Forming an LLC (Limited Liability Company) in Alabama is easy and affordable. The following are few procedural steps on how to start an LLC in Alabama. LLCs can be formed in two ways, domestic and/or foreign. If you are planning to set up an LLC in states other than Alabama, visit How to Start an LLC.
On this page, you’ll learn about the following:
- How to Start an Alabama LLC
- After Starting Your Alabama LLC
- Why Start an LLC in Alabama
- Top 5 Businesses in Alabama
- Alabama LLC Formation Review
How to Start an Alabama LLC
Suppose you’re planning to invest in any profitable type of business or maybe about to set up your business in Alabama. In that case, forming an LLC in Alabama is the simplest option for you.
An LLC or a Limited Liability Company a hybrid business entity combining a corporation’s characteristics with a partnership or sole proprietorship. This section gives you a step-by-step guide on How to Start an LLC in Alabama.
Step 1: Decide a Name for Your LLC
If you are to start an LLC in Alabama, the first thing you do is decide on a business or company name, and how to name your LLC may be tricky. Thus, you have the option to choose a name that complies with the Alabama business naming requirements. It must also be easily searchable for potential clients. Here is a step-by-step guide to follow when naming your Alabama LLC.
Why do you need a proper business name?
If you want your LLC to have special identification, your company name is essential. However, many people face lots of issues by avoiding focus on choosing a business name for their LLC business formation filings.
Because of this, here are some of the major benefits of choosing the best LLC corporate names.
- To help establish a company’s presence in the market, a proper business entity type will help you. This also creates a new identity that will resemble your LLC.
- After you’ve properly chosen the name for your LLC, you will have no problems finishing the registration process and government filings.
- You can only get the EIN number when you have your name registration certificate with you.
What are the requirements when deciding a name for your LLC?
A name search is vital to make sure your business’ name is unique. Check the availability of your name with Business Entity Search on the Alabama Secretary of State’s website. Reserve the name by completing the Name Reservation Request Form for Domestic Entities.
- Don’t include words that could confuse people about your company. Words like ‘treasury, state department.’
- You should also avoid restricted words like ‘bank, attorney, university,’ because they may require a lawyer and more paperwork.
- As for a business website and your URL name, check if your name is still available for domain use with NameCheap.
Reserve a business domain
Even if you don’t have plans to set up a website today, it will help if you buy a domain to avoid others from using your name for their website, so do visit NameCheap for your domain name and Kinsta for web hosting.
If you have decided on your URL name and have reserved it, set up a professional email account with Google GSuite.
Step 2: Assign a Registered Agent in Alabama
A registered agent, or business entity, is a person that will act or work on your behalf. This person or business will receive significant tax forms, legal documents, a notice of lawsuits, and other official government correspondence in the registered office in Alabama. Choosing Alabama-registered agents for your LLC is required.
Make sure your registered agents are residents of Alabama. It could also be a business. Here are the recommended agents and employees for you:
These five LLC formation services are recommended agents’ registered services as they are authorized to conduct business in Alabama. Compare them to check the best yet cheapest option for you. Besides, they can guarantee you professional service because they have been in the business for years.
Step 3: File Certificate of Formation in Alabama
A Certificate of Name Reservation is needed to file a Certificate of Formation. You need to make reports of this certificate with the Alabama Secretary of State. You may file them online or by mail for a one-time cost of $200.
This Certificate of Formation is a legal document needed to form your business officially. It will indicate details about your LLC in Alabama, like if it is a member-managed or managers-managed.
Before you start filings, you must already have your LLC name and registered agents or employees. You will attach a copy of your Name Reservation Certificate along with a list of the services that your Alabama LLC will offer.
How to File Online
Go to the Secretary of State Online Service. Select “non-subscriber.” Fill out the online form. The website will alert you if your county does not support online filings after selecting your principal county.
How to File by Mail
Download Alabama Limited Company Certificate of Formation. Mail it along with the following to the Office of the Judge of Probate:
- Signed original Certificate of Formation document + 2 completed copies
- One copy of your Name Reservation approval letter
- A check for $100 payable to the Secretary of State
- Another check payable to the Judge of Probate’s Office is needed. Fees could vary per county, so contact your local Probate Office for more information.
Step 4: Create Your Alabama LLC Operating Agreement
An operating agreement is a document that legally outlines the proprietorship and operating procedures of your LLC This document is vital as it ensures that all business owners are on the same page regarding how they operate, thus reducing future conflicts.
Starting an LLC in Alabama does not require you to have an operating agreement, but it is ideal to have one that contains all your details of business operation.
Step 5: Filing an Alabama LLC EIN
The Employer Identification Number or, simply, the E.I.N. is a nine-digit number given by the Internal Revenue Service (IRS) to make it easier to identify types of business for tax purposes. It is like a Social Security number dedicated to a business.
It is also called a Federal Employer Identification Number (FEIN) or a Federal Tax Identification Number (FTIN). You will need this number for tax filing and to determine tax classification options like annual costs and cost in terms.
Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999
Fax: (855) 641-6935
After Starting Your Alabama LLC
After forming your LLC, there are still some things that you will need. Take note of the following:
- Get a company business account
- File Alabama business permits & licenses
- Get liability for business insurance with coverage for employees
- File an Alabama LLC annual report or biennial report
- Already existing LLCs that wish to operate in Alabama must register as a foreign Alabama LLC.
This page has provided you with steps to LLC formation and filing processes. You now have to remember upcoming filing deadlines and separate filing fees or filing costs, including fees for late filings to make sure your LLC is up-to-date.
Why Start an LLC in Alabama
Alabama state is located in the south-east part of the United States. It is popularly known as the Cotton State. Having states like Florida, Georgia, and Tennessee bordered around and with remarkable diversification in the economy, Alabama has witnessed a post-world war II boom in finance, technology business, manufacturing, and so on.
Having a limited liability company in the United States brings out a handful of benefits. Alabama, among all other states, offers its own sets of advantages. It is much easier and reasonably cost-effective to have an LLC in Alabama, especially for foreign entrepreneurs. Following are the advantages of starting an LLC in Alabama,
Starting an LLC or start-up in Alabama gives you several tax benefits. There are some major tax credits that an entrepreneur can expect while setting up their business in the state of Alabama.
- Investment Credit – Businesses can get up to 1.5% credit amount of the total qualified capital investment in a year. As much as investments take place in Alabama, it leads to more job creation and employment opportunities.
- Small Business and Agribusiness Credit – Under Section 40-18-390, the small businesses and agribusinesses in Alabama may receive income tax credits up to $1,500. Corporations having less than 75 employees will be qualified for this tax credit in Alabama.
- Dual Enrolment Tax Credit – Any business sets up in Alabama that encourages education or technical employment programs will be eligible to have this tax credit. A business investing in education and a career-oriented field may get a 50% tax credit in Alabama.
No Residencial Requirement
To start an LLC in Alabama, entrepreneurs do not have to reside in the state. This is extremely helpful for foreign LLCs. All they need is a registered agent having a permanent address in Alabama.
Alabama Enterprise Zone Act
Under this act, any LLC that is located in Enterprise zones in Alabama will receive local tax benefits. Places like Monroe, Bullock, Greene, Winston, and some others fall under the Enterprise Zone in Alabama.
Other than these advantages, the state offers easy and affordable filing, compliances, management, and such. You will be able to separate personal assets from business assets and liabilities while having an LLC in Alabama.
Top 5 Businesses in Alabama
When we talk about starting an LLC in Alabama, we look for businesses that make a significant contribution to the economy of the state. Here’s a list of the Top 5 Businesses in Alabama:
Technology is the topmost business sector in Alabama that grows every day. The state hosts a bunch of tech companies in the past few years. From cybersecurity, data centers to the production of hardware, the state has become the heart of the technology business compare to the neighboring states. About 300 tech companies are running their business in Alabama currently.
Another topmost business in the state of Alabama is the Automotive industry. The state has grabbed the 5th position in the USA for manufacturing light-weighted trucks and small cars. Be it car manufacturing or production of the automotive spare parts sector, Alabama has it all.
More than 900,000 companies are operating in Alabama, according to the report published in 2013.
The chemical industry in Alabama has also significantly grown in recent past years. More than 200 chemical manufacturing units are operating in Alabama today. Alabama is in the second position in exporting chemicals like chlorine, stabilizers, oxidants, and so on.
The Aeronautics business is another sector to look forward to. The growing sector has started in the year 1910 with the establishment of Civilian Flight School by the Wright Brothers. Since then, the state is hosting several aeronautics manufacturing companies.
Finally, Forestry Business is the last but not the least sector in our top-5 list. Being at the top position in producing Paper and Pulp, the forestry industry produces around $15 billion products every year. The Timberland in the state is the largest in the whole United States of America.
Some low-cost profitable businesses in Alabama for startups:
- Online selling
- Digital Marketing – SEO consulting
- Graphic Designing
- Website building
Apart from these, some other options are Garden maintenance, pet care, cleaning, and taxi service can be good options for low-cost businesses.
Alabama LLC Formation Review
Time needed: 1 hour and 5 minutes.
Just to recap, here are the easy steps again when forming an LLC in Alabama. Click on the steps in this list to read the full detail.
- Name your Alabama LLC
The first thing you must do is to choose a company name, which should include the phrase “limited liability company,” or one of its abbreviations (LLC or L.L.C.).
- Choose a registered agent
In Alabama, it is mandatory to select a registered agent for your LLC. You can check out our list of our 5 Best LLC Services in the United States.
- File a formation certificate
Filing a formation certificate is necessary when forming an LLC. Depending on the state, it could be called any of the following: Certificate of Formation, Articles of Organization, or Certificate of Organization.
- Create operating agreement
An operating agreement is not a strict requirement but something encouraged when you start an LLC.
- Get an EIN
The Employer Identification Number (EIN), also called Federal Tax Identification Number, serves to identify a business entity like a social security number but for a company.
A “domestic LLC” is one that conducts business in a state where it was formed. Meanwhile, a “foreign LLC” is an existing LLC that extended business to another state.
For Domestic LLCs, it is vital to have a Certificate of Name Reservation and Certificate of Formation. For the foreign LLCs, you must have a Certificate of Good Standing.
The cost to form an LLC varies per state.
Seldom do L.L.C.s use D.B.A. or a ‘Doing Business As’ name nor a fictitious business name. However, if you want to have one, you make read more about DBAs here.
This document is vital as it ensures that all business owners are on the same page regarding how they operate, thus reducing future conflicts.
>Your name should have “L.L.C. or LLC” or the phrase “limited liability the business.”
>Do not include words that could create confusion between your LLC and any government business.
>Words like ‘bank, attorney, university’ are restricted as well.
>Lastly, your name should distinguish from other limited liability corporations, limited partnerships, or registered limited liability partnerships.
Typically, you can file your LLC name online or by mail. Check with the state where you will set up your LLC name. Take note that the fees for business names may also vary per state.
As for a website and your URL name, check if your name is still available for URL use with NameCheap to see if your name is available as a web domain. Even if you don’t have plans to set up a website today, it will help if you buy a URL. Buying it can help to prevent others from getting your name; check out WPEngine, Kinsta, and GoDaddy for hosting and building your website.
No. Never mail these documents or payments to the Secretary of State directly.
The reason you might need an E.I.N. is that it would help for three reasons:
>Opening a business bank account
>Filing and managing federal and state taxes
>Hiring employees or agents
You are not required a Social Security number when getting an EIN You can proceed to fill out I.R.S. Form SS-4 and leave section 7b blank. You must then call the IRS at (267) 941-1099 to complete your application. Agents or employees will help you with that.
International EIN applicants do not need an SSN to get an EIN.
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