Alabama LLC Guide | A Comprehensive Write-up For Beginners
When it comes to business it’s better to have a clear knowledge of the one you really would like to venture into. Every business is a step by step process, it not something that you will just sit down at your home and decide what to do and it will come to pass without hard work and stress.
Every successful business you see today started somewhere and truly, some of the business owners now can really boast that their business has gone far and wide. So, you too can be like them, if you really want to make a positive change in your business.
Do you know that forming an LLC is the simplest way of structuring your business to protect your personal assets in case your business is sued?
Now, you have an idea of why you should start an LLC in Alabama.
A limited liability company (LLC) is a business entity that offers certain legal protections and rights to its owners. An LLC is either a corporation or a sole proprietorship/partnership.
Alabama LLC Information
Forming LLCs in Alabama is affordable and easy. Unlike other states, the State of Alabama has some unique LLC requirements.
Interested parties must register with the Alabama Secretary of State by filing the necessary forms, paying the necessary fees, and meeting all naming and formation requirements.
The specifications required of an Alabama LLC are:
1. Name Your Alabama LLC
Choosing a company name is the first and most important step of forming an LLC in Alabama. Be sure to choose a name that complies with Alabama naming requirements and is easily searchable by potential clients.
1. Follow The Naming Guidelines:
- Your name must include the phrase “limited liability company” or one of its abbreviations (LLC or L.L.C.).
- Your name cannot include words that could confuse your LLC with a government agency (FBI, Treasury, State Department, etc.).
- Restricted words (e.g. Bank, Attorney, University) may require additional paperwork and a licensed individual, such as a doctor or lawyer, to be part of your LLC.
- Your name must be distinguishable from any other Alabama limited liability company, corporation, limited partnership, or registered limited liability partnership.
2. Is The Name Available In Alabama?
Make sure the name you want isn’t already taken by doing a Business Entity Search on the Alabama Secretary of State’s website.
3. Reserve The Name.
You must complete the Name Reservation Request Form for Domestic Entities. This can be done online or by mail with the Alabama Secretary of State. (Fee: $25)
2. Choose A Registered Agent In Alabama
You are required to nominate an Alabama Registered Agent for your Alabama LLC.
What Is A Registered Agent?
A registered agent is an individual or business entity responsible for receiving important tax forms, legal documents, a notice of lawsuits, and official government correspondence on behalf of your business. Think of your registered agent as your business’s point of contact with the state.
Who Can Be A Registered Agent?
A registered agent must be a resident of Alabama or a corporation, such as a registered agent service, authorized to transact business in Alabama. You may elect an individual within the company including yourself.
FAQ: Nominating An Alabama Registered Agent
Can I Be My Own Registered Agent In Alabama?
Yes. You or anyone else in your company can serve as the registered agent for your Alabama LLC.
Is A Registered Agent Service Worth It?
Using a professional registered agent service is an affordable way to manage government filings for your Alabama LLC. For most businesses, the advantages of using a professional service significantly outweigh the annual costs.
3. File The Alabama LLC Certificate Of Formation
To register your LLC in Alabama, you will need to obtain a Certificate of Name Reservation, then file a Certificate of Formation with the Alabama Secretary of State through your local Judge of Probate Office. You can do this online, in-person, or by mail. Some states refer to the Certificate of Formation as the Articles of Organization or Certificate of Organization.
The Certificate of Formation for an LLC (Limited Liability Company) in Alabama is a legal document to officially form your business. You’ll be expected to provide the name of your LLC, choose a registered agent, attach a copy of the Name Reservation Certificate, list the services your LLC will offer, and pay the state filing fee. After you file the Certificate of Formation, we recommend you obtain an Employer Identification Number (EIN) if you plan to hire employees and open a business bank account.
How To File Online
Select “non-subscriber” and fill out the online form.
Note: If you wish to subscribe to Alabama Interactive, the annual fee is $95. However, this service is designed for attorneys, serial entrepreneurs, and real estate investors who need to track many LLCs simultaneously. It is not recommended for most LLC owners.
How To File By Mail
Mail the following to the Office of the Judge of Probate in your Registered Agent’s county:
- One (1) signed original Certificate of Formation document
- Two (2) completed copies
- A copy of the Name Reservation approval letter.
- $100 check payable to the Secretary of State
- An additional check made payable to the Judge of Probate’s Office in your Registered Agent’s county.
- Exact fees vary by county. Contact your local Probate Office for more information.
Note: DO NOT mail any of these documents or payments directly to the Secretary of State. Your local Probate Office will submit all payments and paperwork on your behalf.
Filing As A Foreign LLC
If you’re expanding your existing LLC to the State of Alabama, you will need to form a Foreign LLC.
FAQ: Filing Alabama LLC Documents
What Is The Processing Time To Form My Alabama LLC?
10 days online or by mail, but can be expedited for an additional fee.
What Is The Difference Between A Domestic LLC And Foreign LLC?
An LLC is referred to as a “domestic LLC” when it conducts business in the state where it was formed. Normally when we refer to an LLC we are actually referring to a domestic LLC. A foreign LLC must be formed when an existing LLC wishes to expand its business to another state.
4. Create Your Alabama LLC Operating Agreement
An operating agreement is not required for an Alabama LLC, but it’s a good practice to have one.
What Is An Operating Agreement?
An operating agreement is a legal document outlining the ownership and operating procedures of an LLC.
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Why Are Operating Agreements Important?
A comprehensive operating agreement ensures that all business owners are on the same page and reduces the risk of future conflict.
FAQ: Creating An Alabama LLC Operating Agreement
Do I Need To File My Operating Agreement With The State Of Alabama?
No. The operating agreement is an internal document that you should keep on file for future reference. However, many states do legally require LLCs to have an operating agreement in place.
5. Get An Alabama LLC EIN
What Is An EIN?
EIN stands for Employer Identification Number. EINs is a nine-digit number assigned by the Internal Revenue Service (IRS) to help identify businesses for tax purposes. It is essentially a social security number for a business.
An EIN is sometimes referred to as a Federal Employer Identification Number (FEIN) or Federal Tax Identification Number (FTIN).
Why Do I Need An EIN?
An EIN is required to:
- Open a business bank account
- File and manage Federal and State Taxes
- Hire employees
Where Do I Get An EIN?
You can get an EIN for free from the IRS. Getting an EIN is an easy process that can be done online or by mail.
NOTE
FOR INTERNATIONAL EIN APPLICANTS: You do not need an SSN to get an EIN.
FAQ: Getting An Alabama LLC EIN
How Do I Get An EIN If I Don’t Have A Social Security Number?
A social security number is not required to get an EIN. You can simply fill out IRS Form SS-4 and leave section 7b blank. Then call the IRS at (267) 941-1099 to complete your application.
What Tax Structure Should I Choose For My Alabama LLC?
When you get an EIN, you will be informed of the different tax classification options that are available. Most LLCs elect the default tax status.
However, some LLCs can reduce their federal tax obligation by choosing the S corporation (S corp) status.
6. Cost To Form An LLC In Alabama
To form an LLC in Alabama, you will need to obtain a Certificate of Name Reservation, then file a Certificate of Formation with the Alabama Secretary of State through your local Judge of Probate Office.
You can apply online for $200 or by mail for $100, plus probate office fees. The Certificate of Formation is the legal document that officially creates your Alabama Limited Liability Company.