How much does it cost to form an Alabama LLC or Corporation?

Alabama LLC or Corporation

Once you form or register a new business in the state of Alabama, you can benefit from their incentive and grant programs. It is necessary to identify the right business structure as each structure has its own advantages and disadvantages. You can form a for-profit, non-profit, and even foreign entity. There are several angles to be considered while choosing an entity structure. For example, you must consider whether the chosen entity provides any legal advantage like protection against legal liability. You will also need to consider possible tax consequences, cost to form Alabama Corporation or LLC, annual maintenance cost, licensing costs, and state laws.

Which business entity should I choose for Alabama business?

There are several factors that play a key role in helping you make an important decision regarding the type of entity structure to be registered in the state. The cost to form an Alabama LLC will always be different from the cost to incorporate in Alabama or registering any other form of business. The paperwork required during the formation process will also vary according to the chosen structure. The two most popular structures in the state of Alabama are that of a C Corporation and an LLC. Let us look at some of the finer aspects of these structures.

• Risk to personal assets – Whatever form of business you choose to register, there will always be a risk for a lawsuit. One of the biggest advantages of corporations and LLC’s is limited liability protection. This ensures the owners of such entities are not held responsible for any debts of their company vis-à-vis a sole proprietorship or general partnership.
• Startup costs – The chosen business structure plays a key role when it comes to the overall startup costs as well as operational costs. The cost to form an Alabama corporation or an LLC along with the annual maintenance cost is a decisive factor and should be considered.
• Ownership – Ownership is an important factor as well because the involvement of multiple owners in structuring a business can make the process and operations quite complicated. For example, S corporation and C corporation structures require a board of directors.
• Administrative complexity – Different types of business structures have different levels of administrative complexity. These include initial paperwork, filing fees, licensing paperwork and fee, and Alabama annual report filing fee.

Pros and Cons of forming an LLC or Corporation in Alabama

When you choose the structure of a business then it is important to keep in mind that this decision will have an impact on various aspects of your business including day-to-day operations as well as annual maintenance. Whether you are looking to form an LLC or a corporation, it is important to first identify the pros and cons of each entity including the initial registration cost and Alabama LLC annual fee.

Pros of an LLC or Corporation

• The cost to form an Alabama LLC is the same as that of incorporation
• A business or professional corporation can issue stock
• A limited-liability company enjoys pass-through taxation on the profits
• There is no Alabama annual report filing for LLCs and Corporations
• You can start an LLC with a single owner also known as single-member LLC
• A limited-liability company enjoys flexibility in-terms of management
• Venture capitalist (VC) firms and other investors find corporations more lucrative for investment as compared to other entity structures
• A business corporation enjoys perpetual life
• There is less initial paperwork for a limited-liability company as compared to other structures
• An LLC or corporation can elect for S Corporation tax status

Cons of an LLC or Corporation

• In a limited-liability company, you will not be able to pay yourself salary or wages
• The registration of a C Corporation requires a lot of paperwork
• The overall cost to form an Alabama corporation is higher when compared to a sole proprietorship
• It is difficult for a limited liability company to raise capital vis à vis a C corporation
• A business corporation undergoes double taxation on its profits
• Depending on the state of formation, LLC members may be subjected to self-employment tax

Alabama LLC Cost

In the state of Alabama, one of the most favored structures is that of a Limited Liability Company due to the several advantages it has over other entity structures. If you are thinking of forming an LLC then it is important to identify the formation cost of forming an Alabama LLC. An LLC has different state requirements and costs attached to its formation and operations. Let us take a look at the various costs that you may incur.

Cost for forming an Alabama LLC

The cost to form an Alabama LLC takes into account one-time as well as recurring costs. These are:

• The LLC initial registration process and fee may be different from that of other entities. The first step towards registration is to file the domestic entity name reservation form after conducting a name availability search
• According to state laws, you will need to hire and maintain a registered agent for service of process. The cost or fee would vary according to the RA service chosen by you.
• The third and most important area is the formation cost of an Alabama LLC. You will have to file a Certificate of Formation pursuant to AL Code § 10A-5A-2.01 (2022). The filing fee is $200.

Annual maintenance cost for an Alabama LLC

Once you have registered a limited-liability company in Alabama; it is important to ensure that your company maintains compliance with all state requirements. The costs involved as a part of annual maintenance include:

• Annual Report – There are no requirements of Alabama annual report filing and hence no fee attached
• Taxes – A limited liability company is considered as a “Pass-through Entity”. Hence it will not be required to file any taxes but each member has to file personal income tax. Apart from this, an LLC will also be required to file a Business Privilege Tax Return. This type of cost to form an Alabama LLC is a recurring cost as the taxes have to be filed each year.
• Business Licenses – One of the important formation costs of an Alabama LLC is that of business licenses and permits. This is a recurring cost as licenses and permits have to be renewed each year. The fee for licenses will vary according to the type of license.

Form your new LLC in Alabama with Ease!

Alabama Corporation Cost

A C corporation is also known as a traditional corporation. This type of entity has several advantages over other business structures like sole proprietorships. One of the salient aspects of a C corporation is its ability to raise funds or capital, which is a necessity if you are planning to start a new business. If you incorporate, then the cost to form an Alabama corporation and make it operational will include initial or one-time costs as well as recurring costs.

Cost of forming a Corporation in Alabama

The cost to incorporate in Alabama will be controlled by several factors. The cost will vary depending on whether you want to register a foreign company or a domestic entity. Here are important costs related to incorporation in this state:

• The first step towards incorporation is to file the name reservation form for a domestic entity. You will need to ensure compliance with Alabama naming guidelines and also conduct a name availability search. You can also register an Alabama DBA (Doing Business As), which is also known as a trade name.
• According to the 2022 Code of Alabama, AL Code § 10A-1-5.31 (2022), you will need to hire and maintain a registered agent for service of process. The cost or fee would vary according to the service chosen by you.
• The most important initial cost to form an Alabama corporation is that of the incorporation process itself. You will have to file the Certificate of Incorporation pursuant to AL Code § 10A-2-2.03 (2022). There is a fee of $200 for the same.

Annual maintenance cost for Alabama Corporation

Apart from the initial cost to form an Alabama Corporation, there will be other costs associated with annual maintenance of your company. The costs involved are as follows:

• Annual Report – There are no requirements of Alabama annual report filing for a C Corporation and hence there is no fee applicable.
• Taxes – Each state has its own taxes and in Alabama, a C Corporation will be required to file Corporate Income Tax at a rate of 6.5 percent. You may also be required to file state sales and use tax towards certain services or for selling specific products. Taxes are a part of recurring costs to incorporate in Alabama.
• Business Licenses – Once you incorporate in Alabama, you will need to apply for and obtain business licenses and permits. These licenses will ensure you are able to operate your business in this state. This is an integral component of cost to form an Alabama corporation. It is a recurring cost as licenses have to be renewed each year.

Register a Corporation in Alabama Efficiently!

Need any Assistance in Forming Your Alabama LLC or Corporation

Alabama is home to a very pro-business environment and the state provides support and resources to help small businesses become operational. You can choose from a variety of entity structures in the state although an LLC or a C Corporation are often favored over other entity structures. The registration processes and costs may vary according to the entity chosen including whether it is a foreign or domestic business. We, at IncParadise can provide valuable assistance through handling any requirements you may have related to incorporation or new business formation in the state.