How to Start a Business and Form Your LLC in Alabama

Alabama Business Facts and Environment

AL Business Facts

Alabama, also known as the Yellowhammer State, the Cotton State, and the Heart of Dixie, is considered to be the thirtieth largest state by area. What the state has become today is a product of the economic hardship it suffered in the past.

From its beginning as an agriculturally dependent state, Alabama has diversified its interests in modern times. From management to finance, manufacturing, automotive, aerospace, healthcare, mineral extraction, retail, education, and technology, Alabama is now one of the most thriving states in America.

When it comes to business development, Alabama has many reasons to be proud. Alabama has evolved into a hub for modern medicine and automotive manufacturing, with recent successes ranging from Remington to Polaris. Companies such as Airbus, Hyundai, and Mercedes-Benz locating plants in the state demonstrate how pro-business Alabama can be for big companies. A new study reveals that Alabama is likewise an attractive destination for small business entrepreneurs and owners.

Major Companies Headquartered in Alabama

Established corporations such as Encompass Health, Regions Financial, The University of Alabama at Birmingham, Civil Air Patrol, Vulcan Materials Company, and BL Harbert International have enjoyed success in the Yellowhammer state.

Startup Environment

Alabama believes that welcoming large corporations fosters an environment where smaller business can develop and grow in their ability to become resource providers. Alabama has one of the lowest rates for property tax and corporate income tax. This leads to the creation of a pro-business environment.

Step 1: Decide on a Business Structure

There are 3 basic options: a DBA, a Corporation or an LLC. Click here to learn more about business entities.

• A DBA or “Doing Business As” (also known as a “Fictitious Business Name” or FBN) is not really a separate structure, but just a different name that an individual or partners use as their business name.
• A Corporation is a separate entity (provides liability protection to the owners) that has a structure that includes shareholders, directors and officers. More complex than a DBA but the entity of choice for large companies and startups that intend to raise funding. Some professions are required to choose what is known as a “Professional Corporation” or PC (doctors, lawyers, architects, etc.).
• An LLC or “Limited Liability Company” is a newer type of business that is both a separate entity but provides very easy management (doesn’t require directors or officers) and taxation. Has largely replaced the DBA and Corporation in popularity recently as it provides liability protection but with much less complexity (and taxation) than a Corporation.

Step 2: Pick a Business Name

Alabama Business Facts

Alabama, also known as the Yellowhammer State, the Cotton State, and the Heart of Dixie, is considered to be the thirtieth largest state by area. What the state has become today is a product of the economic hardship it suffered in the past.

From a state that is completely dependent agriculture, Alabama has now diversified its interests. From management to finance, manufacturing, automotive, aerospace, healthcare, mineral extraction, retail, education, and technology, Alabama is now one of the most thriving states in America.

In terms of business development, Alabama has many reasons to be proud of. Alabama is a hub for medicine and automotive manufacturing, with recent successes ranging from Remington to Polaris. Companies such as Airbus, Hyundai, and Mercedes-Benz locating plants in the state demonstrate how pro-business Alabama can be for big companies. A new study reveals that Alabama is likewise an attractive destination for small business entrepreneurs and owners.

Major Companies Headquartered in Alabama

Alabama is the headquarters of many major companies including HealthSouth, Regions Bank, BE&K, Civil Air Patrol, and the University of Alabama.

Startup Environment

Alabama believes that by bringing in big corporation, this will lead to the development of smaller businesses that are there to offer resources but ultimately seeking ways to expand. Alabama has among the lowest rates for property tax and corporate income tax. This leads to the creation of a pro-business environment.

Step 3: Register the Business

Each state has its own requirements for registering a business. Now that you’ve chosen a business structure and selected your business name, here are the requirements to register your business in Alabama.

How to form an LLC in Alabama

• File the “Articles of Organization” with the Alabama Secretary of State.
• Once the articles are filed and approved you will then need to properly organize the LLC (this also applies to “1-person LLCs”) by holding an “Organizational Meeting” which takes contributions from the members, issues Member Certificates, adopts the company Operating Agreement and more.
• Hire a professional Registered Agent.
• Hold an Organizational Meeting to take contributions from the members, issues Member Certificates, adopts the company Operating Agreement and more. (yes, even for 1 person LLCs).
• Optional: Elect S-Corporation status with the IRS by filing IRS Form 2553. Yes, even an LLC can choose to be taxed as an S-Corporation (or even a C-Corporation). 

TIP: Speak to your tax advisor about this important issue because it adds complexity to your LLC most people would rather avoid.

• Optional: Create an operating agreement. This is a legal document that outlines ownership and operating procedures of your LLC.

How to Incorporate in Alabama

• File the “Articles of Incorporation” with the Alabama Secretary of State.
• Hold an Organizational Meeting to properly organize the corporation, take contributions from the shareholders, elect directors and officers, issues stock, adopts the Corporate Bylaws and more.
• Hire a professional Registered Agent.
• Optional: Corporations can elect S-Corporation status with the IRS by filing IRS Form 2553. Click here to learn more about S-Corporations.

Considerations when incorporating or forming an LLC in Alabama

The Alabama Secretary of State could take anywhere from 4 to 5 weeks for mail filings to process the paperwork. This may increase during peak periods.

TIP: Check our order form to see how long Alabama is currently taking to process regular and expedited orders.

• A Registered Agent is required for every Alabama Corporations and LLC. The chosen registered agent must have a physical street address in Alabama. A professional Registered Agent who will provide their address and forward any important documents to you. This is convenient if you have to move, since you won’t have to file forms or pay fees, (just update your address with your agent).

How to File a DBA in Alabama

• Check the state database of business names.
• Complete the DBA registration form.
• Notarize and submit the form
• Pay $30 for the filing fee.

Step 4: Obtain Your Federal Employer Identification Number

Your EIN is like your Social Security Number for your company. It’s required for Corporations and LLC’s and optional for DBA’s (if you don’t have any employees, then it’s required). However, if you are a DBA and don’t obtain an EIN you will be forced to use your Social Security Number on many documents so it’s typically recommended you obtain the EIN to prevent identity theft.

To obtain an EIN you can apply online with the IRS or via IRS Form SS-4.

TIP: We will obtain your EIN for you if you we form your company.

Step 5: Open Company Bank and Credit Accounts

To keep business and personal expenses separate, you should open a separate account for your business. In addition, getting business credit cards is how you begin to build a company credit profile (corporation or LLC required) and can later qualify for larger loans and lines of credit. To open the account simply call your chosen bank and inquire on the steps to open a business bank account. Typically you’ll need a) your filed paperwork, b) your EIN and c) a company resolution authorizing your company to open the account (signed by the owners, members, officers or directors, etc.).

Top 5 Major Banks in Alabama

• Regions Bank
• BBVA Compass Bank
• People’s Bank of Alabama
• First Community Bank
• National Bank of Commerce

TIP: Our business formation service includes a free banking resolution for your use.

Step 6: Set-up An Accounting System

Setup your Accounting and Record-keeping system and learn about the taxes your new company is responsible for paying.

Company documents generally are required to be kept for 3 years, including: a list of all owners and addresses, copies of all formation documents, financial statements, annual reports, amendments or changes to the company. All Tax and Corporate Filings should be kept for at least 3 years. View our “Accounting & Financial Management” section for help with setting up an accounting system and purchasing accounting software.

Step 7: Obtain Licenses and Permits

Now that you’ve registered your business name you need to obtain a business license for your company – this authorizes your company to do business in your city or county. Typically this also involves registering for state taxes and permits (the city may require them as part of the business licensing process).

TIP: We work with a company that can obtain and prepare business licenses and permits for you. Click here to learn more.

Step 8: Hire Employees (if applicable)

If you intend to hire yourself or others as a full or part-time employee of your company, then you may have to register with the appropriate State Agencies or obtain Workers Compensation Insurance or Unemployment Insurance (or both). View our “Employees & Payroll” section for help with hiring employees and processing payroll.

Step 9: Obtain Business Insurance

There are many types of insurance for businesses but they are usually packaged as “General Business Insurance” or a “Business Owner’s Policy”. This can cover everything from product liability to company vehicles. A decent policy can run as little as $300/year and offers a great extra level of protection. Click here to view our preferred provider of business insurance online.

Step 10: Systemize and Organize

Prepare the business as if someone needed to take it over and run it for you. This means have a method to process orders, pay bills, pay employees, pay taxes, maintain your permits, etc. Basically, try to make the operational aspect of the business as automated and efficient as possible so you can concentrate on growing your business. View our “Manage Your Company” section for help with systemizing and automating your business.

Step 11: Branding and Marketing

Now that you’ve set-up the company for success, you need to get the word out. Create a marketing plan for your products and services that targets your ideal customer. View our “Marketing & Sales” section for help for more information.

Step 12: Annual and Ongoing Requirements

DBA: Your Fictitious Business Name should be valid for 5 years (unless you change company name or other information listed on the FBN) at which point you’ll need to renew it with the county.

Corporation: Business in Alabama should file an Annual Report with the Secretary of State of Alabama.

LLC: Alabama corporations are required to file an Annual Report with the Alabama Secretary of State each year, in addition to general taxation. Information on your business’s taxes can be found here.

Important Alabama Contacts

Alabama Secretary of State

Business Services (for Corporation and LLC filings)
Alabama State House
11 South Union Street, Suite 119
Montgomery, AL 36130
Phone: 334-242-5324

Alabama Taxation Departments

• Alabama Department of Revenue

Alabama Labor and Employment Departments

• Alabama Department of Labor

Alabama Startup Resources

1. Small Business Administration (SBA) Alabama District Offices

• Birmingham District Office

2. SCORE Alabama

• SCORE Alabama provides free and confidential business advice and counseling tailored to meet the needs of your small business and your personal objectives.

3. Alabama Legal Statutes

• Alabama Business Corporation Law – note this is the broad code that includes various other topics including business corporation.
• Alabama Limited Liability Company Law of 2014 – the specific act that applies to Alabama LLC’s.
• Alabama Code Title 34. Professions and Businesses – this includes regulations on Alabama’s professions and businesses

4. Alabama Chambers of Commerce

• Hoover Area Chamber of Commerce
• Decatur Morgan County, Alabama, Chamber of Commerce
• Monroe County Chamber of Commerce
• Thomasville Alabama Chamber of Commerce

5. Innovation Portal

• The mission of the Innovation PortAL is to create a regional entrepreneurial and innovation hub by providing local entrepreneurs and businesses with access to state-of-the-art facilities, comprehensive training programs, extensive professional networks and mentorship.

6. Angel.co Alabama Startups

• A list of all 480+ Alabama Startups and 4,700+ Alabama angel investors registered with Angel.co. Good research resource.

7. Alabama Business News

• Birmingham Business
• Business Alabama
• Alabama Business News
• Birmingham Business Journal

8. EDPA

• The Economic Development Partnership of Alabama is the State of Alabama’s lead economic development agency.

9. ADECA

• The Alabama Department of Economic and Community Affairs is responsible for administering a broad range of state and federal programs that contribute to the department’s mission — Building Better Alabama Communities.

10. USGBC Alabama

• USGBC Alabama is at the forefront of environmentally-sensible development and sustainability in the state working at the national and regional levels to advocate for high performance healthy buildings, and deliver high-quality sustainable building education and networking opportunities.