Why Incorporate in Alabama?
Like many states in the country,
Alabama offers a
variety of tax incentives
that are attractive to new and
existing businesses looking to expand
their operations within the state.
For
example, the
Alabama Enterprise Zone Program
provides certain tax incentives to
corporations, partnerships, and
proprietorships that locate or expand
within designated Enterprise Zones. In
addition to state-level tax
incentives, businesses may also
receive local tax and non-tax
incentives for locating or expanding
within a designated Enterprise
Zone.
For most
entrepreneurs looking to create a
larger business, forming an Alabama
corporation may be the best choice. As
a corporation, your business is able
to buy and trade stock, and when it
comes to excess profits, corporations
offer more flexibility than a limited
liability company (LLC). A corporation
is allowed to pass income and losses
to its shareholders, who report taxes
on an individual tax return at
ordinary levels.
Is an LLC Better Than a Corporation?
It all depends on your goals. Limited
liability companies are generally
better for smaller businesses. An LLC
is easier to set up, and you receive
many of the same benefits as a
corporation, but with less
regulation.
Learn more
about forming an
Alabama LLC
so you can decide which business
entity is right for you.
Benefits of Forming an Alabama C Corp
- The strongest form of liability protection possible by insulating your personal assets and finances from business debts, obligations, damages, bankruptcy or other liabilities
- Several options to create, buy, sell or transfer stock, including publicly
- The ability to issue more than one type of stock
- The ability to raise more funds by issuing more stock
- The ability to sell stock to investors inside and outside the U.S.
Benefits of Forming an Alabama S Corp
It offers several advantages similar to those provided by a C Corp including, but not limited to:
- Options for creating, transferring and selling stock, though not as many as a C Corp
- The capacity for up to 100 shareholders
- Simpler rules than those applicable to C Corporations
- Easy transfer of ownership simply by selling your stock
- The possibility of saving money by allowing you to pay less self-employment tax
In this guide, you’ll find information
on naming your corporation, getting a
Registered Agent, the fees you’ll need
to pay, business taxes and much more.
We also cover what you'll need to
register your corporation and how
you'll interact with the AL Secretary
of State.
To help you along
the way, use our
Starting a Business
checklist to keep track of everything
you need to do to get your business up
and running.
How to Form an Alabama Corporation Yourself in 6 Steps
Step 1 - Choose a Unique Business Name and Complete a State Business Search
Step 2 - Provide an Official Business Address for Your Corporation
Step 3 - Assign a Registered Agent
Step 4 - File Your Certificate of Formation with the AL Secretary of State
Step 5 - Get an Employer Identification Number (EIN) from the Internal Revenue Service
Step 6 - Write Your Bylaws
1
Choose a Unique Business Name and Complete a State Corporation Search
Every Alabama business must have a
unique name that hasn't already been
claimed by another business in the
state. If you’re having difficulty
coming up with a name, try using our
Business Name Generator
to gather ideas. You'll need to follow
a few naming rules, which you can read
about in detail on the
Alabama Corporation Names
page.
Once you’ve chosen a
name, you’ll need to make sure it’s
available in Alabama. To learn whether
another company in the state is using
your desired business name, use our
tool to do an Alabama entity search.
You can also
carry out a name search
on the AL Secretary of State website.
2
Provide an Official Business Address for your Corporation
Every Alabama corporation must have a
designated address. That could be the
address of your home (if you’re
running the company from your
residence), a building where your
office is located or any physical
address of your preference. The
address can be outside the state of
Alabama and can be a P.O.
Box.
You may also be able
to use a virtual mailbox for your
business address. Bizee can provide
you with an Alabama virtual mailbox
where we'll receive your mail, and
scan it for your online review. This
can be especially convenient if you
run a home-based business and don't
want your home address published
publicly as part of your business
record.
3
Assign a Registered Agent
A Registered Agent is someone who
receives official correspondence and
is responsible for filing reports with
the Secretary of State. Every Alabama
corporation is
required to have a
Registered Agent.
You can
fill this position yourself, assign
another manager in your business or
use a Registered Agent service. If
your
Registered Agent in Alabama
is a person, they must have a physical
street address in Alabama and must be
present during business hours to
receive important documents on behalf
of your company.
You'll
appoint your Registered Agent when you
file your Alabama Certificate of
Formation to create your business with
the Secretary of State.
All
of Bizee’s business formation packages
include Registered Agent service. It’s
free for the first year and just $119
per year after that. You can also
access a digital dashboard to view any
document we've received on your
behalf.
4
File Your Certificate of Formation with the AL Secretary of State
Once you've gathered all the information for your corporation, you’ll need to complete your filing online with the Secretary of State to receive your Alabama Certificate of Formation. This will officially create your business.
Here’s what is typically included:
- Your business name and type
- Registered Agent's name and address
- Names and addresses of directors
- The corporation’s capital structure (number of shares to be issued, who owns them, pricing, etc.)
- Your corporation's purpose, which is the Alabama default "the transaction of any lawful business for which corporations may be incorporated in Alabama" under Title 10A, Chapter 2A of the Code of Alabama
- The organizer's name and address
Your Certificate of Formation can be filed online via the state's digital portal. You can also mail the form to the Office of the Secretary of State, or Bizee can file it on your behalf. The Alabama corporation filing fee is $208.
File by Mail
Secretary of State
Business
Services
P.O. Box 5616
Montgomery,
Alabama 36103-5616
You only need to file your Alabama Certificate of Formation once, but every year after, you'll also need to report and pay AL business privilege tax (if applicable to your business) and file an annual report. Bizee can remind you about this every year, or we can do it for you if you have us handle the paperwork.
What are the fees and requirements to incorporate in Alabama?
State Fee | State Filing Time | Expedited Filing Time |
$236 | 3 Weeks | 1 Business Days |
State Fee | $236 | |
State Filing Time | 3 Weeks | |
Expedited Filing Time | 1 Business Days |
Annual Report
Frequency
Annually
Due Date
Annual Year: April 15th Fiscal Year: 3½ months after beginning of tax year
Note
Schedule AL-CAR filed with Business Privilege Tax Return is accepted in lieu of a separate Annual Report. C Corps must file Form CPT. S Corps must file Form PPT.
Business Privilege Tax
$1005
Get an Employer Identification Number (EIN) from the Internal Revenue Service
You'll need an EIN to identify your business to the IRS. You use this number when filing and paying taxes, when submitting payroll information and payments for your employees and for opening a business bank account. You can obtain one directly from the IRS, or Bizee can get one for you as part of the Alabama corporation formation process.
6
Write Bylaws
A set of rules that govern how a
corporation will be run, bylaws detail
how many directors the corporation
will have, whether the board of
directors will have annual meetings
and what the voting requirements are,
among other things.
Some
states require companies to create
bylaws — including Alabama. It’s
always a good idea to write them to
protect your business from any future
changes and events, regardless of the
legalities of your state.
Alabama Corporation Types
C Corporation
When you file to start a
corporation, by default, it's a C
Corp. This is the choice for large
businesses that will trade shares in
the stock market.
An
Alabama C Corp will offer you
several liability protections, but
it will also be required to adhere
to numerous strict rules and
regulations. It will also likely
have a substantial amount of
administrative overhead and won't
enjoy as many tax advantages as
other corporation types.
Learn more about
C Corporations.
S Corporation
Technically, an S Corporation isn't
a business entity the way LLCs and C
Corporations are. It's a tax filing
status. An LLC or a C Corporation
can be an S Corporation. It's just a
matter of filing a form with the
IRS.
The main reason to
file as an S Corp is to save money
on self-employment taxes. To get an
idea of how much money you might
save, use our
S Corp Tax Calculator.
If you want your
Alabama C Corp to be treated as an
Alabama S Corp, file the IRS
Election by a Small Business
Corporation
form, also known as Form 2553 or an
S Corp Election form.
Consult with your tax
advisor or accountant to determine
whether this is your best option.
Learn more about
S Corporations.
Compare
S Corp vs. C Corp
to learn the benefits and drawbacks
of both, and decide which one will
best suit your needs.
Professional Corporation
Some states, including Alabama,
allow certain occupations to form
Professional Corporations that
deliver professional services. The
state's business code defines this
as:
"...any type of
service that may lawfully be
performed only pursuant to a license
issued by a state court, state
regulatory licensing board, or other
like agency pursuant to state laws."
Per Alabama code, Title 34, a few of the professions permitted to form an Alabama Professional Corporation include, but may not be limited to:
- Architects
- Attorneys
- Accountants
- Dentists
- Physicians
- Veterinarians
Check with the AL Secretary of State to confirm whether your business should and can be a Professional Corporation.
Close Corporation
Put simply, a Close Corporation is
one that has a limited number of
shareholders, and isn't publicly
traded. Usually, Close Corporations
are exempt from corporate
requirements, such as having a board
of directors and holding annual
meetings. Alabama no longer allows
the formation of close corporations,
however there are certain exemptions
applicable to close corporations
formed before 1995. Information on
close corporations can be found in
the Alabama code
Title 10A, Chapter 30, Article
2.
These entities are
often chosen by family-owned
businesses to prevent non-family
members from establishing or
claiming any ownership of the
company.
Foreign Corporation
If your business operates in another
state and you want to expand into
Alabama — or vice versa — you’ll
need to form a Foreign Corporation.
Learn more about
Alabama Foreign Corporation
registration.
Nonprofit Corporation
Charitable organizations can
incorporate as nonprofit
corporations. This means all the
profits they generate are donated to
the organization supported by the
charity, minus administrative costs.
A
nonprofit corporation
is also exempt from federal and
state taxes, allowing more of the
profit to benefit the charity.
Note:
Everything in this guide applies to
for-profit corporations, and mostly
to C Corps and S Corps. Items listed
as requirements for forming a
corporation may or may not also
apply to nonprofits.
Limited Liability Company
Depending on the kind of business
you want to form, or your personal
circumstances and goals, an LLC may
be a better option. For example, you
may not need the options to buy and
sell stock. Or you may simply want
to start a small business with a few
employees or even just yourself.
An
Alabama LLC
is usually a better option for a
smaller business. It's easier to set
up, but it still offers you certain
advantages you'd get from a
corporation. You can even have your
LLC treated as an S Corporation for
tax purposes to save you money.
Regardless
of which direction you decide to go,
we can help you with your Alabama
business registration.
Learn
more about
limited liability companies.
Sole Proprietorship or Partnership
These are the simplest types of
businesses to set up. That's because
there's no real setup to do. If you
don't choose to form a separate
business entity, by default, you'll
have either a sole proprietorship
(just you) or a partnership (you and
one or more other people).
Neither of these options
provide you with any special
benefits or liability protections
and can leave your personal assets
vulnerable. For these reasons, we
don't recommend them.
Compare
business entity types
to decide which one is best for you.
Helpful Resources from the State of Alabama
More Information in This Guide
You’ll find plenty more insight and guidance on the other pages of this guide, including:
How to search the state business registry and find the right name. Includes information on naming rules, trade names, reserving a corporation name and more.
How to appoint, change and search for Registered Agents. Also includes the duties they fulfill and the rules they’re required to follow.
Details the various fees you’ll need to pay, as well as the state and federal requirements you’ll need to meet. Includes details about Employer Identification Numbers (EINs), state and federal business licenses, annual reports and more.
Covers the various taxes you’ll have to pay to the state and federal governments. Includes details about state taxes such as sales and franchise, and federal taxes such as income and self-employment.
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