If you own a business that was created in a state other than Alabama, you will need to qualify or register that business in Alabama if you want to do business there. Here is an overview of the rules on how to qualify your foreign (non-Alabama) limited liability company (LLC) to do business in Alabama.
Note: Unlike other states, Alabama does not have laws specifically for registering foreign LLCs. Instead, Alabama has a set of laws that cover registration of foreign businesses generally. Alabama law refers to these businesses collectively as foreign entities.
For Alabama purposes, if your LLC is formed in another state, then it is known as a foreign LLC in Alabama. In other words, foreign doesn't mean from another country. Instead, it means your business was organized under the laws of another state. A domestic LLC, on the other hand, is one that is formed in the state where it is doing business. This is common usage throughout the United States. For example, an LLC formed in Indiana is a foreign LLC in Illinois.
According to Alabama foreign entities laws, you are required to register your foreign LLC with the state of Alabama if you are "transacting business" in Alabama. What does this mean? Well, like most states, Alabama law does not specifically define the phrase "transacting business" in relation to foreign registrations.
However, state laws governing when foreign companies must collect state sales tax in their state provide some guidance on the issue. Under these laws, a business must have a physical presence in—or nexus with—the state in order to be required to collect state sales tax on sales to that state's residents. Generally speaking, physical presence and nexus are synonymous, and mean having:
Certain exceptions may apply and the rules can get more complicated with things like Internet sales. Nevertheless, in general, if you have an office, a store, a warehouse, or employees in another state, you will need to qualify your LLC as a foreign company in that state. For more details, including some possible distinctions between physical presence and nexus, check Nolo's articles on Internet Sales Tax: A 50-State Guide to State Laws. You may also find some guidance from the Alabama Department of Revenue webpage on business tax filing requirements.
As a rule, certain activities do not constitute transacting business in a state. However, unlike other states, Alabama's business entity laws do not list any exempt activities. In most other states, the following activities are specifically listed as exempt:
If your LLC's only activity in Alabama is one or more of the listed items, you probably will not need to register with the state. However, because Alabama law does not specifically list any exempt activities, you should check with a local business attorney for additional guidance.
To register your business in Alabama, you must file a Foreign Limited Liability Company (LLC) Application for Registrationwith the Alabama Secretary of State (SOS). You can download a copy of the application form from the SOS website.
To complete the application, you must provide more or less the same information that you need to create an LLC in your home state. More specifically, for an Alabama application for registration, you need to provide:
You can file by mail or online. The basic filing fee is $150.
If your LLC does business in Alabama without being registered, it cannot bring a lawsuit in any of the state's courts. In addition, the LLC may be subject to late filing fees and an action brought by the state to restrain it from doing business in Alabama. However, not being registered does not invalidate your LLC's contracts or prevent your LLC from defending a lawsuit in Alabama. Also, the limitation on the personal liability of a member of the LLC is not waived solely because the company did business in Alabama without being registered.
If your business is organized as a corporation rather than an LLC, the rules and requirements for foreign qualification in Alabama are essentially the same. See the Alabama Secretary of State website for forms, information, and filing instructions for registering a foreign corporation in Alabama.