How to Form an LLC in Alabama | 2025 Guide

Alabama has a thriving small business sector—in fact, it’s estimated that there are more than 449,000 small businesses in the state, accounting for 99.4% of all Alabama businesses and employing approximately 46.7% of the workforce.¹

Combined with historic levels of capital investment coming into the state in 2024, Alabama stands out as a top destination for business growth and opportunity.² This guide explores the step-by-step process of starting an LLC, so you can take advantage of all the state has to offer. We'll also discuss the Wise Business account. The global account that can help your company with all things cross-border.

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How to Form an LLC in Alabama (Step-by-Step)

The formation process for an Alabama LLC is straightforward but as always, it’s important to pay careful attention to state-specific rules. Here are the key steps:

Step 1: Choose Your LLC Name and Reserve It

Your business name will need to be unique and compliant with Alabama’s naming guidelines. That means it must include “Limited Liability Company,” “LLC,” or “L.L.C.,” and be distinguishable from existing business entities registered with the Business Entities Division of the Alabama Secretary of State.

Before filing, you’ll have to get a Name Reservation Certificate by submitting a Name Reservation Request Form. This certificate is valid for one year, and it costs $25 ($28 if filed online).³

Step 2: Appoint a Registered Agent

Every Alabama LLC needs a registered agent with a physical address in Alabama.⁴ This agent receives legal documents and official notices on behalf of your LLC.

You can act as your own agent as long as you have an Alabama address. Other options include appointing another individual or hiring a registered agent service.

Step 3: File the Certificate of Formation

In Alabama, the Certificate of Formation acts similarly to the Articles of Organization seen in other states. It’s the legal document that officially creates your LLC.

File this document with the Alabama Secretary of State. The form requires your LLC name, address, registered agent information, and your Name Reservation Certificate. The filing fee is $200 by mail or $208 online, and you can use a credit card payment for online filings.⁵

Step 4: Draft an Operating Agreement

Alabama doesn’t require an operating agreement, but it’s highly recommended. This internal document outlines how your LLC will conduct business, manage finances, and resolve disputes.

Multi-member and single-member LLCs need to protect personal assets and clarify management roles.

Step 5: Get an EIN and Open a Business Bank Account

Apply for an Employer Identification Number (EIN) from the Internal Revenue Service. Not only is it necessary for opening a business bank account, but it also allows you to hire employees and file taxes.

Most banks will require your EIN, Certificate of Formation, and operating agreement to open your account. This key step ensures your business and personal finances remain separate.

Step 6: Secure Necessary Business Licenses

All Alabama LLCs need a Business Privilege License from each county where they operate.⁶

Also, depending on your industry, you may need to apply for additional state or local licenses and permits.

Step 7: File the Alabama Business Privilege Tax Return

Within 2.5 months of formation, file the Initial Business Privilege Tax Return (Form BPT-IN) with the Alabama Department of Revenue.

Every year, you’ll also need to file the annual Business Privilege Tax Return (Form PPT) and renew your Business Privilege License.⁷

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What Are The Business Requirements For An Alabama LLC?

Alabama LLCs must meet several documentation and compliance requirements.

• A Name Reservation Certificate to file the Certificate of Formation.
• Find a registered agent with a physical address in Alabama to submit this form.
• Attain a Business Privilege License for every county of operation.
• File the Annual Business Privilege Tax Return to maintain good standing.

What Are The Benefits Of Starting An LLC In Alabama?

One of the most significant benefits is the limited liability protection provided by the state of Alabama. As a result, your personal assets are shielded from business debts and lawsuits.

Also, Alabama LLCs enjoy flexible taxation options. Since they’re taxed as pass-through entities, profits are taxed only at the individual member level, avoiding double taxation. Plus, you can choose to have your LLC taxed as a corporation if it suits your business needs.

How Much Does It Cost To Start An LLC In Alabama?

Here’s a breakdown of common LLC filing and ongoing fees in Alabama:

Name Reservation Certificate	$25 by mail, $28 online
Certificate of Formation	$200 by mail, $208 online
Registered Agent Service	$100-$300 annually (optional)
Operating Agreement	$0-$199 (optional)
EIN	Free from the IRS
Business Privilege Tax	Minimum $50 annually (based on net worth)
Business Privilege License	Varies by county and business type
Certificate of Compliance	$14 (optional)

At minimum, it’ll cost $225 to start an LLC in Alabama, including the Reservation Certificate and Certificate of Formation. Depending on your industry and location, however, you may incur additional costs and fees.

Can I open an LLC in Alabama without living there?

Yes, you can form an Alabama LLC even if you don’t live in the state. Alabama doesn’t require LLC members or managers to be residents. However, you’ll need to appoint a registered agent with a physical address in Alabama to receive legal documents. Many nonresidents use a registered agent service to fulfill this requirement.

Can a nonresident open a company in Alabama?

Yes. Nonresidents and foreign nationals can form an LLC in Alabama. The process is the same as for residents, but you’ll need a registered agent in the state. Also, you may need an Individual Taxpayer Identification Number (ITIN) from the IRS if you don’t have a Social Security Number.

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Comparison with other states

If you have your heart set on forming your LLC in the American Southeast, take a look at this quick comparison to see how Alabama stacks up with some of its neighbors.

Feature	Alabama	Tennessee	Mississippi	Georgia
Filing Fees	$200	$300	$50	$100
Annual Report Fee	$10 (with BPT Return)	$300	$25	$50
Privacy	Standard	Standard	Standard	Standard
Tax Environment	Business privilege tax (min. $50); pass-through taxation; 6.5% corporate tax 8	Franchise tax ($100 min.); pass-through taxation; 6.5% corporate tax 9	Franchise tax ($25 min.); pass-through taxation; 5% corporate tax 10	No franchise tax; pass-through taxation; 5.75% corporate tax 11
Best For	Asset protection, low annual fees, new business owners	Established businesses, strong state economy	Cost-conscious startups, simple compliance	Growing businesses, tech startups

Alabama stands out for the fact that its annual report fee is filed with the Business Privilege Tax Return, not as a standalone report. Unlike Tennessee and Mississippi, it doesn’t require both franchise and annual report fees.

FAQ: Alabama LLC

Privacy protections for Alabama LLCs

Alabama LLCs offer some privacy, but the names and addresses of members and managers are generally part of the public record. However, using a registered agent service can help keep your personal address off state filings.

Why do people use Alabama for LLC?

Business owners choose Alabama for its straightforward formation process, low minimum tax, and flexible management structure. The state’s relatively low filing fees and absence of an annual report requirement make it attractive for new business owners and those seeking to minimize paperwork.

Is an Alabama LLC tax-free?

No, Alabama LLCs aren’t tax-free. While LLCs benefit from pass-through taxation, the state requires an annual Alabama Business Privilege Tax, with a minimum tax of $50. LLCs also need to pay income tax on profits distributed to members.

What are the disadvantages of an Alabama LLC?

Drawbacks include the annual business privilege tax, the business privilege tax return, and the business license requirement for every county where the LLC operates. Also, Alabama doesn’t offer the same level of privacy as “anonymous LLC” states like Delaware or Wyoming.

The Bottom Line

There are a couple of unique requirements associated with forming an LLC in Alabama that set the state apart. Notably, you’ll need to get a Business Privilege License in every county where your company operates, and you’ll need to file a Business Privilege Tax Return each year to maintain your LLC’s good standing.

Aside from these extra steps, the process isn’t very complicated. Initial filing fees are moderate compared to other states, and ongoing annual costs remain relatively low. As long as you stay on top of these requirements, you’ll be set up for long-term success in this business-friendly state.

Learn How to Form an LLC in State
Alaska
Georgia
Hawaii
Florida

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**Sources:**

1. Small Business Saturday giving shoppers across the state opportunity to invest in their communities
2. New & Expanding Industry Announcements
3. Organizing Your Domestic Limited Liability Company or Registering Your Foreign Limited Liability Company
4. Organizing Your Domestic Limited Liability Company or Registering Your Foreign Limited Liability Company
5. Domestic Limited Liability Company (LLC) Certificate of Formation
6. Business Privilege License
7. Alabama Business Privilege Tax
8. Alabama Business Privilege Tax
9. Franchise & Excise Tax
10. Corporate Income and Franchise Tax FAQs
11. LLC Annual Report and Tax Filing Requirements in Georgia