is at least $50.
An LLC operating agreement is not required in Alabama, but is highly advisable. This is an internal document that establishes how your LLC will be run. It sets out the rights and responsibilities of the members and managers, including how the LLC will be managed. It can also help preserve your limited liability by showing that your LLC is truly a separate business entity. In the absence of an operating agreement, state LLC law will govern how your LLC operates.
Alabama requires LLCs to file a combined Business Privilege Tax Return and Annual Report with the Department of Revenue each year. The initial report (Form BPT-IN) is due two and one-half months after your LLC is formed. Subsequent reports (Form PPT) are due on or before three and one-half months after the beginning of the LLC’s taxable year. A minimum $100 tax must be paid each year. For details and tax forms, see the Alabama Department of Revenue website.
In some cases, for example if you will be selling goods and collecting sales tax or if you have employees, you’ll need to register with the Alabama Department of Revenue (DOR). You can register online (via the My Alabama Taxes (MAT) website) or on paper (using DOR Form COM:101, Combined Registration/Application).
For more information on Alabama LLC tax registration and annual reports, see Nolo's article LLC Annual Filing Requirements in Alabama.
Additional tax and regulatory requirements may apply to your LLC. These may include:
EIN: If your LLC has more than one member, it must obtain its own IRS Employer Identification Number (EIN). This is so even if it has no employees. If you form a one-member LLC, you must obtain an EIN for it only if you elect to have it taxed as a corporation instead of a sole proprietorship (disregarded entity). You may obtain an EIN by completing an online EIN application on the IRS website. There is no filing fee.
Business Licenses: Depending on its type of business and where it is located, your LLC may need to obtain other local and state business licenses. Check with the county probate office or county licensing commission for the county where your LLC office is located.
LLC Records: An Alabama LLC must keep the following records in its principal office and make them available for inspection by LLC members:
Under Alabama law, LLCs can be formed to provide professional services. However, only one specific type of service may be provided and all the owners of the LLC must be licensed or registered to perform the professional service for which the LLC was organized.
All LLCs organized outside of Alabama must register with the Alabama Secretary of State to do business in Alabama. Foreign LLCs must appoint a registered agent for service of process physically located in Alabama. You may register online for a $260 fee. You may also register by postal mail for a $150 fee by filing two original copies of the Foreign Limited Liability Company Application for Registration with the Business Entities Division of the Secretary of State. You must obtain a Certificate of Name Reservation prior to filing the Application for Registration. You may obtain the Certificate online.
Mail the fee, Certificate, and Application to:Alabama Secretary of StateAttention: Business Entities DivisionP.O. Box 5616Montgomery, Alabama 36103