If you are looking to form an LLC in Alabama, then you’ve come to the right place, because this is exactly what we will teach you. It’s important to note that while forming an LLC isn’t overly difficult, individuals must follow the proper steps to maintain legal compliance.

Also important to note is that individual states, such as Alabama for instance, have different laws when it comes to forming an LLC. Today, we’re going to provide you with step-by-step instructions on how to form an LLC in Alabama.

What Is an LLC?

A limited liability company, also known as an LLC, is a special hybrid business structure that lets owners and partners limit personal liability.

This comes with all of the advantages that you get with a sole proprietorship or a partnership, particularly in terms of flexibility and taxation, combined with the legal protection that you get from a corporation.

All members of the LLC benefit because the company, seen as a separate entity, protects them from personal liability. This also helps benefit you in terms of tax savings.

Benefits of Forming an LLC

Let’s just take a quick look at all of the different benefits that come with forming an LLC in the state of Alabama.

  • With an LLC, all losses and profits can be adjusted between the business members.
  • An LLC does not pay any corporate taxes on its profits.
  • An LLC is a business type that allows members to choose how they are taxed.
  • Members of an LLC have legal protection.
  • This business type lets you open a business bank account. You can apply for a business credit card. Purchase business insurance easily. Protect your business with a trademark and logo.

How to Form an LLC in Alabama – Step by Step

Let’s now go through a step by step process on exactly how to form an LLC in the state of Alabama.

1. Choose a Name

The first step to creating an LLC in the state of Alabama is to choose a name. There are several important naming requirements that everybody in Alabama must follow when forming an LLC.

First, all business names have to include the words LLC or limited liability company. Furthermore, the name of your new LLC has to be different from any other existing business in the state of Alabama. Follow this link to check if the business name you want is already in use in Alabama.

Beware that your LLC business name cannot include any words or abbreviations used by government agencies, and there are also certain restrictive words that you need to be aware of. Here is a list of all LC naming rules for the state of Alabama.

If you’re struggling to decide on the perfect name, our business name generator can offer some creative suggestions tailored for you. Plus, once you’ve shortlisted your choices, we can help you check for domain availability, ensuring that your LLC’s online presence is as unique as its name. Don’t leave your business identity to chance. Use our business name generator and secure the perfect name and domain for your Alabama LLC.

2. Choose A Registered Agent

To form an LLC in Alabama, you must then choose a registered agent. This is the entity or person who is authorized to receive service of process and other legal documents and notices on behalf of your limited liability company.

The registered agent can be an employee of the LLC, yourself, or a business that offers registered agent services.

However, the registered agent must meet specific criteria. Companies must offer registered agent services. The agent should be in Alabama with an official address. They must be on site during business hours to accept documents.

3. File Your Certification of Formulation

The next step is to file your certification of formulation, which in other states around the USA may be known as articles of organization. This is the document that officially establishes your limited liability company by providing all the information about it.

You’ll have to prepare it and file it with your Secretary of State to register your limited liability company. All you have to do is fill out a quick online form and submit it, and it’s not very difficult at all.

Enter information like your LLC’s name. Provide the registered agent’s name and address. Specify if it’s nonprofit, professional, or series LLC. State the LLC’s effective date. Include the organizer’s signature. The state will then review your certification.

DomesticLLCFormation.pdf (alabama.gov)

4. Receive Your Certificate

Next, once everything has been approved, the state of Alabama will officially send you a certificate that confirms that your LLC is legal and that it exists. 

This is a necessary step, as you need your certificate to then obtain your EIN or employer identification number, as well as your business bank account, and business licenses.

5. Formulate an Operating Agreement

Step 5 is to formulate an operating agreement, which is simply a document that describes how your LLC will conduct itself as a business. Although the state of Alabama technically does not require an operating agreement, it’s still a crucial part of your business.

If nothing else, this will tell possible shareholders, investors, and employees how the company operates. This is a document that may include information about how to settle disputes that arise over litigation and financial agreements, as well as other such issues.

6. Obtain the EIN

Next, you will need the EIN, which is the employer identification number. This is a number that is assigned to all businesses in the United States by the IRS or Internal Revenue Service. Follow this link to get your EIN in Alabama.  

The point of the employer identification number is so the IRS can identify your limited liability company for taxation purposes. The EIN can be obtained online or through mail. Without an EIN, you will not be able to open a business bank account or hire any employees.

7. Keep All Records On-Site

If you plan on forming your own LLC, there are a variety of records that you must keep on site. You need to maintain a list of all members’ current names and updated addresses, retain a copy of the certificate of formation, store a copy of the operating agreement, and keep copies of the recent financial statements filed with Alabama’s Department of Revenue for LLCs.

8. File a Business Privilege Tax Return

In the state of Alabama, all limited liability companies have to file an Alabama business privilege with the Alabama Department of Revenue. You must complete this within 3.5 months from the start of the taxpayer year.

You must include a copy of pages 1-4 of your federal tax return, the Alabama apportionment schedule (form 65), any supporting documentation for tax exclusions or deductions, and the balance sheet calculating the taxpayer’s net worth in all privilege tax return documents.

9. Additional Steps

Having a registered LLC provides you with a great legal foundation to perform business in the state of Alabama. However, you then also want to create a plan to ensure that your LLC remains compliant in the state of Alabama.

What you need to know here is that all limited liability companies in the state of Alabama have to file an annual report within 2.5 months of the start of the organization.

If you have employees, sell goods, have quarterly tax payments if you have employees or sell goods, you may also need to make additional tax payments, maintain registered agents for your business, and maintain quarterly tax payments.

Conclusion

As you can see, although there is a good bit of red tape and a lot of forms that have to be filled out to form a limited liability company in the state of Alabama, it’s not overly difficult per se. It also should not cost you very much, which is one of the benefits of forming an LLC.

As long as you follow all of the rules and regulations as laid out in the article today, starting your own LLC in the state of Alabama should not be very difficult. Just make sure that you maintain legal compliance by filing and maintaining proper documentation.