When it comes to having an LLC, many people shy away because they fear too much difficulty in setting up and maintaining that particular kind of entity. Fortunately, that isn’t the case for most LLCs, as they can be set up without a lot of effort and maintained by following some rules and regulations. In the state of Alabama it is relatively easy to set up an LLC, provided the specific legalities are followed correctly.

Getting Started

Naming the LLC

Naming the LLC matters. A company name should be clear and direct about what is offered, but it should also be what the owners are comfortable with. In Alabama it’s possible to search online to see whether a particular company name has been taken or whether it is available for use. When selecting a name, remember that it must have the words Limited Liability Company or its abbreviation (LLC or L.L.C.) in the name itself. Additionally, restricted works like Banc or Bank will require additional paperwork or a licensed individual in the LLC. Some words are prohibited if they would confuse people and make them think the LLC is a government agency. It’s also important to make sure the domain name is available, so everything matches properly.

Selecting a Registered/Statutory Agent

A registered agent must be a resident of the state of Alabama or a corporation that can do business in the state. As an owner of an LLC, it is legal to elect a person within the company as registered agent, and owners can also elect themselves. A registered agent must be available to take any official correspondence for the LLC, so choosing someone who is going to have a high level of availability at nearly all times is very important. Otherwise, important information could be missed.

Filing Articles of Organization

There are two documents that have to be filed in Alabama, and neither are specifically called the Articles of Organization. Different states sometimes have different terms for these documents, but they serve the same purpose. These are the Name Reservation and the Certificate of Formation, which must be filed with a probate judge. These cost $28 online or $10 by mail, and $100, respectively.

  • Creating an Operating Agreement

Like many states, Alabama does not require an operating agreement. One can be created if that is what the owners of the LLC desire, but it is certainly not a requirement for doing business in the state.

Running Your Business

Getting Your EIN

What’s an EIN?

An EIN is an employee identification number, issued by the Internal Revenue service. Sometimes it is also called a Federal Tax Identification Number. It’s a unique number issued to each business.

You’ll need an EIN to

  1. Open a business bank account.
  2. File Federal and State Taxes
  3. Hire employees.

Before you get your EIN:

  1. Make sure your new business has been properly formed before applying.
  2. Be wary of paid sites. EINs are free direct from the IRS.

How do I get an EIN?

  1. Apply online: The easiest way is to apply online for an EIN. Note, the IRS website has office hours, and is only available Monday through Friday, 7am to 10pm. Yes, we also agree this is one of the most ridiculous things we’ve ever seen.
  2. Call: You can call 1-800-829-4933, between 7am to 7pm of your time zone, Monday to Friday.
  3. Snail Mail – You can download the form and mail it in.

Keep Business and Personal Accounts Separate

  1. Get a business bank account for your business. This will help you protect your personal assets from potential creditors and lawsuits, and will also make life A LOT easier come tax time.
  2. Get a business credit or debit card. This will help you keep your expenses separate and easier to track.

Accounting

No matter what business you run, accounting software and processes is a must for any small business. If you have an accountant, ask them which software they work with and recommend.

A good accounting system is necessary to:

  1. Track income and expenses, so you can easily see if you’re making money
  2. Makes filing income taxes so much easier.

Always try and find something that will:

  1. Sync with all of your bank and credit card accounts automatically – not just downloads, but auto sync.
  2. Automatch vendors, customers and other accounts.
  3. Let you accept credit cards and ach drafts with ease.

 

This can be applied for online, as can unemployment. Additionally, the state of Alabama requires filing for several taxes.

Alabama LLC Taxes

Income

State income tax withholding and employee withholding tax are both required by the state.

Unemployment

Alabama requires LLCs to pay unemployment insurance tax.

Sales Tax

Sales tax is a requirement for any LLC that offers taxable goods and services.

State licensing is also important, and often required based on the type of business that is being operated.

Getting Insurance for your LLC

One of the most important requirements for an Alabama LLC is workers’ compensation insurance. This is a requirement of the state, and something every LLC must have if they hire employees. While there are many other types of insurance available, including general liability, that might be helpful for an LLC to have, the state requirements come first. After that, other kinds of insurance may be worth exploring.

Keeping Your LLC Compliant

Alabama has hiring compliance guidelines that have LLC must follow. These help ensure that each company that hires employees is doing so fairly, and that the employees are legal to work in the United States. The Annual Business Privilege License is another compliance requirement, along with the Business Privilege Tax, which is due in the third week of April. This is between 0.025% – 0.175% of the net worth of the business an LLC conducted in the state, throughout the previous taxable year. An annual report is also required, as is filing in every county where the business has a presence. The fee for that varies by county, and is population dependent. Getting a Certificate of Good Standing is possible, as well, and can be requested online.

How to File a Foreign LLC in Alabama

A foreign LLC is allowed to do business in Alabama provided it files the required, proper paperwork. This can be filed online for a $250 fee, or through the mail for a $150 fee. No matter which way the request is processed, there are specific requirements that must be met for foreign entities that wish to do business in the state. Filing online can also help the process move more quickly, allowing a company to begin doing business faster than when filing through the mail.