Starting an LLC in Alabama takes $200 in state filing fees plus a $25–$28 name reservation, and the whole process runs through the Secretary of State’s online portal. Alabama is one of the few states that requires you to reserve your business name before filing your formation paperwork, which adds a step most other states skip. Below is how the process works from name search through your first tax filings.
Choose and Reserve Your Business Name
Your LLC name has to include the words “Limited Liability Company” or the abbreviation “L.L.C.” or “LLC,” and it has to be distinguishable from every other entity already registered in Alabama.1Alabama Legislature. Alabama Code 10A-1-5.06 – Name of Limited Liability Company or Foreign Limited Liability Company Search the Secretary of State’s online business entity database first to confirm availability before you pay the reservation fee.
Avoid names that suggest a business type you won’t actually conduct or that mimic a government agency. If you want to operate under a different trade name later, that’s a separate “doing business as” registration after formation.
Alabama requires a Name Reservation Certificate before it will accept your Certificate of Formation. The Secretary of State will not process formation paperwork without the reservation attached.2Secretary of State of Alabama. Domestic Limited Liability Company (LLC) Certificate of Formation The fee is $25 by mail or $28 online.3Alabama Secretary of State. Fee Schedule Once approved, the state holds your name for up to one year or until you withdraw it, whichever comes first.4Alabama Legislature. Alabama Code 10A-1-5.14 – Duration of Reservation of Name File your formation documents well inside that year so you don’t have to pay for a second reservation.
Appoint a Registered Agent
Every Alabama LLC must designate a registered agent to accept lawsuits and government notices. The agent needs a physical street address in Alabama where someone can be personally served during normal business hours. A mailbox service or answering service doesn’t qualify as a registered office.5Alabama Legislature. Alabama Code 10A-1-5.31 – Designation and Maintenance of Registered Agent
You can be your own registered agent if you have a qualifying address and are available during the day. Many owners hire a professional service instead, which keeps a home address off public records and guarantees someone is on hand to accept service. If the agent’s address changes later, they can file a statement of change with the Secretary of State.6Alabama Legislature. Alabama Code 10A-1-5.33 – Notice by Registered Agent of Change of Registered Agent’s Name or Address
File the Certificate of Formation
The Certificate of Formation is the document that legally creates your LLC. Download the standardized form from the Secretary of State’s Business Downloads page or file through the state’s online portal.7Alabama Secretary of State. Business Downloads You’ll need:
- The LLC name, matching your Name Reservation Certificate (which you’ll attach)
- The registered office street address in Alabama, including the county
- The registered agent’s name
- A statement confirming the LLC has at least one member
- The names and addresses of the organizers filing the document (organizers don’t have to be members or managers)
The form also asks whether the LLC is member-managed or manager-managed. In a member-managed LLC, all owners run the business. In a manager-managed LLC, one or more designated managers (who may or may not be members) handle operations. Pick the structure that matches how you actually plan to operate. Most single-owner LLCs default to member-managed.8Alabama Legislature. Alabama Code 10A-5A-2.01 – Formation
The filing fee is $200.3Alabama Secretary of State. Fee Schedule Online filings usually process within a few business days; mailed filings take longer. Once approved, you’ll receive a stamped copy of the Certificate of Formation as official proof the LLC exists.
Get an EIN From the IRS
After formation, apply for an Employer Identification Number. This nine-digit federal tax ID is what you’ll use to open a business bank account, file tax returns, and hire employees.9Internal Revenue Service. Employer Identification Number The application is free at irs.gov and issues your EIN immediately upon completion. A single-member LLC with no employees isn’t always required to have one for federal tax purposes, but nearly every bank demands one to open a business account, so treat it as non-optional.
Write an Operating Agreement
Alabama doesn’t require you to file an operating agreement with any state agency, but drafting one is the most important thing you can do after formation. This internal document spells out ownership percentages, how profits and losses are split, voting rights, and what happens if a member leaves or dies. Without one, Alabama’s default LLC rules fill in the blanks, and those defaults rarely match what the owners actually intended.
Even a single-member LLC benefits from an operating agreement. It reinforces the separation between you and the business, which is the liability protection you formed the LLC to get in the first place. Courts are more likely to respect the LLC’s separate existence if you treated it like a real business from day one. A solid agreement should also cover how new members can be admitted, how disputes are handled, and the specific duties of any managers.
Choose a Federal Tax Classification
By default, the IRS treats a single-member LLC as a disregarded entity (taxed like a sole proprietorship) and a multi-member LLC as a partnership. All business income passes through to the owners’ personal returns. For many small LLCs, the default works fine.
To be taxed as an S-corporation, file IRS Form 2553. Filing that form counts as an automatic election to be treated as a corporation, so you don’t need to file anything else first. To be taxed as a C-corporation instead, file Form 8832.10Internal Revenue Service. Form 8832 Entity Classification Election Once you make either election, you generally can’t change it again for 60 months.
S-corp status can reduce self-employment taxes if you pay yourself a reasonable salary, but the actual savings depend on income and payroll costs. These elections also change your quarterly estimated tax obligations, payroll responsibilities, and accounting workload. Talk to a tax professional before you switch off the default; the self-employment tax savings can disappear once payroll processing and reasonable compensation rules are factored in.
File the Initial Business Privilege Tax Return
Alabama imposes a Business Privilege Tax on most entities doing business in the state. New LLCs must file Form BPT-IN, the initial privilege tax return, within two and a half months of formation, with no extensions available.11Alabama Department of Revenue. Alabama Business Privilege Tax Form an LLC on June 1 and the initial return is due August 15.
The tax is based on your LLC’s net worth in Alabama, with rates from $0.25 to $1.75 per $1,000 of net worth depending on federal taxable income.12Alabama Department of Revenue. Business Privilege Tax The maximum tax is $15,000 for most entities. For taxable years beginning after December 31, 2023, there is a full exemption if the calculated tax is $100 or less, which means most brand-new LLCs with minimal net worth won’t owe anything on their first return.11Alabama Department of Revenue. Alabama Business Privilege Tax Check the current year’s instructions on the Department of Revenue website to confirm whether you need to file at all.
The privilege tax becomes annual after the initial return. If you owe $750 or more, payment must be made electronically, and substantial penalties apply for missing that electronic payment requirement.13Alabama Department of Revenue. BPT-V 2025 Business Privilege Tax Payment Voucher
Register for Local and Occupational Licenses
State formation is only half the picture. Alabama municipalities have broad authority to require a business license before you operate within city limits.14Alabama Legislature. Alabama Code 11-51-90 – Municipal Business Licenses Contact the city clerk or business license office in every municipality where the LLC will do business. Fees and renewal schedules vary by city, and some also charge a local gross receipts tax.
Certain professions need state-level occupational licenses on top of any city permit. Alabama regulates dozens of fields, including contractors, real estate agents, cosmetologists, engineers, pharmacists, funeral directors, electricians, and private investigators.15Alabama Department of Revenue. Boards and Agencies Requiring Permits/Certificates/Licenses Each has its own licensing board with separate applications and fees. Verify with the relevant board before you start operating in a regulated industry.
Sales Tax and Employer Registrations
If your LLC sells tangible goods or certain services, you need a sales tax license from the Alabama Department of Revenue. Register through the My Alabama Taxes (MAT) portal at myalabamataxes.alabama.gov; the license is mailed after your application is processed.16Alabama Department of Revenue. How Do I Obtain or Register for a Sales Tax License
Planning to hire employees adds two more registrations. Open an unemployment tax account with the Alabama Department of Labor by submitting Form SR-2 as soon as you establish liability.17Alabama Department of Labor. How Does My Business Register as a New Employer Then register for state income tax withholding through the same MAT portal you used for sales tax.18Alabama Department of Revenue. Withholding Tax Both registrations need to be in place before your first employee’s start date.
What It Actually Costs
Here’s the cash outlay to get a basic Alabama LLC running:
- Name reservation: $25 by mail or $28 online
- Certificate of Formation: $200
- EIN: free from the IRS
- Initial Business Privilege Tax: $0 if the calculated tax is $100 or less, otherwise based on net worth
- Municipal business license: varies by city
The minimum out-of-pocket cost paid to the state is $225 to $228, not counting professional services like a registered agent or legal help drafting an operating agreement. Budget for your city’s business license fee too. Some municipalities charge as little as $10, while others run several hundred dollars depending on projected revenue and industry.