Forming an LLC in Alabama will help protect your personal assets from lawsuits and judgments against your business. An LLC is a legal structure that separates your business and personal assets. By not having your business in a separate legal structure, you can be held personally liable for certain debts and lawsuits incurred by the company. Forming an Alabama Limited Liability Company does not require an attorney and you can save a lot of money if you do it yourself with the five simple steps below.
Before getting into the five steps here are a few things to know about Alabama LLCs.
How Much Does It Cost to Get an LLC In Alabama?
Minimum of $150.
Alabama has a different filing fee structure from most other states. In most states, LLC formation is handled at the state level by the Secretary of State or similar entity. In Alabama however, LLC formation is routed through the County Probate Judge for the county in which the LLC’s registered agent is located in addition to the Secretary of State. The minimum county probate judge fee is $50, but in some counties, it is higher. Here is the list of probate judges by county.
The county probate judge then forwards your Alabama Certificate of Formation to the Secretary of State.
The Secretary of State charges a $100 filing fee in addition to the probate judge fee. Expedited filing costs an additional $100.
Alabama Annual Report and Annual Fees
Annually, Alabama requires an LLC to file an annual report, Alabama Business Privilege tax return and renewal fee. The minimum tax is $100.
- Minimum Number – one or more
- Members/Managers- at least one is required to be listed in the Articles of Organization
- Residence Requirements – none specified
- Age Requirements – none specified
Steps to Forming an Alabama LLC
Step 1. Name Requirements
Your corporate name must end with the words Limited Liability Company or an abbreviation of these words (L.L.C. or LLC). Check out our article on naming your LLC for all of the requirements that you must follow when naming an LLC.
Now that you have the perfect name, you want to be sure nobody else is using it as each state requires a unique name per LLC or Corporation. To check if your name is being used, visit our page to do a free LLC name search in Alabama.
An Alabama Registered Agent through Northwest Registered Agent costs $125. Click for more information.
Step 2. Choose a Registered Agent
The registered agent must have a physical presence in Alabama but may be an individual resident, domestic or foreign corporation authorized to transact business in Alabama. The registered agent must also have a physical address in Alabama and a Post Office Box or Drop Box is not acceptable. If the registered office includes a suite number, it must be included in the registered office address.
Check out our article on LLC Registered Agents for more details.
Step 3. File the Certificate of Formation
This is the most important step and many people believe that you need an attorney to file. While we don’t discourage having an attorney, filing for an LLC can be done by most people, but you can save considerable money over an attorney and make sure everything is filed correctly by using a formation service such as LegalZoom.
Alabama does things a bit differently than many other states. Instead of registering your Certificate of Formation at the state level (with the Secretary of State), you need to register your LLC at the county level (with the Probate Judge).
You’ll need to send 2 separate checks (or money orders). One to the Secretary of State for $100. And one to the Probate Judge. The fees vary among the Probate Judges (there are 67 of them but the average is $50) – County Probate Contact Information
Click to download the Alabama Certificate of Formation
Step 4. Create an Operating Agreement
An operating agreement is not required in Alabama but is typically a good idea, especially for an LLC owned by multiple people. The primary function of the operating agreement is to govern the relationship between the owners of the business, but also outlines who makes what decisions, how profits or losses are distributed and the operating procedures of the LLC.
Step 5. Get an EIN
What is an EIN? The Employer Identification Number (EIN), or Federal Tax Identification Number (FEIN), is used to identify a business entity. It is essentially a social security number for the company.
In addition to the EIN being an identifying number for the LLC it serves a few other purposes such as:
- Opening a business bank account
- Federal and State tax purposes
- Conduit to pass payroll taxes for employees paid by the company
This link will take you to the IRS website to get an EIN for your LLC. Less than five minutes and you will have your number free of charge. Wait until your LLC is approved and filed before applying for your EIN.
Something to consider with a new LLC is that the new entity has no credit history associated with it and as such may make it a little more difficult to acquire business funding or vendor credit. Depending on the industry, you may want to look into building your LLC’s business credit soon after filing to begin generating a credit history. Dun & Bradstreet offers a lot of information about improving business credit.
Don't want to go it alone but don't want the expense of an attorney? Another alternative is to use an LLC formation service that will do the formation at a low cost. Take a look at our comparison page of popular LLC formation services.
IncFile has a special right now for LLC formation services for only $49 plus state fees, plus a free registered agent for the first year!