How to Get an LLC in Alabama
Over the past few years, the state of Alabama has grown into a national leader in
manufacturing and industry due to its
abundance of available resources. The state continues to enjoy a significant upward trend of
growth in new business
ventures and has emerged as the industrial hub in the south.
The fastest and easiest way to start a business in Alabama can be an Alabama LLC. Setting up
your LLC in Alabama seems
complicated but trust us, it isn’t. However, it does require the right amount of
preparation. This guide will help you
How to set up an LLC in Alabama in 2023.
Why I should start an LLC in Alabama
If you are looking to establish your business, registering an LLC in Alabama can be a smart
move as it can help you in
protecting yourself and your business from personal liability and debts. The state also
offers additional advantages for
LLCs, including low sales and income tax rates, affordable utilities, low cost of living,
and a wide variety of tax
incentives. Alabama also makes it easy to form an LLC by offering online filing and low
filing fees.
Benefits of Starting an LLC in Alabama
Learn more about the advantages of starting an LLC.
How to start an LLC in Alabama yourself in 6 steps
Choose a unique name business name for your LLC
First things first – before you set up your LLC in Alabama, you should choose a unique business name that is currently not being used by any other company or business in the state. If you already have a name in mind, you will need to check if this name is still available. Don’t worry; you can easily check it and register your name online by heading to the Alabama Business Services website.
Pro tip: Don’t forget to add the term LLC at the end of your business name.
Let’s Get Started
It is advised that you should always come up with a name that does your business justice. Your unique business name should tell the story of your company. The name should instantly convey the message behind your business to its stakeholders. The name of your company should be catchy, simple, and easy to remember.
Having trouble finding the best name for your business? We’ve got you covered! Try our business name generator tool.
Provide an Official Address for Your LLC
After you finalize a name for your business, the next most crucial requirement in registering your LLC in Alabama is a designated street address. This physical location serves as the foundation for your business operations, signaling your presence to clients, partners, and the state itself. However, the Alabama Secretary of State demands more than a mere P.O. box; it necessitates an authentic street address, either within or outside the state.
By securing a legitimate street address for your Alabama LLC, you showcase a commitment to professionalism and credibility. It establishes a tangible connection between your business and its surroundings, instilling confidence in those who engage with your services. Additionally, it acts as a central point for potential customers to locate and reach out to your business, boosting your visibility and accessibility.
Choose a Registered Agent
Moving ahead – it’s time to choose a registered agent for your company. This person receives official legal and tax correspondence and has responsibility for filing reports with the Alabama Secretary of State. Additional responsibilities of a registered agent include sending and receiving important legal information to the state, local or federal government on behalf of your business. You can choose yourself or someone that you trust, such as your partner or one of your first employees.
This is an official position that can be filled by you, another trusted manager, or a partner in the business or you can also opt for a dedicated Registered Agent Service. It is necessary that your Alabama Registered Agent must be residing at a physical street address in Alabama and be around during business hours to receive important documents for your company. In Alabama, you designate your Registered Agent when you formally create your business and file your Certificate of Formation.
Keep in mind: Registered Agent must be a resident in the state or associated with a
business that is licensed to do business in Alabama – According to Alabama State Law.
Let’s Get Started
File Certificate of Formation with the Alabama
Secretary of State
To make your LLC an official business entity, it is necessary to file the
Certificate of Formation with the state of
Alabama. It is a formal document that provides the state with specific
information about your LLC so the state and
public can identify you and ensure your business remains legally compliant.
What’s included?
- Your business name and address
- Details of your Registered Agent
- Purpose of your business
- Duration (can be perpetual or limited)
- Provisions for the regulation of the internal affairs of the company
- Names and addresses of managers or members of the LLC at the time of
filing
- Name of the organizer
Alabama LLC Certificate of Formation can be filed online with the Secretary
of State online business portal and mail a
form to the Office of the Secretary of State. The Alabama LLC filing fee is
$200.
Allow us to do the honors
The certificate of formation is only filed once, but after every year, you
have to file an annual report. Get Set LLC
can also remind you to do and we can also look after and handle the
paperwork for you.
What are the fees and requirements to form
an Alabama LLC
- State Fee
- State Filing Time
- Expedited Filing
Time
- $236*
- 3 Weeks
- 1 Business Day
*includes online processing fees
Annual Report
- Due Date
- Annual Year: April 15th Fiscal Year: 3½ months
after beginning of tax year
- Note
- LLCs elected to be taxed as corporations follow
corporation rules.
Obtain an Employer Identification Number (EIN)
Another crucial step to start an LLC in Alabama is to sign up for the EIN or Employee Identification Number. This number is required so that your business is identified and recognized by the IRS for tax purposes. Other than that, EIN is used when you submit payroll information and payments for your employees. It is also required to open a business bank account. It can be obtained directly from the IRS online portal, or we can get one for you as part of the Alabama LLC formation process.
Create an Operating Agreement
Like most of the new businesses, if you are setting up your LLC in Alabama, you will want to create an Operating Agreement. It is a legal document or a type of ‘instruction manual’ that explains how you’ll run your business. While the state does not require an Operation Agreement, it’s always a good idea to take this extra step.
This document can be submitted alongside your Certificate of Formation. This is also a good opportunity for you and your partners to sit down and decide how the company will be operated, how the business will be divided among members, and what will happen if a member leaves the company. If you are the sole owner of your company, you will own 100 percent of the business.
Business Taxes Applied to your LLC
The biggest advantage of forming an LLC is tax abatements. If you’ve already formed
or planning to form an LLC in Alabama, there are some state-related business taxes that
you should be aware of. Although LLCs are not taxed on their profits at a business level
like C corporations in Alabama, you are responsible for paying state income and sales tax,
self-employment, payroll, and federal taxes. The tax structure for LLCs in Alabama is as follows:
Type of Tax
Paying Authority
- Self-employment tax on business profit
- Business Owner
- State Income tax on profits (state allowances or deductions excluded)
- Business Owner
- Federal Income tax on profits (state allowances or deductions excluded)
- Business Owner
- Alabama Sales Tax on Products
- LLC
- Payroll Tax on employees’ salaries
- Employers
- Federal and State income tax on earnings
- Employees
State Taxes for Alabama LLCs
There are three types of state taxes that must be paid to the Alabama Department of Revenue:
income, sales, and privilege tax.
- Type of Tax
- Applied On
- Paid By
- Percentage
Alabama Income
Tax
Alabama Sales
Tax
Alabama Business
Privilege Tax
Earnings & Salary
Physical Products
Business Owners & Employees
Customers
Federal Taxes for LLCs
There are two types of federal taxes that business owners are bound to pay self-employment
tax and federal income tax, both of which are levied as “pass-through taxation."
Federal Taxes are more complicated as compared to state taxes, so it is advised that you should speak
to your accountant or a professional tax preparer to make sure your Alabama LLC is paying the right amount.
Other Taxes and Duties for Your LLC
Some LLCs are liable to pay other taxes and duties depending on their industry. For instance, if you are a gasoline
seller, you may need to pay tax on any fuel you sell. Other than this, if you import or export goods,
the state may need you to pay certain duties. It’s better to speak to a professional accountant
about any other taxes or duties you may have to pay.
Estimated Taxes
Most LLCs are obliged to pay certain estimated taxes throughout the year. These taxes are based on factors such as adjusted gross income, taxable
income, taxes owed, deductions, and other applicable credits for the
given year. Here are some common types of estimated taxes:
- • Federal self-employment tax
- • Federal income tax
- • Alabama income tax
For more information about the estimated taxes your LLC is liable to pay, visit the IRS website or talk to your accountant.
