Alabama LLC in 2026: Name Reservation, the $200 Certificate of Formation and the Business Privilege Tax

An Alabama LLC costs more to start than most, at $200 for the certificate of formation, and Alabama adds a step few states have: you must reserve the company's name before you can file. After that the yearly cost can be very low, because the LLC's annual report is folded into the business privilege tax return, and many small LLCs owe nothing and file nothing. This guide covers each step for a first-time owner in order: the name reservation, the registered agent, the certificate of formation, the paperwork that follows, the business privilege tax, licences, and a worked first-year budget. Every fee was checked against the Secretary of State's forms and fee schedule and the Department of Revenue's 2026 instructions in October 2026.

Quick answer

To form an Alabama LLC, first reserve the name with the Secretary of State ($28 online or $25 by mail), then file a certificate of formation for $200 naming a registered agent with an Alabama street address. There is no separate annual report: the LLC's yearly filing is Form PPT, the business privilege tax return, and no return is needed if the tax would be $100 or less.

• Name must include "Limited Liability Company", "L.L.C." or "LLC"

• Attach the name reservation certificate to the certificate of formation

• Privilege tax: $0.25 per $1,000 to $1.75 per $1,000 of Alabama net worth, capped at $15,000

• First privilege tax return (BPT-IN) within 2½ months of formation if tax exceeds $100

• You still need county and city business licences

What an Alabama LLC is and who should form one

An Alabama limited liability company is formed under Chapter 5A of Title 10A of the Code of Alabama, the Alabama Business and Nonprofit Entities Code. Section 10A-5A-2.01 covers formation, and the general filing and fee rules for every entity type sit in Chapter 1 of Title 10A. The LLC is a legal person separate from its owners, called members, so a business creditor generally cannot reach your house or savings. That protection only holds if you keep the LLC genuinely separate: its own bank account, contracts in its own name, and records that show who put in money and who took it out.

Two state agencies matter. The Secretary of State's Business Services Division in Montgomery keeps the register of entities and receives the name reservation, the certificate of formation and later amendments. The Alabama Department of Revenue collects the business privilege tax, sales tax and income tax. Licences are a third layer: the county license office sells the state and county business privilege license and your city sells its own.

For federal tax, a one-owner LLC is a disregarded entity whose profit goes on the owner's Schedule C, and a multi-owner LLC is a partnership unless it elects to be taxed as a corporation. Alabama follows the federal choice for income tax, but its business privilege tax applies to LLCs whatever their federal treatment, which is the main Alabama-specific cost to understand.

An LLC suits most small Alabama businesses: contractors in Huntsville, food trucks in Birmingham, rental owners on the Gulf Coast, consultants and online sellers. You do not need to live in Alabama or be a US citizen, and one person can form it alone. Alabama also allows series LLCs, professional LLCs for licensed professions and nonprofit LLCs, all chosen with check boxes on the same certificate.

Alabama LLC at a glance (2026)

$200

Certificate of formation

$100 passed to the agent's county

$28

Name reservation online

Compulsory; $25 by mail

$100

Privilege tax minimum

No return if tax is at or below it

$15,000

Privilege tax maximum

Step 1: Reserve the name (compulsory in Alabama)

In most states a name reservation is optional. In Alabama it is a required step: the certificate of formation form says a copy of the Name Reservation Certificate from the Secretary of State must be attached, and filings without one are rejected.

The name rules. Under section 10A-1-5.06, an LLC's name must contain "Limited Liability Company", "L.L.C." or "LLC". A professional LLC may put "Professional" in front, and a series LLC may use "Series". The name must be distinguishable on the Secretary of State's index from existing names, ignoring entity endings and punctuation, so "Magic City Roofing LLC" will not be accepted if "Magic City Roofing, Inc." already exists.

Restricted words. Banking names need a letter from the Alabama Banking Commissioner's office and insurance names need one from the Insurance Commissioner. A name with a professional word such as engineering, architect, attorney or doctor needs a copy of an Alabama licence held by a member or a letter from the licensing board; engineering firms also need a letter and certificate of authorization from the engineering board.

How to reserve. Search the Business Entity Search first, then reserve online through Business Services. Non-subscribers pay $28 by card and print the certificate at the end of the session; nothing is mailed. By mail, the statutory fee is $25, and the form must be typed. The reservation lasts one year, and you can renew it for another year during the 90 days before it expires. Test variations with our LLC name checker before you pay for anything.

Step 2: Choose a registered agent

Every Alabama LLC must keep a registered agent with a street address in Alabama; a P.O. box is not accepted for the registered office. The agent receives lawsuits and official notices for the LLC. You can name yourself if you live in Alabama, another adult with an Alabama address, or a company that provides registered agent services. Only one agent can be named.

The county of the registered office matters more in Alabama than elsewhere. The certificate asks for it because the Secretary of State pays $100 of the $200 fee to the treasurer of the county where the initial registered agent's office is located. This is a holdover from the days when Alabama LLCs were filed with the county probate judge; since then the whole fee goes to Montgomery and the county share is passed on.

Owners outside Alabama, or who do not want their home address on the public record, usually pay a commercial agent, typically around $50 to $300 a year (an estimate based on national agent services' published prices, not an official figure). Changing the agent later costs $100, so choose one you expect to keep.

Step 3: File the certificate of formation

The certificate of formation is short. It asks for the LLC's name, the registered agent's name and street address and county, a mailing address in Alabama if different, a statement that the LLC has at least one member, whether it is a series, professional or nonprofit LLC, and an optional delayed effective date. It is signed by an organizer or attorney-in-fact. Members and managers do not have to be listed, which keeps owner names off the certificate itself.

You can file it online through the Secretary of State's Business Services pages, which the form describes as taking "the time it takes to type this request", or mail two typed copies to Business Services, P.O. Box 5616, Montgomery, AL 36103, with the $200 fee and a self-addressed stamped envelope. Paper filings paid by card carry a convenience fee of 3% plus $2.00, and a dishonoured check costs $30.

The LLC exists from the date the Secretary of State receives the filing, or from the delayed date you specify. A delayed date must be on or after the filing date and no later than the 90th day after the certificate was signed, which is useful if you want the LLC to start on January 1.

Forming an Alabama LLC

1. 1

   Search and reserve the name

   Search the Business Entity index, then reserve online for $28 and print the certificate.

   Tip: Get licensing letters first if the name uses a professional word.

2. 2

   Pick the registered agent

   One agent with an Alabama street address; note the county.

3. 3

   Complete the certificate of formation

   Name, agent, county, at least one member, optional series or professional status and effective date.

4. 4

   File and pay

   File online or mail two copies with $200, attaching the name reservation certificate.

   Secretary of State — LLCs

Why filings get rejected. The common reasons are a missing name reservation certificate, a name that does not match the reservation exactly, a P.O. box as the registered office, a handwritten paper form (it must be typed) and a card that does not authorise. A rejected paper filing goes back by post, which can cost a week or more, so online filing is worth it when timing matters.

Step 4: EIN, operating agreement, bank account and tax accounts

EIN. Apply for an employer identification number from the IRS once the LLC exists. It costs Free ($0) and the online application issues it at the end of the session. Alabama's privilege tax instructions are explicit that a single-member LLC should use its own number, not the owner's FEIN or Social Security number, so get one even if you have no employees. Our EIN application guide walks through each screen.

Operating agreement. Alabama does not ask you to file one, but every LLC should have a signed agreement covering ownership, profit shares, who can sign contracts and what happens when a member leaves. Banks ask for it, and without one the default rules of Chapter 5A apply.

Bank account. Open an account in the LLC's exact legal name using the filed certificate, the EIN letter and the operating agreement, and keep business money in it. Our guide on how to pay yourself from an LLC explains draws and salaries.

State tax accounts. If you sell taxable goods, register for sales tax with the Department of Revenue through My Alabama Taxes. Alabama's state rate is 4%, and cities and counties add their own. Our Alabama sales tax guide covers rates and filing. Register for withholding if you hire.

Beneficial ownership. Since FinCEN's 2025 rule change, companies formed in the United States do not file beneficial ownership information reports, so a new Alabama LLC has no BOI filing (current position: Not required for US-formed companies).

Your first weeks as an Alabama LLC

Step 1

Name reservation

$28 online

Step 2

Certificate of formation

$200

Step 3

EIN

free

Step 4

Bank account

Step 5

County privilege license

renew each October

Step 6

City licence and sales tax

The business privilege tax: Alabama's version of an annual report

Alabama does not ask LLCs to file a separate annual report with the Secretary of State. The Secretary of State's fee schedule lists a $10 annual report fee only for corporations, collected for it by the Department of Revenue; there is no equivalent line for LLCs. For an LLC, the yearly state filing is Form PPT, the Alabama Business Privilege Tax Return and Annual Report for Pass-Through Entities, filed with the Department of Revenue.

Who files which form. LLCs taxed as partnerships, LLCs taxed as S corporations and disregarded single-member LLCs file Form PPT. An LLC that has elected to be taxed as a C corporation files Form CPT instead. A single-member LLC whose owner is itself subject to the privilege tax, such as an Alabama corporation, is exempt; one owned by an individual is not, because individuals do not pay the privilege tax.

How the tax is worked out. The tax equals the LLC's taxable Alabama net worth multiplied by a rate that depends on its federal taxable income apportioned to Alabama. For taxable year 2026 the rate starts at $0.25 per $1,000 of net worth for taxable income under $1, rises to $1.00 per $1,000 below $200,000, $1.25 per $1,000 from $200,000, $1.50 per $1,000 from $500,000 and reaches $1.75 per $1,000 at $2.5 million and above. The tax is capped at $15,000 for most LLCs, and at $500 for an electing family limited liability entity, an election that is not open to disregarded single-member LLCs.

The $100 rule. The minimum tax is $100. Under Act 2022-252, for taxable year 2026 a taxpayer whose tax would be that minimum has no filing requirement. In practice, an LLC needs more than roughly $100,000 of taxable Alabama net worth at the $1.00 rate before it owes anything, so most new and small LLCs neither pay nor file.

Timing. The taxable year is based on the previous year's figures: the 2026 return uses a determination period ending December 31, 2025 for calendar-year filers. The return is due no later than the LLC's corresponding federal income tax return, which for a calendar-year LLC filing Form 1065 is March 15. For a single-member LLC owned by an individual, the corresponding return is the owner's Form 1040, generally due April 15. A new LLC whose tax would exceed $100 files Form BPT-IN, the initial return, within 2½ months after the date it was formed. Payment is due by the original due date even if you extend the return.

Alabama business privilege tax rate for 2026

Federal taxable income apportioned to Alabama	Tax per $1,000 of Alabama net worth
Less than $1	$0.25 per $1,000
$1 to under $200,000	$1.00
$200,000 to under $500,000	$1.25
$500,000 to under $2,500,000	$1.50
$2,500,000 and over	$1.75 per $1,000

Less than $1

Tax per $1,000 of Alabama net worth

$0.25 per $1,000

$1 to under $200,000

Tax per $1,000 of Alabama net worth

$1.00

$200,000 to under $500,000

Tax per $1,000 of Alabama net worth

$1.25

$500,000 to under $2,500,000

Tax per $1,000 of Alabama net worth

$1.50

$2,500,000 and over

Tax per $1,000 of Alabama net worth

$1.75 per $1,000

Worked calculation. A Mobile landscaping LLC with $60,000 of net worth and $90,000 of taxable income pays $1.00 per $1,000, or $60. That is below the $100 minimum, so it files nothing. A Huntsville engineering firm with $250,000 of net worth and $320,000 of taxable income pays $1.25 per $1,000, or $312.50, and must file Form PPT with its federal partnership pages attached.

Licences, sales tax and local registrations

Forming the LLC is not a licence to trade. Most Alabama businesses need a state and county business privilege license from the county license office, which may be the probate judge, revenue commissioner or license commissioner depending on the county. Licences run October 1 to September 30, the Department of Revenue adds a $1 issuance fee per licence, and renewals not made by October 31 carry a 15% penalty. Cities license separately, often on gross receipts. Our Alabama business license guide covers each layer.

Contractors also need to check the state licensing boards: residential home builders need a licence from the Home Builders Licensure Board for work over $10,000, and general contractors need one for projects of $50,000 or more.

Foreign LLCs, changes and closing down

Registering an out-of-state LLC. An LLC formed in another state that does business in Alabama registers with the Secretary of State for $150. One that operates without registering faces a late filing penalty of $150 a year. If your business is only in Alabama, forming a Delaware or Wyoming LLC usually adds cost: you pay both states and still register here.

Amendments. Changing the name or other details in the certificate costs $100. A new name still needs to be distinguishable, so reserve it first.

Certificates. A certificate of existence, which banks and landlords sometimes ask for, costs $25. See our certificate of good standing guide.

Dissolving. When you close the business, file articles of dissolution for $100, file any final privilege tax and sales tax returns, and cancel licences. Simply stopping does not end the LLC's tax accounts.

What it costs: a worked first-year budget

The table shows three realistic Alabama LLCs. State fees come from the Secretary of State's fee schedule and forms. The registered agent line is a market estimate, and county and city licences are left out because they depend on the activity and location.

What the table leaves out. Insurance, an accountant, the county privilege license, the city licence, health permits for the food truck and lodging taxes for the rental all sit on top.

Compared with neighbours. Georgia charges $110 to form, and Tennessee charges a per-member fee from $300 to $3,000. Alabama's formation is dearer, but an LLC that never crosses the privilege tax minimum can go years without another state filing fee.

Worked examples

A Montgomery consultant. Denise reserves "Capitol Analytics LLC" online at lunchtime, files the certificate the same afternoon with herself as registered agent at her Montgomery address, and gets her EIN that evening. Her net worth stays under $50,000, so her privilege tax would be below the $100 minimum and she files no PPT. She does buy a county privilege license and a City of Montgomery licence.

A Birmingham food truck run by two partners. Marcus and Lee mail a typed certificate with a card payment, attaching the name reservation they printed. Their first certificate is rejected because they changed "and" to "&" in the name; they refile with the name exactly as reserved. They register for sales tax, buy the Jefferson County licence and the city licence, and file Form 1065 by March 15 each year.

An out-of-state owner with a Gulf Shores rental. Paul lives in Georgia and holds a beach condo in an Alabama LLC. He pays a commercial registered agent in Baldwin County, so $100 of his fee goes to that county. His LLC's net worth is about $300,000 with modest income, so at $1.00 per $1,000 his privilege tax is about $300 and he files Form PPT each April with his own Form 1040, plus lodging tax returns for the rental.

Alabama LLC launch checklist

0/8

• Name searched and reserved; licensing letters obtained for restricted words
• Registered agent with an Alabama street address and county confirmed
• Certificate of formation filed with the name reservation attached
• EIN issued in the LLC's own name and operating agreement signed
• Business bank account opened
• Sales tax and withholding accounts in My Alabama Taxes, if needed
• County privilege license and city licence bought; October renewal noted
• Privilege tax worked out each year; BPT-IN or PPT filed if over the minimum

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Common mistakes and how to fix them

Skipping the name reservation. It is required. If a guide tells you to go straight to the certificate, it was written for another state.

Using the owner's SSN for privilege tax. The Department of Revenue tells single-member LLCs not to use the owner's FEIN or Social Security number. Get the LLC its own EIN.

Assuming no tax means no licence. Even an LLC with no privilege tax needs county and city business licences if it trades.

Missing the BPT-IN. A new LLC that is well capitalised from day one, for example one holding property, may owe more than the minimum in its first year and must file Form BPT-IN within 2½ months after formation.

Paying look-alike mailers. Letters offering to file your "annual report" or sell a certificate for a large fee come from private companies. Alabama LLCs have no separate annual report fee with the Secretary of State.

Official links

• Alabama Secretary of State — LLCs$200 formation, $150 foreign
• Secretary of State fee schedule (PDF)All Business Entities fees
• Name reservation request form (PDF)$28 online
• Certificate of formation form (PDF)Domestic LLC
• ADOR — TY 2026 privilege tax quick reference (PDF)Form PPT, rates, $100 rule
• IRS — Apply for an EINFree

What to do next

Check your name with our LLC name checker, reserve it online, file the certificate the same day and get your EIN. Then follow our Alabama business license guide for the county and city licences, and the Alabama sales tax guide if you sell goods. Put a note in your calendar each January to work out the privilege tax. If you are still choosing a structure, our LLC registration guide and LLC vs sole proprietorship explainer compare the options.

This is general information, not legal or tax advice — confirm on the official source or with a professional.

Frequently asked questions

How much does it cost to form an LLC in Alabama?

The Secretary of State charges $200 to file a certificate of formation, and you must first reserve the name for $25 on paper or $28 online. That makes the minimum state cost about $225 to $228. The EIN is Free ($0). After that, the main recurring state cost is the business privilege tax, which many small LLCs do not owe because their tax would not exceed $100.

Do I have to reserve a name before forming an Alabama LLC?

Yes. Alabama is one of the few states that makes a name reservation compulsory. The Secretary of State's certificate of formation form says a copy of the Name Reservation Certificate must be attached. Online, the reservation costs $28 and prints immediately; by mail it costs $25. It lasts one year and can be renewed in its last 90 days.

Does an Alabama LLC file an annual report?

Not with the Secretary of State as a separate filing. An Alabama LLC's annual report is part of Form PPT, the business privilege tax return filed with the Alabama Department of Revenue. For taxable year 2026, an LLC whose tax would be no more than the $100 minimum has no filing requirement at all, so many small LLCs file nothing with the state each year.

What is the Alabama business privilege tax for an LLC?

It is a yearly tax on the LLC's net worth in Alabama, charged at $0.25 per $1,000 to $1.75 per $1,000 of taxable Alabama net worth depending on the LLC's taxable income, up to a maximum of $15,000. Pass-through LLCs file Form PPT by the due date of their federal income tax return. If the tax works out at the $100 minimum or less, no return is required.

How long does it take to form an LLC in Alabama?

The online name reservation is processed in real time, and the certificate of formation can be filed online the same day. Paper filings sent to Montgomery take longer because they are mailed both ways. The LLC exists from the date the Secretary of State receives the filing, or from a delayed effective date of up to 90 days after signing if you choose one.

Do I need a business license as well as an Alabama LLC?

Usually yes. Forming the LLC registers the company, but it is not a licence to trade. Most Alabama businesses buy a state and county business privilege license from the county license office each year, renewable by October 31, plus a city licence where they operate, and register for sales tax if they sell taxable goods.

Sources & verification

Figures on this page were checked against the sources below when it was last reviewed on 12 October 2026. Each rate and limit is stored once with its own official source and review date, and official update channels are monitored daily so changes are picked up. How we verify

1. 1.Limited Liability Companies — Alabama Secretary of State · accessed 12 October 2026
2. 2.Fee Schedule (revised August 23, 2023) — Alabama Secretary of State · accessed 12 October 2026
3. 3.Domestic Limited Liability Company Certificate of Formation (form, 10/2022) — Alabama Secretary of State · accessed 12 October 2026
4. 4.Name Reservation Request Form for Domestic Entities — Alabama Secretary of State · accessed 12 October 2026
5. 5.Name Reservation Renewal Request Form — Alabama Secretary of State · accessed 12 October 2026
6. 6.Quick preparation reference for TY 2026 Alabama business privilege tax forms (Form CPT and Form PPT) — Alabama Department of Revenue · accessed 12 October 2026
7. 7.Get an employer identification number — IRS · accessed 12 October 2026
8. 8.Beneficial Ownership Information — FinCEN · accessed 12 October 2026