How to Start an LLC in Alabama: 2025 Guide

Using an LLC Formation Service

Online LLC services specialize in filing the required documents to form an LLC. Business owners who already have their hands complete with a small business may find that the small price tag that comes with hiring an LLC service is well worth it. Most packages offer features like guaranteed acceptance by the state, EIN application, registered agent service, and operating agreement drafting. Many services are customizable, and if you like to shop around for the best fit, there are several options. Northwest Registered Agent, Swyftfilings, and Bizee LLC services are the most popular options with the best ratings.

 

Starting a Limited Liability Company (LLC) in Alabama can be exciting for anyone looking to launch a new business. An LLC offers the liability protection of a corporation with the flexibility and simplicity of a partnership. If you’re in Alabama and considering forming an LLC, here’s a step-by-step guide to help you through the process.

Step 1: Choose a Business Name

The first step in creating your LLC is picking a unique name. Alabama has specific guidelines for naming your LLC, including the need for the name to be different from other businesses registered in the state.

Here are the guidelines you must follow: 

• It must be different from other business names already registered in the state.
• It can’t include restricted words or phrases (like implying it’s a bank unless it is one).
• It must end with “Limited Liability Company” or one of its abbreviations (LLC or LLC).

 

Step 2: Hire a Registered Agent

Like in other states, your LLC must have a registered agent in Alabama. A registered agent is a person or company that agrees to receive legal papers on behalf of your LLC, ensuring you get all important legal notices. The agent must have a physical address in Alabama and be available during business hours. You can act as your registered agent, choose someone you trust, or hire a professional service like Northwest Registered Agent, Swyftfilings, or Bizee.

Check out our blog: ‘Is a Registered Agent Necessary? Your Guide to Finding an Affordable Option‘

 

Step 3: File Your Certificate of Formation

Let’s make your Alabama LLC official by filing the Certificate of Formation. This document is crucial as it formally registers your LLC with the state of Alabama. Here’s what you need to include in your 

Certificate of Formation:

• LLC Name: Ensure you include the full legal name of your LLC, followed by “LLC” or “Limited Liability Company.”
• Mailing Address: If your business receives mail at a location different from its physical address, list that here.
• Registered Agent: Designate a registered agent who will handle official documents for your LLC. Include their full name, address, and contact information. They must formally agree to act as your registered agent.
• Management Structure: Indicate whether your LLC will be member-managed (by you and any other owners) or manager-managed. List the names and addresses of the members or managers. For privacy, you may use a P.O. box for addresses.
• Purpose: Provide a brief description of your business.
• LLC Organizer: Identify the person or entity completing and filing your work. This role is crucial for correctly setting up your LLC.
• Formation Date: Specify the date your LLC will officially begin. You can set this to the filing date or choose a date up to 90 days.
• Signature: After reviewing your Certificate of Formation for accuracy, sign and date the document. Ensure your registered agent has consented to their appointment.

How to Send Your Form

When you’re ready to establish your LLC in Alabama, filing your Certificate of Formation is crucial. This document officially registers your business with the state. Here’s how you can file your Certificate of Formation in Alabama:

• Online: For the quickest processing, file your Certificate of Formation online through the Alabama Secretary of State website. This platform offers an efficient way to submit your paperwork and payment securely.
• By Mail: If you prefer to file by mail, you can complete the Certificate of Formation and mail it with the appropriate fee. Ensure you include two copies of the form and a self-addressed stamped envelope for the return of your filed documents. Send everything to: Secretary of State, Business Services PO Box 5616 Montgomery, AL 36103
• In-Person: For those who wish to file in person, you can bring your completed Certificate of Formation to the Secretary of State’s office located at Secretary of State, Business Services 11 South Union Street, Suite 207 Montgomery, AL 36130 

Filing Fee

The filing fee for domestic LLCs is $200. This fee applies whether you file online, by mail, or in person. For foreign LLCs seeking authorization to operate in Alabama, the filing fee is $150.

Filing the Certificate of Formation is fundamental to establishing your LLC in Alabama. Before submitting your form, it is essential to review all information for accuracy and completeness.

 

Step 4: Making an Operating Agreement for Your Business

Let’s discuss setting up some ground rules for your business. This is where an Operating Agreement comes in. Think of it as a handbook that explains how your business runs. It’s important because it helps everyone understand their role and what’s expected in your LLC.

Here’s what an Operating Agreement usually includes:

• Ownership: This part talks about who owns what percentage of the business. 
• Member’s Rights and Responsibilities: Here, you’ll write down what each person in the LLC can and cannot do and what they’re responsible for. It’s like a job description for each member.
• Joining & Leaving: This section covers how new people can enter your business and what happens if someone decides to leave. It’s good to have this figured out so there are no surprises later.
• Dissolution: This might sound a bit gloomy, but it’s practical. It’s about how to close down the LLC if you ever need to. It includes the steps to take and how to handle everything when wrapping up the business.

Creating an Operating Agreement is a smart move. It keeps things clear and organized so everyone knows what to expect, and it can save you a lot of time. 

 

Step 5: Getting Your EIN from the IRS

Your business needs a number called an EIN from the IRS. It’s like an ID number for your business. This number will help you as an identification number when getting bank accounts and credit accounts, filing taxes, and hiring employees.

It’s free, and you can get it from the IRS website at https://www.irs.gov/businesses/small. 

 

Alabama LLC: Permits, Licenses, Tax Requirements, and Annual Reporting

After forming your Limited Liability Company (LLC) in Alabama, navigating the state’s regulatory framework is crucial to ensure your business’s compliance and success. This encompasses obtaining the required permits and licenses, managing tax responsibilities, and fulfilling annual reporting obligations. Here’s what you need to know for your Alabama LLC.

Obtain Any Additional Permits and Licenses

Depending on the nature of your business and its location, your LLC may need specific permits and licenses.

Local Business Licenses

• Overview: Various municipalities in Alabama require businesses to obtain local business licenses.
• How to Obtain: Contact your city or county clerk’s office or visit their website to understand your area’s licensing requirements and application processes.

Professional Licenses

• Overview: Certain professional services in Alabama may require state-issued licenses.
• How to Obtain: The Alabama Department of Labor provides resources and guidelines for obtaining professional licenses. Check their website for detailed information on licensing requirements for your specific profession.

Health Permits

• Overview: If your business involves food, healthcare, or beauty services, you might need health permits to guarantee public safety.
• How to Obtain: These permits are generally issued by the Alabama Department of Public Health. Visit their website or contact your local health department for specific requirements and application procedures.

 

Tax Requirements in Alabama

Properly managing your LLC’s tax obligations is essential for compliance and the financial health of your business.

Employer Taxes

If you plan to hire employees, you will need to:

• Register for Unemployment Insurance Tax through The Alabama Department of Labor.
• Register for Employee Withholding Tax through The Alabama Department of Revenue.

State Taxes

• Pass-Through Taxation: LLCs in Alabama operate similarly to those in other states. They are typically treated as pass-through entities for federal tax purposes, meaning the business doesn’t pay income taxes. Instead, profits and losses are passed through to individual members’ tax returns. However, depending on your LLC’s earnings, you may be subject to certain state taxes.
• Sales Tax: If you own an LLC and sell physical products or specific services, you must register for a Sales Tax License with The Alabama Department of Revenue.
• EIN: If you own an LLC and sell physical products or specific services, you must register for a Sales Tax License with The Alabama Department of Revenue.

 

Annual Reporting in Alabama

Your LLC must comply with annual reporting requirements to maintain good standing with the state.

• Filing Requirements: Unlike some states, Alabama LLCs are not required to file an annual report with the Secretary of State. However, you must file an Annual Business Privilege Tax Return with the Alabama Department of Revenue.
• Fees and Filing: The Business Privilege Tax is calculated based on your LLC’s federal taxable income apportioned to Alabama. The Alabama Department of Revenue’s website provides more information and allows you to file a tax return.

By following these permits, licenses, tax obligations, and reporting guidelines, your Alabama LLC will be positioned for successful operations and state compliance. For more information and updates on regulations affecting Alabama LLCs, visit the official Alabama Secretary of State website and the Alabama Department of Revenue website. 

 

New 2025 BOI Reporting Update

Effective March 26, 2025

Big update for business owners: As of March 26, 2025, U.S.-based companies no longer need to file a BOI report. This is a major change from the 2024 rules. If you run a domestic LLC, corporation, or similar entity inside the U.S., you’re no longer required to file Beneficial Ownership Information reports unless you’re registered as a foreign entity. Here’s what you need to know now:

First Report Deadlines:

• U.S.-Based Entities: If your company is formed and based in the U.S., you’re now exempt—no deadline, no filing.
• Foreign Entities Registered Before March 26, 2025: You must file your first BOI report by April 25, 2025.
• Foreign Entities Registered On or After March 26, 2025: You have 30 days from the date your business is registered in the U.S. to file your BOI report.

Who Needs to Report:

• Domestic Reporting Companies: No longer required to report as of March 26, 2025.
• Foreign Reporting Companies: If your company is formed outside the U.S. but registered to do business here, you still need to report.

Exceptions to Reporting:

Some foreign companies may be exempt. You’ll want to check the latest rules under 31 CFR § 1010.380(c)(2) and the official Small Entity Compliance Guide from FinCEN to confirm.

What Must Be Reported:

The report focuses on transparency. If you’re a foreign company that needs to file, you must report:

• Your company’s legal name, any trade names, and its business address.
• The jurisdiction where it was formed and its U.S. registration details.
• The full name, date of birth, home address, and ID number (plus an image of the ID) of each person who owns or controls the business.

When Must Reporting Companies File Reports:

• Foreign companies formed before March 26, 2025: File by April 25, 2025.
• Foreign companies formed after March 26, 2025: File within 30 days of registration.

Filing Reports & Noncompliance Penalties

• Where to File: All BOI reports must be submitted electronically through FinCEN’s official portal.
• Cost: Filing is free.
• Accuracy: You’re required to certify that the information is true and correct. Double-check your report before hitting submit.
• Penalties for Noncompliance:
  • Up to $10,000 in fines
  • Up to 2 years in prison if you knowingly provide false information or skip the filing.
• Safe Harbor Rule: If you realize you made a mistake in your report, you get 90 days to file a corrected version without penalty.
  

If you need help filing, you can use a third-party service or visit the official FinCEN website for full guidance.

Starting an LLC in Alabama involves a series of straightforward steps. From choosing a unique business name to filing your initial report and managing your finances, each step is designed to help establish your business on a solid foundation. This guide lets you easily navigate the process, setting your LLC up for success. If you need help, services like Northwest Registered Agent, Swiftfiling, or Bizee exist. They can handle any legal details your LLC requires, like getting your EIN and sorting out your operating agreement.