How to Start a Series LLC in Alabama

Series LLC in Alabama

A series LLC is one of the most popular options for scaling a small or mid-sized business. In Alabama, series limited liability companies (SLLCs) can be formed as of 2017. This is a great option for real estate investors and entrepreneurs with multiple lines of business.

A series LLC consists of an umbrella company and an unlimited number of subsidiary companies or "cells." Each cell has its own assets.

Another important feature of series LLCs is that they are isolated from each other.

Even if one of the subsidiary companies is embroiled in litigation, all others in the series are protected from liability.

How to Form an LLC in Alabama: Step-by-Step Guide

In  Alabama, series LLC registration is virtually the same as for a regular limited liability company. The key difference is that when you form the parent company, you must indicate that you plan to form a series of subsidiary "cells" in the future.

First, you have to file a paper copy of the Alabama Name Reservation Request Form for Domestic Entities with the Secretary of State. The filing fee is $28 (for non-subscribers; varies from county to county) or $100 for expedited processing within 24 hours.

In fact, Alabama is the only state where you will need to send a statement of information and reserve your business name.

Step 1: Name Your Series LLC

To officially name your series LLC, you must use "limited liability company" (or its abbreviation) in your chosen (and available) business name.

After this, you will have to obtain/complete two documents to legalize your business:

• Certificate of Name Reservation;
• Certificate of Formation.

The Certificate of Formation for your Alabama Series LLC will cost you $208 to file.

Step 2: Appoint a Registered Agent for Your Alabama Series LLC

Under Alabama law, to legally register and operate a series LLC in Alabama, you will need to appoint and maintain a registered agent (RA).

According to Alabama State Code Section 10-2B-5.01, this can be an individual or a commercial entity with a registered office (must be a physical address, not just a P.O. box) in the state.

The good news is that you can hire one RA for the entire series LLC (including all sub-cells), thereby saving you money.

Preferably, this should be a local company, e.g. Alabama Registered Agent. Or you can choose a national provider that works in all 50 states, in case you’re planning to expand your business to other states in the future.

Step 3: File Your Series LLC Certificate of Formation

To find out how to start a series LLC in Alabama, you will need to follow this next step, which is filing a Certificate of Formation. Namely, you should complete the required form and mail it to the Secretary of State, including the following attachments:

• A copy of the Name Reservation Certificate from the Office of the Secretary of State;
• A completed and signed Certificate of Formation;
• An envelope with a stamp and return address;
• A check/money order for $208 payable to the Secretary of State.

When starting a series LLC in Alabama, make sure you include the following information about your company in the Certificate of Formation:

• Series LLC name and street address;
• Mailing address in Alabama of registered office (if different from street address);
• Name and address of your registered agent (must be located in Alabama);
• County of your registered agent;
• Name and full address of the responsible member of the venture;
• Effective date, etc.

Mail to:

Secretary of State, Business Services, 

P.O. Box 5616, 

Montgomery, Alabama 36103.

To file a Certificate of Formation online, visit the Secretary of State's online business portal.

For more information on other forms, visit the Business Downloads page on the official website of the state.

Step 4: Draft an Operating Agreement

Next, to form a series LLC in Alabama, you need to prepare an operating agreement (in written form). This internal company document contains basic information about your venture and describes the following:

• Various operating procedures;
• Rules and regulations;
• Responsibilities and limitations of members of the series LLC.

Note that the state does not require business owners to have an operating agreement to start a series LLC in Alabama. However, it's highly recommended to have one for your company.

This way, you will be able to easily resolve any internal disputes, challenges, and controversies among members of your LLC in the future.

Moreover, an OA authorizes your Series LLC to establish individual cells and defines the structure of your organization, including:

• The definition of the owner(s);
• Members’ association with each series, and more.

You can find a template for creating an LLC OA online to further adapt it to the needs of your business.

Step 5: Submit Your Initial Report

After you file the Certificate of Formation for your Series LLC in Alabama, you will need to submit a combined Initial Report / Business Privilege Tax Return (Form BPT-IN) to the Alabama Department of Revenue, Business Privilege Tax Section.

Note that the initial report must be filed within two and a half months of forming the venture. The tax base is your series LLC’s net worth, however, the minimum tax is $100. One report will cover each cell of your series LLC in Alabama.

Step 6: Get an EIN for Your Alabama Series LLC

If you plan to open a separate business account in a bank, hire employees for your series LLC or take advantage of tax elections (i.e. if you want to be taxed as an S corporation), you will need to obtain a federal employer identification number (FEIN or EIN).

To do this, you'll need to fill out and submit the Application for Employer Identification Number (Form SS-4) to the IRS. You can do this online on the official website of the Internal Revenue Service or by fax/mail.

The time it takes to obtain an EIN depends on how you apply. The fastest way is to apply online, as it can take up to 7 days to receive it by mail or by fax.

After you register a series LLC in Alabama, you will have the same EIN, even if you decide to change your company name.

LLC Alabama Cost: How Much Is a Series LLC in AL

Before you are fully aware of how to create a series LLC in Alabama, it's worth researching county law, as LLC name reservation fees vary from county to county.

Also, included in the basic list of series LLC costs in Alabama for 2022 are:

The total cost varies by county.

Additionally, you want to consult the County Probate Office Directory to find out if you need an application for a business license. If you do, this will also increase the total LLC Alabama cost.

Also, you can register for Alabama business taxes and renew your tax license online through My Alabama Taxes.

First Tasks After Creating a Series LLC in Alabama

Once you finally know how to get a series LLC in Alabama, keep in mind that you might also need to:

• Open a business bank account to protect your personal assets and separate them from your business assets. Plus, this will allow you to get a loan from the bank;
• Get an insurance policy to have some coverage to protect your series LLC from unexpected accidents and mishaps.

Additionally, there are employee compensation, real estate, and other insurance policies.

Note that if you decide to temporarily shut down your company after setting up a series LLC in Alabama, you will need to obtain income protection insurance.

Keep Your Company Compliant

Once you find out how to create a series LLC in Alabama and register it in the state, your company will be fully operational.

However, it is important to remember that throughout the life of your business, you also have obligations to various federal agencies. Plus, you will need to clarify additional requirements at the state and county level where your company is registered.

A list of required actions includes:

• Tax requirements. This is a $100 tax on business privileges;
• Also a personal income tax on each member of the LLC;
• Obtaining a general business license.

To open a series LLC in Alabama, you need to get a business license from the County Probate Office Directory or licensing commissioner. Next, you need to file a tax return.

Since a limited liability company is considered a "pass-through" entity in the state, you need to be sure to list your company's income on your personal income tax return.

After that, you can be considered a bona fide owner of a series LLC, which means you will avoid penalties.

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