How to Start an LLC in Alabama

The first step will be to decide on a name for your business. Choose a name that is memorable and unique, easy to understand and pronounce, and accurately represents your business. You'll want to search your name choices on the web to quickly find out if they are already taken. It's also best to jot down one or two alternatives, in case the name you settle on is not available for registration in Alabama.

There are a few rules that Alabama Limited Liability Companies must follow in order to register a name.

1. First and foremost, the name you choose must be unique and not "confusingly similar" to the name of any other Alabama business. This is to prevent fraud or misrepresentation and is a common rule in all 50 states.

   You can find out whether a name is available in Alabama by searching the Alabama business entity search tool for possible conflicts, but be sure to check variations or alternate spellings as well, otherwise your filing may be rejected.

   You can also use our business name search service, and we will do a more thorough search on your behalf and report back our findings. MyCorporation also include a business search for free when we complete your LLC filings for you.

2. Secondly, consider including a corporate indicator along with the name of your business. A corporate indicator a representation of the type of business entity you have filed, tacked on to the end of your business name. Example indicators that you can use include LLC, L.L.C. and Limited Liability Company. You cannot misrepresent your entity, for example an LLC cannot have Inc. included in the business name.
3. Your name can also not contain restricted words such as "bank", "trust", "trustee", "incorporated", "inc", "corporation", "corp", "insurer" or "insurance company".

You can learn more about how to choose a business name and other important information through the Alabama Secretary of State website.

There are two options to choose from when it comes to setting up your limited liability company in Alabama. "Member managed" or "manager managed". The first thing you need to know is that owners of any LLC are referred to as "members". A single member LLC has just one owner, while a multi-member LLC is an LLC owned by 2 or more members. Pretty simple, right?

Secondly, LLCs also must also designate one or more individuals to manage the day to day operations of the business. This can be handled by one of the members of the business (member managed, the most popular choice and the default in most states), or a professional manager appointed by the members to act on their behalf (manager managed).

While the differences are subtle, what you really need to know is that each member in a member managed LLC has the power to make decisions for the business. However, in a manager managed LLC, the members choose who will manage the business and relinquish all of the decision making to the manager chosen. The person chosen can be one of the members of the business as well, or it can be someone else entirely.

Most states require that you designate a registered agent for your business, and Alabama is no exception. A registered agent acts as the state's means to communicate with a business and is responsible for receiving legal and official documents related to the business.

A registered agent can be anyone you wish, with one small caveat. The registered agent must have a physical address in Alabama. In other words, a P.O. Box is not allowed as a registered agent address. This means a member of the LLC can act as the registered agent if desired, or a third-party registered agent service like MyCorporation can be used.

Why designate a third party to act as my registered agent?

One thing to note about the registered agent information is that it is publicly available. This can cause privacy concerns for business owners who do not wish to list their personal contact information on the internet for everyone to see. It is also common for the registered agent to become a target of spam or robocalls since this private information is relatively easy to obtain.

Another issue that may arise is that in the case of a lawsuit, these documents would be hand delivered directly to the registered agent, and in the case that you used your business location for this purpose, this could occur in front of your customers. This is why many business owners opt for a third-party registered agent service such as MyCorporation to act as a registered agent on behalf of their business.

The state of Alabama requires you to file Articles of Organization in order to form an LLC. This document includes basic information about the Alabama LLC such as:

• Name of the Alabama limited liability company
• A copy of the name reservation certificate from the Office of the Secretary of State (attached)
• Name of the registered agent and street and mailing address
• Check only if the type applies to the LLC being formed (Series LLC or Professional LLC)
• Effective date of the LLC filing
• Any other matters the members determine to include must be attached
• Signature, typed name, typed title, and date

A filing fee of $100 must be made payable through check or money order to the Secretary of State. Expedited service is available for $200 and processed within three days after date of receipt from the County Probate Office.

After formation, the state of Alabama requires an LLC to create an operating agreement. This agreement needs to be written and should be kept with the company's records. In order to open a bank account for your business, you will often be required to submit both your operating agreement, and your EIN number.

What kind of information needs to be included in an Alabama operating agreement?

Operating agreements are required in Alabama and are important to laying the foundations of a properly run business. An operating agreement sets guidelines for the way your business operates now and into the future. Common details in an operating agreement include the following:

• Basic contact details: The name of the LLC, the address of the principal business location and often, the registered agent address.
• Business purpose: This is a basic one sentence description that details what kind of business your LLC does. It is often a very general description, which creates a bit more flexibility as the business matures.
• Tax structure: This indicates the way the LLC will choose to be taxed. The primary options include being taxed as a sole proprietor or a partnership (both pass-through options) or to be taxed as a corporation (which requires filing for an S Corporation election).
• Ownership and management: This section lays out the general rules about how the business will operate day to day. This refers to step 3, where you determined whether your business would be "manager managed" or "member managed." As mentioned earlier, member managed is the most common choice. If you are unsure of which type of ownership to choose, member managed is a pretty safe bet.

The state of Alabama requires an LLC to create an operating agreement at the time of formation. The agreement can be oral or written, and should be kept with the company's records. In order to open a bank account for your business, you will often be required to submit both your operating agreement, as well as your EIN number.

What kind of information needs to be included in a Alabama operating agreement?

Operating agreements while not required, are an import part to laying the foundations of a properly run business. An operating agreement sets guidelines for the way your business operates now and into the future. The most common details included with an operating agreement are:

• Basic contact details: The name of the LLC, the address of the principal business location and often, the registered agent address.
• The business purpose: This is a basic one sentence description of what kind of business your LLC will do, and is often a very general description, which creates a bit more flexibility as the business matures.
• Tax structure: Often this indicates the way the LLC will choose to be taxed. The main options are to be taxed as a sole proprietor or a partnership ( both pass through options ) or to be taxed as a corporation ( requires an S Corp Election to be filed )
• Ownership and management: This section lays out the general rules about how the business will operate day to day. This refers to step 3, where you determined whether your business would be "manager managed" or "member managed". As mentioned before, member managed is the default and the most common choice. If you are unsure, member managed is a pretty safe bet.

In Alabama, state and county business privilege licenses are issued through the local county probate offices. These offices provide businesses with new licenses, renewals of licenses, transfers of licenses, copies of licenses, and any other changes to the license. For more information about the business licenses and permits your business needs, check in with the Alabama Department of Revenue.

In the event that you need a bit of help, you may also turn to MyCorporation's business license compliance package. Our skilled professionals will do the work for you. We identify all of the licenses required by your business and provide you with the information you need in order to file.

An EIN (also called a Federal Tax Id) is a nine-digit number that is issued by the IRS and used to uniquely identify your business for tax purposes. Think of it as a Social Security Number (SSN) for your business, except an EIN is far less sensitive. It is important to wait until the LLC has been approved by the state before applying, and for that reason, filing for an EIN is one of the last things to do when you are setting up a business.

Like a social security number, the EIN allows you to:

• Open business checking, savings, or investment accounts
• File taxes for the business
• Complete payroll for employees if applicable
• Obtain lines of credit and credit cards, as well as "build credit" for your business
• Apply for applicable business licenses when required.

You only need a few pieces of information to file including your mailing address and legal business name. You can apply online with the IRS by downloading IRS Form SS-4 (PDF)(116 KB), or work alongside a third party organization like MyCorporation to complete an EIN application.