How to Form an LLC in Alabama: Steps & Cost (2026)
You form an Alabama LLC by reserving your entity name with the Alabama Secretary of State, then filing a Certificate of Formation for a domestic limited liability company and appointing an Alabama registered agent. Alabama levies a Business Privilege Tax, but the minimum was cut to $50 for tax years after December 31, 2022 and later eliminated for small entities. An EIN from the IRS is free.
Quick Answer
- Form
- Domestic Limited Liability Company Certificate of Formation
- Agency
- Alabama Secretary of State, Business Services
- Name reservation
- Required before filing (Secretary of State)
- Registered agent
- Required - physical Alabama address, must consent
- State tax
- Business Privilege Tax (Department of Revenue); $50 minimum for tax years after Dec 31, 2022, since eliminated for small entities
- EIN
- $0 from the IRS
Alabama Agency and Form: Secretary of State, Certificate of Formation
An Alabama LLC is created by filing a Certificate of Formation for a domestic limited liability company with the Alabama Secretary of State. Alabama differs from most states in one important way: you must first obtain a Name Reservation from the Secretary of State, and the name-reservation certificate is submitted together with the Certificate of Formation. Filing the certificate - and the Secretary of State's acceptance of it - is the legal act that brings the LLC into existence under Alabama's business entity law in Title 10A of the Code of Alabama.
The Certificate of Formation asks for the LLC's name, its registered agent and registered office, the names of the organizers, and whether the LLC is member-managed or manager-managed. The name must contain an LLC designator (such as "LLC," "L.L.C.," or "Limited Liability Company") and be distinguishable in the Secretary of State's records from existing entity names. The exact filing fee is set by the Secretary of State; confirm the current amount on the Secretary of State Business Services pages before you file. This guide covers the Alabama process; for the national overview see how to form an LLC and, for a comparison state, our Texas LLC guide.
How to Form an Alabama LLC, Step by Step
Forming an Alabama LLC is a six-step process built around the Certificate of Formation. Each step corresponds to a requirement of Alabama's entity law or a federal tax rule.
- Choose and reserve your LLC name. Select a name that includes an LLC designator and is distinguishable from names already on file. Alabama requires a name reservation through the Secretary of State before you can file the Certificate of Formation. Confirm the name also does not infringe a federal trademark.
- Appoint an Alabama registered agent. Every Alabama LLC must name a registered agent with a physical Alabama street address (the registered office). The agent - an individual Alabama resident or a qualified entity - must consent to the appointment before being named.
- File the Certificate of Formation. Submit the Domestic LLC Certificate of Formation to the Alabama Secretary of State together with the name-reservation certificate and the state filing fee. Once the Secretary of State accepts the filing, your LLC legally exists.
- Adopt an operating agreement. Alabama does not require you to file an operating agreement, but one is strongly recommended to set ownership percentages, management, voting, and profit distribution. It governs the LLC internally and is not submitted to the state.
- Get an EIN and register for Alabama taxes. Apply for a free federal EIN from the IRS, then register with the Alabama Department of Revenue for the Business Privilege Tax and, if you sell taxable goods or have employees, sales/use and withholding accounts through My Alabama Taxes.
- Get your business privilege license. Obtain the county business privilege license from the Probate Office where you operate, plus any state store license or municipal license your activity requires.
After these steps, open a business bank account - banks generally ask for the stamped Certificate of Formation and the EIN - and keep your registered agent, tax registrations, and license current each year.
Alabama LLC Costs (2026)
The core costs of an Alabama LLC are the Secretary of State filing fees to create the entity and the ongoing Business Privilege Tax administered by the Department of Revenue. Because the Secretary of State sets and periodically updates its filing fees, confirm each amount on the Business Services fee schedule before filing rather than relying on a third-party figure. The Business Privilege Tax figures below are verified against the Department of Revenue.
| Item | What it is | Amount (2026) | Agency |
|---|---|---|---|
| Name Reservation | Required before formation | Set by Secretary of State - confirm | Secretary of State |
| Certificate of Formation | Creates the LLC | Set by Secretary of State - confirm | Secretary of State |
| Business Privilege Tax - minimum | Annual entity tax | $50 (tax years after Dec 31, 2022); eliminated for small entities | Department of Revenue |
| Business Privilege Tax - rate | On taxable net worth | $0.25–$1.75 per $1,000 | Department of Revenue |
| Business privilege license | County license to operate | Set locally - confirm with Probate Office | Probate Office / Dept. of Revenue |
| Federal EIN | Tax ID number | $0 (free) | IRS |
For a full breakdown of start-up and recurring costs, see Alabama LLC cost and compare states with the national how much does an LLC cost guide.
Alabama Registered Agent Requirement
An Alabama registered agent is the person or entity your LLC designates to receive service of process, tax notices, and official state correspondence. Alabama's entity law requires every domestic filing entity, including an LLC, to designate and continuously maintain a registered agent and a registered office in the state. You name the initial agent directly on the Certificate of Formation, and the agent must consent to serve.
The registered office must be a physical Alabama street address - a post office box alone does not satisfy the requirement. You may act as your own registered agent, name a member or manager, or hire a commercial registered agent service. If you change agents later, you file the appropriate change form with the Secretary of State. Failing to maintain a registered agent can lead to loss of good standing or administrative dissolution. See Alabama registered agent requirements and the national registered agent overview for detail.
Alabama Business Privilege Tax
The Alabama Business Privilege Tax is an annual tax "levied for the privilege of being organized under the laws of Alabama or doing business in Alabama," administered by the Alabama Department of Revenue rather than the Secretary of State. It applies to LLCs and most other entities. The tax is calculated on the entity's net worth apportioned to Alabama, at a rate that runs from $0.25 to $1.75 per $1,000 of taxable net worth, based on the entity's federal taxable income apportioned to the state.
Alabama historically imposed a $100 minimum Business Privilege Tax. For tax years beginning after December 31, 2022, taxpayers who would otherwise owe the $100 minimum instead pay $50, and Alabama has since eliminated the minimum for small entities - meaning many small LLCs owe nothing. Because the current-year minimum and filing threshold are set by statute and updated by the Department of Revenue, verify the exact figure that applies to your tax year. The maximum Business Privilege Tax is generally $15,000. For the recurring-filing details, see Alabama LLC annual reporting and Business Privilege Tax.
EIN, Federal Tax Classification, and State Registration
A federal Employer Identification Number (EIN) is issued free by the IRS and is used to open a bank account, hire employees, and file taxes. By default, the IRS treats a single-member Alabama LLC as a disregarded entity taxed on the owner's return and a multi-member LLC as a partnership; either can elect corporate or S-corporation treatment by filing IRS Form 8832 or Form 2553. An EIN is required if the LLC has more than one member or any employees.
At the state level, you register through the Department of Revenue's My Alabama Taxes portal for the Business Privilege Tax and, if applicable, sales/use tax and employee withholding. If your LLC sells taxable goods or services, you must register before making sales. Alabama has no single statewide "general" business license, but the county business privilege license is broadly required, and many regulated professions and municipalities require their own permits. See business licenses in Alabama.
Penalties for Missing Alabama Requirements
Missing Alabama requirements carries real consequences. If an LLC fails to file and pay its Business Privilege Tax when due, the Department of Revenue can impose penalties and interest. Separately, if an LLC does not maintain a registered agent and registered office, or otherwise falls out of good standing, the Secretary of State can administratively dissolve the entity. Operating while dissolved can put the LLC's liability shield at risk.
Reinstating a dissolved LLC generally requires correcting the underlying problem - for example, appointing a registered agent or clearing delinquent taxes - and filing the appropriate reinstatement paperwork. Keeping your registered agent, Business Privilege Tax account, and county license current every year is the simplest way to avoid these outcomes.
Closing an Alabama LLC
To close an Alabama LLC properly, you wind up the business, settle debts and taxes, and file the appropriate dissolution filing with the Alabama Secretary of State. You should also close your Business Privilege Tax and other Department of Revenue accounts so obligations stop accruing. Simply abandoning the LLC leaves tax and compliance duties running. See how to dissolve an LLC in Alabama and the national how to dissolve an LLC guide for the full wind-up steps.
Frequently Asked Questions
What form do I file to create an Alabama LLC?
The Domestic Limited Liability Company Certificate of Formation, filed with the Alabama Secretary of State. Alabama also requires you to reserve your entity name with the Secretary of State before filing the Certificate of Formation.
Do I have to reserve my LLC name in Alabama?
Yes. Alabama requires a Name Reservation from the Secretary of State before the Certificate of Formation is filed. The reservation confirms the name is available and distinguishable.
Does an Alabama LLC need a registered agent?
Yes. Every Alabama LLC must continuously maintain a registered agent and a registered office with a physical Alabama street address. You name the agent on the Certificate of Formation, and the agent must consent.
Does an Alabama LLC pay the Business Privilege Tax?
Yes. The minimum was reduced to $50 for tax years beginning after December 31, 2022, and Alabama has eliminated the minimum for small entities. Confirm the current threshold with the Department of Revenue.
How is an Alabama LLC taxed by the IRS?
By default, a single-member LLC is a disregarded entity and a multi-member LLC a partnership. Either can elect corporate or S-corp treatment via IRS Form 8832 or Form 2553. An EIN is free.
Do I need a business license for an Alabama LLC?
Most businesses need a county business privilege license from the Probate Office where they operate. Some activities also require a state store license or a municipal license.
Related
- How to form an LLC (cluster hub)
- How much does an Alabama LLC cost?
- Alabama registered agent requirements
- Alabama annual report & Business Privilege Tax
- How to get a business license in Alabama
- How to dissolve an LLC in Alabama
- How to get an EIN
- What is an LLC?
- How to form an LLC in Texas (sibling)
More Alabama business guides
Annual Report Articles Of Organization Certificate Of Formation Dba Filing Llc Cost Operating Agreement Registered Agent Business License In
Sources
- Alabama Secretary of State - Business Services (Certificate of Formation, name reservation, registered agent, filing fees).
- Alabama Department of Revenue - Business Privilege Tax ($0.25–$1.75 per $1,000; $100 minimum reduced to $50 for tax years after Dec 31, 2022; $15,000 maximum).
- Alabama Department of Revenue - Individual & Corporate Tax Division (administers the Business Privilege Tax).
- Alabama Department of Revenue - Entity Registration (business tax registration).
- Alabama Department of Revenue - Business License (county business privilege license).
- My Alabama Taxes - state tax registration and filing portal.
- IRS - Limited Liability Company (LLC) (federal default classification).
- IRS - Get an Employer Identification Number (free EIN).
- IRS - About Form 8832, Entity Classification Election.
- IRS - About Form 2553, Election by a Small Business Corporation.
- Legal Information Institute - 26 CFR 301.7701-3 (entity classification election).
- Legal Information Institute - 26 CFR 301.7701-2 (business entity definitions).
LegalGlass provides general information for educational purposes and is not a law firm or a substitute for advice from a licensed attorney or tax professional. Laws, fees, and thresholds change; verify current requirements with the Alabama Secretary of State and Alabama Department of Revenue before acting.