Form a Limited Liability Company in Alabama
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How to Form a Alabama LLC in 10 Steps
An LLC or Limited Liability Company is a typical type of business structure in the United States. With an LLC, one or more people can own a part of the company. Each member receives their own profits earned by the LLC, and each owner(s)’ exposure to liability is limited based on the company’s activities. It's also important to note that separate tax returns do not have to be filed by LLCs (as they do by corporations).
When forming a limited liability company, these are the steps you will need to follow:
1. Choose Your Company Name.
Make sure your company has a name that no other company has. At SunDoc, we can also run your name search or reserve your LLC name on your behalf for a nominal fee. It is essential that the name you choose is available with the State of Alabama.
2. Understand the LLC Organizer Requirement.
Every LLC in Alabama will need to have something called an LLC organizer. This name should be listed on the Articles of Organization form. You will be the organizer by default if you prepare your own Articles. On the other hand, you can name someone else as organizer too. This doesn't have to be a manager or a member of your LLC. Many times, a lawyer who helps with the formation of your business will be the organizer. SunDoc can also be your organizer if we file your Articles of Organization on your behalf.
3. Designate a Registered Agent.
Remember that you’ll need to have a registered agent for your LLC. This can be a person, or it can be a business. You need to have your registered agent listed on your Articles of Organization form. Check out our article Registered Agent Service to find out more about why you need to have a registered agent.
4. Decide Your Ownership and Management Structure.
Will your LLC be managed by multiple managers, just one manager, or all of your LLC members? The Articles of Organization form will ask this. Essentially, you will need to figure out whether you want to be a member-managed or a manager-managed LLC.
5. Create an Operating Agreement.
In the state of Alabama, LLCs do not have to have Operating Agreements. There are default conditions that are specified by Alabama law, and these will dictate an implied Operating Agreement. Still, it's good to go over the default conditions in order to make sure they suit your new LLC.
An Operating Agreement is necessary if you are going to have a manager-managed LLC. This will be for your LLC’s company records. The law in Alabama states that LLCs that are manager-managed will only be valid if you declare this fact in your Operating Agreement and your Articles of Organization.
The Operating Agreement does a lot for your business. Not only does it manage your business’ working capital and create governance, but it also manages the payout of profits. Serious matters of voting, liability, money, and fiduciary constraints are involved. You can consult with an attorney for more advice.
6. File the Articles of Organization.
You will be required by the State of Alabama to file a form called the Articles of Organization. This is a one-page form only, and in it will be all of your company details. You company will officially be created when your Articles of Organization are accepted by the Alabama Secretary of State.
There are several things you’ll need when filing your Articles of Organization. First, you’ll need a unique name for your new company. Next, you’ll need your company address. And finally, you will need to know your chosen management method, who your registered agent is, and who your LLC organizer is. In the State of Alabama, you don’t have to file member names, and you do not need to publish creation of your new company in a newspaper of record.
If you have time restraints or prefer to outsource the filing of your paperwork, SunDoc is happy to help. On your behalf, we can file your Articles of Organization.
7. Obtain an EIN and Open a Business Bank Account.
Congratulations! You are now a registered Alabama LLC. Any LLC with more than one member must file with the IRS for an EIN, Employer Identification Number, whether or not you have employees. You can file with the IRS yourself, or SunDoc can file for you.
An EIN is also required by most banks in order to open a business account. If you've been paying business expenses out of a personal account up until now, this is a good time to set up your company's fiscal management. Make sure you keep all receipts for reimbursement no matter the account you’ve used for payments. At this point you may also want to find an accountant for help with business matters.
8. Pay Alabama State Taxes.
Every year, it is required that your company pay an annual tax. This will be paid to Alabama's Franchise Tax Board. Remember that you must also pay in your first operating year. This tax is not a form of income tax. Instead, it is a cost to do business in the State of Alabama. In addition, if you plan on selling goods in the state, you’ll need to begin collecting sales tax. Learn more about state taxes at the State of Alabama’s tax web site.
9. Determine Necessary Licenses and Permits.
Nearly all Alabama companies need to have one or more business licenses or permits in order to operate at the county or city levels. It is crucial to check, and this is true even if you assume you have an exempt company. You might be shocked to find out what is required. If you operate without the proper license or permit, this can result in expensive fines.
10. File an Annual Report within 2 ½ Months.
You must file a Annual Report within 2 ½ months of your LLC formation. After your initial Annual Report filing, you’ll need to file again — with updated information. The Annual Report is a basic form that maintains updated data with the state about your company. Later, if you change your company in any way, the Annual Report will be a form you will need to refile with the state.
Remember that filing within the 2 ½ months period is truly essential. SunDoc would be happy to file your Annual Report on your behalf (and we can complete other similar filings as well). We are always on time and reliable. LLC forms can always be located on the Alabama Secretary of State web site.
Important Notice: It is beyond the scope of this article to discuss your potential insurance needs, or matters relating to employees. You should consult an attorney or accountant with any questions about legal or financial matters. Please note that nothing in this article can be construed as legal, tax or accounting advice.
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