How to Start an LLC in Alabama: Step-by-Step Guide - MarketWatch

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How to Start an LLC in Alabama: Step-by-Step Guide - MarketWatch

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It is relatively simple to create an LLC in Alabama.
Reserve Your LLC Name With the Alabama Secretary of State To form your Alabama LLC, name reservation is the first step.
When researching how to start an LLC in Alabama, you’ll see a lot of information on “registered agents.
File a Certificate of Formation This is the most important step to learning how to start an LLC in Alabama — the certificate of formation tells the government several important pieces of information about your business: Business name, including the indication it’s an LLC Registered agent’s address Registered agent’s name Confirmation that there is at least one member of the LLC If the LLC is a “series LLC,” a statement on enforceability of obligations and expenses Any other matters the members think should be included The form must be typed and can be submitted by mail or online.
Especially if your Alabama LLC has more than one member, an operating agreement will save you legal trouble down the road and lets your members, customers and employees know what to expect.
An LLC in Alabama should have an operating agreement from the time of formation, and can always be amended later.
If you have formed an LLC by converting one type of business to an Alabama LLC, you will likely need a new EIN.

How to Start an LLC in Alabama: Step-by-Step Guide - MarketWatch

It is relatively simple to create an LLC in Alabama. It’s a matter of thinking through your business idea, putting it down on paper and filing that paper with the proper government office. 1. Reserve Your LLC Name With the Alabama Secretary of State To form your Alabama LLC, name reservation is the first step. You must have a unique business name that meets three requirements: Contains the phrase “limited liability company,” “LLC” or “L.L.C.” Is not identical to any other registered Alabama business entity Does not contain words or phrases that mislead consumers about the services provided by the business Reserving your business name first ensures it will be available to you once all the paperwork is complete. To do this, you can file online using the Alabama Secretary of State forms on the interactive website. It requires a $25 fee, and you must save your certificate digitally after filing — one will not be mailed to you. Inside Scoop: For a variety of reasons, some business owners don’t want to use the full business name for every business activity. In this instance, you can use a “DBA” business name, which stands for “doing business as.” In Alabama, you must use your DBA name to do business before you can register it with the state, making Alabama unique from other states in this regard. To register a DBA name, follow these instructions on the Secretary of State’s website. You’ll need to renew every five years. 2. Designate a Registered Agent Doing business in Alabama requires a permanent address in the state. When researching how to start an LLC in Alabama, you’ll see a lot of information on “registered agents.” It sounds complicated, but a registered agent is simply a designated person and address to which the state and IRS send official correspondence. Many businesses offer registered agent services for a periodic fee. You can easily select an Alabama registered agent by searching online or choosing from a list of agents provided by the AL Secretary of State. Inside Scoop: You can be your own registered agent, but it’s not always practical to do so. This is because registered agents must be physically present during all business hours at the address provided to receive correspondence. Additionally, if you receive clients at your registered address, it’s possible you could be served with legal documents in front of them. It may be worth the small fee to let a registered agent company handle it for you, so you can focus on growing your business. 3. File a Certificate of Formation This is the most important step to learning how to start an LLC in Alabama — the certificate of formation tells the government several important pieces of information about your business: Business name, including the indication it’s an LLC Registered agent’s address Registered agent’s name Confirmation that there is at least one member of the LLC If the LLC is a “series LLC,” a statement on enforceability of obligations and expenses Any other matters the members think should be included The form must be typed and can be submitted by mail or online. To mail the form, send the following items in an envelope addressed to: Secretary of State, Business Services, P.O. Box 5616, Montgomery AL 36103 Two copies of the completed Certificate of Formation, with the Name Reservation Certificate attached A self-addressed, stamped envelope A check, money order, or credit card payment form (provided in the online form) for $200.00 To file online, follow the instructions on the Secretary of State’s website. Your filing fee will be $208, payable by credit card or bank account. You’ll find there are multiple options when researching how to start an LLC. In Alabama, an additional option is to convert another type of business to an LLC using this form. Inside Scoop: In a certificate of formation, Alabama allows you to choose one of three LLC types: Series LLC, which operates as part of a larger entity Professional LLC, which offers services by licensed professionals, such as doctors, lawyers or accountants Non-Profit LLC, which engages in charitable activity If you think any of these apply to your LLC, consult a legal or tax professional to ask about your options. Additional tax write-offs or obligations may apply, depending on the type you select. 4. Create an Operating Agreement This isn’t a legal requirement, but it is important. An operating agreement details the policies and procedures you intend to govern your business. Especially if your Alabama LLC has more than one member, an operating agreement will save you legal trouble down the road and lets your members, customers and employees know what to expect. As you draft the operating agreement, you may also be prompted to work out aspects of your business you hadn’t thought of before. You can also use your operating agreement as legal proof you own your business. Operating agreements often include, but are not limited to, information about: Transferring membership interests Voting rights Contributions by members How profits, losses and distributions are shared Management Compensation Bookkeeping Dissolution Inside Scoop: When developing a business idea, it can be difficult to decide how to start. An LLC in Alabama should have an operating agreement from the time of formation, and can always be amended later. A helpful tip is to determine whether your LLC will be “member-managed” or “manager-managed.” In a member-managed organization, all of the members make day-to-day management decisions collectively. In a manager-managed organization, the operating agreement specifies one or more members to be tasked with day to day management. It is important to write this into the operating agreement to prevent confusion down the road. 5. Request an IRS Employer Identification Number (EIN) After formation, you’ll need to request an EIN from the IRS, also known as a federal tax identification number. This unique identifier is used for tax purposes and can be used for other activities, like opening your business bank account. If you have formed an LLC by converting one type of business to an Alabama LLC, you will likely need a new EIN. Make sure to check state requirements for how to start an LLC. In Alabama, if you hire employees, you’ll also need an Alabama income tax withholding number. This can be obtained by registering with My Alabama Taxes. Inside Scoop: You don’t need to request an EIN if your business meets the following conditions: Single-member LLC No employees Does not file “excise taxes” (special taxes levied on goods and services like alcohol, cigarettes, fuel, heavy vehicles, etc.) An owner of such a business will simply use their Social Security number for tax purposes. 6. Fulfill Ongoing Obligations The fun doesn’t end after learning how to start an LLC in Alabama. There are yearly obligations you’ll need to meet in addition to running your business. File Your Taxes Remember to file your yearly federal, state and local income taxes. If you have employees, it’s likely you will need an accounting service to do this for you. Alabama requires a combined Business Privilege Tax Return and annual report to be filed 2.5 months after the LLC is formed and once per taxable year after that. You must pay a minimum of $100 per year as an Alabama LLC. Keep Your Licenses Up to Date You need to check with your local or county government to determine whether you need additional licenses to operate your business. Any professional licenses such as bar memberships for lawyers or accounting certifications for CPAs must be kept current as well. Keep Your Records Part of your ongoing obligations is to keep certain records available for inspection by members of the LLC. Records should be kept in your “principal place of business,” which may be your office or, as is becoming more common, your home. Name and address of each member and manager Copy of the certificate of formation and any subsequent amendments Legal documents such as powers of attorney Federal, state and local income tax returns for the past three years Operating agreement and any amendments Financial statements from the past three years Inside Scoop: Consult a tax professional for more information as you learn how to start an LLC in Alabama. One helpful tip — if you’re working out of your home, dedicate a room or conspicuous space to work. That way, you’ll be able to write off expenses associated with maintaining that space as costs of doing business.
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