How to Form an LLC in Alabama (2026)

1. 1Choose a name for your LLC and verify it is available by searching the Alabama Secretary of State business entity database. Your name must include "Limited Liability Company," "LLC," or "L.L.C."
2. 2Appoint a registered agent with a physical street address in Alabama. The agent can be an individual resident or a business entity authorized to do business in the state.
3. 3File a Certificate of Formation with the Alabama Secretary of State online or by mail. The filing fee is $200. Include your LLC name, registered agent, organizer information, and management structure.
4. 4Obtain an EIN (Employer Identification Number) from the IRS at no cost. You need this to open a business bank account, hire employees, and file taxes.
5. 5Create an operating agreement outlining ownership percentages, member roles, and how profits and losses are distributed. Alabama does not legally require one, but it is strongly recommended.
6. 6Open a business bank account to separate personal and business finances. Bring your Certificate of Formation, EIN confirmation, and operating agreement.
7. 7Obtain any required business licenses or permits. Alabama requires most businesses to obtain a business privilege license from the county probate office.
8. 8Pay the initial Business Privilege Tax. Alabama requires all LLCs to pay a minimum $100 annual business privilege tax based on net worth.

• ✓Obtain an EIN from the IRS (free, apply online at irs.gov)
• ✓Open a dedicated business bank account
• ✓Get a business privilege license from your county probate office
• ✓Register for Alabama state taxes with the Department of Revenue
• ✓Get business insurance (general liability at minimum)
• ✓Set up an accounting system to track income and expenses
• ✓Pay your initial Business Privilege Tax ($100 minimum)

Your Alabama LLC name must contain "Limited Liability Company," "LLC," or "L.L.C." It cannot include words that suggest it is a different type of entity (like "Corporation" or "Inc."). Restricted words such as "Bank," "Insurance," or "Trust" require additional approvals and licensing. The name must be distinguishable from existing business entities registered in Alabama.

Alabama LLCs are pass-through entities by default — the LLC itself does not pay state income tax, but members report profits on their personal Alabama income tax returns (top rate 5%). Alabama charges a Business Privilege Tax based on net worth, with a minimum of $100 per year. There is no separate franchise tax for LLCs.

LLC vs. other structures in Alabama

In Alabama, the $100 minimum business privilege tax applies to LLCs and corporations alike. For low-revenue businesses, a sole proprietorship avoids this tax but offers no liability protection. If your LLC becomes profitable, electing S-Corp tax status can reduce self-employment taxes.

• •Pay the annual Business Privilege Tax ($100 minimum) to the Alabama Department of Revenue by the 15th day of the 4th month after your tax year ends
• •Maintain a registered agent with a physical address in Alabama at all times
• •Keep your operating agreement current and update it when members join or leave
• •File Alabama state income tax returns for all members receiving pass-through income
• •Renew any local business licenses or permits as required by your county

Alabama imposes additional taxes beyond the filing fee that you should factor into your decision. Make sure the total annual cost — including the franchise tax — fits your business budget before committing.

In general, you should form your LLC in the state where you physically live and conduct business. Forming in a "tax-friendly" state like Wyoming, Delaware, or Nevada sounds appealing, but if you operate in Alabama, you will still need to register as a foreign LLC there — paying fees in both states.

An LLC is almost always a better choice than operating as a sole proprietorship because of the personal liability protection it provides. However, if your LLC is highly profitable, you should talk to a CPA about electing S-Corp tax treatment to potentially reduce your self-employment tax burden.

What Alabama LLC Owners Need to Know

• •Alabama does not require an annual report for LLCs, but LLCs must pay a business privilege tax annually
• •The minimum business privilege tax is $100 per year, based on net worth
• •Alabama uses a Certificate of Formation rather than Articles of Organization

Official Alabama Resources

• Alabama Secretary of State — Business Entities
• Alabama Business Privilege Tax