Form an LLC in Alabama (2026)
The $200 Certificate of Formation, the zeroed-out Business Privilege Tax, and the filings most vendors still get wrong.
Contents 7 sections
labama is an easy state to form an LLC in once you understand the two moving parts: the Secretary of State, who accepts your Certificate of Formation, and the Department of Revenue, who handles the Business Privilege Tax. Those are separate agencies with separate portals and separate deadlines. Confuse them and you will miss a filing.
Alabama works well for a founder whose customers, employees, or property are in Alabama. It works poorly as a nominal "home" for a Delaware-style holding structure. The state made two consequential moves in the last three years: the minimum Business Privilege Tax was reduced to zero for most small entities starting with the 2024 tax year, and the separate annual report that once accompanied the BPT return was effectively phased out alongside it. The filing fee is $200 at the state and, depending on county, a modest probate recording fee on top.
If your business lives, banks, and ships in Alabama, form here. If it does not, the savings from forming elsewhere are rarely worth the foreign-qualification paperwork.
When this state is a fit
Alabama is the right home state when you have a physical nexus in Alabama: a storefront, a warehouse, a field-service crew, or an owner-operator who lives in the state. Real-estate LLCs holding Alabama property belong here because title and mortgage work is simpler when the owning entity is domestic. Professional practices (law, medicine, accounting) form here as PLLCs rather than generic LLCs, with the same $200 filing fee.
Series LLCs are permitted under Alabama law, which is useful if you own several rental properties and want to segregate liability without paying $200 per child entity. Alabama's series statute is less battle-tested than Delaware's; if asset segregation is core to your structure, consult counsel on jurisdictional risk.
When it isn't
Skip Alabama if you live outside the state, sell digitally, and do not expect Alabama customers to dominate revenue. Forming here forces you into the BPT return regime, the Alabama corporate franchise/income ecosystem, and filings in Montgomery. Wyoming or New Mexico will be cheaper and quieter for a pure holding entity.
Skip it, too, if you need a fast turnaround. Online Certificate of Formation approval runs roughly 2 to 3 business days; mail filings routinely take 2 to 6 weeks. If you need to open a bank account this week, file online or pay expedite.
Finally, if you plan to operate under a trade name (DBA) statewide, note that Alabama trademark/trade-name registration is handled separately by the Secretary of State. Filing your LLC does not reserve a trade name.
Filing fee + annual cost
| Item | Amount | Where it goes |
|---|---|---|
| Certificate of Formation | $200 |
Secretary of State |
| Online filing convenience fee | ~$10 |
Secretary of State (varies) |
| Probate court recording | ~$50 (county varies) |
County probate judge |
| Business Privilege Tax (most small LLCs, TY 2024 and later) | $0 |
Department of Revenue |
| BPT minimum (entities calculated at > $100) | $50 |
Department of Revenue |
| Annual report separate fee | $0 (phased out) |
Department of Revenue |
Alabama eliminated the $100 BPT minimum in stages under Act 2022-252; for taxable years beginning on or after January 1, 2024, taxpayers whose computed BPT is $100 or less owe nothing and do not have to file the return. If your LLC's computed BPT is above $100, the rules are unchanged.
The 7-step walkthrough
- Reserve the name. Alabama requires a distinguishable name and offers an optional Name Reservation for $28 online or $25 by mail. If you are filing the Certificate of Formation online the same day, the reservation is bundled.
- Appoint a registered agent. The agent must have a physical Alabama street address, be available during business hours, and consent to service. You can act as your own agent if you live in the state. A P.O. box is not sufficient.
- File the Certificate of Formation. Use the Secretary of State's online portal. The filing fee is
$200. Include the LLC name, the registered agent, the management structure (member-managed or manager-managed), and the organizer's signature. - Record with the probate court (if filing by mail). Alabama historically required probate court recording; online filings route this automatically through the state. Paper filers still ship the documents to their county probate judge and pay the local recording fee.
- Obtain an EIN. Apply at IRS.gov immediately after approval. Free; issued in minutes during business hours.
- Register with the Alabama Department of Revenue. If you will collect sales tax, hire employees, or owe withholding, register through My Alabama Taxes. This is distinct from the Secretary of State filing.
- File the initial Business Privilege Tax return (if required). The first return is due 2.5 months after formation. If your computed tax is $100 or less for a TY beginning in 2024 or later, no return is required.
Taxes
Alabama treats a single-member LLC as a disregarded entity for federal and state income tax; multi-member LLCs default to partnership treatment. Either way, profits flow through to the members' personal returns.
Alabama's individual income tax is graduated up to 5 percent. LLCs electing to be taxed as C-corporations pay the Alabama corporate income tax at a flat 6.5 percent, plus the Business Privilege Tax. C-corp elections rarely make sense for small operators in Alabama because of the stacking effect.
The Business Privilege Tax is a franchise-style tax calculated on net worth apportioned to Alabama. Small pass-through LLCs with modest net worth will land at or near zero under the post-2024 rules; larger entities with significant Alabama net worth still pay.
Pitfalls
- Treating the Secretary of State and the Department of Revenue as one agency. They aren't. You file the Certificate in Montgomery with the SOS; you file the BPT return with the DOR. Missing the BPT return (when one is owed) does not jeopardize your good standing with the SOS, but it will eventually trigger DOR penalties and can lead to administrative dissolution.
- Assuming Alabama still requires the old annual report. It does not. The combined BPT annual report was phased out alongside the tax minimum. Vendors still selling an "Alabama annual report" service in 2026 are selling a filing that most LLCs no longer owe.
- Using a P.O. box for the registered agent. Alabama requires a physical street address. The SOS will reject filings with a box address.