Frequently asked questions about starting and running an LLC, or limited liability company.
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 start an LLC in Alabama. For more information on how to form an LLC in any state, see How to Form an LLC.
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 mail a Name Reservation Request Form for Domestic Entities form to the Alabama Secretary of State's office, along with a $25 fee.
Your LLC's name must be distinguishable from the names of other business entities already on file with the Alabama Secretary of State. Before submitting the form, you should search the Alabama Secretary of State's business name database to be sure the proposed name is available.
Under Alabama law, an LLC's name must contain the words:
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.
You don't have to use your LLC's official legal name registered in your Articles of Organization when you do business out in the real world. Instead, you can use a trade name, also called a "DBA" (short for doing business as), assumed name, or fictitious business name. To do so in Alabama, you simply start using the trade name to identify your LLC in the state. You may also file an Application to Register Trade Name In Alabama with the Secretary of State by mail and pay a $30 fee. Registration is not mandatory and does not provide any legal rights, but does alert others the name is in use in Alabama.
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 someone sues the company. The agent should agree to accept service of process on behalf of the limited liability company prior to designation. The registered agent may be:
The Secretary of State has a link to a list of Alabama registered agents here.
You can create an Alabama LLC by filing a Certificate of Formation 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 sends 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:
You must attach a copy of the Name Reservation certificate from the Secretary of State.
The filing fee is $200 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 recommended. This is an internal document that establishes how you will run your LLC. 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. All LLCs must pay a minimum $100 tax each year. For details and tax forms, see the Alabama Department of Revenue website.
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). If you form a one-member LLC, you must obtain an EIN if your LLC is required to file a separate tax return. 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: