Many Alabama entrepreneurs choose to form a limited liability company (LLC) because of the many benefits of this business entity type. An LLC provides liability protection, for instance, so your assets are not at risk if your business is sued or you cannot pay debts.
An LLC is a “pass-through entity” for tax purposes, meaning that the LLC itself is not taxed. Instead, income passes through the business to the LLC owners or members, who report it on their tax returns. LLCs also offer flexibility in terms of management and taxation.
Creating an LLC is relatively straightforward, but ensuring it’s done correctly is crucial to getting your Alabama business on the right foot. The most critical step is filing a certificate of formation.
What Is a Certificate of Formation for an LLC?
The certificate of formation, called articles of organization in most states, is a legal document filed with the Alabama Secretary of State to form an LLC officially. It will include your business name, address, registered agent information, and more, as detailed below.
First, Select a Registered Agent for Your Alabama LLC
Alabama requires LLCs to appoint a registered agent, a person or company authorized to accept and respond to official business correspondence, such as legal, tax, or financial documents.
The registered agent ensures all required notices and documents are received. In Alabama, the registered agent can be an LLC member, individual, or entity that meets state requirements. In Alabama, a registered agent must:
- Be 18 years or older
- Have a physical address in the state
- Be available during regular business hours
- Be registered to operate in the state, if it’s a business
Many business owners hire a registered agent service to ensure their LLC stays fully compliant and for convenience.
If you choose to be your registered agent, you must be at your registered agent’s address for all business hours. A registered agent service allows you to be wherever you need to be to run and grow your business.
How to Submit a Certificate of Formation in Alabama
To start, visit the Alabama Secretary of State to access the certificate of formation online.
In Alabama, the certificate of formation requires the following information:
- Contact information
- LLC name
- Principal office address
- Registered agent information
- Registered office address
The first step is filling out your contact information. The page will then prompt you to reserve your chosen business name.
You’ll then be asked if you want just to reserve the name or go ahead with the document filing. After you select document filing, you’ll be prompted to enter your name as the requestor or person requesting the certificate of formation filing.
Then you will fill out your county and the type of LLC you are forming.
Finally, if applicable, you’ll fill out your registered agent name, address, and mailing address. You’ll have a chance to review all the information before payment.
The filing fee is $200 plus $25 for name reservation and an $11 online processing fee. You should receive confirmation in 7-10 days if you file online.
You can also download the form, fill it in, print and mail it in.
But remember that you’ll need to reserve the name first and include your name reservation certificate with your mailed-in certificate of formation. This tends to make for a lengthy process, and turnaround could take up to three weeks.
Some entrepreneurs hire an LLC formation service like ZenBusiness to handle this step, saving time and ensuring the process is done correctly.
Draft an Operating Agreement
Alabama does not require an operating agreement, but it’s a crucial document that defines members’ ownership percentages and profit allocations. Those are the two key elements, but it should also include the following:
- Each member’s rights and responsibilities
- Management structure and roles
- Voting rights of each member
- Rules for meetings and voting
- What happens when a member sells their interest, becomes disabled, or dies
You can find operating agreement templates online, but it’s best to have them drawn up or reviewed by an attorney. The language of an operating agreement is crucial and can often help determine how member disputes will be resolved. Here you can obtain a free operating agreement template for your Alabama LLC.
Contact Information for the Alabama Secretary of State
Alabama Secretary of State
P.O. Box 5616
Phone: (334) 242-7200
Fax: (334) 242-4993
There’s only one way to create an LLC in Alabama: successfully filing a certificate of formation. If you make any mistakes, you’ll likely have to refile, so be sure to do it right the first time and set your business up for serious success!