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Whatever state you decide to start your LLC in, make sure to read the state-specific guidelines first. Every state has its own rules for LLC formation. Alabama is no exception. Learn how to set up your Alabama LLC below.
Step 1: Name Your Alabama LLC
Alabama requires that every business registered in the state have a name that’s distinguishable from other businesses registered in the state. This helps to avoid confusion. Also, the business name must include the phrase Limited Liability Company, L.L.C., or LLC. If you have a business name you want to use, the first step is to check if it’s available using the Secretary of State’s business entity search. You can search their online database via the “Entity Name” field to see if anyone else is already using the name in question. If your desired business name is free and you want to reserve it, you can do so by completing the business name registration form. Filing a paper copy costs $25 (you mail the document to the address listed on the form). If you file online through Alabama.gov, you’ll have to pay a filing fee of $28.00 as a non-subscriber or $27.00 if you have a yearly subscription to the portal.
Step 2: Select Your LLC’s Registered Agent
Every Alabama LLC must have a registered agent. This can be an individual person or business entity that’s allowed to do business in Alabama and has a registered office address in the state. The registered agent must have a physical street address; post office (P.O.) boxes aren’t permitted. You will designate your registered agent on the Certificate of Information (see the next step). If you need to change your registered agent or their contact details in the future, you’ll have to complete the Change of Registered Agent form and pay a $100 processing fee. Alabama’s Secretary of State provides a list of registered agent services. You can also consult our ranking of registered agent services for help.
Step 3: File the Alabama Certificate of Formation
To formally register an LLC to do business in Alabama, you’ll have to file the Certificate of Formation with the Secretary of State. The form will require you to provide information about your business like the name, registered agent name and contact information, and the type of LLC (series LLC, professional LLC, or non-profit LLC). You will also be asked to disclose if your business has more than 50 full-time employees who are permanent residents of the state; if your business is minority-owned; or if it’s woman-owned. You can opt out of responding to these questions. You can file the paperwork by mailing it to the address listed on the form. You’ll have to pay a $200 processing fee ($100 of that is a county fee, and $100 is a Secretary of State fee). Alternatively, you can file the form online via Alabama.gov, which will cost you $208.
Step 4: Write an Operating Agreement
An operating agreement is a document that provides information about an LLC’s structure and management. It’s signed by the LLC’s members (the owners), after which it can be seen as a legal contract binding the members to the operating agreement’s terms. In Alabama, LLCs are not required to have an operating agreement in place. However, we recommend drafting one anyway. An LLC can be a valuable point of reference in case of disputes with other LLC members.
Your operating agreement should cover essential points like:
- Each member’s ownership percentage, voting rights, and responsibilities opposite the LLC
- Any terms for transferring LLC shares, such as buy-out and buy-sell rules
- A description of how the LLC’s profits and losses will be distributed
Step 5: Get Your LLC an Employer Identification Number (EIN)
An EIN is sort of like a Social Security Number (SSN) except that it’s issued to a business instead of a person. The Internal Revenue Service (IRS) and other state and federal agencies use the EIN to identify your business on official paperwork, like tax filings. You’ll also need an EIN for hiring employees for your business. To get your EIN, all you have to do is apply online through the IRS website. The IRS issues EINs free of charge. Don’t fall for scams where companies or people charge you for an EIN (unfortunately, such frauds do exist). If you don’t want to apply for your EIN online, you can apply via mail or fax instead. International applicants also have the option to request their EIN over the phone.
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