How to Register a Corporation in Alabama?

Alabama Corporation

Alabama is a state with a growing and stable economy, which is good news for those small and medium enterprises (SME’s) who want to register a corporation in Alabama. The real gross domestic product of Alabama in 2022 was over $200 billion and is expected to grow even more thanks to the state’s trade policies. There are several benefits of incorporating in Alabama as the state enjoys growth oriented and competitive international trade with focus on creating a robust startup ecosystem for the new age entrepreneurs. The state not only offers good weather but the cost of services and goods are 13.6% less than the national average.

What is an Alabama Corporation?

A traditional C Corporation is also known as a for-profit corporation or business corporation. This is a type of legal structure, which is distinct as well as separate from its owners. If you are planning to form a corporation in Alabama, then the shareholders or owners will be taxed separately from the entity and this type of company may also be subjected to corporate income taxes. If you are wondering how to form a Corporation in Alabama, then it is important to identify the type of entities you can form in the state. They are:

• Business Corporations (C-Corp)
• Business Corporation (S-Corp)
• Foreign Corporations
• Nonprofit Corporations
• Professional Corporations

What are the benefits of incorporating in Alabama?

A C Corporation has several structural advantages and hence is one of the foremost entity choices for first time business owners. Some of the advantages or benefits of incorporating in Alabama are:

• A Corporation offers Limited liability for the owners
• It is considered as a separate legal identity
• Corporations enjoy perpetual existence (they exist even after death of an owner)
• This type of entity has the ability to issue shares of stock
• There are no restrictions on ownership of shares and such shares are readily transferable
• It enjoys widespread acceptance when it comes to venture capitalists and other private investors
• C Corporations enjoy various tax advantages and can also benefit from Alabama tax incentive programs

Starting an Alabama Corporation

Alabama is home to several top industries including a rich history in aerospace and aviation. There are several other key industries in the state driven by technology and innovation. If you want to start a new business and are wondering about how to form a Corporation in Alabama then there are several important processes to focus on.

1. Naming an Alabama Corporation

If you are planning to register a corporation in Alabama then one of the first steps is to identify a business name. The company name is one of the most principal aspects of incorporation as it will help your future customers to associate the brand, product or service with the said name. There are certain state naming guidelines that a corporation has to follow pursuant to AL Code § 10A-1-5.04 (2014) and AL Code § 10A-1-5.11 (2022) like using words like “corporation”, “incorporated”, or abbreviations like “corp.”, or “inc.”

2. Appointing an Alabama registered agent

If you are wondering how to form a Corporation in Alabama then there is a specific process for new business formation and will involve filing of name reservation application, incorporation documents, and obtaining licenses in accordance with state laws. It is important to ensure compliance with the Code of Alabama and this means you will need to designate and continuously maintain a registered agent in the state pursuant to AL Code § 10A-1-5.31 (2022).

3. Filing Certificate of Incorporation

Once you have completed your Alabama corporation search and reserved your business name, the next step would be to incorporate your business. You will need to follow a specific process that is in accordance with the Sections 10A-1-3.05 and 10A-2A-2.02 of the Code of Alabama 1975. You will be required to prepare and submit the Certificate of Incorporation pursuant to AL Code § 10A-2-2.03 (2022). You can register a corporation in Alabama online or mail it to the office of the Secretary of State, Business Services. There will be a filing fee of $200.

Are you thinking of starting an Alabama Corporation?

4. Preparing bylaws for an Alabama Corporation

One of the important requirements for any new corporation in Alabama is the corporate bylaws. The bylaws are considered to be the regulations of any Alabama corporation and contain some of the basic rules for conducting the business and affairs of the said corporation. They are also known as company bylaws and can be compiled before or after you form a corporation in Alabama. Most states require a corporation to keep a copy although it will not be submitted with the state. The requirement of bylaws is governed by AL Code § 10A-2A-2.05 (2022).

• Location of the Corporation office
• Any formality concerning the holding of meetings of directors and shareholders
• Powers, qualifications, and duties of officers and directors
• Voting on the entitlement of shares
• Provisions for appointment of directors’ committees

5. Holding the first meeting of board of directors

If you have decided to form a corporation in Alabama then one of the first steps prior to beginning operations is to appoint initial directors as they will be responsible for undertaking the first organizational meeting. The organizational meeting is normally held after filing of the Certificate of Incorporation with the initial directors named in the certificate. This is an important event that defines the specific tasks related to the functioning of the corporation and also how they should be executed.

• Distribution of initial shares
• Initial tasks of the said corporation
• Agreement on the election of officers and on salaries
• Approving corporate bylaws
• Taking decisions on opening a bank account
• Approving the corporate seal

6. Issue shares

Issuance of shares is an important part of running an Alabama corporation. Shares or shares of stock are considered as units of ownership in business corporations. Once you incorporate in Alabama, the state business laws (AL Code § 10A-2-6.21 (2022) will ensure you are able to issue a certain number of shares. The number of shares to be issued are often decided in the first organizational meeting. According to AL Code § 10A-2-6.02 (2022), the terms of class or series of shares are determined by the initial board of directors.

7. Getting an EIN

Employer Identification Number (EIN) refers to a unique identification number, which is assigned by the Internal Revenue Service (IRS) to a business entity. If you are planning to register an Alabama corporation online then you will need to fulfill certain annual requirements like corporate taxes and other state business taxes. In order to file taxes, it is necessary to obtain an EIN also known as a Federal Employer Identification Number (FEIN). The EIN can also be used for opening a business bank account in the state of Alabama.

8. Opening a bank account

Once you register a corporation in Alabama, you need to focus on certain aspects of business operations like transacting in the state. When you are conducting business, you will need to make and receive payments and the best way to facilitate all your transactions is by opening a business bank account. It is also known as a checking account. The salient benefits are that it will help you manage your income efficiently while ensuring you are able to track all your expenses.

9. Obtaining the necessary licenses and permits

There are several benefits of incorporating in Alabama and this can vary from favorable business laws to low cost of new business formation as well as business incentives. One of the important requirements of every new business is to obtain the necessary business licenses and permits in the state. This is crucial from the operational perspective as without proper licenses, you will not be able to conduct your business.

• Business Privilege License – If you form a corporation in Alabama then one of the most important requirements is that of a privilege license. This is required by most businesses formed in the state that are engaged in some form of occupation or profession as mentioned in Title 40, Chapter 12, Code of Alabama 1975. This license will be issued by the county Probate Judge or the License Commissioner in the city or county the business is located in.
• Municipal Business License – Once you incorporate, you need to conduct an Alabama corporation search for municipal licenses. This license might not be required by all businesses and is governed by section 40-12-30 of the Code of Alabama 1975.
• Local Licensing – Apart from the privilege and municipal licenses, you may be required to apply for and obtain local licenses depending on the county or city your business is based in as well as the primary activity. If you want to open a Restaurant or a Delicatessen in Dallas County, AL then you will need to obtain a Health Department Inspection Certificate from the Dallas County Health Department prior to applying for a local license.

10. Comply with other tax and regulatory requirements

Once you register a corporation in Alabama, you will be required to comply with state annual maintenance and regulatory requirements. One of the important requirements is that of business taxes in the state. A business corporation will need to file Corporate Income Tax at a rate of 6.5 percent pursuant to sections 40-18-1 through 40-18-59 and 40-18-160 through 40-18-176, Code of Alabama 1975. You may also be required to file state sales and use tax especially if you are selling physical products or certain services.

What you need to know about starting an Alabama Corporation

You have taken a decision to form a corporation in Alabama but have several queries regarding various aspects of your business like the incorporation process, starting costs, dissolution, and foreign corporation among others. We have created a special section of “Frequently Asked Questions” for addressing some of the queries that you may have as a new business owner

Why register a Corporation in Alabama?

A business corporation also called a C corp offers a strong protection to the owners from personal liability. This is one of the top reasons for opting for this type of entity structure. There are several other benefits of incorporating in Alabama like:

• The state offers several tax incentive programs like the Job-Creation Tax Credit, Investment Tax Credit, and Sales tax abatements among others.
• There is a strong transportation and logistics infrastructure including several airports, a wide network of roads, and inland waterways.
• Alabama is considered as one of the top destinations for innovation as well as acceleration for individuals and the corporate sector
• A strong startup eco-system that supports young entrepreneurs, women and minority-owned businesses
• Incorporating in Alabama will open the doors to abundant resources, attractive business climate, low cost of living, and skilled workforce.

How do I know if my Alabama Corporation name is available?

In order to register a corporation in Alabama, you will need to reserve a chosen business name first. It is important to ensure that the chosen name follows the state naming guidelines and at the same time, try to keep it unique. There is the possibility of other corporations using the same name and hence it is necessary to conduct a name availability search. This is also known as an Alabama corporation search and will show if the name is available for reservation.

What will be the cost of forming a corporation in Alabama?

When you form a corporation in Alabama, there will be certain costs attached to it. There are two stages, one is the initial incorporation stage and the other is the annual maintenance or compliance stage. Some of the formation costs are fixed and some are variable. For example, the incorporation of a foreign entity may cost more than that of a domestic entity. There are three aspects that will determine the initial formation costs and they are:

• Business Name: You will need to conduct an Alabama corporation search and reserve a business name
• Cost of Incorporation: This includes the filing fee for Certificate of Incorporation
• Business Licenses: This is a variable cost and will depend on the location of the company and business activity. Your company may require a single or multiple business licenses and permits.

Can I register an S Corporation in Alabama?

Yes. An S corporation or S corp is not a formal business structure and is considered only as a tax designated entity. If you want to elect an S corp status in Alabama then it is important to first register an Alabama corporation online. It is important to note that there are certain requirements that your company has to meet for eligibility purposes like being an eligible domestic corporation and not having more than 100 shareholders. If your corporation meets all criteria then you can fill and submit Form 2553 (Election by a Small Business Corporation) with the Internal Revenue Service (IRS).

Do I need a business license for my Alabama Corporation?

Yes. The process of how to form a corporation in Alabama has many levels and one of the most important levels is that of business licensing. You will need to obtain proper state licenses and permits as well as local licenses. If you conduct your business without proper permits or licenses then this could lead to severe penalties.

Can I register a foreign Corporation in Alabama?

Yes. If you already have an existing business in any other state and want to move or expand your business in Alabama then you will need to apply for foreign qualification. There is a process to incorporate in Alabama as a foreign corporation. You will be required to submit Application for Registration of a Foreign Corporation (Business or Non-Profit) pursuant to Section 10A-1-7.04, Code of Alabama 1975.

How can I dissolve my Alabama Corporation?

You will need to submit the Articles of Dissolution for a Domestic Business Corporation pursuant to Sections 10A-1-9.11 and 10A-2A-14.03 of the Code of Alabama 1975. You will need to submit this form with the Secretary of State, Business Services along with a fee of $100. There may also be a $50 recording fee at the office of the Judge of Probate in the county where the business has been formed.

Ready to Start an Alabama Corporation?

Although you can choose to form any business structure, the benefits of incorporating in Alabama are far more lucrative. You can register a domestic or a foreign entity in this state and this is where IncParadise can provide meaningful assistance.