How to start an LLC in Alabama in 2024

Featured LLC service offers

ZenBusiness

Learn More

Via ZenBusiness’ website

Free version available

Yes

Lowest published package price

$199

Live chat

Yes: Human

LegalZoom

Learn More

Via LegalZoom’s website

Free version available

Yes

Lowest published package price

$249

Live chat

Yes

Northwest Registered Agent

Learn More

Via Northwest’s website

Free version available

No

Lowest published package price

$39

Live chat

Yes

7 steps to start an LLC in Alabama

1. Choose your LLC business name

You likely have a few ideas for naming your LLC. The name you choose needs to be unique from other LLC names already registered in Alabama or it won’t be approved. In addition, your name must include “limited liability company” or an abbreviated or shortened form, such as “LLC” or “limited liability.”

Consider verifying that your name isn’t already in use by searching records on the Alabama Secretary of State’ website. If the name you want is already being used, you can tweak it (if you want the name to remain similar) or pick an entirely different name. 

Unlike most states, Alabama requires that you reserve the name before filing your articles of formation. You can do this online for a $28 fee, or mail a completed “Name Reservation Request Form for Domestic Entities” form and enclose a $25 payment. You might save money on name reservation fees by becoming a paid subscriber to Alabama.gov services. The Secretary of State generally processes online applications in real-time, informing you right away if your name is approved or rejected 

2. Select a registered agent

Alabama requires you to designate a registered agent when forming your LLC. This person or entity is responsible for receiving mail, government notices and papers for your LLC during regular business hours. The registered agent must maintain a physical address in Alabama. You can be your own registered agent, or you can pay a third-party company to act as your registered agent. 

Hiring a registered agent service might be wise if you can’t meet the requirements of being your own agent. These include being at the listed address during business hours. Be aware that if you decide to be your own registered agent, embarrassing paperwork, such as notices that you’re being sued, might be delivered to your business while employees and customers are there.

If you want to hire a registered agent, read our best registered agent services guide to find the best one for your LLC. 

3. File a certificate of formation

You must file a certificate of formation to set up your LLC in Alabama. To do so, fill out and submit the domestic certificate of formation form online. Or you can fill out the form online (you can’t print it and fill it out in your handwriting) and then print and mail it. Filing your certificate of formation costs $200. If you submit the form online, an $8 processing fee is charged.

Include the following information on your application:

• Name and address of the registered agent.
• Mailing address of the registered agent’s office (no P.O. boxes).
• Type of LLC you want to form. 
• LLC’s desired date of formation.

Along with your form, submit the name reservation certificate you obtained earlier from the Alabama Secretary of State. Those who are mailing their form must include a pre-addressed and stamped envelope (to receive a receipt from the Alabama Secretary of State) as well as a check, money order or credit card information to cover the $200 filing fee. 

Mail your packet to:

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

New LLC reporting requirement alert 

The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has implemented a new reporting requirement for all non-exempt LLCs starting on January 1, 2024. 

The requirement is called the Beneficial Ownership Information (BOI) report and it is estimated to only take about 20 minutes to complete. 

Here’s what you need to know:

• LLCs formed before January 1, 2024 have until January 1, 2025 to file.
• LLCs formed between January 1, 2024 and January 1, 2025 have 90 days to file from the confirmed date of the businesses’ registration.
• New LLCs formed after January 1, 2025 will have 30 days to file from the confirmed date of formation.

For all details, FAQs and to file, visit FinCEN’s BOI website. 

4. Get an employee identification number (EIN)

An EIN is a federal tax number that identifies your LLC for tax purposes, much like a Social Security number identifies a person. An EIN is used for opening a business bank account and other such financial tasks. You can apply for an EIN online through the IRS website at no cost. 

You need the following information to apply for an EIN:

• LLC’s name and address.
• LLC’s principal activity (such as insurance or manufacturing).
• LLC’s formation (effective) date. 
• Number of employees you plan to hire within one year.
• When employees were paid their first wages.
• Person responsible for managing the LLC (referred to as “the responsible party”). 
• Responsible party’s Social Security number.
• Reason for applying (such as starting a business).
• Type of business.

Those who apply for an EIN online will receive one immediately after submitting their application. You can apply on the IRS website’s Employer ID Numbers page. Scroll down and click “Apply for EIN online.”

To file by mail, fill out form SS-4. Processing takes about four weeks. If your business is in one of the 50 states (including Alabama) or the District of Columbia, mail your application to: 

Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999

5. Create an operating agreement

Although Alabama doesn’t require an operating agreement, it’s a good idea to create one. This document outlines how you want to operate your business, including daily and financial decision-making processes, who will run the LLC and business rules and regulations. Producing an operating agreement helps prevent disputes among members and the need to rely on state LLC operating rules that contradict your business’ needs. 

Most operating agreements include the following information:

• Voting rights and responsibilities of employees or LLC members. 
• LLC’s distribution of profits and losses. 
• Ownership percentage of members.
• Method for dissolving the LLC. 
• Accounting policies of the LLC. 
• Instructions for meetings of LLC members.

Many reputable sources online offer free templates or examples of operating agreements, including Bizee and Rocket Lawyer. Because an operating agreement should address your business’ particular needs and is legally binding, it’s smart for an attorney to review the document before anyone signs it. Once all members sign the agreement, keep it with your own business records.

6. Apply for business licenses

Depending on the nature of your business, you might need to obtain business licenses or permits before you can operate your LLC. Alabama Department of Revenue’s Business and License Division oversees business licenses for the state, so check with the agency to determine which licenses or permits you need. The division provides a handbook about business licensing in Alabama

Keep in mind that different counties might require you to apply for a business license. For example, Jefferson County requires certain businesses operating in this county to obtain a county business license. 

7. File annual reports

Each year, Alabama LLCs are required to file an annual report along with the Alabama business privilege tax return. To do so, file form PPT. If there are any changes or updates to your LLC, indicate them on this form. You’ll need to submit a privilege tax payment when submitting your form unless payments are made electronically. 

All LLCs must make a privilege tax payment and pay a $10 annual report filing fee. Privilege tax rates are based on the LLC’s ability to pay; the minimum annual payment is $100. So, if an LLC makes between $1 and $200,000 a year, the tax rate is $1 per $1,000. And the business makes at least $200,000 but no more than $500,000, the tax rate is $1.25 per $1,000. 

Businesses can file the PPT form by mail or through an approved electronic tax filing service. You can mail the form and payment to: 

Alabama Department of Revenue
Business Privilege Tax Section
P.O. Box 327431
Montgomery, AL 36132-7431

Find the best LLC services for Alabama: Best LLC formation services of 2024

Featured LLC service offers

ZenBusiness

Learn More

Via ZenBusiness’ website

Free version available

Yes

Lowest published package price

$199

Live chat

Yes: Human

LegalZoom

Learn More

Via LegalZoom’s website

Free version available

Yes

Lowest published package price

$249

Live chat

Yes

Northwest Registered Agent

Learn More

Via Northwest’s website

Free version available

No

Lowest published package price

$39

Live chat

Yes

Frequently asked questions (FAQs)