When you form your LLC in Alabama, you’ll have to pay certain costs to officially register your business with the state.
In addition to formation and ongoing costs, there will be business expenses like using a registered agent service, building a website, getting business insurance, and so on. So, what’s the total Alabama LLC cost?
In this guide, we break down the costs associated with forming your LLC, from the Alabama LLC filing fee to LLC upkeep prices and other business expenses.
Cost of Forming an LLC in Alabama
When forming your limited liability company (LLC), there are a few different costs that you may incur. These include the filing fee, LLC formation service cost, operating agreement draft, and registered agent costs.
Alabama LLC Filing Fee
To form an LLC, you must file a Certificate of Formation with the Alabama Secretary of State. The filing fee for the Alabama Certificate of Formation is $200. You will commonly see this fee referred to as the “state fee” or “filing fee.”
Alabama also requires LLCs to reserve their name prior to registering with the state (if filing by mail) or at the time of registration (if filing online). The fee for a Name Reservation Certificate is $25.
If you choose to use an LLC formation service, you will pay the $200 state fee on top of their service fee. Generally, these service fees start around $29 and increase depending on additional services you purchase.
Note: If you are interested in forming a foreign LLC, you will be required to pay $156 (online) or $150 (mail) instead.
Most people choose to use an LLC formation service to create their LLC. The cost is low and they guarantee that your filing is done correctly. Check out our #1 rated LLC service:
For more details on the formation process, check out our Alabama LLC Formation guide.
Alabama Registered Agent and Registered Office
Every Alabama LLC is required to appoint a registered agent. A registered agent is a person or entity you assign to receive tax forms, legal documents, or government correspondence on your LLC’s behalf. Registered agent services can cost around $130 per year or more.
Your registered agent can be:
- A registered agent service (most common)
- Yourself (not recommended)
- Another member of the LLC
- A business attorney
If you haven’t yet formed your LLC, we recommend using Northwest Registered Agent to form, as you will receive one year of registered agent services for free with a $29 formation.
Alabama LLC Operating Agreement
An operating agreement defines the roles and responsibilities of the LLC members or managers and will help prevent and solve any business disputes that may arise later on.
The costs associated with the operating agreement come in the drafting of the document. For single member LLCs and simple multi-member LLCs, most people choose to create the document themselves.
You don’t need to file this document with the Alabama Secretary of State. Using a free operating agreement template or document builder, that means your total cost would be $0.
Optional Alabama LLC Formation Costs
Along with the fees associated with forming an LLC, there are several optional LLC formation costs that you may encounter.
- Reserve a Name for Your LLC – Before registering your Alaska business name, you must first check to ensure it’s unique by doing a business entity name search. The $30 name reservation fee is only necessary if you aren’t forming right now, but still want to reserve the name.
- Doing Business As (DBA) Name – If you’re distinguishing your business under another name, you’ll need to check the state database to confirm that your name is unique. The filing fee for a DBA or trade name in Alabama is $30.
- Certified Document Copies – Certified copies in Alabama verify that all of your documents are correct. The fee for requesting a certified copy is $10 per document.
- Certificate of Compliance – A Certificate of Compliance (often called a Certificate of Good Standing in other states) is a legal document that states your business was registered correctly and is authorized to conduct business in Alabama. The fee for requesting a Certificate of Compliance is $14.
Alabama LLC Cost and Fees Over Time
There are a few things you need to address to keep your LLC in good standing with the state year after year. Each of these comes with costs and fees.
Annual LLC Fee Alabama
Every year, you must submit a Business Privilege License with the Alabama Department of Revenue to keep your Alabama LLC in good standing. You’ll also need to pay the Business Privilege Tax. The fees for the tax start at $100 and the license fees are determined by the county you live in. (Note that some counties do not charge for licenses).
The rates for the business privilege tax are based on your federal taxable income apportioned to Alabama. Rates range from $.25 – $.75 per $1,000 of net worth. When you renew your business privilege license and how much you pay for it will depend on your county.
Registered Agent Fee
If you use a professional registered agent service, you will pay their fee annually. Pricing will depend on the service provider that you use, but usually costs around $130/year. Using a registered agent service will save you time and the hassle of handling important legal documents and filings for the long term.
If you act as your own registered agent there are no maintenance fees. However, for privacy and compliance purposes, we don’t recommend being your own registered agent.
We recommend Northwest Registered Agent, which offers a year of its registered agent service for free when you use the company to form your LLC ($29 + state fees).
General Costs of Running a Business
Operating a business will obviously come with more than just LLC costs. These are a few of the expenses that you may run into.
Business Bank Account
An LLC separates your personal assets from your business assets. This separation is called the corporate veil. That corporate veil ensures that if your business is sued or incurs debts, your personal assets will be protected from any liabilities.
Commingling (mixing) your personal bank account with your business can pierce your LLC’s corporate veil, which means you are no longer protected by the separated entity of your LLC.
Using a separate bank account to accept payments and pay business expenses is the only way to prevent commingling funds and piercing the corporate veil.
Recommended article: Check out TRUiC’s Best Small Business Banks guide to find the best bank account for your business.
Business Permits and Licenses
Depending on the type of business you operate, your business may need the proper permits and licenses to legally operate in Alabama.
Alongside the permits required, your business may require industry-specific licenses to operate legally. Examples include business licenses like the Alabama real estate license, Alabama insurance license, Alabama adjuster license, and so on.
See TRUiC’s How to Get a Business License in Alabama article for more information on getting started as a business owner.
Every business needs a website. There’s no better way to get in front of your customers, build your brand, and grow your business.
Fortunately, the cost and difficulty of creating a business website have come down over the years. Websites are now simple to build and cheap to keep up.
We advise LLC owners to use the GoDaddy Website Builder. It’s an extremely simple to use system, creates great business websites, and only costs about $15/month.
Having the proper insurance coverage can potentially save your entire business if there is a loss, accident, or lawsuit.
A few of the most common business insurance policies include:
- General liability insurance – Protects against claims of personal injury, physical injury, property damage, and more. This is the most common of all business insurance policies. Learn more about general liability insurance.
- Professional Liability Insurance – Protects against claims of inaccurate or negligent work. It’s most common in the “professional” space where businesses offer services or advice to other businesses or consumers. Learn more about professional liability insurance.
- Commercial Workers’ Compensation Insurance – This type of insurance protects your employees from on-the-job injuries or illnesses. This coverage is required if you have one or more employees. Learn more about Workers’ Compensation insurance.
The cost of business insurance varies widely based on business type, size, location, and other factors. Getting a quote is the only way to understand the actual cost of insurance for your LLC.
We recommend NEXT Insurance to help protect and grow your Alabama LLC. It features instant coverage with competitive pricing that’s tailored to fit your business’ needs.
LLC Cost in Alabama FAQ
Do you have to pay ongoing fees for an LLC every year?
Yes. You’ll need to pay for your business license and the Alabama business privilege tax — as well as annual income tax with the Internal Revenue Service. The minimum Business Privilege Tax is $100 and fees vary for your business license by county. You can learn more about these taxes on the Alabama Department of Revenue website.
What’s the cheapest way to form an LLC?
Can you start an Alabama LLC for free?
No. All applicants must pay the state filing fee to start an Alabama LLC. The filing fee starts at $200.
How much does a registered agent cost?
Do I need to pay a franchise tax for my Alabama LLC?
No. Alabama charges a business privilege tax for LLCs, which is based on your federal income in proportion to the state. Fees start at $.25 for every $1,000 of net worth.