Key Considerations When Starting an LLC in Alabama

Forming a limited liability company (LLC) in Alabama requires careful attention to legal obligations to ensure proper formation and compliance with state laws.

This Best Financial article outlines key considerations, such as naming conventions, filing requirements, and tax registration, providing essential guidance to help you navigate the process and establish your business correctly.

Short on time? Here are the key takeaways

• In Alabama, you must name your organization correctly, file a certificate of formation, and register for state taxes.
• Consulting a lawyer or financial advisor is crucial to understanding your legal obligations when establishing an LLC.

Setting up a limited liability company (LLC): The basic steps

LLCs are a popular business structure offering pass-through taxation and protection from personal liability. LLC formation laws vary between states.

The general steps to form an LLC in Alabama are as follows:

1. Choose a unique name. Check whether your business name is already in use by searching the Secretary of State’s business entity records.
2. File articles of organization. You can file this document online or by mail with the Secretary of State’s office.
3. Create an operating agreement. Unlike California, operating agreements aren’t mandatory in Alabama but are strongly recommended to protect your business and its owners.
4. Obtain necessary licenses and permits, including a business license. See the Department of Revenue’s (DOR) quick reference guide for licensing information.
5. Apply for an employer identification number (EIN).
6. File a beneficial ownership information (BOI) report within 90 days.

Specific laws and regulations you must consider when starting an LLC in Alabama

Setting up an LLC in Alabama involves navigating specific laws and regulations to ensure your business is compliant from the outset.

Business name

In Alabama, your business name:

• Must include “limited liability company,” “LLC,” or “L.L.C.”
• Mustn’t include terms associated with government agencies, such as “State Department.”
• Can’t suggest your company offers products or services it doesn’t.

Your business name must be unique. If the name is available, file a name reservation request form. This costs $28 online and $25 via post.

Certificate of formation

In Alabama, articles of organization are called a certificate of formation. The filing fee is $200 ($208 online), which is slightly higher than the average but less than Massachusetts’s $500 charge.

Alabama recognizes special statuses for specific types of LLCs, including series LLCs, professional LLCs, and non-profit LLCs.

Registered agents

Your LLC must have a registered agent (also referred to in other states as an agent for service of process) with a physical address in Alabama to receive financial and legal documents. If your registered agent is an individual, they must be over 18. This agent can be an LLC member if they reside in the state.