A limited liability company (LLC) is a type of business structure that is formally registered with the state. Some businesses choose to become an LLC because this business structure provides extensive protections to the assets of those involved. In an LLC, there are no owners, but only members. There are also fewer costs and less paperwork to create an LLC than there are with creating another type of business, such as an S-corporation.
The first step in forming a LLC in Alabama is choosing and reserving a name with the Alabama Secretary of State. The cost to reserve a name is $25 and the name must include one of the following: “Limited Liability Corporation,” “L.L.C.”, or “LLC” in the name. Next, you have to choose a registered agent who will be sending out the paperwork and receiving any notifications. The registered agent has to live in Alabama in order to receive service. After you fill out a Certification of Formation, you will have to file the original, plus 2 copies with the county probate judge in the county you plan on registering the LLC. There must be at least one member for your LLC, and your LLC needs to have a "Limited Liability Company Agreement."
You have to file a Certificate of Formation with the county probate judge. The form should include a check for $100 made out to the Office of the Alabama Secretary of State as a filing fee. If you want it expedited, some courts will allow that, but it will cost an additional $100. You are also required to include a copy of the Name Reservation with your application.
Foreign-based LLCs will have to fill out an application for registration. The form should include the official name, any other names used for the company, a copy of the name reservation, where the company was formed, the name and address of the registered agents, the office address and the day the company will start business in Alabama.
A huge advantage that Alabama gives to LLCs is that it does not require an LLC to choose between being member-managed or manager-managed, meaning that it can be governed by both managers and members. Along with that, an LLC is allowed to set up different classes of membership, so you can decide what responsibilities or how much power any member gets in your company. Also, if the LLC is mostly owned by a single family, it can get a special tax break by registering as a “family limited liability entity,” which can be done by attaching an additional form to the LLC’s Alabama Business Privilege Tax return form.
In Alabama, your LLC will have to pay a yearly tax called the "Business Privilege Tax." It is also possible for a member to be sued and have to give up their financial interest in the membership as a remedy.
There is a very strict process to setting up an LLC in Alabama, and one misstep can result in your business failing to become an LLC. An Alabama business lawyer can assist you in correctly setting up your LLC so that you are not putting your business and personal finances at risk.