1. Alabama LLC Overview

If you operate a business in Alabama, you must register it locally. Alabama's compliance environment requires paying close attention to both state-level taxes and local county/city licenses.

  • Formation fee — $200 to file the Certificate of Formation online
  • Annual Business Privilege Tax — Minimum $100 per year
  • Local licenses — Almost all counties and cities in AL require separate business licenses

2. Alabama LLC Requirements

  • Name must contain "Limited Liability Company" or "LLC"
  • Appoint a registered agent with an Alabama physical address
  • File a Certificate of Formation with the Secretary of State ($200)
  • File the Annual Business Privilege Tax Return
  • Obtain county/city Business Privilege Licenses

3. Alabama LLC Costs and Fees (2026)

Cost Item Amount Notes
Certificate of Formation$200Online state filing fee
Business Privilege Tax (BPT)$100 minimumAnnual tax return
Registered Agent$50–$150/yearRequired AL physical address
EINFreeApply at IRS.gov
Operating Agreement$0–$1,000Recommended, not legally required

4. How to Start an Alabama LLC (Step by Step)

  1. 1 Choose your LLC name (must include "Limited Liability Company" or "LLC")
  2. 2 Appoint a registered agent with an Alabama physical address
  3. 3 File the Certificate of Formation with the AL Secretary of State ($200 online)
  4. 4 Obtain an EIN from the IRS (free at IRS.gov)
  5. 5 Draft an Operating Agreement (not filed, but highly recommended)
  6. 6 Register for the Business Privilege Tax (BPT) with the AL Department of Revenue
  7. 7 Obtain required local Business Privilege Licenses (county/city)
  8. 8 Open a business bank account
Initial BPT Return Required

In addition to the annual BPT, newly formed Alabama LLCs must file an Initial Privilege Tax Return within two and a half months (75 days) of organizing. Do not miss this deadline, or you will face penalties.

5. Alabama Business Privilege Tax (BPT)

Instead of an Annual Report filed with the Secretary of State, Alabama LLCs file a Business Privilege Tax return with the Department of Revenue.

  • Due Date: Due on or before the due date of the corresponding federal income tax return (typically April 15).
  • Cost: Based on the LLC's net worth. The minimum tax is $100.

6. Alabama LLC Taxes (2026)

  • State income tax — Up to 5% graduated rate on pass-through profits
  • Federal income tax — Pass-through to personal return
  • Self-employment tax — 15.3% on net earnings
  • Sales tax — 4% state base rate + local county/city additions (frequently reaching 9%–10% combined)

7. Best For / Not Best For

Best For

  • Entrepreneurs living and operating in Alabama

Not Best For

  • Out-of-state owners without Alabama nexus
  • Founders wanting simple tax compliance (AL's BPT return can be complex)