How to start an Alabama corporation

It might seem like a lot at first, but once you understand the steps, it’s very doable. This guide will walk you through everything you need to know to start your Alabama corporation.

How to start a corporation in Alabama

Incorporating means registering your business as a corporation so the law sees it as its own entity, separate from you. Each state has its own rules for how to do this, so the process can seem confusing. Let’s go through each step: 

1. Choose a name for your Alabama corporation

Your corporation’s name should be unique and make a statement about your business. Make sure it complies with the following Alabama requirements:

• Your name must end with "Corporation," "Corp.," "Incorporated," or "Inc."
• Avoid deceptive terms. For example, don't name your Alabama corporation "Noah's Toy Trains" if you're selling baked goods.
• Your name should be unique. Avoid names that are deceptively similar to any other existing business names. Your name must be distinguishable from all other recorded entities already filed with the Secretary of State.
• Reserve your name prior to incorporation. You must attach the Name Reservation Certificate received from the Secretary of State to the Certificate of Formation.

Need help coming up with a business name for your corporation? Try the Rocket Copilot™ AI Business Name Generator, a free tool to help you brainstorm business names and get started registering your corporation.

2. Decide between an Alabama S-Corp and C-Corp tax designation

There are similarities between an Alabama S-Corp and a C-Corp regarding personal liability, management, structure, and compliance. The differences, however, come down to the following:

• Ownership Rules: an Alabama C-Corp can have an unlimited number of shareholders and unlimited classes of stock. An S-Corp is limited to a maximum number of shareholders, usually 100, and only one stock class.
• Taxes: a C-Corp is taxed on a separate basis. It files taxes at the corporate level, then shareholders can be additionally taxed on individual dividends they receive. S-Corps are "pass-through" tax entities. They pay no taxes at the corporate level, but corporate owners pay taxes individually.
• Documents: an Alabama S-Corp must file IRS Form 2553 to elect S-Corp status.

3. Appoint directors and shareholders for your Alabama corporation

Each state has its own personnel requirements for incorporating. In Alabama, the Domestic Business Corporation Certificate of Formation requires the disclosure of three or more directors, if you have that many. You must also disclose one incorporator. If you want to identify more than three directors or more than one incorporator, you must attach a list to your Certificate of Formation.

Single-officer or single-director corporations are permitted. The same person can hold more than one office or position. There is no minimum age requirement in Alabama for incorporators, officers, or directors, nor do they have to live in Alabama.

State the number of your corporation's directors in either your Bylaws or your business's Certificate of Formation. 

4. Choose a Registered Agent

A Registered Agent is the person or business responsible for receiving tax, legal, and government documents during regular business hours. It's important that every business has one. You can either serve as your own registered agent (if you have an Alabama address) or choose one to do that service for you (if you are not located in Alabama or would like an extra layer of privacy).

5. File your Certificate of Formation with the state of Alabama

Once you have a business name and registered agent, you can register your business as an Alabama corporation with the state by filing your Certificate of Formation. This document may be referred to in other states as "Certificate of Organization," "Certificate of Filing," or "Articles of Organization."

Alabama also requires that corporations file an Application for Certificate of Existence of Registered Entities. The Certificate of Existence documents an entity that is indexed or registered with the Alabama Secretary of State. Completing an application for a Certificate of Existence in Alabama requires that the corporation has an entity ID number. The Secretary of State issues entity ID numbers. There are standard and expedited fee options for Certificates of Existence.

6. Get an Employer Identification Number (EIN)

Before opening your doors for business, apply to the IRS for an employer identification number, or EIN. All corporations with employees in Alabama must have an EIN. An EIN is similar to your Social Security number, but it's for businesses. You'll also need an EIN to open your corporate bank account.

Congratulations! After you have completed all these steps, you have formed your Alabama corporation.

What to do after incorporating in Alabama

Alabama recommends that corporations create business records, such as Bylaws and Corporate Minutes. We have requirements for Bylaws and Corporate Meeting Minutes for all 50 states. It's a good idea to create and keep these documents regardless of whether Alabama officially requires them. They can help protect the legality of your corporate status and shield you from personal liability.

Still have questions? Learn more about how to start your own business with Rocket Lawyer and get started today!
 

Key takeaways Starting a corporation in Alabama means following state rules, like choosing a unique name, filling out paperwork, and paying fees to make it official. One important choice is deciding how your corporation will be taxed in Alabama, either as an S-Corp or a C-Corp. This affects how the business and owners pay taxes, and the differences between the two change from state to state. After forming the corporation, it’s recommended to keep records – like Bylaws and Meeting Notes – to stay in good standing with the state and prove your business is real and operating correctly.

Additional resources

Learning how to enforce a contract is just one step. Explore these additional topics to learn more and take the next steps.

• What is a corporation?
• What is an S-corporation?
• How are corporations taxed?
• How to start a corporation
• How to register a corporation by state