Business License in Alabama

One of the most important aspects of any new business formation is choosing the right structure and reserving a company name. Once this is done, you can register your company according to the state laws but will you be able to operate such a company? Yes, but first you will need to apply for and obtain an Alabama privilege license or an operational permit. If you conduct business without proper business licenses then it will be deemed as unlawful and this may lead to penalty for violation of state or local ordinances requiring licenses and permits. You may have to pay a hefty fine and can even be imprisoned according to 2020 Alabama Code – Section 11-51-93.

Who needs an Alabama business license?

An Alabama business license can be defined as a mandatory permit or approval, which is normally issued by a state or government agency authorizing a domestic or foreign entity to operate within a specific city, county, or jurisdiction. In order to understand whether your company needs to apply for and obtain Alabama business licenses and permits, it is important to understand why licenses and permits are essential. The state issues different types of licenses based on certain criteria as the primary objective is to hold businesses accountable for any action as well as behavior while ensuring safety and protecting the health of the public (consumers).

What business license do I need in Alabama?

Some states in the USA have a general license for all forms of businesses but Alabama does not have any statewide general license. Instead, the state requires individuals, firms like LLC or corporations engaging in any trade, commerce, business, occupation, or profession for the sole purpose of profit or gain will be required to apply for an Alabama privilege license. It is one of the few states where a privilege license exists. Apart from this you may also be required to apply for and obtain an Alabama business license based on specific activity, the location of the business, and municipal licenses among others.

Obtain Applicable Federal Licenses

If you are planning to start an LLC or a corporation in Alabama then you would need to apply for several different Alabama business licenses and permits depending primarily on the business activity. One of the important licenses that some businesses may require are Federal licenses. The federal government has formed regulatory agencies in each state, which are responsible for issuance of licenses and permits for certain regulatory activities. If your company is engaged in any activity that has been regulated by the federal government then you have to obtain a license or permit for the same from the state regulatory agency. You will need to conduct appropriate Alabama business license search for regulated business activities. Let’s look at an example to understand the same.

Example: If you start a food establishment and plan to serve alcohol in the premises then this will come under regulated activity. You will need to check with the Licensing and Compliance Division of the Alabama Alcoholic Beverage Control (ABC) Board for the type of license required by your establishment and the corresponding fee. If you want to sell Beer (Retail – on or off premises) then the Alabama business license fee will be $150. Now, if you want to expand into Lounge Retail Liquor – Class I then you will need to apply for a separate Lounge Retail Liquor License for on-premises and off-premises consumption pursuant to AL Admin Code R 20-X-12-.04. The fee for this type of Alabama business license and permits is $300.

Obtain a Professional License

If you start a business where-in the primary business activity is defined as a profession then you will need to apply for a professional certification or license prior to conducting business or transaction in the state.

What is a professional license in Alabama?

A professional license is a type of permit, registration, license, certificate, temporary license or permit, qualification, or temporary registration. This type of Alabama business license and permits can be issued to individuals as well as firms. It is also referred to as a non-transferrable authorization that is required for carrying out a specific activity. You will need to conduct an Alabama business license search and identify the required license as well as the State Licensing Board responsible for issuance of that license. Different professional licenses will be issued by different agencies. For instance, the Alabama State Board of Public Accountancy provides licensing and fee information for Certified Public Accountants (CPA), Public Accountants (PA), and CPA/PA Firms.

Which professions required licensing in Alabama?

If you start a business, you may not need to apply for a professional license. Again, there are some businesses that may even require both Alabama privilege license as well as a professional license. Here is a list of professions that will require you to apply for and obtain a professional license in the state.

• Accountancy
• Architecture
• Behavior Analysis and Therapy
• Communication Disorders and Sciences
• Counseling and Rehabilitation Education
• Dental Hygiene
• Engineering Programs
• Forestry
• Geology
• Health Care Management – Long Term Care Administration
• Human Nutrition and Dietetics
• Interior Design
• Law
• Mortuary Science and Funeral Service
• Nursing
• Occupational Therapy
• Physical Therapy
• Physician Assistant
• Psychology
• Public Health
• Radiologic Science
• Recreation Professions
• Social Work
• Teacher Education

Other Alabama Business Licenses

Whether you start a small company, startup, large enterprise, or even a home-based business, the licensing requirements in the state will vary according to the activity and the location of your company. Apart from the Alabama privilege license, you may even require permits and licenses in the county you are conducting your business in. Let’s look at the various other forms of Alabama business license and permits that may be required by any company operating in the state.

City or county for local licensing in Alabama

The most common type of business license required by businesses is the county license also known as municipal license or local license. Depending on the city or county where your business is established, you can conduct an Alabama business license search to identify the permits required. It is also important to note that if the municipality where you are conducting your business, has a business license ordinance, then you will be required to obtain a license or permit. Once you obtain an Alabama business license you will need to renew them as well. Most municipal business licenses are due on January 1 each year and hence you need to renew them to avoid penalties.

Building & Zoning Permits

One of the important forms of Alabama business license and permits is the building or zoning permit. Each county or city in Alabama has their own local ordinances, which define the need for such permits. Some cities and counties may have separate building code ordinances as well. The issuance of license and zoning permits vary from one county to another depending on these ordinances. Let’s look at an example:

Alabama home-based licenses

Over the years, the small businesses sector has witnessed a steady growth with many home-based businesses mushrooming across the USA. Alabama has also seen a rise in the number of startups becoming operational from the home or residence of an individual. Such businesses are often in the form of sole proprietorships but some have even formed partnerships and LLC’s (both single and multi-member). Once you have gone through the planning and new business formation stage, it is important to focus on the business licensing aspect. It is important to note that a startup from home may also require an Alabama privilege license as it is mandatory for every individual or firm that is engaged in a business activity, profession or occupation as mentioned in Title 40, Chapter 12; Code of Alabama 1975. A home-based business may also be required to obtain an Alabama business license or a professional license along with municipal and local licenses depending on the primary business activity and the location of the company.

Need any Assistance in Obtaining Your Alabama Business License?

If you are planning to start a small business or a medium enterprise in the state of Alabama then certain compliances need to be met to ensure the business becomes operational. You will need to apply for state and local Alabama business licenses and permits to enable you to transact in the state with ease. The Alabama business license or permit application, fees, and renewal processes will vary according to the type of license and municipality your business is operating from.

Alabama Business Entity Search

A business name is a powerful driver of business or customers if given the right direction. You will need to choose a name that not only reflects the brand identity but also helps impress investors. This is one of the many reasons why it is important to conduct an Alabama business name search. This type of search will not only reveal availability of your chosen name but also open the doors to creativity. You will be able to see other names or names of various LLCs and corporations in the state thus providing a platform to choose the right name. Business names can vary from simple (Pizza Hut) to extremely creative (Nike). The sky’s the limit but you need to also maintain compliance with Alabama business name rules.

• First and foremost is to choose a name that people can spell and pronounce
• It is also important to follow the Alabama LLC or Corporation name rules and guidelines
• Choose a name that is easy to remember
• Ensure that the chosen company name is consistent with your brand
• Be careful and ensure your company name is not similar to that of a competitor
• You can be creative with a company name
• Always conduct an Alabama business entity search prior to finalizing the name
• Try to make the entity name web-friendly as this ensures availability of domain
• Last but not the least; you can use online business name generators for identifying a name

What is an Alabama business name search?

Once you have chosen the entity structure, the next important step would be to identify a business name. The name of a company will define the future of the business and increase customer’s brand recall value. If you have chosen a name following the naming guidelines then conducting an Alabama business entity search becomes necessary. This type of entity search is available in all states of the USA although the governing or facilitating authority will be different. The governing authority for an entity name search is facilitated by the office of the Alabama Secretary of State.

Naming your Alabama LLC

If you have taken a decision to form a limited liability company then there are several processes that you need to follow in order to successfully establish your business. One of the most important processes is that of naming your LLC, as a business name helps in creating an identity among the customers as well as competitors. If you think of an effective business name then it will influence the decision of your prospective customers. When choosing a name, you can conduct an Alabama LLC name search to get some ideas as well as to check availability of the chosen name in the state. Let’s look at the two important aspects to consider when it comes to naming your limited liability company.

General Alabama LLC naming rules

One of the most important areas to focus on during naming of your limited liability company is Alabama business name rules and regulations. The business naming guidelines are regulated by 2022 Code of Alabama, Title 10A – Alabama Business and Nonprofit Entities Code, Chapter 1 – General Provisions, Section 10A-1-5.06 – Name of Limited Liability Company or foreign limited liability company. The general rules for an LLC name are:

• It should have words like Limited Liability Company or abbreviations like LLC or L.L.C. pursuant to AL Code § 10A-1-5.06 (2014)
• The business name should be distinguishable from any other name in the Alabama Secretary of State database
• It is important to note that the reservation of certain names are prohibited pursuant to AL Code § 10A-1-5.12 (2014)

Alabama LLC business search

Once you have identified a name for your limited-liability company then the next step will be to conduct an Alabama LLC name search. The Alabama Secretary of State offers an online portal that will enable LLC name search through the entire state database or business entity records. There are different ways to conduct the search and the main method is:

• Search by Entity Name: This is the most common form of Alabama business name availability search. This search will help both new domestic as well as foreign LLC’s to check if their chosen name is available. You can search using variables like searching with the chosen name, type of company (LLC), place of formation (county), principal city, and the status of the company that has a similar name like exists or dissolved. Let’s look at an example to understand this process.

  Example: If you want to start a business skilled in Computer Consulting/Computer Software Development then the name should be appropriate to the services being offered. If you chose a name like “Software Architects LLC” and conducted an Alabama LLC name search in the state database then it will show an active company with such a name operating out of Albertville, AL. Now, if you change the name to “Software Specialists LLC” then the Alabama business entity search shows “no matches”. This means the new name is available and you can reserve it.

• Business Entity Search By Agent or Officer or Incorporator
• Entity ID
• Reservation ID

Are you planning to form an LLC in Alabama?

Naming your Alabama Corporation

One of the most popular forms of businesses is a traditional corporation also known as a C Corp. If you are thinking of starting a domestic corporation in the state then it is important to start by identifying a corporate name. You will have to reserve this name pursuant to AL Code § 10-2B-4.01 (2022) prior to incorporating your business. A corporate name is a powerful driver of brand identity and recognition and hence it is important to follow Alabama business name rules as suggested by the state. There are several ways to pick out a name for your company thanks to the online business name generators available. Once you come up with a name, you will also need to conduct an Alabama Corporation name search to check for availability of the said name. This process will facilitate reservation of your corporate name. Let’s look at the important aspects to consider when it comes to naming your business corporation.

General Alabama C & S Corporation naming rules

If you are planning to form a domestic or foreign corporation then you will need to reserve a name prior to applying for incorporation. If you want an S Corporation then the naming guidelines will vary according to the entity structure chosen. An S corporation (S corp) is tax designated and you can form a limited liability company and then elect S Corp status or form a corp and then opt for S Corp status. Either ways, you will need to conduct an Alabama business name availability and the name reserved for your LLC or corporation will be the name for the S Corporation.

• It should have words like “Corporation,” “Incorporated,” or abbreviations like Corp. or INC pursuant to AL Code § 10A-1-5.04 (2014)
• The name should be unique and should not imply that the said corporation has been organized for any purpose other than what is outlined in the articles of incorporation.
• According to Alabama business name rules, use of certain words or names are prohibited pursuant to AL Code § 10A-1-5.03 (2014) like Bank, Banking, Engineer, etc.

Alabama Corporation Business Search

Once you have identified a name for your corporation in compliance with state naming rules and guidelines, the next step is to look for Alabama business name availability. This is facilitated by the online portal of Alabama Secretary of State also known as business entity records search. There are different ways by which you can conduct this search and the main method is:

• Search by Entity Name: This is the most popular method of conducting Alabama Corporation name search. This search can be used by both domestic and foreign corporations. You can search using variables like search using a chosen name, the type of entity structure (Corporation), place of formation (county), principal city, and the status of the company like it exists or has been dissolved. Let’s look at an example to understand this process.

  Example: If you want to start a business focusing on the Architecture industry then try to choose a name that is in-sync with the services offered or the industry. If you choose a name like “Bay Area Architects Inc.” then follow it up with an Alabama Corporation name search. The process will search the entire state entity database and show a dissolved company with such a name. Since the company is dissolved, you will be able to reserve this name. Now, if the corporation was active then you would have had to choose another name and conduct an Alabama business entity search again and if available, reserve it.

There are other search options available, which are:

• Search for business entity By Agent or Officer or Incorporator
• Search using Entity ID
• Search using Reservation ID

Are you thinking of Incorporating in Alabama?

Need any Assistance in Alabama Business Name Search?

A corporate or an LLC name is the top branding vehicle as consumers, competitors, partners, and vendors will associate the business name with your products and services. An Alabama business name search will facilitate the entire process of reservation of a name without which you will not be able to proceed with company formation or incorporation. Business name reservation also facilitates several other important sub-processes like opening a business bank account and issuance of licenses.

Alabama LLC Annual Filing Requirements

You can form different types of limited liability companies in the state including single-member and multi-member entities. It is important to remember that the annual requirements of a domestic LLC may be different from that of foreign LLC’s and Alabama Corporation annual requirements. Once you start a limited liability company in this state then the following important annual requirements will need to be considered

Annual Report

An annual report is required by new and existing businesses in most states and is governed by the state statutes. This report requires entities to provide updated information to the state or submit any changes like ownership changes, change of address and registered agents. Some states may also require LLC’s to provide additional information regarding assets, revenue, and paid-in capital. There is no requirement of standalone Alabama LLC annual report although the state requests entity information to be provided annually using the business privilege tax return.

Business Privilege Tax

One of the most important annual requirements in the state of Alabama is the business privilege tax also known as ABPT. This has to be filed annually by most forms of entities operating in this state. This form of privilege tax is governed by the Alabama Administrative Code, Title 810 – Alabama Department of Revenue, Chapter 810-2-8 – Alabama Business Privilege Tax and Corporate Shares Tax. A domestic limited liability company registered with the Alabama Secretary of State as well as foreign LLCs qualified to do business in this state will be subjected to the Alabama business privilege tax (ABPT) filing requirements pursuant to AL Admin Code R 810-2-8-.10.

Employer Taxes

One of the important annual requirements in Alabama apart from the business privilege tax is the employer taxes. This is also known as State Withholding Tax or payroll taxes. There are several states that impose this type of tax and Alabama is one such state. The employer taxes or state withholding tax is a specific amount of money that an employer is required to withhold by law from the wages being paid to every employee. The employer usually does not pay the taxes and is only responsible for collection and remittance of the tax withheld. The Alabama Administrative Code, AL Admin Code R 810-3-71-.01 states that employers or withholding tax agents are required to deduct, withhold, and pay the withholding tax each calendar quarter. This has to be paid to the Department of Revenue.

Do you have any queries on Alabama LLC Annual Requirements?

Alabama INC Annual Filing Requirements

A C Corporation or a business corporation is a favored structure in the state of Alabama. There are several advantages that this type of entity structure enjoys vis-à-vis other forms of businesses. Once you have incorporated, there would be several state level requirements that your business is required to fulfill and they are categorized under Alabama Corporation annual requirements. You will need to maintain compliance with all annual requirements to remain in good standing with the state and this is applicable for both domestic and foreign entities. Let’s look in detail at the various annual requirements of an Alabama Corporation.

Annual Report

An annual report is an important document that contains comprehensive and updated information pertaining to a business corporation formed or operational in any state in the USA. In the state of Alabama, there is no requirement related to filing an annual report by corporations and instead such entities have to file an Initial Business Privilege Tax Return.

Business Privilege Tax

There are several important Alabama Corporation annual requirements that every entity needs to be compliant with. One of the important annual requirements is that of the business privilege tax also known as ABPT. This is also termed as an initial business privilege tax return and is normally due after the said corporation or taxpayer starts conducting business in the state of Alabama.

Corporation Taxes

Different states have different types of annual requirements governed by the state business laws. Similarly, the Alabama Corporation annual requirements are governed by the Alabama Administrative Code with the filing of taxes annually being governed by Title 810 – Alabama Department of Revenue. When you incorporate in the state, you will be required to maintain compliance by filing tax returns including business privilege tax and other applicable corporation taxes. This will ensure you enjoy a good standing in the state. There are different types of corporation taxes that you may be required to file with the most important being the Corporate Income Tax with a flat rate of 6.5 percent. Apart from this, you may also be required to file state sales and use tax as well as withholding taxes.

Do you want to know more about Alabama Corporation Annual Requirements?

Need any Assistance in Alabama LLC or INC Annual Filings?

The annual compliances or requirements normally encompass annual reports and taxes although sometimes business license renewals are also considered a part of Alabama LLC annual requirements or that of a corporation. The state of Alabama currently doesn’t require corporations or LLCs to file an annual report although it may be required in the near future.

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 $236.

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.

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.

LLC in Alabama

The state of Alabama has one of the rapidly growing economies with the real gross domestic product being $213.26 billion in 2022. The state is home to over four hundred thousand businesses. Small business owners and first time entrepreneurs prefer to form an LLC in Alabama as the state provides important knowledge and resources required by such startups to achieve maximum growth while minimizing expenses. The state is also home to diverse industries right from aerospace manufacturing and aviation to the thriving bioscience sector (780 companies), cutting-edge research and technology sectors, metals manufacturing, and a strong automotive manufacturing sector.

What is an Alabama LLC?

A limited liability company (LLC) is a specific form of private limited company that has an extremely flexible business structure. This type of entity follows pass-through taxation and is also known as a hybrid legal entity. The hybrid status is due to the fact that as an LLC, it has specific characteristics of a traditional C Corporation as well as a partnership company. You can form an Alabama LLC online with ease and there are different types of limited liability company structures that you can choose from. They are:

• Single-Member LLC like Sole Proprietorships
• A series LLC
• Multi member managed LLC
• Manager-Managed LLC
• Foreign limited liability company

Benefits of forming an LLC in Alabama

There are several reasons why entrepreneurs prefer to register an Alabama LLC and one of the primary reasons is the various advantages this type of structure has over other business entities. Some of the advantages of a limited liability company are:

• Taxation – When you form an LLC in Alabama online, you will get to elect the type of taxation it follows. A limited-liability company can elect to be taxed as a C Corporation, partnership, sole proprietorship, or even an S corporation. This ability to elect taxation status provides a lot of flexibility.
• Liability protection – One of the most important benefits of forming an LLC is limited liability protection. This simply means that assets attributed to members or owners of this type of entity, cannot be seized for repayment of debt obligations.
• Flexibility of Ownership – One of the salient aspects of forming a limited liability company is that there are no restrictions on the type and number of owners that such an entity can have unlike in an S Corporation.
• Flexible profit distribution – If you form Alabama LLC online then this is another advantage you can enjoy. There is a flexibility in the way profits are distributed to the owners i.e., it need not be distributed equally.

Forming an LLC in Alabama

Alabama is a popular destination for first time business owners due to its favorable business and tax climate. The state has a reliable transportation infrastructure, dedicated and skilled workforce, and pro-business regulations. If you are planning to form an Alabama LLC then there are several processes involved for registration and operation of the said business. The processes mentioned below are not only relevant but will also help you to fulfill all state filing requirements including obtaining a business privilege license in Alabama.

1. Choose the Alabama LLC name

The first step towards forming a limited liability company in the state is identifying a name for your company and conducting an Alabama LLC name search. Choosing an LLC name is not an easy process even though you can use business name generator tools for this. It is important to ensure compliance with LLC naming requirements as governed by 2020 Code of Alabama
Title 10A – Alabama Business and Nonprofit Entities Code, Chapter 1 – General Provisions, Article 5 – Names of Entities; Registered Agents and Registered Officers. The naming guidelines in the state are:

• In order to form an Alabama LLC online, the chosen name should contain “limited liability company”, “limited company” or abbreviations like L.L.C or LLC pursuant to 2021 Code of Alabama – AL Code § 10A-1-5.06 (2014).
• The business name should be distinguishable from the names of any other business entity that exists in the records of the Secretary of State including foreign limited liability companies and corporations. This is possible through conducting an Alabama LLC name search also known as name availability search.
• It is important to note that reservation of certain names are prohibited pursuant to AL Code § 10A-1-5.12 (2021)

2. Choose Alabama registered agent

There is a specific process to form an LLC in Alabama and this includes filing of different types of documents. You will need to ensure correct information in the forms submitted for LLC registration. Simultaneously, you will also need to maintain compliance with all state laws. As a first time business owner or an entrepreneur, this process may look complicated and this is where a reputable Alabama LLC registered agent like IncParadise can provide meaningful assistance.

3. File Certificate of Formation

Once you have reserved a name after conducting an Alabama LLC name search, the next most important step is to register your company. You will be required to prepare and then submit a Certificate of Formation pursuant to AL Code § 10A-5A-2.01 (2022). You can choose to form an Alabama LLC online or the articles can be mailed to the office of the Alabama Secretary of State. The filing fee is $236. It is important to ensure proper information is provided in the registration document and is compliant with the state regulations and laws.

Form your new business in Alabama Today!

4. Prepare the Alabama LLC operating agreement

One of the most important documents that needs to be created before or after you form an Alabama LLC is the operating agreement. It is a type of document where the terms of your limited liability company will be customized in accordance with the specific needs of each member. The operating agreement also outlines the functional and financial decision-making aspect within a structure. Whether you are planning to form an Alabama LLC online or offline, this form of legal document will help members of the said LLC in laying down the standard operating procedures. This document is not legally required or doesn’t have to be submitted with the state but it can play an important role in protecting the overall business operations. The LLC operating agreement should address key areas like:

• Organization and ownership
• Management and voting
• Profit and loss distribution
• Capital contribution
• Dissolution
• Future changes to the membership structure

5. Obtain EIN for your Alabama LLC

When planning to register an Alabama LLC, the most important aspect to consider is the tax structure. The filing of taxes is dependent on the type of business structure. The type of tax will also determine whether you need a Social Security number (SSN) to file taxes or an Employer Identification Number (EIN). The latter is also known as the Federal Employer Identification Number (FEIN) and is applicable for most businesses including a limited liability company. The EIN is a unique nine-digit number, which is assigned by the Internal Revenue Service (IRS) to different forms of businesses. You can apply for this number before or after filing registration papers of an LLC and a good Alabama LLC registered agent like IncParadise can assist you with the process.

6. Obtain necessary business licenses and permits

Alabama offers several benefits and advantages if you form an LLC in Alabama and this can vary from a low-tax environment to favorable business regulations and policies. Once you have registered your business the next step is to apply for business licenses and permits as they will help your company to become operational. Your company may require multiple licenses depending on your business activity. For example, Delicatessen shops may need to apply for a business privilege license in Alabama as well as a Food Service License. Let’s take a look at the various licenses and permits applicable in this state:

• Business Privilege License – This is a privilege license and is required by individuals, a company, shops, or a firm that is engaged in any business, profession, or occupation as mentioned in Title 40, Chapter 12, Code of Alabama 1975. The business privilege license in Alabama is normally issued by the License Commissioner or the county Probate Judge in the city or county where your LLC is located. The fee for this type of license will vary according to business activity and has to be renewed each year by October 31.
• Municipal Business License – If you form an Alabama LLC in a municipality that has passed a business license ordinance then you will need to check with the said municipality regarding the requirement of a license. The license would depend on your occupation and will be valid for operations within the city limits and its police jurisdiction. The issuance of this license is governed by the Municipal Business License Reform Act of 2006.
• Local Licensing – Apart from the business privilege license in Alabama, you may also need to apply for separate local licenses depending on the county or city your business is based in and the activity. If you want to start a food service establishment in a specific city or county like Baldwin then the Bureau of Environmental Services will be responsible for providing the permits or licenses post inspection of such establishments.

7. Open a business account for your Alabama LLC

Once you register an Alabama LLC, it becomes important to open and maintain a business account as it helps in keeping individual and business transactions and funds separate. There are several other benefits of opening a business checking account like providing additional protection and making bookkeeping manageable. A business account also makes it easier to navigate through the tax season by ensuring all your business transactions remain in one place.

8. File state tax return/Annual Report

Once you form an Alabama LLC online and obtain the necessary business licenses and permits, the next step is to ensure all annual state compliances are met. There are primarily two important annual requirements and they are:

• Annual Report – Alabama is one of the few states in the USA where a limited liability company is not required to file an annual report.
• LLC Taxes – Once you form an Alabama LLC, you may be required to file different types of taxes depending on the type of business or business activity. The most common is the Business Privilege Tax Return by March 15, each year. An LLC is a pass-through tax entity and hence personal income tax would be filed by owner or members. Apart from these, you may also be required to file sales and use tax with the Alabama Department of Revenue (ALDOR).

Know more about starting an Alabama LLC!

There is a process to form an LLC in Alabama and this consists of different documentation. You may have several questions pertaining to various aspects of the new LLC formation. Hence, we have created a special section of “Frequently Asked Questions” for addressing some of the queries that you may have as a first time entrepreneur.

Is Alabama a good state to form an LLC?

If you are thinking of establishing a startup in Alabama then it is a great decision. There are many reasons for choosing to form Alabama LLC online including the pro-business environment. Some of the reasons why it is beneficial to form a limited-liability company in this state are:

• The state has very competitive tax structures, which play a key role in decreasing the overall tax burden of LLC’s
• The transportation infrastructure is quite strong and includes a network of roads, airports, and inland waterways.
• The average cost of living in Alabama is much lower than some of the top states in the USA like New York, Florida, and California
• In terms of advanced business facilities, Alabama is ranked 14th in the nation
• There are good workforce development programs in the state that helps in building a pool of skilled workers
• A vibrant tech and innovation ecosystem exists in this state

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

A business name is extremely crucial for any new or existing company. Once you have chosen a name, it is essential to conduct an Alabama LLC name search. This process of checking name availability will help you to identify if the chosen name is already being used by any other company in the state. If your chosen name is available then you can reserve it and if it is not available then you will have to think of a new name and conduct the name search again.

How much does an LLC cost in Alabama?

The formation of an LLC in the state of Alabama will be governed by the 2020 Code of Alabama, Title 10 – Corporations, Partnerships, and Associations, Chapter 12 – Limited Liability Company Act. The initial cost to file an LLC in Alabama is $236. You will also need to draft an Alabama LLC operating agreement although it is not required to be submitted with the state. Apart from the initial cost, there will be costs attached to business licenses, name reservation, and hiring a registered agent among others.

Do I need a business license for my Alabama LLC?

Yes. If you are planning to transact in the state of Alabama then you will have to apply for single or multiple business licenses and permits. One of the important licenses required by domestic and foreign LLC’s is the business privilege license in Alabama. Apart from this, you may also need municipal licenses, and other permits based on location and activity. You can subscribe to our Business License Research Report service as it provides detailed information on several aspects of licensing in the state.

What is a business privilege license in Alabama?

The business privilege license in Alabama is one of the most important licenses that most companies transacting in the state require. This license is issued by the License Commission in the city or county and some companies may not require it depending on the business activity, vocation or occupation. For example: if you form an LLC in Alabama that sells tangible personal property through retail or wholesale then you will be required to apply for and obtain this license.

What taxes does an LLC pay in Alabama?

Once you form an online Alabama LLC, depending on the tax status you choose, you will be required to file business taxes in the state. Some of the applicable taxes are:

• Personal income tax for a pass-through entity
• Annual business privilege tax
• Alabama Sales and Use Tax
• LLC Payroll Taxes or Withholding tax
• Other miscellaneous taxes according to business activity like Oil & Gas Production Tax

Can I register a foreign LLC in Alabama?

Yes. The formation of a foreign limited liability company will be governed by the 2020 Code of Alabama, Title 10 – Corporations, Partnerships, and Associations, Chapter 12 – Limited Liability Company Act, Article 9 – Foreign Limited Liability Companies. You will be required to file the Application for Registration of foreign LLC along with a fee of $150. This process is known as the “Foreign LLC Qualification” and you will not be allowed to conduct business in the state without this registration.

How do I dissolve my Alabama LLC?

After you form an Alabama LLC online, there can be several reasons to discontinue the business. According to state laws, AL Code § 10-12-42 (2020), you will be required to file Articles of Dissolution if you want to wind up your business in this state. The fee for processing a dissolution is $100.

Ready to form an Alabama LLC?

There are different types of business structures that you can choose to form in the state of Alabama although one of the most popular structures is that of a limited liability company. An LLC has several advantages over other business structures and also provides tax benefits. If you want to form an Alabama LLC then IncParadise can assist you with the process of registration of your new business in the state.