How to Form an LLC in Alabama

Filing fee: $200 (Certificate of Formation) + $28 (name reservation)

Processing time: Immediate for online filings through Alabama Interactive

State agency: Alabama Secretary of State, Business Services Division

Annual report due: No annual report required as of October 1, 2024 (Alabama Act No. 2024-213). Alabama Business Privilege Tax return due April 15 each year.

State tax rate: Alabama Business Privilege Tax applies; no state-level LLC income tax on pass-through income

Forming an LLC in Alabama takes 5 steps: reserve your business name with the Secretary of State, appoint a registered agent with a physical Alabama address, file a Certificate of Formation online or by mail, draft an operating agreement, and get an Employer Identification Number (EIN) from the IRS. The state filing fee is $200.

Why form an LLC in Alabama

Alabama offers low sales and income tax rates, affordable operating costs, and a range of tax incentives that make it a practical state for small business owners. An LLC gives you personal liability protection and pass-through taxation without the administrative overhead of a corporation — a combination that works well for most Alabama entrepreneurs.

Alabama also eliminated its annual report requirement for LLCs as of October 1, 2024, which reduces ongoing compliance work compared to many other states. You'll still need to file an Alabama Business Privilege Tax return each year, but the paperwork burden is lighter than it used to be.

Step 1: Reserve your LLC name

Alabama requires you to reserve your LLC name before — or as part of — filing your Certificate of Formation. You can do this online through the Secretary of State's Name Reservation system. The fee is $28, payable by credit card, and the reservation is issued immediately. A reserved name is valid for 365 days.

Your LLC name must be distinguishable from other registered businesses in Alabama and must include a designator like "Limited Liability Company," "LLC," or "L.L.C." Check the Secretary of State's business name database before you apply to avoid a rejection.

Step 2: Appoint a registered agent

Every Alabama LLC must have a registered agent — a person or entity designated to receive legal notices and government documents on behalf of the business. The agent must have a physical street address in Alabama (a P.O. box doesn't count) and be available during regular business hours.

You can serve as your own registered agent if you have a physical Alabama address and can be there during business hours. Many business owners use a professional registered agent service instead — it keeps your personal address off public records and ensures someone is always available to receive documents.

Step 3: File your Certificate of Formation

The Certificate of Formation is the document that legally creates your Alabama LLC. You file it with the Alabama Secretary of State, Business Services Division. Online filing through Alabama Interactive is the fastest option — processing is immediate. You can also mail a paper form, though that takes longer.

The Certificate must include your LLC's name (matching the reserved name), the Name Reservation Certificate, your registered agent's name and Alabama street address, and a statement that the LLC has at least 1 member. The state filing fee is $200.

Step 4: Create an operating agreement

Alabama doesn't require you to file an operating agreement with the state, but you should have one. It's the internal document that defines how your LLC is managed — who owns what, how profits are distributed, and how decisions get made. Without one, Alabama's default LLC statutes fill in the gaps, which may not reflect what you actually want.

Your operating agreement should specify whether the LLC is member-managed or manager-managed. In a member-managed LLC, all owners share day-to-day authority. In a manager-managed LLC, a designated manager handles operations while other members retain economic rights. Alabama law permits oral agreements, but a written agreement is the only version that holds up when disputes arise.

Step 5: Get your EIN

An Employer Identification Number (EIN) is a 9-digit federal tax ID issued by the IRS. Your Alabama LLC needs one to open a business bank account, hire employees, and file federal taxes. Applying online at irs.gov is free and issues your EIN immediately after you complete the application.

To use the IRS online application, the responsible party must have a valid Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN), and the business must have its principal place of business in the United States. The IRS does not charge a fee for issuing an EIN.

Ongoing compliance in Alabama

Alabama eliminated its annual report requirement for LLCs on October 1, 2024, under Alabama Act No. 2024-213. That's one less filing to track each year. However, most Alabama LLCs are still subject to the Alabama Business Privilege Tax and must file a return with the Alabama Department of Revenue by April 15 each year.

Missing the Business Privilege Tax deadline can put your LLC out of good standing with the state, which can affect your ability to do business in Alabama. A tax professional can help you figure out whether your LLC is subject to the tax and what you owe.