How to Start Your Own LLC in Alabama

This detailed, step-by-step guide walks you through exactly how to form an Alabama LLC, from selecting a business name to staying compliant after registration.

1. Name Your Alabama LLC

Choosing the right business name is one of the most important decisions in the LLC formation process. Your name represents your brand identity and is often the first impression customers have of your business.

How to Choose a Business Name

You can approach naming your LLC in several ways:

• Define Your Business Concept: Clearly understand what products or services your business will offer before deciding on a name.
• Ask for Feedback: Get suggestions and opinions from trusted friends, family members, or colleagues.
• Conduct Online Searches: Check if your desired name has an available domain name and social media presence.
• Use Online Name Generators: These tools can spark ideas, but they shouldn't replace thoughtful decision-making.

Your LLC name should be unique, memorable, and legally compliant.

Check Name Availability in Alabama

Search the Alabama Secretary of State Business Entity Database to confirm that your desired name is not already in use. You should also look for names that are too similar, as Alabama may reject names that could cause confusion.

Alabama LLC Naming Rules

Under Alabama law, your LLC name must:

• Include "Limited Liability Company" or an abbreviation such as LLC or L.L.C.
• Not imply affiliation with a government agency
• Not include restricted words such as bank, insurance, trust, or university unless proper approval is obtained
• Be distinguishable from other registered businesses in the state

Check Federal Trademarks

Before finalizing your name, search the U.S. Patent and Trademark Office (USPTO) database to ensure the name isn't federally trademarked.

How to File an Alabama LLC Name Reservation

Alabama requires name reservation before formation. Visit the Alabama Secretary of State's Business Services website.

Click "Reserve an Entity Name" and select "Name Reservation". Review filing instructions and fees, then complete the online or paper application.

Doing Business As (DBA) / Trade Name

If you plan to operate under a different name than your legal LLC name, you must register a trade name (DBA).

Why Use a DBA? To operate multiple brands under one LLC or to accept payments and open bank accounts under a different business name.

Example: "JJ's Waffles LLC" can register "JJ's Muffins" as a DBA.

To register a trade name, download the Trade Name Application from the Secretary of State, submit proof of name usage (specimens), and pay the filing fee.

2. Select a Registered Agent

Alabama law requires every LLC to appoint a registered agent. This person or company receives legal notices, tax correspondence, and official state documents on behalf of your business.

Registered Agent Requirements

The registered agent must:

• Be 18 years or older
• Have a physical street address in Alabama
• Be available during regular business hours
• Be authorized to do business in Alabama (if an entity)

You may act as your own registered agent, but many business owners hire professional services for privacy and convenience.

3. Determine Your Management Structure

Alabama LLCs can be managed in two ways:

Member-Managed LLC

• All members participate in daily operations
• Best for small businesses with few owners

Manager-Managed LLC

• Members appoint one or more managers
• Ideal when some owners are passive investors
• Managers may or may not be members

If no structure is specified in the Certificate of Formation, Alabama defaults to member-managed.

4. File a Certificate of Formation with the State of Alabama

To officially form your LLC, you must file a Certificate of Formation with the Alabama Secretary of State.

• Required Information
• LLC name
• Principal office address
• Registered agent name and address
• Registered office address
• Organizer contact information

Filing Fees

• Certificate of Formation: $200
• Name reservation: $25–$28
• Online processing fee: ~$11

Processing Time

• Online filings: typically processed quickly
• Mail filings: up to 2–3 weeks

5. Draft an LLC Operating Agreement

Although Alabama does not legally require an operating agreement, having one is strongly recommended.

What an Operating Agreement Covers

• LLC name and principal address
• Ownership percentages
• Management and voting rights
• Profit and loss distribution
• Procedures for adding/removing members
• Dispute resolution rules
• Record-keeping requirements

An operating agreement helps prevent disputes and strengthens liability protection, even for single-member LLCs.

6. Obtain an Employer Identification Number (EIN)

An EIN is issued by the IRS and functions like a Social Security number for your business.

An EIN is required if:

• Your LLC has more than one member
• You hire employees
• You elect corporate taxation

You can apply for an EIN free through the IRS website.

7. Obtain Business Licenses and Permits

Your LLC may need licenses or permits at the federal, state, county, or city level, depending on your industry.

Common Licenses & Permits

• Sales tax license (seller's permit)
• Professional or industry licenses
• Health and safety permits
• Zoning and building permits
• Fire and signage permits

Operating without proper licenses can result in fines or shutdowns.

8. Choose Your Tax Status

By default, Alabama LLCs are pass-through entities.

Default Taxation

• Single-Member LLC: Taxed as a sole proprietorship
• Multi-Member LLC: Taxed as a partnership

Optional Corporate Tax Elections

• C-Corporation: Subject to corporate income tax (21%) with possible double taxation
• S-Corporation: Allows salary + distributions, reducing self-employment taxes (must meet IRS requirements)

Other Important Alabama LLC Requirements

Open a Business Bank Account

Separating business and personal finances is essential to maintain liability protection.

Apply for a Business Credit Card

Helps build business credit and manage startup expenses.

Obtain Business Insurance

Common policies include:

• General liability
• Professional liability (E&O)
• Workers' compensation
• Property and equipment coverage
• Commercial auto insurance
• Business Owner's Policy (BOP)

Maintain Records

Keep:

• Certificate of Formation
• Operating agreement
• Tax filings
• Licenses and contracts

Business Privilege Tax & Annual Filing

Alabama LLCs must file a Business Privilege Tax Return each year with the Alabama Department of Revenue.

• Minimum tax usually starts around $50–$100
• Filing deadline: 2½ months after the beginning of the tax year

Alabama no longer files a separate "annual report" with the Secretary of State — it is handled through the tax filing.

Alabama LLC FAQs