How To Start An Llc In Alabama
- What is an LLC in Alabama?
- Comparing an LLC in Alabama to Other States
- Steps on How to Start an LLC in Alabama
- Step 1 – Pick a Name for your Company
- Step 2 – Find a Registered Agent In Alabama
- Step 3 – Certificate of Formation
- Step 4 – Keeping LLC Records
- Step 5 – Annual Requirements
- What Taxes are Payable in Alabama?
- How Long Does it Take to Register an LLC Business in Alabama?
- What Happens After You Form an LLC Business in Alabama?
- Final Word: How to start an LLC in Alabama
Are you looking to start an LLC in Alabama or how to start an LLC in Alabama? Then you need to read this quick guide. This guide discusses the process, costs, benefits, and other features that can make the process a little easier for those who have no idea how to start an LLC in Alabama.
What is an LLC in Alabama?
An LLC is a legal structure for businesses that allows for additional flexibilities and protection that cannot be found with sole proprietorships and partnerships. For instance, should you find yourself under legal scrutiny, the personal property you own is protected in an LLC. There are also tax benefits, management flexibility, and ease of administration.
There are two main options for forming an Alabama LLC. The first is to complete the process yourself. It is a simple process that takes just a few hours. Or, if you’re still concerned, then you can hire an agency to complete the work for you.
Comparing an LLC in Alabama to Other States
You can register your LLC in lots of different states. They all have their own advantages and disadvantages. Here is a quick comparison of the different states and how they compare.
|State||LLC Filing Fee||LLC Annual/Biennial Fee||Corporate Tax Rate||Nominal GDP per capita|
|Georgia||$100||$50 (every year)||5.75%||$63,271|
|Florida||$125||$138.75 (every year)||5.50%||$56,301|
|Alabama||$200||$100 minimum (every year)||6.50%||$49,027|
|South Carolina||$110||$0 (no fee and no information report, unless LLC is taxed as an S-Corp )||5.00%||$52,031|
|US Average||$130.38||$89.34 (every year)||5.60%||$64,773.08|
As you can see, Alabama has one of the highest LLC filing fees and corporate tax rates. The cheapest location is South Carolina. The costs can also stack up.
You need to have a reserved name for your LLC, this can cost between $10 and $28. If you’re filing online, you will pay a higher price than the paper version. You will also need to pay a filing fee for approving and issuing the Certificate of Formation for your business. You can get the certificate done quicker for an additional $100.
Every LLC has to pay an annual minimum of $100 Business Privilege Tax, this is made payable to the Alabama Department of Revenue. There is also a $10 annual fee that needs to be paid when you file an annual report and there is also a fee if reapplication is required.
If you want to hire a professional service to help you start an LLC in Alabama, then your costs can increase by $150.
Steps on How to Start an LLC in Alabama
If you’re looking to start an LLC in Alabama, then you need to follow these instructions to help you start the business as an LLC in the state.
Step 1 – Pick a Name for your Company
The first thing that you need to do is to choose a name for your company. There are several ways that you can go out choosing a business name for you. However, you do need to comply with the naming requirements set by the State of Alabama. Some of those limitations that are included within the rules and guidelines:
Limited Liability Company, LLC or L.L.C. must be contained within the name.
The main elements of the name have to be unique and be significantly different from other business names which are registered with the Alabama Secretary of State’s Office. Words that are included in the names of government agencies cannot be used and the business name has to imply the purpose of the business.
When you have chosen a name that you feel is suitable for you and your brand, then you need to reserve the business name you want. To do this, you need to speak to the Alabama Secretary of State’s Office.
The first way to do this is to fill out a Name Reservation Request Form and mail it to the department. The process tends to take about a week. You can do this online, which tends to speed up the process.
Once the name has become reserved, you will get a notification. In Alabama, you can reserve a name for one year and then use it.
Step 2 – Find a Registered Agent In Alabama
Next, you need to find a registered agent in Alabama. These are an individual or entity who is authorized to be the central contact for the LLC. This agent needs to have an address within the state and be available during business hours to receive service of process, legal documentation, tax notices, summons, and other mail for the LLC. And you cannot use a PO Box.
Step 3 – Certificate of Formation
Now you need to complete the Certificate of Formation Form, which is also known as Articles of Organization. For this to happen you need to offer:
- LLC Name
- The name and address of the registered agent.
- The effective starting date of the LLC.
- Stating whether it is a series, professional or not-for-profit.
- The organizer’s signature.
- Any other specific elements that might need to be completed.
You should also attach the Name Reservation Certificate to the document.
The Effective Date section is an option and will depend on whether you wish to delay the start of their LLC. You should only do this if you’re not going to operate the business immediately and you need to avoid filing a tax return.
The Certificate of Formation can be completed in writing or you can complete the process online. If you are writing the document, it can be mailed to the Alabama Probate Court. When the document has been reviewed by the court, it will be forwarded to the Secretary of State for review and approval.
Once the approval has been completed, you can obtain a business license, Employer Identification Number, and a business bank account.
You will also need to sort out the NAICS documentation. This is a system used by the federal government to classify businesses and collect/analyze statistical data. These are then published to provide details on the business's economic performance. The NAICS is a six-digit code that characterized the business activity of the LLC.
Step 4 – Keeping LLC Records
When you’re an LLC business, there are certain documents that you must keep. These must be kept on-site or at the registered office at all times. Included with these documents should be:
- An updated list of names and addresses of the business manager and each team member.
- Copy of all LLC documentation and the executed powers of attorneys.
- Copies of the operating agreements and the applicable amendments.
- Copies of all financial statements for the past three years.
- Copies of local, federal, and state income tax returns, for the last three tax years.
Step 5 – Annual Requirements
Every year, the Alabama Department of Revenue will expect you to complete and file an Annual Report and pay the relevant taxes. The minimum tax that must be paid every year is $100, regardless of whether your corporation has any profits or not.
If your income is significantly high, then the state will determine what tax you must pay.
What Taxes are Payable in Alabama?
Numerous taxes are payable in Alabama. These taxes can seem confusing, so if you’re in any doubt, then you should speak to an accountant who is familiar with the applicable tax laws.
There is a flat rate of 6.5% corporate tax that is paid based on your taxable net income. There are also employer taxes that are required if you have any taxes.
There are also federal taxes that need to be paid by LLCs in Alabama.
How Long Does it Take to Register an LLC Business in Alabama?
The length of time that it takes to form an LLC business in Alabama depends on your method of submission. Those businesses that submit paper documents will have longer to wait for the business to be officially formed. However, those who are completing the documents online can have the process done much more quickly.
The downside of completing the paperwork online is that the cost is much higher. Therefore, you need to make budgets higher.
Regardless, you can expect that it will take between one and two weeks for you to form an LLC business.
What Happens After You Form an LLC Business in Alabama?
Once you’ve formed your business, you can start to operate it. However, it is very important that when marketing your business you should note that your business is an LLC. You need to display the relevant certificates and business numbers to ensure that all those who are thinking about doing business with you know you are an LLC.
However, the advantage of being an LLC in Alabama is that you’re more likely to be taken seriously by financial companies and find it easier for finding funding. And you can get better credit terms with suppliers.
An LLC business will also protect your assets from seizure should the business go into debt.
Final Word: How to start an LLC in Alabama
Above are the steps required and some tips on how to start an LLC in Alabama. You can follow these steps very easily and ensure that your brand is registered in the state with ease. If you have any questions, the best people to speak to us are the state department.