Before we get into this guide on how to start an LLC in Alabama, it’s important to know you can use a professional service like Northwest Registered Agent or Tailor Brands. Both of them will incorporate your business for $39 + state filing fees.
I will take you through each step but remember as you’re looking to setup an Alabama LLC, it will be important that you take the right steps to setup your Limited Liability Company.
If you’re looking to setup an LLC in Alabama, I’m sure you’re looking for business ideas too. I love thinking about what the top business ideas could be before we go straight into the steps it takes to setup an Alabama LLC.
Alabama is known for:
- College Football
- Southern Hospitality
- Gulf Coast Beaches
If I were to pick one Alabama LLC to start, I’d go with selling peanuts at college football games. We could call it Bam Nuts LLC! I don’t know if that already exists but if not – you should do it. You could make it a food truck or just a straight up business selling to everyone drinking their beer at the tailgate.
Alright, let’s get into what you need to do for setting up a business name and make sure you’re getting business advice delivered straight to ya without feeling like you’re not getting what you need.
Name Your Alabama LLC
There are specific Alabama LLC naming rules you’ll need to follow for the Alabama Secretary of State that you’ll want to look up and follow.
The rules are:
- Your name must include “Limited Liability Company,” “L.L.C.” or “LLC.”
- You can’t use words that could confuse your LLC with a government agency (FBI, Treasury, State Department, etc.)
- You can’t use words that imply a purpose not allowed by your formation documents (e.g. “Olympic,” “Banking,” or “Insurance”).
- You can’t use profane words or phrases.
- Your name must be distinguishable from other business names already on file with the Secretary of State.
- You may reserve a name for 120 days by filing an Application for Reservation of Name with the Business Services Division.
Once you understand the rules, you’ll want to go do a name search with the Alabama Department that handles this which is the Alabama Secretary of State’s office.
Here is the search portal that you can use:
If you need help with the business entities division, I would contact them directly and make sure you’re following Alabama Law to setup your Alabama Limited Liability Company correctly.
Once you’ve gotten your business name and the name reservation certificate if you decide to hold it for the 120 days you’re able to.
It’s also important that if you’re going to be one of the LLC owners and you plan on having multiple LLC members, please make sure you’re all on the same page for the business name.
After you get the right business structure figured out with your LLC members, you should also make sure you can lock down the digital version (a website) from GoDaddy or wherever you get your domains from.
As a business owner, you’re going to want to keep your LLC name similar if not the same as a .com if you can. A great deal of decisions are made online now and if your Alabama LLC online name is the same as your LLC name with the Alabama Secretary of State – you’re going to be extremely happy.
Once you’ve feeling good about Alabama LLCs and this being one for you – it’s time to move on to consider a registered agent service.
Choose your registered agent
An Alabama registered agent is a must. You can either be your own LLC registered agent or you can choose a professional service.
As an LLC owner myself, I’ve used both and I can tell you that the pros of using a professional service like Northwest Registered Agent is worth every penny when you factor in the time it saves you. They give you the first registered agent year for free with your LLC formation. It’s a must do as you start to get your business figured out.
If you decide to find a registered agent on your own, there are some rules you need to follow which are:
- The individual must reside in Alabama.
- The individual must maintain a business address in Alabama where legal documents can be received during normal business hours.
- The individual must be available at the listed business address during normal business hours to receive service of process and other legal documents on behalf of the LLC.
- An out-of-state business entity may not act as the LLC’s registered agent.
So if you choose an Alabama registered agent, they must have a physical address in Alabama where legal documents can be served and received during business hours. If you live outside of Alabama, you’re not allowed to choose yourself as the LLC registered agent in Alabama unfortunately.
You can also look for a local law firm who can help you with this too. There are Alabama law firms that offer their own registered agent services but you’ll want to make sure that’s the right option for you. As I said, I’d highly recommend using a professional service that’s going to include this in the initial LLC formation.
You’re almost at the finish line but before you can officially start your LLC, you’ll need to file your Articles of Organization with the Alabama Secretary of State.
Prepare and File Articles of Organization
The form for filing your LLC’s Articles of Organization is available on the Alabama SOS website.
Here is a direct link to the form you need to file:
You’ll want to have the following information ready before you start filling out the form:
- The name of your LLC and whether it’s going to end in “LLC” or “L.L.C.”
- The name and address of your Alabama registered agent.
- The LLC members names and addresses.
- The effective date of the Articles of Organization.
- Your signature as the organizer of the LLC.
The filing fee for the Articles of Organization is $100 and you have the option of filing online, by mail, or in person.
If you file online, you’ll need to create an account with the Alabama Business Filings website first and then you can log in and complete the filing.
To file by mail, you’ll need to print out the Articles of Organization form, fill it out completely, and then mail it to the address below with a check or money order for the $100 filing fee made out to “Probate Judge.”
To file in person, you can bring the completed form and filing fee to the following address:
Place 1, Room G-15
1 Court Square
Montgomery, AL 36104
Once your Articles of Organization are filed and accepted, you’ll receive an official Certificate of Formation that you can use as proof that your LLC exists in the state of Alabama.
Congratulations – you’ve now officially started your Alabama LLC!
Before you can get moving and starting to sell and collect sales tax, you’re going to need to get an LLC operating agreement setup.
Create an operating agreement
While an operating agreement isn’t required in Alabama, it’s still a good idea to have one. It’s basically a contract between the members of your LLC that outlines how the business is going to be run and how decisions are going to be made.
If you form your LLC with my recommended service, they provide you with a customizable LLC operating agreement that you can fill out and sign online. They filing it away for you and then send it to you if you ever need it for your records.
If you form your LLC on your own or with another service, I recommend using an online legal service like Northwest Registered Agent to create and customize your LLC operating agreement.
The operating agreement is one of the most important legal documents you’re going to put together. If you put personal assets into this Alabama LLC and you’re thinking about what that means between your business partners – you’ll need this document. If you have more than one member please use an operating agreement to get on the same page about the business.
Typically you’re going to find the following pieces of information in an operating agreement:
- The names and addresses of the members of the LLC
- The date when the operating agreement was signed
- Percentage ownership of each member
- Voting rights of each member
- Profit and loss allocations
- Indemnification and liability protections for members
- Member restrictions ( what they can and can’t do )
- Decision making process
- How new members can be added to the LLC
- What happens when a member wants to leave the LLC
Get an EIN
The next thing you’ll need to do is get a Federal Employer Identification Number (EIN) for your Alabama LLC. This is a nine digit number that the IRS uses to identify your business. You can apply for it online, by mail, or by fax.
If you have more than one member in your LLC, you’ll need to file for a partnership EIN. If you only have one member, then you can apply for a sole proprietor EIN.
Applying for an EIN is free and it only takes a few minutes to do it online. All you have to do is go the IRS website and fill out the online application.
To apply for an EIN by mail or fax, you’ll need to print out and fill out Form SS-4. Once it’s complete, you can fax it to the number listed on the form or mail it to the address below:
Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999
You should receive your EIN in about four weeks if you apply by mail or fax.
If you need it sooner than that, you can always call the IRS at 800-829-4933 and they will give it to you over the phone. Just have your Articles of Incorporation or Organization handy when you call.
This is one of the more important steps of the LLC formation process because it will allow you to start thinking about how you’re going to track your business expenses, hire a business accountant and if you’re going to have state taxes to track.
Open A Business Bank Account
Once you have your Federal Tax Identification Number, you can get a bank account setup and I like using Novo.co because it makes it easy to setup a virtual debit card to start paying for business expenses.
It will also easily connect with any system to help you track Alabama sales tax so you can be clear about how to pay income tax.
Get Small Business Insurance
Depending on the industry you’re in, you may need to get some form of small business insurance to protect your LLC. This could be general liability insurance, product liability insurance, or professional liability insurance.
The best way to find out if you need business insurance is to speak with a licensed insurance agent in your area. They’ll be able to help you understand what type of insurance you need and how much it will cost you.
There are a lot of different ways to get small business insurance and the best way to find out is to speak with a licensed insurance agent in your area. They’ll be able to help you understand what type of insurance you need and how much it will cost you.
One of the better insurance solutions is to go to commercialinsurance.net and they will help you get what you need. It’s a great place and you’ll be ready to go when you call or contact them.
Get a Business License
The final step in starting your LLC is to get a business license from the state of Alabama. This is a simple process and you can do it online, by mail, or in person.
To apply for a business license online, you’ll need to go the Business License Center on the Alabama Department of Revenue website. Once you’re there, you’ll need to create an account and then follow the instructions to apply for your license.
If you prefer to apply by mail or in person, you can download the Business License Application from the Alabama Department of Revenue website. Once you have it, you can either mail it to the address below or hand deliver it to the address below:
Business License Division
P.O. Box 327100
Montgomery, AL 36132-7100
You should receive your business license within four to six weeks if you apply by mail or in person.
If you need it sooner than that, you can always call the Business License Division at 334-242-1170 and they will expedite the process for you.
Congratulations! You’ve now completed all the steps to start your LLC in Alabama.
File an Annual Report
There is one final step to keep your LLC in good standing and that’s filing an annual report. The annual report is due on the anniversary of your LLC’s formation date and it’s simply a way for the state to update their records and make sure you’re still in business.
To file your annual report, you’ll need to go the Business License Center on the Alabama Department of Revenue website. Once you’re there, you’ll need to login to your account and follow the instructions to file your report.
Or, you can download the Annual Report Form from the Department of Revenue website and then mail it or hand deliver it to the address below:
Business License Division
P.O. Box 327100
Montgomery, AL 36132-7100
The annual report is due by the end of your LLC’s formation month and there is a $50 fee to file it.
If you file it late, there is a $100 late fee. So, be sure to mark the date on your calendar and file it on time!
And that’s it! You’ve now completed all the steps to start and maintain your LLC in Alabama. Congratulations and best of luck in your new venture!
Pay Annual Taxes
The state of Alabama requires all LLCs to pay an annual tax of $100. The tax is due on the anniversary of your LLC’s formation date and it’s simply a way for the state to update their records and make sure you’re still in business.
To pay your annual tax, you’ll need to go the Business License Center on the Alabama Department of Revenue website. Once you’re there, you’ll need to login to your account and follow the instructions to pay your tax.
Or, you can download the Annual Tax Form from the Department of Revenue website and then mail it or hand deliver it to the address below:
Business License Division
P.O. Box 327100
Montgomery, AL 36132-7100
The annual tax is due by the end of your LLC’s formation month and there is a $100 fee to file it.
If you file it late, there is a $200 late fee. So, be sure to mark the date on your calendar and file it on time!