LLC

How to Start an L.L.C. in Alabama?

Before starting a business, one must decide which business entity is best. An L.L.C. is a business-friendly and popular choice in Alabama. L.L.C. is a typical business structure in the United States, accounting for over a third of all businesses nationwide. A significant benefit of running an L.L.C. is that it provides limited liability to business owners by shielding them from legal and financial responsibility and many business debts. The owners of an L.L.C. are known as “members”. You can form an L.L.C. in Alabama through the Alabama Secretary of State. To start operating an L.L.C., you must register with the Secretary of State and pay L.L.C. formation fees.

Steps to Start an L.L.C. in Alabama

Name your Alabama L.L.C.

Before you register your L.L.C., you need to choose a name to include in the articles of organization. The name of the L.L.C. must comply with the naming requirements, which are as follows:

1. The name of the L.L.C. must include words such as Limited Liability Company, L.L.C. or L.L.C.
2. The name of the L.L.C. must be unique and not the same as an existing business in the State. A search can be conducted on the Secretary of State’s website to determine whether a business name is in use.
3. The name of the L.L.C. cannot use words used by government agencies such as the State Department, C.I.A., F.B.I., Treasury, etc.
4. A few restricted words, such as bank, attorney, lawyer, credit union, etc., may require more documentation and license paperwork.

Additional considerations:

• URL availability: Even if you think you’ll not need a webpage, at least reserve an option to have one in the future by buying a domain name. Ensuring the URL is available before you register your L.L.C. name is good.
• Reserve your name: If you are concerned that someone else might take your name, you can reserve the name for up to 120 days by paying a small fee.

Choose a registered agent

Appointment of a registered agent is mandatory for an L.L.C. A registered agent can be either a person or an entity authorized to accept service of processes and other official legal documents and notices on behalf of your L.L.C. The registered agent offers a registered agent service and can be a person or an entity. A registered agent has to qualify for the following criteria:

1. It must provide registered agent services.
2. It must have an address in Alabama.
3. It must be on-site and available to accept documents during regular business hours.

Prepare and file Articles of Organization

Articles of Organization are the document that establishes an L.L.C. formally by laying out basic information about it. One has to prepare the articles of organization and file them with the Alabama Secretary of State Corporations Division Corporations to register Alabama L.L.C. properly. It includes filing a simple online form and submitting it. It can also be sent by mail. Usually, the following information is provided to prepare the certification of formation:

To prepare articles, you need the following:-

1. Name of your L.L.C.
2. Name and address of the registered agent of the L.L.C.
3. Indicate whether it is a series L.L.C., professional L.L.C. or nonprofit L.L.C. by checking the appropriate box.
4. The effective date of the L.L.C. is different from the certificate of formation of the filing date.
5. The signature of the organizer

The Secretary of the State reviews your Articles and approves them. Once the approval is granted, the L.L.C. becomes a legal business entity.

Receive a certificate from the State

On filing the certificate of formation, the secretary of State reviews the filing, and if the approval is granted, the L.L.C. becomes a legal business entity. The State issues a certificate confirming the L.L.C. formally exists after the L.L.C.’s formation documents are filed and approved. This certificate allows the L.L.C. to obtain an Employer Identification Number (E.I.N.), obtain business licenses and open a business bank account.

Create an Operating Agreement

It is a document outlining the way an L.L.C. conducts business. It is not mandatory to have an operating agreement. Still, it is highly advisable as it is helpful for various reasons, such as settling disputes arising over financial agreements and other potential litigation. Without an operating agreement, the courts make determinations based on state law, which might not necessarily be in the L.L.C.’s and its members’ best interest. The operating agreement includes the following:-

1. Name and principal address of the L.L.C.
2. Duration of the L.L.C.
3. Information about the Certificate of Organization
4. Name and address of the registered agent
5. Purpose of the Business
6. Process in which profits and losses will be divided
7. Members and their contributions
8. Procedure for incoming and outgoing members
9. Indemnification and liability clauses
10. Management of the L.L.C.

Get an Employer Identification Number (E.I.N.)

E.I.N. is a nine-digit number assigned by the Internal Revenue Service to identify L.L.C.s for tax purposes. An E.I.N. can be obtained either by mail or online through the I.R.S. E.I.N. serves the following purpose:-

1. Open a business bank account
2. To hire employees
3. To file and manage taxes at the State as well as the federal level.

Keep certain L.L.C. records on-site

L.L.C.s in Alabama must keep the following records at their registered office. This list includes but is not limited to:-

1. The current list of names and recently updated addresses of all L.L.C. members
2. A copy of the certificate of formation along with all its amendments and executed powers of attorney for actions(s) already taken.
3. Copy of the effective operating agreement along with any or all of its amendments.
4. Copies of the recent financial statements filed with the Department of Revenue L.L.C.s in Alabama may be established to offer one specific kind of professional services. However, all members should be licensed and registered to perform the service the L.L.C. was organized initially.

L.L.C.s in Alabama should file a business privilege tax return

L.L.C.s should file an Alabama Business Privilege with the Alabama Department of Revenue on or before three and half months after the beginning of the taxpayer’s tax year. Every Business Privilege Tax Return must include the following documents (any other additional L.L.C. forms:-

1. A copy of pages 1 to 4 of the federal tax return
2. A copy of Form 65 Alabama apportionment schedule
3. Documentation supporting exclusions and/or deductions claimed
4. A copy of the balance sheet utilized for computing the taxpayer’s net worth

Steps to be taken after the formation of the L.L.C.

Registration of an L.L.C. gives a legal foundation to conduct business. All Alabama L.L.C.s must file an annual report to keep the L.L.C. compliant and active on the State’s website. This is done online, and the annual report should be filed by the end of the calendar in the quarter of the anniversary month of the L.L.C.’s formation. Quarterly tax payments must be made, and a registered agent must be appointed for the business.

A registered L.L.C. must also do the following:-

1. Obtain permits or licenses essential to operate your business. The permits include health department permits, zoning permits, home occupation permits, professional licenses, etc.
2. Register the business with the State’s tax agency.
3. Open a business bank account.
4. Apply for a business credit card.
5. Purchase insurance for the L.L.C.
6. Protect the name and logo along with the trademark.

Conclusion

In this blog, we have seen the requirements to start an L.L.C. in Alabama. From choosing a name for the L.L.C. to obtaining an employer identification number, all are simple steps that must be followed to ensure that your L.L.C. in Alabama is legally compliant.   

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