LLC formation in Alabama: fees, filing steps, and ongoing costs
Data last updated: Apr 21, 2026Where Alabama fits, and where it doesn't
Good fit for Alabama
You live in Alabama and want to run a local operating business. You are a single-member consultant, contractor, or online seller whose Business Privilege Tax computation will stay at or under the old minimum, which makes you fully exempt from BPT and the return after 2024. You run a real estate holding entity centered on Alabama property and want a home-state LLC rather than a Delaware or Wyoming wrapper. You want a one-and-done state that does not stack a Secretary of State annual report on top of the tax department's forms.
Skip Alabama when
You live in Georgia, Tennessee, or anywhere else that is not Alabama and someone pitched you on forming here to save money. The name reservation, dual state-plus-county fee, and out-of-state mail handling eat any supposed saving, and you still have to foreign-qualify back home. Larger LLCs with significant net worth apportioned to Alabama are also a worse fit, since BPT scales up to a $15,000 annual cap for big entities on Ala. Code Section 40-14A-22.
What an Alabama LLC actually costs
- Formation filing fee Paid once at formation $200
- Commercial registered agent Annual, estimate $100
- Annual state obligations None in this state $0
- Year 1 total estimate Formation plus first-year ongoing $300
Registered agent estimate uses a $100 midpoint. Specialist agents start around $50 per year. Full-service formation companies bundle RA for $125 to $200.
Cost across the first three years
How Alabama compares on the basics
How to apply for an LLC in Alabama
- Pick a compliant LLC name
The name must end in "Limited Liability Company," "LLC," or an approved abbreviation, and must be distinguishable from every other entity on the Alabama Secretary of State record. Check availability at the Alabama entity search.
- Designate a registered agent
Every Alabama LLC is required to have a registered agent with a physical street address in Alabama. You can serve as your own agent if you live in Alabama, or hire a commercial service for $99 to $249/yr. See the Alabama registered agent guide.
- File Domestic Limited Liability Company Certificate of Formation
Filing fee is $200. Online filing is available through the state portal. Mail filings are accepted.
- Apply for a federal EIN
Free directly from the IRS in about 15 minutes (see the EIN guide). Required for opening a business bank account, hiring employees, and most formation-service tax workflows.
- Adopt an operating agreement
Alabama does not require an operating agreement by statute, but adopting one is strongly recommended to preserve the liability shield. See the operating agreement pillar for the 12 clauses every agreement should include.
Filing walkthrough
Alabama is the one state in the country that requires you to reserve your LLC name before you can file the Certificate of Formation. It is the quirk almost no national formation blog bothers to mention. File a Name Reservation Request through Alabama Interactive for $28 online (the $25 state fee plus a $3 portal charge) or $25 by mail. The reservation certificate goes into the packet with your Certificate of Formation.
Once you have the name reservation in hand, file the Domestic Limited Liability Company Certificate of Formation. The total fee is $200, broken down as $100 to the Secretary of State and $100 to the county where your registered agent sits. Online filings through Alabama Interactive clear in about 3 business days and show $208 at checkout (the extra $8 is a portal processing fee). Mail filings take roughly 14 business days. Alabama does not offer a paid expedite tier, so online is already the fast lane.
Your registered agent needs an Alabama street address. Commercial agents run $50 to $125 per year. If you live in Alabama you can serve as your own agent, and that is fine for a small operating LLC that does not mind having its home address on the public record.
How Alabama taxes an LLC
Alabama's entity-level tax sits at the Department of Revenue rather than the Secretary of State, so there is no Secretary of State annual report at all. The annual filing is the Business Privilege Tax (BPT) return, historically with a $100 minimum and a $15,000 maximum based on net worth apportioned to Alabama. Act 2022-252 changed the small-business picture. The minimum dropped to $50 for tax year 2023, and for tax years beginning on or after January 1, 2024, any entity whose BPT would only be the minimum is fully exempt from both the tax and the return. Most small LLCs therefore owe $0 and file nothing to the DOR beyond pass-through income tax reporting.
LLC income flows through to members and lands on their Alabama personal return. Alabama's personal income tax is graduated and tops out at 5%. The flat 6.5% corporate income tax only hits LLCs that elect C-corp treatment federally.
State sales and use tax is 4.0%, with local counties and municipalities stacking on top. Combined rates commonly run 8% to 10% in Birmingham, Mobile, and Huntsville. The grocery rate dropped to 2% at the state level on September 1, 2025.
Ongoing compliance and costs after year one
Budget $50 to $125 a year for a commercial registered agent. For a small LLC that sits below the BPT threshold under Act 2022-252, the only other ongoing state cost is nothing. No Secretary of State annual report, no BPT return, no annual license fee. Larger LLCs with meaningful Alabama net worth still owe BPT on a scale up to the $15,000 cap and file Form PPT (or Form CPT if taxed as a C-corp) with the Department of Revenue by March 15 for calendar-year filers.
If you also operate in another state, your Alabama LLC has to foreign-qualify there and pay that state's fees on top. The Alabama side stays simple either way.
Common mistakes forming an Alabama LLC
Two patterns come up a lot. First, filers jump straight to the Certificate of Formation, get rejected, and have to start over because they skipped the Name Reservation Request. Alabama is the only state that requires a separate name-reservation filing before formation (Ala. Code Section 10A-1-4.02(f)), and you cannot shortcut it. Second, owners keep paying BPT out of habit or on outdated CPA advice. Act 2022-252 exempted most small entities from both the tax and the return starting in 2024, so if your computed BPT would have been the $100 minimum, you do not owe anything and you do not file.
State agencies that handle Alabama LLCs
Alabama Secretary of State, Business Entities Division
- Website
- www.sos.alabama.gov
- Phone
- (334) 242-5324
- business.services@sos.alabama.gov
- Business Entities Division, P.O. Box 5616, Montgomery, AL 36103-5616
- Office
- RSA Plaza, Suite 580, 770 Washington Ave., Montgomery, AL 36104
- Hours
- 8:00 AM to 5:00 PM Central, Monday to Friday
Alabama Department of Revenue
- Website
- www.revenue.alabama.gov
- Phone
- (334) 242-1170
- Alabama Department of Revenue, P.O. Box 154, Montgomery, AL 36135-0001
- Office
- 375 S. Ripley Street, Montgomery, AL 36104
- Hours
- 8:00 AM to 5:00 PM Central, Monday to Friday
Frequently Asked Questions
-
How much does it cost to form an LLC in Alabama in 2026?
$200 for the Certificate of Formation, broken down as $100 to the Secretary of State and $100 to the county of your registered agent. Online filings through Alabama Interactive add an $8 portal fee, so the real day-one online cost is $208. You also need a Certificate of Name Reservation before you file, which is $28 online or $25 by mail. A commercial registered agent is another $50 to $125 per year.
-
Does Alabama have an annual report for LLCs?
No. Alabama does not require a separate Secretary of State annual report for LLCs. The annual entity filing historically ran through the Department of Revenue as the Business Privilege Tax return, but under Act 2022-252, entities whose BPT would only be the minimum are fully exempt from both the tax and the return for tax years beginning on or after January 1, 2024. Most small LLCs therefore have no recurring state filing at all.
-
What is the Alabama Business Privilege Tax and does my LLC owe it?
The BPT is a net-worth-based tax on LLCs, corporations, and disregarded entities under Ala. Code Section 40-14A-22. Rates run from 0.025% to 0.175% of Alabama-apportioned net worth, capped at $15,000. Under Act 2022-252, if your BPT would have been only the old $100 minimum (or $50 for 2023), you owe $0 and file no return for tax years starting January 1, 2024. Larger LLCs still file Form PPT (or Form CPT if taxed as a C-corp) by March 15 for calendar-year filers.
-
Why does Alabama require a name reservation before filing?
Ala. Code Section 10A-1-4.02(f) makes the Certificate of Name Reservation a prerequisite for filing domestic formation documents. Alabama is the only state in the country that does this. You file the Name Reservation Request Form first ($25 state fee, $28 online with the portal charge), and then you attach the certificate to your Certificate of Formation packet. Skipping this step gets the formation rejected.
-
How long does it take to form an Alabama LLC?
Online filings through Alabama Interactive typically clear in about 3 business days. Mail filings take around 14 business days. Alabama does not offer a paid expedite tier, so online filing is already the fastest path the state supports.
-
Should I form my LLC in Alabama instead of my home state?
Only if you actually live or operate in Alabama. If you live in Georgia, Mississippi, or Tennessee and form in Alabama to dodge your home-state fees, you still have to foreign-qualify the Alabama LLC back home. You now pay both states plus two registered agents for no real benefit. Alabama is a home-state pick, not a tax-avoidance pick.
-
Does Alabama require an operating agreement?
No. Alabama's LLC Law of 2014 (Ala. Code Section 10A-5A-1.02) recognizes oral, written, or implied operating agreements and does not require a written one to be filed. A written agreement is still a good idea for any multi-member LLC and helps preserve the liability shield if a dispute reaches court.
-
Does Alabama have a publication requirement for new LLCs?
No. Alabama's LLC Law (Title 10A, Chapter 5A) does not require newspaper publication of formation. You file the Certificate of Name Reservation, then the Certificate of Formation, and the LLC exists once the Secretary of State approves it.
-
How do I apply for an LLC in Alabama?
Apply for an LLC in Alabama by filing Domestic Limited Liability Company Certificate of Formation with Alabama Secretary of State, Business Entities Division. The filing fee is $200. Online filing is available through the state portal. Approval typically takes 3 business days online. Mail filings take about 14 business days. Before filing, pick a registered agent (see the Alabama registered agent guide) and confirm your business name is available using the state's entity search.
Further reading on LLCs
How much does an LLC cost?
Formation, annual, and hidden fees broken down across all 51 US jurisdictions.
Registered agents for LLCs
What the role is, whether to be your own, and honest comparison of 12 national services.
LLC vs sole proprietorship
Liability, taxes, cost, and when each makes sense. Written for a working owner.
LLC vs S-corp election
When the S-corp tax election actually saves money, with concrete SE-tax math.
Dissolve a Alabama LLC
Step-by-step dissolution: member vote, tax clearance, state filing, IRS closure.
Formation services compared
Bizee, Northwest, ZenBusiness, LegalZoom, and 11 more. Honest price comparison.
Compare Alabama to another state
Side-by-side breakdowns of fees, taxes, approval time, and compliance. Every other US jurisdiction has a dedicated compare page against Alabama.
M
N
Sources
- Filing fee: www.sos.alabama.gov/business-entities/llcs · verified April 21, 2026
Alabama Secretary of State LLC page lists the domestic LLC Certificate of Formation filing fee as $200.00. The $200 consists of a $100 Secretary of State fee plus a $100 county filing fee distributed to the county of the registered agent, per the form instructions. - Filing fee: www.alabamainteractive.org/sos/introduction_input.action · verified April 21, 2026
When filed online through Alabama.gov (Alabama Interactive), the domestic LLC filing shows $100 Secretary of State Fee + $100 County Fee plus an $8 portal processing fee for non-subscribers, for a $208 total day-one online cost. Filers must also obtain a Certificate of Name Reservation ($25 state fee + $3 online portal fee = $28 online, or $25 by mail) before filing the Certificate of Formation per Ala. Code Section 10A-1-4.02(f). - Expedited filing: www.sos.alabama.gov/business-entities/llcs · verified April 21, 2026
Alabama Secretary of State does not advertise a paid expedite service for LLC Certificates of Formation. Online filings via Alabama.gov typically process within 1 to 3 business days. Recorded as offered: false. - Annual report fee: www.revenue.alabama.gov/faq-categories/business-privilege-tax/ · verified April 21, 2026
Alabama has no separate Secretary of State annual report for LLCs. The annual entity-level filing is the Business Privilege Tax return (Form PPT) filed with the Department of Revenue. Under Act 2022-252 (signed 2022), the BPT minimum was reduced to $50 for tax year 2023 and, for tax years beginning on or after January 1, 2024, entities whose BPT would be only the minimum are fully exempt from BPT and do not have to file a return. See Alabama DOR FAQ: 'For taxable years beginning on or after January 1, 2024, every corporation, limited liability entity, and disregarded entity...who would otherwise be subject to the minimum tax due shall be exempt from the privilege tax.' - Franchise tax: www.revenue.alabama.gov/faq-categories/business-privilege-tax/ · verified April 21, 2026
Alabama Business Privilege Tax per Ala. Code Section 40-14A-22. Historical minimum $100 and maximum $15,000. Under Act 2022-252, entities owing only the minimum are exempt from both tax and return filing for tax years beginning on or after January 1, 2024. We classify BPT as a net-worth-based franchise tax for compare purposes. annualMin reported as 0 because a small LLC typically owes nothing starting 2024; annualMax retains the $15,000 statutory ceiling that still applies to larger entities. - Operating agreement requirement: law.justia.com/codes/alabama/title-10a/chapter-5a/ · verified April 21, 2026
Alabama Limited Liability Company Law of 2014, Ala. Code Sections 10A-5A-1.01 et seq. Section 10A-5A-1.02 defines operating agreement as the agreement of the members, which may be oral, in a record, implied, or any combination. No statute requires a written operating agreement. Recorded as not required. - Foreign LLC registration fee: www.sos.alabama.gov/business-entities/llcs · verified April 21, 2026
Alabama Secretary of State LLC page: Foreign LLC Application for Registration filing fee is $150.00 by mail, or $150.00 (plus Alabama.gov portal service charge) online. Name reservation also required before filing. - Publication requirement: www.sos.alabama.gov/business-entities/llcs · verified April 21, 2026
Alabama does not require newspaper publication of LLC formation. Alabama's LLC Law (Title 10A, Chapter 5A) contains no publication requirement. - Business name search: arc-sos.state.al.us/cgi/corpname.mbr/input · verified April 21, 2026
Alabama Government Records Inquiry System business entity name search. Confirm availability before filing a Name Reservation Request Form for Domestic Entities. - Sales tax rate: www.revenue.alabama.gov/sales-use/tax-rates/ · verified April 21, 2026
Alabama Department of Revenue Sales and Use Tax Rates page. General state sales tax rate is 4%; automotive and farm rates are 2% and 1.5% respectively. State sales tax rate on food and food ingredients was reduced from 3% to 2% effective September 1, 2025. Local option adds up to about 7 additional percentage points (combined rates often 8% to 10%). - Corporate income tax rate: www.revenue.alabama.gov/faq-categories/corporate-income-tax/ · verified April 21, 2026
Alabama corporate income tax FAQ: 'For tax years beginning January 1, 2001, the tax rate is 6.5%.' Alabama has no minimum corporate income tax. The 6.5% rate applies to C-corp income; default-classified LLCs are taxed as pass-throughs and do not owe this entity-level tax.