Creating a Limited Liability Company (LLC) in Alabama involves several crucial steps in line with the state’s laws and regulations. Below is a detailed guide that outlines the process:
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STEP 1: Choose a Name for Your LLC
The name you select for your LLC must be distinguishable from any other registered Alabama business entity and must include the words “Limited Liability Company” or the abbreviations “L.L.C.” or “LLC.”
Use the Alabama Secretary of State’s online database to check for name availability: http://arc-sos.state.al.us/CGI/CORPNAME.mbr/input
If desired, reserve your LLC name for up to one year by filing a Name Reservation Request form and paying the $28 fee. This can be done online or via postal mail.
Step 2: Appoint a Registered Agent
Time it Takes to name an LLC
Researching and deciding on a name: 1-2 hours
If opting for a name reservation: The act of filing can take about 10-15 minutes.
If opting for a name reservation: Filing can take minutes, but approval might take a few days to a week.
STEP 2: Appoint a Registered Agent
Appoint a registered agent who agrees to accept legal papers on your LLC’s behalf if it is sued. The agent must be an Alabama resident or a corporation authorized to do business in Alabama with a physical street address in the state.
Time it Takes to be a Registered Agent
Registered Agents MUST BE at the Business Address everyday during business hours. This is why Home Addresses Are Not Accepted.
If you already have someone in mind (like an attorney or a service), this can be quick. If you need to find and appoint a registered agent: 1-3 hours.
Why use Inc Authority vs Being your own Registered Agent?
Benefits of having Inc Authority serve as your Registered Agent include:
· Privacy: Keep your home address private
· Efficiency: Easily receive and promptly process state and legal documents
· Hassle-free: Reduction of junk and solicitation mail
· Legal Compliance: Avoid fines, penalties, and possible dissolution
· Convenience: Serves as your public & legal business address
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STEP 3: File Articles of Organization
Prepare a Certificate of Formation, which includes information such as the LLC’s name, its purpose, the name and address of the registered agent, the duration of the LLC (if not perpetual), and the name(s) of the organizer(s).
The filing can be done online or by postal mail with the Alabama Secretary of State. As of my last update, the filing fee is $200. Check the official website or contact the office for the most current fees.
Note that in Alabama, you’re also required to publish an announcement of the LLC formation in a local newspaper. Proof of this publication must be submitted within 2 weeks after the certificate’s effective date.
Time it takes to write the Articles of Organization
Preparing the document: 1-2 hours
Filing online: 30 minutes to 1 hour.
Waiting for confirmation/approval: This can range widely, but typically, online filings can be processed in a few days to a couple of weeks.
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STEP 4: Create an Operating Agreement
While not legally required in Alabama, it’s highly advisable to create an operating agreement to establish ownership terms, member responsibilities, voting powers, profit distribution, and other operational procedures. This document doesn’t need to be filed with the state; it’s an internal agreement.
Time it takes to write an Operating Agreement
If using a template and making minimal changes: 1-3 hours
If drafting from scratch or having extensive negotiations among members: Several days to weeks.
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STEP 5: Obtain an Employer Identification Number (EIN)
Apply for an Employer Identification Number (EIN) from the Internal Revenue Service (IRS) for tax purposes.
You can apply for an EIN online at no cost through the IRS website: https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online
The EIN will be used for tax filings, opening bank accounts, and hiring employees.
Time it takes to get an EIN / Tax ID
Filling out the online form and receiving the EIN: Approximately 0.5 to 1 hour (the online process is relatively quick if there are no complications).
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SO HOW MUCH TIME WILL IT TAKE TO FORM AN LLC MYSELF? DO IT MYSELF (DIY) an LLC?
Total Time Investment (Minimum): 5 hours (if you exclude the higher range estimates and name reservation)
Total Time Investment (Maximum): 11.5 hours (if you include the higher range estimates and name reservation)
This gives a ballpark range of 5 to 11.5 working hours for an individual, excluding all waiting times. It’s worth noting that these times can vary based on the person’s familiarity with the processes and any specific details or challenges related to the business being set up.