How to form an LLC in Alabama

The Alabama Secretary of State charges $200 to file the Certificate of Formation. Name reservation, registered-agent service, local licenses, and tax registrations can add to that amount. Do not automatically add an old $50 BPT minimum: for tax years beginning after December 31, 2023, entities with a calculated BPT of $100 or less are exempt and do not file the BPT return.

Online filings through the Alabama SOS portal typically approve in 1–3 business days. Mail-in filings can take 2–4 weeks. Alabama doesn't offer a separate expedited tier — online is the fastest option.

A standard Alabama LLC does not file a separate annual report with the Secretary of State. Tax, licensing, and registered-agent obligations can still apply. The Department of Revenue now exempts entities with a calculated BPT of $100 or less from both the tax and return for tax years beginning after December 31, 2023.

The BPT is based on the entity's Alabama taxable net worth and classification. Under the current rule, an entity with calculated BPT of $100 or less is exempt and does not have to file the BPT return for tax years beginning after December 31, 2023. Entities above the threshold should use current Department of Revenue forms and instructions.

Almost always. The Certificate of Formation creates the LLC at the state level, but most Alabama cities require a separate municipal business license. Birmingham, Mobile, Huntsville, and Montgomery all have their own licensing requirements, usually based on gross receipts. Check with your city clerk for fees and renewal dates.

Yes. Alabama has no residency requirement for LLC members or managers. You only need to appoint a registered agent with a physical Alabama street address. Non-residents commonly use a commercial registered agent service to satisfy this requirement.

Yes. Alabama recognizes single-member LLCs (SMLLCs) and they enjoy the same liability protection as multi-member LLCs at the state level. For federal tax purposes, the IRS treats an SMLLC as a "disregarded entity" by default — its income flows through to the owner's personal return on Schedule C.

The choice depends on liability, tax, banking, and administrative needs. An LLC can separate business obligations from an owner when it is properly maintained, while a sole proprietorship is simpler. Compare the $200 formation fee and any real licenses or taxes with your risk and get professional advice for the facts of the business.

Taxes depend on the LLC's federal classification and activities. Alabama income tax, sales tax, payroll taxes, and BPT may apply. For tax years beginning after December 31, 2023, an entity whose calculated BPT is $100 or less is exempt from BPT and does not file the return; entities above the threshold should follow current Department of Revenue instructions.

Yes, non-residents and foreign nationals can form an Alabama LLC without any residency requirement — you simply need a registered agent with a physical Alabama street address to receive official correspondence. However, if you operate your business in your home state, that state may require you to foreign qualify your Alabama LLC there, which involves filing a Certificate of Authority and paying that state's fees. Non-resident members still owe Alabama taxes on income sourced from Alabama business activities. Using a registered agent service is especially practical for out-of-state owners who have no physical presence in Alabama.

To dissolve an Alabama LLC, members must first vote to approve dissolution according to the operating agreement, then file Articles of Dissolution with the Alabama Secretary of State, which carries a $100 filing fee. Before the Secretary of State will accept the dissolution filing, you must obtain a Certificate of Compliance from the Alabama Department of Revenue confirming all Business Privilege Tax obligations are satisfied. You should also cancel any local business licenses, close state tax accounts, and notify creditors before winding up operations. Processing typically takes 3 to 5 business days once the filing is submitted online through the Alabama SOS portal.

Alabama does not issue a single statewide general business license, but most LLCs must obtain a county or municipal business license from each locality where they operate — fees and requirements vary widely by county and city. Certain regulated industries such as contractors, healthcare providers, and food service businesses require additional state-level professional or occupational licenses through the relevant Alabama licensing board. If your LLC sells taxable goods or services, you must also register for an Alabama sales tax license through the Alabama Department of Revenue at no cost. Failure to obtain required local licenses can result in fines, so check with the county probate office and city clerk in each jurisdiction where you do business.

Alabama law does not legally require an LLC to have a written operating agreement, but the Alabama Limited Liability Company Law strongly assumes one exists and defaults to statutory rules when there is none. Without an operating agreement, Alabama's default rules govern critical matters like profit distribution, management authority, and what happens when a member leaves — which may not match your intentions. A written operating agreement is especially important for multi-member Alabama LLCs to spell out voting rights, capital contributions, and buy-out procedures. Banks and title companies in Alabama routinely request the operating agreement when you open a business bank account or purchase real estate, so having one in place from the start is highly advisable.