Fact checked for accuracy by Billie Anne Grigg, a bookkeeper and Mastery Level Certified Profit First Professional.

Starting a new company is a dream for many, but it can seem so far off due to the complicated steps to get a business going. The planning process of starting a company is complex, but with the right direction, you will be up and running in no time. 

Forming an LLC will be a different process in every state, and Alabama falls somewhere in the middle for easiest states to form a company.

Here is a step-by-step guide on how to start an LLC in Alabama.

If you want help forming your LLC, ZenBusiness is our top pick for fast and affordable LLC setup, all online.

Step 1: Choose a Name for Your Company

The first step is to choose a name for your company. This will be what your company is legally known as and labeled on any legal documents and invoices. The name of your LLC must follow specific guidelines that are unique to the state of Alabama.

Naming guidelines for an LLC in Alabama

  • The name of your business cannot include any words that relate to a government agency like the State Department, CIA, Homeland Security, FBI, etc.
  • The name of your business must include the words Limited Liability Company or abbreviated as LLC.
  • There are certain restricted words that may require special licenses or a professional, such as a doctor or lawyer, to be part of your company.
  • The name of your company must be unique. And it should not be easily confused with any other registered Alabama LLC, corporation, or partnership.

After choosing a name, you need to make sure the name is available in Alabama. You can use this business entity search to check the company name.

Once you ensure the LLC name is available, you can reserve the name. This will hold the name while you are in the process of registering the company with the state. 

We also recommend that you check for a domain name (website handle) at this time and reserve that as well.

Step 2: Select a Registered Agent for Your Business

A requirement in Alabama for a limited liability company is to appoint a registered agent. A registered agent can be the owner or individual of the LLC, a separate Alabama-based company, or an office in Alabama that helps the LLC form and function (e.g., ZenBusiness, IncFile). Here is an official list of Alabama registered agents.

The registered agent’s primary function is to accept essential government documents and compliance-related documents on behalf of the LLC.

Step 3: File and Certify Your LLC

To file your LLC in Alabama, you used to need to post the Certificate of Formation to the office of the Judge of Probate in your county. The Court of the Probate would then look over your certificate and file it with the Secretary of State of Alabama. However, this requirement was changed in 2021. Now you can file the Certificate of Formation directly with the Secretary of State.

Here is a list of the information that you must include on the Certificate of Formation document:

  • The registered agent’s full name and local address in Alabama
  • The official name of the Limited Liability Company 
  • If the LLC is a series LLC, professional LLC, or non-profit LLC, the appropriate box should be ticked. This is not applicable for most LLCs
  • Business name reservation certificate
  • The date the LLC will effectively begin if different than the filing date
  • The signature of the organizer of the LLC or attorney.
  • Filing fee. The $200 fee for the Secretary of State should be separated from the Probate Court fee, which is a minimum of $50.

There are many third-party companies that will help you certify and register your LLC. Zenbusiness and Incfile are some great companies that will even provide a lot of helpful information and advice for free.

You can register your company with them and even name them your Registered Agent for an extra charge.

Step 4: Prepare and Create the Operating Agreement

This is not a mandatory step in Alabama, although in other states, it is required. But we would advise that you do it. The operating agreement is a document used internally to distinguish the roles and rules within the company.

An operating agreement is good practice to have because it ensures all members of the LLC are on the same page about the entity and can be referred to in later business meetings to resolve conflicts.

Step 5: Receive an Alabama LLC EIN (Employer Identification Number)

An Employer Identification Number is required for LLCs in Alabama. An EIN is a nine-digit number given to your company by the IRS for tax purposes. The best way to describe an EIN is a social security number for businesses.

An EIN is straightforward to get, and the best way is by contacting the IRS by mail or online. It is worth noting that most companies that help you form an LLC will also provide an EIN as part of their package deal.

An EIN allows an LLC to:

  • Hire other people as employees
  • File your state and federal taxes
  • Create a business bank account under the LLC’s official name

Step 6: Check for any Necessary Licencing

Not all LLCs in Alabama need licensing, but depending on the services you provide, you may need to apply for some business licenses before starting your LLC. Specific licenses are necessary for companies based on how they function (e.g., stores or establishments that sell alcohol).

Cost to Start an LLC in Alabama

There are a few different costs involved in the initial forming of an LLC in Alabama. In this section, we are looking at the cost of forming the LLC and not considering the other start-up costs needed for a company, such as promotion, business materials, and lawyer fees.

  • Filing fee for the Secretary of State: $200
  • Name reservation fee: $25
  • Third party fee: Average cost of about $25 to $200 depending on the service you use like ZenBusiness or Incfile
  • Business privilege tax: Minimum of $100
  • Annual report fee: $10

What To Do After Forming Your LLC in Alabama

The first step for starting a new business is registering your company and ensuring that any monetary income is being legally tracked. After your LLC is formed in Alabama, we recommend the following:

Hire an accountant: As a business owner, there are so many things on your plate, and doing your own accounting will add to your workload and stress. Accountants will save you time and help you save money in the long run with taxes and regulatory compliance. Most accountants can be hired for specific periods, such as during tax season. But depending on your situation, you may need a permanent accountant. 

Organize a business plan: Defining your business’s goals and style is essential for consistency as you get your company up and running. Creating a business plan will help you put that on paper. You can find templates and guides on how to write a business plan online, or you can hire a professional business writer.

Get business insurance: Business insurance is important for keeping your business assets covered in the case of negligence, accidents, or data breaches. Although insurance is not necessary for most businesses in the state of Alabama, it is always wise to think ahead. Many insurance companies offer a wide variety of insurance options, so we recommend looking at some of the options and deciding what works best for your entity.

Open a business bank account: Opening a bank account is one of the first steps after forming your LLC. It is necessary to have a business account for your LLC as you cannot use a personal bank account for company expenses due to liability reasons. There are options such as Alabama Credit Union, which offers fee-free business accounts. Larger banks such as Bank of America offer business checking as well.

Prepare for filing taxes: Filing taxes as an LLC is one of the most daunting things when opening a company. Taxes are complicated, and figuring out how to use tax breaks and deductions is a learning curve. This is why we recommend staying ahead of the game from the moment you open your LLC; diligently keep track of your earnings and spending.

It is important to keep your LLC compliant after it has been formed.

If you are overwhelmed by the ongoing work it takes to keep your finances organized, we highly recommend that you keep an accountant on the payroll.

How to Keep Your LLC Compliant in Alabama

Compliance is very important for keeping your business running in good standing. You should make sure that your business has all of the necessary licenses. In Alabama, you need to ensure you have an EIN and are keeping track of your tax responsibilities.

You also need to keep several records as an Alabama LLC that are subject to inspection.

  • An updated list of the names and current street addresses of each member and manager
  • A copy of the filed articles of organization and all additions to the document 
  • Copies of the federal, state, and local income tax returns and reports of the LLC for the three most recent years, if applicable
  • Copies of financial statements the LLC has held for the three most recent years.

Tax Filing Requirements for LLCs in Alabama

Tax filing is one of the most important and most confusing aspects of an LLC. In Alabama, LLCs are required to file two types of taxes. Business privilege tax and an annual report need to be filed with the department of revenue. These taxes must be filed after the start of the LLC’s taxable year but before three and a half months after the beginning of the tax year. 

Some states will require a state tax identification number, but fortunately, Alabama does not require this.

Frequently Asked Questions

How can I tell if my business name is available?

You can quickly check if your business name is distinguishable and available for registration by going to the State of Alabama’s business entity search.

How long does it take to register an LLC in Alabama?

The time frame for registering your LLC will vary depending on the state you are in and the backlog the specific state is experiencing at the time of filing. 

You can expect the LLC approval to take around 14 days to process in Alabama. It will usually take 2-4 days for the Judge of Probate to process and about ten days for the Secretary of State’s approval.

How do I set up a website for my LLC?

In this day and age, almost every company should have a website to succeed in the market. Setting up a website is not always the most straightforward task, especially if you need to create a store to sell products online too.

You can attempt to make the website for your LLC by yourself, using a company such as Wix or Squarespace. Another option, however, is to hire a professional to customize a well-crafted website for you. This is generally a relatively expensive option, but it will give your LLC a head start in the market after you have formed your company.


Filed under: Alabama Business Guides

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