How to Start an LLC in Alabama

Written by: Mary Gerardine

Last updated:

An Alabama LLC is one of the most simple, cost-effective, and quick business structures to form. Even so, navigating the formation process can seem daunting without clear guidance and an actionable plan.

In this How to Start an LLC in Alabama guide, we’ll break down everything you need to know to form your LLC, from the steps you’ll need to take to get started to maintaining your structure.

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LLC in Alabama

In order to form an LLC in Alabama, you’ll need to complete the following steps:

  1. Name Your Alabama LLC
  2. Pick an Alabama Registered Agent
  3. Submit the Certificate of Formation
  4. Create an Alabama LLC Operating Agreement
  5. Get an EIN
  6. File Your BOI Report

In the sections below, we’ve broken down each of these steps in more detail.

Step 1: Name Your Alabama LLC

The first thing you’ll need to do before getting started is picking the right name for your LLC. This is important because your business’s name will need to represent your brand accurately, as well as be as memorable as possible.

In Alabama, all LLC names need to abide by the following statutory guidelines in order to be accepted by the Secretary of State:

  • Distinctiveness: Your LLC’s name must be distinguishable from the names of other business entities already on file with the Alabama Secretary of State
  • Required Suffix: Your LLC’s name must end with “Limited Liability Company” or one of its abbreviations — such as LLC or L.L.C
  • Prohibited Words: Your LLC’s name cannot include words that could confuse it with a state or federal government agency (e.g., FBI, Treasury, State Department, etc.)

Keep in mind that Alabama requires prospective business owners to reserve a name before submitting their LLC’s Certificate of Formation.

Reserve an LLC Name

In order to file your LLC formation documents (Step 3), you’ll first be required to obtain a Name Reservation Certificate from the Alabama Secretary of State.

You can do this by submitting a Name Reservation Request form by mail with the Secretary of State ($25 fee) or online for a slightly higher fee of $27.75.

Keep in mind that you can conduct a Business Entity Name Search through the Alabama Secretary of State’s website to check if the name you want to reserve is available.

Having said that, If you choose to submit your name reservation request online, the system will automatically conduct this search for you, eliminating the need for a separate search.

Register a DBA Name

Another potential cost associated with naming your LLC is a “doing business as” (or DBA) name. This is essentially a nickname that you can choose to register for your business to operate under — particularly if you’re not content with your LLC’s legal name.

Registering a DBA name can be done either online or by mail and requires a $30 filing fee.

Note: Keep in mind that you will need to renew your LLC’s DBA name every 5 years.

Buy a Domain Name

Finally, you’ll want to focus on securing a good domain name (which is your website’s URL address) for your business. For this, try to focus on choosing one that’s easy for customers to remember, relevant to your business, and accurately reflects your brand.

After confirming the domain name you want to use is actually available, you can purchase it through a trusted registrar.

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Step 2: Pick a Registered Agent

The next step you’ll need to take toward forming your LLC is to pick a registered agent.

This is an individual or business entity that accepts legal correspondence on behalf of your business, such as service of process, notice of lawsuits, and official government communications; you’re required to continuously maintain one as long as your LLC is active.

Your registered agent can be an individual or business entity, but will need to satisfy the following requirements:

  • Must have a physical address in the state, not a P.O. Box; and
  • Must be available during normal business hours to accept service of process

The Alabama Secretary of State maintains a List of Registered Agents in order to facilitate your search for third-party services; however, remember that this is offered as a resource only and should not be interpreted as an endorsement of any service provider.

Note: You can choose to act as your own registered agent if you’re looking to save money, though we don’t typically recommend this as you’re much more likely to suffer fines and penalties due to non-compliance than if you just hire a professional service.

On top of this, you’ll lose any anonymity your LLC would have given you since your name, address, and contact information will be publicly available.

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If you’re ready to get started, you can form your LLC with Northwest Registered Agent and get a free registered agent service for your first year (normally costs $125).

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Note: To have a look at some of our other top recommendations, you can also check out our Best Registered Agent Service of 2024 guide.

Step 3: Submit Your Certificate of Formation

In Alabama, the Certificate of Formation is the filing document that you’ll need to submit with the Business Entities Division of the Secretary of State in order to officially register your LLC (this is also referred to as the Articles of Organization in other states).

When preparing your Certificate of Formation, you will need to include the following information:

  • Your LLC’s name, as well as a copy of the Name Reservation Certificate obtained from the Alabama Secretary of State
  • The name and address of the agent who will receive legal documents on behalf of your LLC
  • You will need to confirm that your LLC will have at least one member
  • If applicable, you will need to indicate if your LLC will be a Series LLC, Professional LLC, or Non-Profit LLC, each complying with specific sections of Title 10A
  • You can choose an effective date and time for your filing; this can be on or after the date filed at the Secretary of State’s office and within 90 days after signing the document

You can submit your LLC’s Certificate of Formation either online through the Secretary of State’s website or by downloading this form, completing it, and mailing two copies to the following address:

Secretary of State 
Business Services
P.O. Box 5616
Montgomery Alabama 36103

Keep in mind that you will need to include a $200 filing fee with your submission.

Step 4: Create an Alabama LLC Operating Agreement

Once this is completed, the next step you’ll need to take is to create an operating agreement.

This is an internal document that clearly outlines the ownership and management structure of your company in order to reduce potential future conflict.

While this document isn’t legally mandated in Alabama, all LLCs are recommended to have one as it can help maintain both: smooth operations and your LLC’s corporate veil.

A number of companies provide drafting services for operating agreements online, typically for a fee of around a few hundred dollars. However, it’s quite easy to sort this out by yourself if you want to save money, and you can even find a number of free templates online to help with this.

Step 5: Get an EIN

Even though it’s not a legal requirement (unless your LLC has employees or multiple members), all Alabama LLCs should apply for an Employer Identification Number (EIN).

This is a free, nine-digit number used by the IRS to identify your business and keep track of its tax reporting — much like a Social Security Number (SSN) for individuals.

You’ll need an EIN to be able to:

  • Hire employees
  • Open a business bank account
  • Apply for some business licenses/permits
  • Establish a line of credit

On top of this, using an EIN instead of a Social Security Number (SSN) helps to protect your personal information and safeguard your anonymity as the business owner of your LLC.

You can quickly apply for an EIN for your LLC online through the IRS website. You’re also able to submit a paper application using Form SS-4 either via fax to (855) 641-6935, or by mailing it to the following address:

Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999

Note: Don’t worry if you don’t already have an SSN, it’s not necessary to have one in order to apply for an EIN — instead, you can just leave Section 7b of the application blank and call the IRS on (267) 941-1099.

Step 6: File a BOI Report

Starting January 2024, the vast majority of LLC owners will be required to file a Beneficial Ownership Information (BOI) Report with the US Financial Crimes Enforcement Network (FinCEN).

This is part of an initiative by the U.S. government to stop individuals and entities engaging in illegal or unethical activities from being able to conceal this using “opaque ownership structures”, like shell companies, to hide their true identities.

Existing LLCs will be able to file this report anytime between January 1, 2024, and January 1, 2025, while new LLCs will have up to 90 days after the date they were initially formed to do so (30 days for LLCs formed after the start of 2025).

Keep in mind that failure to file your LLC’s BOI report on time can result in exorbitantly high fines (i.e., $591 per day) or even jail time (up to two years).

Note: Not every LLC owner is required to file a BOI report. For example, companies with more than 20 full-time employees, accounting firms, and banks are exempt. For a full list of filing exemptions, you can have a look at FinCEN’s website.

How to Maintain Your Alabama LLC

In order to keep operating legally in the state of Alabama, there are a couple of things you’ll likely need to periodically take care of, including:

  • Obtaining a Business Privilege License
  • Paying the Business Privilege Tax

Don’t worry if you’re not sure how to complete each of these steps, as we’ve detailed all the information you’ll need to know in the sections below.

Obtain a Business Privilege License

All LLCs in Alabama are required to obtain a Business Privilege License in order to operate legally within the state.

This license is issued by the Probate Judge or License Commissioner in the county in which your LLC will be established.

If your LLC operates in multiple counties, you will generally need to acquire a separate license for each county where business activities are conducted, unless there are specific exemptions in place.

The cost of a Business Privilege License varies based on several factors, including:

  • The population size of the municipality where your business is situated
  • The total capital investment of your LLC
  • The gross volume of orders or contracts handled by your business

For detailed guidance on the application process for obtaining a Business Privilege License in your county, you can visit the Association of County Commissions of Alabama website.

Pay the Business Privilege Tax

LLCs in Alabama are required to pay a tax for the privilege of conducting business within the state each year, known as the Alabama Business Privilege Tax (BPT).

The tax amount you will have to pay will be based on your LLC’s net worth in Alabama, which is adjusted for certain additions and deductions, and further refined by an apportionment factor to calculate the final taxable net worth.

The tax rates are as follows:

  • For taxable income less than $1, the tax rate is $0.25 per $1,000 of your LLC’s net worth
  • For income of at least $1 but less than $200,000, the rate is $1.00 per $1,000
  • For income of at least $200,000 but less than $500,000, the rate is $1.25 per $1,000
  • For income of at least $500,000 but less than $2,500,000, the rate is $1.50 per $1,000
  • For income of $2,500,000 or more, the rate is $1.75 per $1,000

Keep in mind that as of May 2024, if your Alabama-registered LLC has a calculated Business Privilege Tax (BPT) of $100 or less, you will be exempt from paying this tax.

This means that there is no longer a minimum Business Privilege Tax requirement, which you can read more about on the Alabama Department of Revenue’s website.

Alabama vs Other States

When comparing the process and costs of forming and maintaining an LLC, Alabama is generally perceived as more expensive than many other states.

The administrative procedures in Alabama can be less streamlined, potentially leading to longer setup times and higher initial costs. This includes aspects such as a mandatory name reservation and the requirement for a business privilege license.

However, despite these challenges, Alabama offers a supportive environment for businesses. The state provides a variety of economic incentives, including tax credits, grants, and specialized support for small businesses, which can be particularly advantageous for growing companies.

Additionally, Alabama’s regulatory framework is designed to support business expansion and economic development, making it an attractive option for entrepreneurs looking for long-term investment and growth opportunities.

Regardless, keep in mind that the best state to form your LLC is almost always the state that you will be operating in; this is because otherwise you’ll likely be required to register as a foreign LLC in your home state, meaning that you’ll need to pay registration and maintenance fees twice.

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Alabama Secretary of State Contact Information

Mailing Address:

Business Entities Division
P.O. Box 5616
Montgomery, AL 36103-5616

Physical Address:

RSA Plaza – Suite 580
770 Washington Ave.
Montgomery, AL 36104
Monday – Friday, 8:00am – 5:00pm

Contact Information:

Email: Elaine.Swearengin@sos.alabama.gov
Phone: (334) 242-5324

How to Start an LLC in Alabama FAQ

How much does it cost to start an LLC in Alabama?

To start an LLC in Alabama, you will need to pay $200 for submitting your LLC’s Certificate of Formation and $25 for reserving your LLC’s name.

Additionally, you may need to pay for a professional registered agent service (if you choose to not act as your own).

Interested in finding out more? You can check out our Alabama LLC Cost guide.

Do I need a business license for my LLC in Alabama?

Yes, all LLCs operating in Alabama are required to obtain a Business Privilege License from the county in which their business is located.

If your LLC operates in multiple counties, you will need to secure a license in each one, unless specific exemptions apply.

How fast can I get an LLC in Alabama?

The time it takes to form an Alabama limited liability company (LLC) will depend on your submission method. If you file online, you can generally expect to have your LLC formed within 5 business days.

On the other hand, mail submissions typically take around two weeks to process.

For more information, you can check out our guide on How to Start an LLC in Alabama.

Does Alabama allow single member LLC?

Yes, Alabama permits the formation of single-member LLCs. To create your LLC as a single-member entity, you will need to specify this arrangement in your LLC’s Certificate of Formation.

Interested in finding out more? You can have a look at our state-specific How to Start an LLC guide.

How do LLCs in Alabama handle federal taxes?

LLCs in Alabama are treated as pass-through entities for federal income tax purposes, meaning the LLC itself does not pay taxes on its profits.

Instead, profits and losses are passed through to the members, who report this information on their personal tax returns.

What are the benefits of forming an LLC in Alabama?

One significant benefit of forming an LLC in Alabama is the limited liability protection it offers.

This means that LLC members are not personally responsible for business debts (in most cases) which safeguards their personal assets.

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