CobaltProsper

How to start an LLC in Alabama

By Brent Chudoba, editor Updated

Forming an LLC in Alabama costs $200 to file the Certificate of Formation with the Alabama Secretary of State. There is no annual report fee. Alabama charges no franchise tax on a standard LLC. Total real-world startup cost is closer to $225, not just the $200 Certificate of Formation fee: Alabama also requires a separate, effectively mandatory $25 Certificate of Name Reservation before filing.

How much does it cost to start an LLC in Alabama?

Alabama LLC costs (reviewed August 29, 2026)
ItemCost
Filing fee (Certificate of Formation)$200
Annual reportNone
Franchise or business taxNone
Registered agentRequired

Source: Alabama Secretary of State, fee schedule reviewed August 29, 2026.

What are the steps to form an LLC in Alabama?

  1. Name your LLC. Pick a name that is available and meets Alabama naming rules, then check it against the Secretary of State's business database.
  2. Appoint a registered agent. Alabama requires a registered agent with a physical in-state address to receive legal mail. You can be your own agent, or hire a service.
  3. File the Certificate of Formation. Submit it to the Alabama Secretary of State and pay the $200 fee. This is the step that legally creates the LLC.
  4. Get an EIN from the IRS. It is free and takes minutes. Do not pay a service for it. See how to get an EIN free from the IRS.
  5. Open a business bank account. Keep business money separate from personal money so your liability protection holds up.

Does Alabama have a franchise tax on an LLC?

No. Alabama has no tax called a 'franchise tax,' but LLCs are subject to the Business Privilege Tax (net-worth based, Code of Alabama 40-14A). For taxable years beginning after 12/31/2023, entities with computed tax of $100 or less are fully exempt from both paying and filing, which covers most small/typical LLCs. Larger LLCs (higher net worth) must file Form PPT annually and pay privilege tax above that threshold.

How is an LLC taxed in Alabama?

By default, an LLC is a pass-through entity: it pays no income tax itself, and the profits flow to the owners' personal returns. Alabama has a state individual income tax with a top rate of 5% (graduated brackets), so those profits are taxed on your Alabama return on top of federal tax. Graduated rates from 2% to 5%. Single/HOF/MFS: 2% on first $500, 4% on next $2,500, 5% over $3,000. MFJ: 2% on first $1,000, 4% on next $5,000, 5% over $6,000.

An LLC can also elect to be taxed as an S-corp, which changes how owners pay self-employment tax. See LLC vs S-corp vs sole proprietorship and how self-employment tax works.

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