Have you made up your mind to jump into the waters of starting a business in the beautiful state of Alabama? Making a Limited Liability Company (LLC) is an option that most business people consider to be a legal middle ground between being a sole proprietor and a corporation. An LLC allows you to run a business without fear of personal losses or burdens, yet keeps your management needs simple.
In this detailed guide, we will explain in detail the procedure for forming your Alabama LLC. Once you know how to pick a name, we take you from paperwork filing to what else we have left. This guide is valuable for both experienced business owners as well as beginners as it is designed to provide the necessary information for a successful business establishment.
In this section, we will examine how to form an LLC in Alabama effectively.
Step 1: Decide on a Name for Your LLC
Please note it must be Original and Complying: This activity of wanting to form an LLC begins with the most critical step which is selecting a name that will be original and satisfy the requirements of the concerned state. Your LLC name shouldn’t have existed before in the records of Alabama. What is more, other than these limitations, Alabama law does not permit names that do not contain the phrase “Limited Liability Company” or its abbreviation “LLC/ L.C” or the euphemism “Business corporation”.
Check for Name Register of Your Organization: Before opting for a name, it is important to check that the name is not already in use by someone else. This can be done in the state of Alabama by visiting the secretary of state website where an internet database is provided to ascertain that the name you wish to use has not been registered before.
Reserve Your Name: If you verify that the name you would like is available to you, you are free to make the reservation so that it will not be claimed by people before you can go on with the approval process. You have the right to submit online or by mail a Name Reservation Request to the Alabama Secretary of State. This reservation lasts for one year and costs $28 when it is submitted on the Internet but only $10 when made using the postal service.
Step 2: Appoint a Registered Agent
Who can be a Registered Agent? Every LLC in Alabama must have a registered agent. They can be an individual “resident” of Alabama or a corporate or any other type of entity that is permitted to operate in that state. An ‘LLC registered agent’ would be the person who acts as the person who receives legal and official documents as well as state communication on behalf of your LLC.
Addresses Requirement: This principle means that the registered agent must have a street address in Alabama, which is not a post office. A P.O. Box is unacceptable. In the capacity because that fails to allow the registered agent to receive official documents themselves.
Step 3: File the Certificate of Formation
Prepare the Document: The Certificate of Formation is the most important document that is needed if someone wants to establish an LLC in Alabama. This document outlines a few important facts such as the name of the LLC, which is the name chosen by the members, the registered agent, and the business purpose of the operation. Furthermore, the details filled in that particular intercourse should be precise.
Submit the Form: After that, you can decide to file the Certificate of Formation online or through post to, the Alabama Secretary of State. It attracts a filing fee of $200 and it is advisable to always take a hasty copy of the filled form.
Additional Filing: Contrarily in some states, in Alabama almost all LLCs graving an original of Certificate of Formation and two copies must be filed with the local Probate Court where the LLC registered office address resides. This is an exception made to Alabama in that there is a supplementary this occurs here at the local authorities.
Step 4: Create an Operating Agreement
Not Legally Required: Alabama law does not legally require the LLC to have an operating agreement. However, it is advisable to have one to run the affairs of the business more efficiently.
Purpose of the Agreement: An operating agreement is for internal use only and contains the internal owners’ and managers’ structure and operating policies and procedures for the LLC. It is designed to avoid misunderstandings among the members on how business is to be run in terms of sharing profits, making decisions, and determining who does what among the members of the Company.
Step 5. Get ahold of an EIN
Employer Identification Number (EIN): In taxation, the two terms are used interchangeably but the Federal Tax Identification Number EIN is more widely used. It is also needed for opening a business bank account and employing workers.
Apply for an EIN: The process of applying for an EIN is simple and costless since it can be done online through the IRS website. A person who submits a completed application for an EIN thereby receives a number for many reasons including federal taxation and all activities associated with it.
Step 6: Comply with Alabama Tax and Regulatory Requirements
Business Privilege Tax: Every Alabama LLC is required by law to complete a Business Privilege Tax Return and pay the prescribed tax. The initial return is due within 2 months of incorporation and it is also required to be submitted every year. This tax ranges over upon the net worth of the corporation and it is primary if the LLC Tab in Washington is to be active.
Other Taxes: Further state taxes registration; sales tax, use tax, and employer taxes will be necessary other than the business income tax depending on registration. From the responses, it would seem wise to contact the Alabama Department of Revenue over the issues and challenges that may emerge.
Step 7: Annual Reporting and Maintenance
Annual Report: To be compliant with State laws, Alabama requires LLCs to submit an annual report to keep the LLC in good standing with the State. Information update covers the business operations which has changed during the financial year and will ensure the correction of all the changes in the records maintained by the state system to date.
File On Time: Every year there is a deadline for the filing of an annual report and it is best to meet the deadline to evade unnecessary penalties and remain in good standing for your LLC at all times. Noncompliance comes with more costs or may compromise your business’s legal standing.
Conclusion
In Alabama, you probably know that several sequential activities need to be undertaken to complete the process of forming an LLC legally. If you want to set up your LLC, do these steps, and you will not have to waste your time on anything else except business.
For specific inquiries or further information, it may be helpful to speak with an expert on the formation of Alabama LLCs. This extra help may prove to be essential in dealing with business law and management of your LLC.
Frequently Asked Questions (FAQs)
How long does it take to form an LLC in Alabama?
When filing for an LLC in Alabama, it generally takes about 1 to 2 weeks for your LLC to be processed and formed. Other methods speed up this processing period but at an extra cost.
Do I need an Operating Agreement for my LLC in Alabama?
There is no Operating Agreement legally enforced in Alabama but it is good practice. It outlines a definitive structure in the running of the LLC and helps in maintaining your limited liability.
Are individuals permitted to act as Registered Agents in the state of Alabama?
Yes. Given that you have a business address in Alabama and have proper business hours wherein you can receive important papers, you can choose to be your Registered Agent.
What are the recurring requirements of an LLC in the state of Alabama?
Every year, an Alabama LLC is expected to present a Business Privilege Tax Return and Annual Report. This report is used to announce any changes in contact and operating status of the LLC to the state. The fee comprised for filing the Business Privilege Tax varies depending on the earnings of the LLC.
Is it possible for a foreign LLC to do business in Alabama?
Yes, a foreign LLC can transact business in the state of Alabama although it has to be registered with Alabama’s Secretary of State. To be able to make such registration, the foreign LLC has to file an Application for Registration as well as enclose a Certificate of Existence from its state.
Nabin Adhikari
