Think about your LLC a year from now: raking in profits and taking Alabama by storm. You have big plans, but before your business can officially take off, you’ll need to make a bit of an investment.
And we’re not talking about renting office space or paying employees – before you sell a single product, there are startup costs associated with launching an LLC in Alabama.
While you’re making plans and dreaming big, make sure that you consider all the possible costs associated with starting an LLC. To help you out, we’ve compiled the most common Alabama startup fees here.
Quick Note: If you’d like to keep your costs of starting an LLC as simple and low as possible, consider hiring ZenBusiness – a reliable business formation service. To get a better idea of the value they offer and how it works, we compared them to the two most well known services:
Overall Alabama LLC Formation Costs
LLC Name Reservation Fee
In Alabama, obtaining a Certificate of Name Reservation is a mandatory first step in the LLC formation process. So in preparing to start your business, your first move will be to reserve your name with the Alabama Secretary of State. This ensures your desired name will be available when you file your Certificate of Formation and no one else will use it in the meantime. A name reservation will run you $28 online and $10 on paper.
Certificate of Formation Fee
This is the big one, the most important (and most expensive) form that you’ll file to start your Alabama LLC. Standard processing is $150 and expedited processing costs $200. Filing online also costs $200, since online submissions are processed as quickly as expedited paper forms. So when you go to file your Certificate of Formation, be prepared to shell out some money. Fortunately, this is a one-time fee, so as long as your form is accepted, you won’t have to pay it again.
LLC Formation Service
Starting an LLC can be a complicated and time-consuming process. If you want to spend less time on paperwork and more time planning your business, you might opt for an LLC formation service. These services take care of the registration process for you, so you don’t have to spend the time on research, paperwork, and filings.
Most of these services (like ZenBusiness and Northwest) offer basic LLC formation service like Articles of Organization filing, tax consultations, and phone/email support for a flat rate, with options to pay more for premium packages with premium services like Employer Identification Numbers, Operating Agreements, and expedited filing.
Registered Agent Service
Appointing a registered agent is an important part of your LLC formation process. Your registered agent is responsible for handling sensitive legal and tax documents and keeping your business compliant with Alabama business law. In short, you need an agent you can trust. While you can be the registered agent for your own LLC, this puts pressure on you to keep up with business filings and potential legal disputes. Sometimes it’s better to hand off that responsibility to a professional.
A registered agent service ensures that your annual reports and other forms are filed efficiently and on-time, saving you from the penalties of delinquent filings and the stress of having to do it yourself. Not all registered agent services are equal, so you’ll need to be careful in choosing one. Fortunately, we’ve done some research for you, and we recommend Northwest Registered Agent.
In addition to registered agent services, Northwest also handles LLC formation — and they’ll include a registered agent free for one year when you form your business with them. We think they’re the most reliable choice, but if you’d like to evaluate all your options, check out our Best Registered Agent Services guide.
If you have questions or concerns about the LLC formation process or if it’s the best business structure for you, sometimes it’s best not to take chances and consult an attorney. They’re not cheap, but they can provide essential business advice, professional filing assistance, and peace of mind. Some attorneys offer free consultations (usually 30-60 minutes) but will charge by the hour after that.
On average, business attorneys charge between $150-350 per hour. Some will offer a flat rate for setting up an LLC, which can range from $500-2000. Cost variations depend on the experience and location of the lawyer. Search, compare, and contact Alabama attorneys on sites like Avvo. Find the one that’s right for you and reach out to request a consultation or get started forming your LLC.
Foreign Qualification Fee
This only applies if your LLC was formed in another state and is now expanding into Alabama. In this case, the foreign qualification fee takes the place of the Certificate of Formation fee. All foreign business entities are required to foreign qualify in Alabama, or they could incur some pretty severe penalties. To qualify, you’ll need to submit an “Application for Registration” either online or on paper. Online filings cost $250 and paper ones cost $150.
LLC Annual Fees
Most states have annual fees and/or forms that LLCs file to stay in good standing, and Alabama is no exception. Each year, your LLC is required to submit a Form PPT: Business Privilege Tax Return and Annual Report. This is a tax for the privilege of doing business in Alabama and will cost a minimum of $100. However, it could cost more, depending on your federal taxable income. You can calculate how much your LLC owes right on the form. Make sure to file it by April 15th each year to maintain your compliance with the state.
In addition to the annual Business Privilege Tax listed above, your LLC needs to pay an “Initial Business Privilege Tax” within 2.5 months of its formation. Like the annual tax, your initial tax will be a minimum of $100 but could be more depending on your taxable income. Use Form BPT-IN to submit your initial tax. If you don’t submit this form and pay your tax within 2.5 months of formation, your LLC could be labeled delinquent.
What If I Don’t Pay?
Looking at all these fees, you might be thinking: how can I pay less? While you might be tempted to look for loopholes or find a way around them, this could cause you bigger problems in the future.
Failure to pay annual fees and taxes will result in your LLC being labeled “delinquent,” and you will lose your compliance with the state. Plus, you’ll end up with additional penalties. For example, if you don’t pay your annual Business Privilege Tax, you’ll be fined 10% of the amount due (or $50, whichever is greater).
Aside from that, losing your compliance with the state has its own set of disadvantages. You won’t be able to request a Certificate of Compliance, which allows you to expand your business to other states, and is necessary for certain tax filings. Keeping up with your fees and payments will save you from additional fines and headaches down the road.
Planning Your Expenses
By now, your budget spreadsheet might be looking a little crowded, but have no fear! Most of these are one-time fees that you won’t have to worry about again. Plus, with all these on the books, there won’t be any surprise costs when you register an LLC in Alabama.
Soon, you’ll have these fees behind you and you’ll be forging ahead, growing your business and earning profits. As you do, make sure to keep up with the few recurring fees – like annual reports and franchise taxes – so your business doesn’t fall out of good standing.