How to Form a Company in Alabama

Introduction

In Alabama, there are two ways to form a company: incorporating and filing as a limited liability company (LLC). Whether you choose to incorporate or file as an LLC depends on your business needs and goals. It’s important to remember that when you register as either one of these entities with the state of Alabama, you’ll have certain responsibilities and limitations in your business practices.

Choose a Name for Your Business.

Choosing the perfect name for your company can be a tricky task, but it’s important to get it right. You want a name that is unique, but not so unique that it’s difficult for people to pronounce or spell. You also want a name that doesn’t offend anyone or confuse customers.

You’ll need to make sure that your chosen business name isn’t already in use by another company in Alabama before filing paperwork with the state. For example, if “Apple” was already being used by an existing company in Alabama when you began looking into forming one yourself, then you might have trouble registering under that particular name—you’d have to choose something else instead (perhaps “Big Red”).

File Your Assumed or Fictitious Name.

File an Assumed or Fictitious Name. You can file an assumed name or fictitious name to protect your business’s name from being used by another company. An assumed name is only available for up to 3 years, while a fictitious name can be in place for up to 5 years at a cost of $50.

If you don’t want this option and don’t want to pay the fee, consider filing a trademark instead.

Create Your Articles of Incorporation.

The initial steps of forming a new Alabama LLC will be the same as in other states. You’ll need to:

• Nail down the name you’d like to use for your business.
• Get together all necessary paperwork and information, including articles of incorporation and other documents that are required by law or customarily filed with the state (these vary from state to state). As part of this process, you may want to check if there are any special requirements for filing these documents in Alabama–for example, if one or more officers live out-of-state, they’ll likely have to file something called a Certificate of Authority with the secretary of state’s office before starting operations here in Alabama. This certificate says that even though their principal place of business is outside our borders, they still plan on doing some business within them.* Get ready for your meeting! You should know what kind of date/time works best for everyone involved; maybe pick a lunch hour so you can break up the day? Or maybe at night after work when everyone else should already be home (you could save on gas). Either way–meetings are an important part of running a successful company!

Publish Your Incorporation Notice.

You must publish your incorporation notice in a newspaper. The notice can be published once a week for three consecutive weeks. The publication must include the name of your business, the county where you will operate, and the address of your principal office.

Get EIN from the IRS.

You will need to get an Employer Identification Number (EIN) from the IRS. This can be done online and takes about 5 minutes, so there’s no reason not to do it now!

Your EIN will be used for several things:

• Registering your company as a foreign entity in Alabama (see below)
• Setting up business accounts with banks and other financial institutions
• Paying taxes if you have employees

Register to Pay Taxes in Alabama.

As a small business owner in Alabama, you’ll need to pay taxes on all of the following:

• Sales tax on all sales made in Alabama.
• Income tax on all income earned in Alabama.
• Business license tax on all profits from your business.
• Unemployment tax (if applicable) on employees who work in Alabama and receive state unemployment benefits if they become unemployed or have been laid off but are still able to work. Some cities and municipalities also require businesses to pay unemployment insurance for their workers at their own expense. If this is the case for you, contact your city’s finance department for more information about how much it will cost and what documentation is required before filing your taxes with them each quarter/year depending upon the terms of your contract with them (it varies so be sure not miss any deadlines).

Set up Licenses and Permits.

Alabama licenses and permits vary by state, but many are required for all businesses. These can include licenses for your business location (e.g., a retail store or restaurant), workers’ compensation insurance coverage, and more.

There are also special licenses and permits that may be required for specific industries only—for example, if you plan to operate as a contractor or provide certain services such as plumbing work or pest control.

In Alabama, incorporation isn’t totally necessary, but it can provide benefits that you might find worthwhile

Incorporation isn’t necessary to do business in Alabama, and it’s not something you should do if you’re just starting out. If you’re looking for a quick way to get up and running with your new business, then incorporation can be helpful, but if you already have a good amount of money saved up or are planning on taking the long road through small-business success, then there’s no real need for it.

For those who do want to incorporate their business in Alabama, they’ll find that doing so can provide a number of benefits:

• Limited personal liability: Your corporation will be liable for its own debts and liabilities (but not yours). This means that if someone sues your company because they’re unhappy with one of its products or services, then only the assets of the corporation will be at stake—not any personal assets like homes or cars.
• Raising capital: You can raise capital by selling shares in your corporation to investors (people who agree to provide funding in return for financial returns).

Conclusion

We hope that this post has given you a better idea of what it means to form a company in Alabama. If you have any questions about your business, feel free to contact us!