Guidelines on how to register a Limited Liability Company in the State of Alabama and legal and taxation requirement thereafter:
What is a Limited Liability Company?
Any business entity, that has features of both corporations and sole proprietorship organized under these laws or any other jurisdiction limiting the liability of its members for conducting the business and which is taxable under the State of Alabama laws and includes limited liability companies, registered limited liability partnerships, and limited partnerships.
What are the advantages of registering your business as a Limited Liability Company LLC?
- A person who registers a business as LLC has a tax advantage that is associated with the partnership business structure. His business losses cannot be offset as tax deductions against his business income.
- There is no or a limited personal liability for the actions of the company.
- The liability of the owners are limited to the extent of business of the company.
- There is unlimited participation of individuals, corporations and partnerships in the structure of LLC.
- Members of LLC are able to offset their business losses against their operating income.
- An LLC has the ability to file taxes as a corporation, Sole Proprietorship or partnership.
What are the preliminary requirements for registration an LLC in the State of Alabama?
- If you are willing to register your company as an LLC in the State of Alabama, you are required to file an application for registration on form available on the state website. This form is called a certificate of formation or articles of organization and has to be filed with the Judge of the probate of the city/ county where LLC registered office is or to be located.
- After duly certification by the Judge of probate in your respective area, this certificate in original and with two copies along with the prescribed fee is forwarded to the Office of the Secretary of State within 10 days.
What details are required for the Certificate of formation registration Application?
You are required to provide the following details on the certificate of formation application;
- Name Availability of the Alabama LLC: Your business must have the name ending with the LLC. L.L.C or Limited Liability Company that is an indicator which gives a user an ability to recognize about the entity type. You need to check with the registration office, whether the name you want for your business has been taken or not. You can also reserve a name for your business for a fee of $ 10.
- A copy of the name reservation certificate: After due checking and verification, a name will be assigned to your business entity on a certificate called a name reservation certificate.
- Name of the registered agent: Name of the registered agent along with complete mailing address should be mentioned.
- Acknowledgement that there is at least one member of the LLC: The person filing the application has to certify that the LLC is being formed with at least one member or a company.
- Complete mailing address of registered office in Alabama. A commercial registered agent in the state of Alabama can either be a person or an entity that is registered with the Alabama Secretary of State. A registered agent of the Alabama receives mail from the departments on the company's behalf.
What is the application fee?
- Application filing fee for certificate of formation is $100.00
- If you want to process your application on an urgent basis, an additional fee is $100 is charged.
- Fee payable to the Judge of probate for certification process is $ 50.
What additional documents will be required for the process?
- You are required to submit certificate of formation for LLC on form available.
- An LLC operating agreement (when there are more than one member) is required to be kept at the registered office of your company. The operating agreement is not required to submit along with the articles of formation.
- You are needed to obtain a certificate of name reservation for your LLC before registration with the state.
- If you are planning to form an LLC with more than one member, you are advised to have liability operating agreement at your business office.
How long will it take to process the application?
Your application usually takes 7 to 10 working days to process.
What are the legal and tax requirements for an LLC in Alabama?
Once you are registered as an LLC in the State of Alabama and permitted to run your business, there are certain legal and tax requirements that you have to fulfil in order to avoid any penalties and fine imposed by the department of revenue, the State of Alabama.
- Once you commence business in the Alabama, you need to file the Form BPT within two and a half months of the commencement of business to the department of revenue.
- You have to file an annual report (AL CAR) with the department of revenue stating details of your business.
- You are also liable to pay the Alabama business privilege tax and submit and update the tax information on the Business privilege Tax return (Form PPT). This tax return is due no later than three and a half months after the beginning of the taxpayer’s taxable year.
- You can file all these reports manually or online through the state website.
- LLCs in Alabama are taxed as LLCs, corporations, partnerships or single-member LLCs and are also subject to federal income tax.
How much state and other taxes is my LLC subject to?
Depending upon your business structure, number of staff, nature of transactions and business of your company and state requirements, your company is subject to different types of taxes in the state of Alabama. Some are mentioned below:
- Business Privilege Tax A minimum tax of $100 is charged from a company who is continuing their business in the state of Alabama. This tax along with LLC annual report is submitted to the department of revenue annually.
- Sales Tax: Depending upon the nature of your business, for example, purchasing and selling of goods within and outside the state of Alabama, this tax is applicable on your LLC as per the various rates prescribed by the relevant authorities.
- Corporation Income Tax: If you have opted for your LLC to be treated as a corporation, then state of Alabama requires you to pay a corporation tax of 6.5% of the taxable income of your business.
- Employer Tax: This tax is required to be paid by you (as an employer of your business and where you have hired staff) to the state. However, these tax lists is not an exhaustive one and depending upon the formation and nature of your business and legal and tax structure of the State of Alabama, you might be subject to additional taxes.
