How to Form an LLC in Alabama
Understand how an LLC works., Consult with a tax professional., Allow for self-employment taxes., Name your company., Identify the LLC members., Designate a legal agent and registered office., Create an LLC Operating Agreement., Apply for an...
Step-by-Step Guide
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Step 1: Understand how an LLC works.
A limited liability company, commonly called an LLC, is a legal business entity that allows the owners to limit their financial liability.
The owners, called members, of the LLC will not be held personally liable for lawsuits or other debts incurred by the company., An LLC carries some special tax considerations.
In general, the members will report the income from the LLC on their personal tax returns and will be taxed as individual income, including self-employment taxes.
You should consult with a tax professional to see if an LLC is the best way to organize your business.
Single member LLCs reconcile the profits and losses for the business on IRS Schedule Cand report the income on your Form 1040 tax return.If the LLC has multiple members, the income from the business will be divided between the members via IRS Form 1065and reported as individual income on a Form 1040 tax return. , In a business, you and the other members won't have taxes automatically deducted from your paycheck.
Whether you pay yourself wages or take cash draws from the business, you will have to calculate and pay self-employment taxes.
You will report your self-employment taxes on IRS Schedule SE.For estimating purposes, budget 15 percent of the wages you pay yourself as your self-employment tax.
It is critical that you pay your self-employment taxes.
This is your contribution to the Social Security retirement and disability system.
If you have not paid sufficient self-employment tax and are injured in an accident, you may not be eligible to apply for Social Security Disability Insurance benefits., In Alabama, your company name must contain either the words "Limited Liability Company"
L.L.C., or LLC.
All three are equally acceptable under the law.
You are free to choose which works best with your vision of branding your company.
Before you file your LLC, search the Alabama Secretary of State database to see if your proposed name is already in use.More than one business can have the same name.
However, if there is another business in your area that would appeal to the same customers, you should consider tweaking the name to make it more distinctive. , You can be the only member of your limited liability company.
It is not required that you have a partner.
However, if you have one or more partners, you need to all agree on how to split profits and expenses, percentage of ownership, and other duties.
Each member will need to account for the income from the LLC on his or her taxes.
Don't make anyone a "ceremonial" member.
Only those who have a direct stake in the business should be named members. , The legal agent is the person in your business who can receive legal correspondence and service of process.
This can be a member of the LLC or an attorney.The registered office must be located in the state of Alabama and not be a post office box. , The Small Business Administration strongly recommends that every LLC have an operating agreement that defines and structures the business.LLC operating agreements in Alabama are governed by Section 10-12-10 of the Alabama State Code.At a minimum, the articles of organization must include the name of the company, its duration (can be perpetual), the business purpose, the mailing address of the office, the names and addresses of each member, the ownership percentage of each member, the procedure to add new members, the procedure to remove members, and how the company would be dissolved.
There is no set format and can be a simple document.
However, you should strongly consider having an attorney review your draft agreement and make sure it protects all members and complies with state law.
A single member LLC must have articles of organization.
The ownership percentage would be 100 percent. , This is a unique number assigned to your LLC by the Internal Revenue Service.
Rather than using your Social Security number, the EIN is more private and secure.
You will need an EIN whether your LLC has employees or not.
You can apply online through the IRS websiteor by mail through Form SS-4.There is no charge to apply for an EIN. , Your first step is to file a "Name Reservation Form for Domestic Entities" form with the Alabama Secretary of State.
This form reserves your business name.If you have no specific timeline for forming the business, you can file with the $10 fee.
Your request will be processed in the order it was received with no guaranteed timeframe for receiving the certificate of name reservation.
For three-business-day expedited processing, the fee is $25.
You can also complete the business name reservation online for a fee of $28., This form is available to download in .pdf format at the Secretary of State website.You will complete the name of the company, the address, the name and registered office address of the designated agent, and attach the certificate of name reservation.
The effective date of the LLC must not be more than 90 days after the filing date.
Only one member must sign the certificate.
In a multi-member LLC, you should attach a list of members.
You are not required to file your LLC operating agreement. , In Alabama, you will file your LLC documents with the Judge of Probate's office in the county where the registered office of the designated agent is located, even if the LLC does business in another county.
You must include all documents and all filing fees with your submission or it will be returned to you.
You can file the package in person with the court clerk or by mail.
One original signed in blue ink and two copies of the Certificate of Formation and any attachments.
The Name Reservation Certificate issued by the Alabama Secretary of State.
A check or money order for the filing fee for the county.
Contact the county court clerk for the exact fee.
It is typically around $50.
A check or money order for $100 made out to the Alabama Secretary of State.
If you want three-day expedited processing of your application, the fee is $200. , You will receive a file-stamped copy of your Certificate of Formation from the court.
This is the "Proof of Existence" of your Limited Liability Company.
The court will forward the information to the state for indexing.
About two weeks after your court filing, check the business name entity search on the Secretary of State website to see if your LLC appears in the index. -
Step 2: Consult with a tax professional.
-
Step 3: Allow for self-employment taxes.
-
Step 4: Name your company.
-
Step 5: Identify the LLC members.
-
Step 6: Designate a legal agent and registered office.
-
Step 7: Create an LLC Operating Agreement.
-
Step 8: Apply for an Employer Identification Number (EIN).
-
Step 9: Complete and file a Name Reservation.
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Step 10: Fill out the Certificate of Formation.
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Step 11: File the Certificate of Formation.
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Step 12: Confirm your LLC registration.
Detailed Guide
A limited liability company, commonly called an LLC, is a legal business entity that allows the owners to limit their financial liability.
The owners, called members, of the LLC will not be held personally liable for lawsuits or other debts incurred by the company., An LLC carries some special tax considerations.
In general, the members will report the income from the LLC on their personal tax returns and will be taxed as individual income, including self-employment taxes.
You should consult with a tax professional to see if an LLC is the best way to organize your business.
Single member LLCs reconcile the profits and losses for the business on IRS Schedule Cand report the income on your Form 1040 tax return.If the LLC has multiple members, the income from the business will be divided between the members via IRS Form 1065and reported as individual income on a Form 1040 tax return. , In a business, you and the other members won't have taxes automatically deducted from your paycheck.
Whether you pay yourself wages or take cash draws from the business, you will have to calculate and pay self-employment taxes.
You will report your self-employment taxes on IRS Schedule SE.For estimating purposes, budget 15 percent of the wages you pay yourself as your self-employment tax.
It is critical that you pay your self-employment taxes.
This is your contribution to the Social Security retirement and disability system.
If you have not paid sufficient self-employment tax and are injured in an accident, you may not be eligible to apply for Social Security Disability Insurance benefits., In Alabama, your company name must contain either the words "Limited Liability Company"
L.L.C., or LLC.
All three are equally acceptable under the law.
You are free to choose which works best with your vision of branding your company.
Before you file your LLC, search the Alabama Secretary of State database to see if your proposed name is already in use.More than one business can have the same name.
However, if there is another business in your area that would appeal to the same customers, you should consider tweaking the name to make it more distinctive. , You can be the only member of your limited liability company.
It is not required that you have a partner.
However, if you have one or more partners, you need to all agree on how to split profits and expenses, percentage of ownership, and other duties.
Each member will need to account for the income from the LLC on his or her taxes.
Don't make anyone a "ceremonial" member.
Only those who have a direct stake in the business should be named members. , The legal agent is the person in your business who can receive legal correspondence and service of process.
This can be a member of the LLC or an attorney.The registered office must be located in the state of Alabama and not be a post office box. , The Small Business Administration strongly recommends that every LLC have an operating agreement that defines and structures the business.LLC operating agreements in Alabama are governed by Section 10-12-10 of the Alabama State Code.At a minimum, the articles of organization must include the name of the company, its duration (can be perpetual), the business purpose, the mailing address of the office, the names and addresses of each member, the ownership percentage of each member, the procedure to add new members, the procedure to remove members, and how the company would be dissolved.
There is no set format and can be a simple document.
However, you should strongly consider having an attorney review your draft agreement and make sure it protects all members and complies with state law.
A single member LLC must have articles of organization.
The ownership percentage would be 100 percent. , This is a unique number assigned to your LLC by the Internal Revenue Service.
Rather than using your Social Security number, the EIN is more private and secure.
You will need an EIN whether your LLC has employees or not.
You can apply online through the IRS websiteor by mail through Form SS-4.There is no charge to apply for an EIN. , Your first step is to file a "Name Reservation Form for Domestic Entities" form with the Alabama Secretary of State.
This form reserves your business name.If you have no specific timeline for forming the business, you can file with the $10 fee.
Your request will be processed in the order it was received with no guaranteed timeframe for receiving the certificate of name reservation.
For three-business-day expedited processing, the fee is $25.
You can also complete the business name reservation online for a fee of $28., This form is available to download in .pdf format at the Secretary of State website.You will complete the name of the company, the address, the name and registered office address of the designated agent, and attach the certificate of name reservation.
The effective date of the LLC must not be more than 90 days after the filing date.
Only one member must sign the certificate.
In a multi-member LLC, you should attach a list of members.
You are not required to file your LLC operating agreement. , In Alabama, you will file your LLC documents with the Judge of Probate's office in the county where the registered office of the designated agent is located, even if the LLC does business in another county.
You must include all documents and all filing fees with your submission or it will be returned to you.
You can file the package in person with the court clerk or by mail.
One original signed in blue ink and two copies of the Certificate of Formation and any attachments.
The Name Reservation Certificate issued by the Alabama Secretary of State.
A check or money order for the filing fee for the county.
Contact the county court clerk for the exact fee.
It is typically around $50.
A check or money order for $100 made out to the Alabama Secretary of State.
If you want three-day expedited processing of your application, the fee is $200. , You will receive a file-stamped copy of your Certificate of Formation from the court.
This is the "Proof of Existence" of your Limited Liability Company.
The court will forward the information to the state for indexing.
About two weeks after your court filing, check the business name entity search on the Secretary of State website to see if your LLC appears in the index.
About the Author
Judith Davis
Judith Davis specializes in lifestyle and practical guides and has been creating helpful content for over 2 years. Judith is committed to helping readers learn new skills and improve their lives.
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