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Alabama LLC
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An Alabama LLC offers business entrepreneurs the form of corporate organization that provides perhaps the most flexibility to you. An LLC formation, like the alternative corporate forms of organization like a limited partnership or a Subchapter S Corporation, are generally prime candidates for a business juststarting. The state of Alabama gives public support to an LLC.
Should I form an LLC in Alabama?
An Alabama LLC satisfies a necessary condition of your business planning developement in that it meets the requirement that you establish a legal form of organization in order to gain the statutory benefits and protection available in Alabama to your LLC. Your Alabama LLC establishes a legal presence within the state, which you can use either as a platform for in-state operations or by registering your Alabama LLC via your agent's physical address in order to meet the purely statutory requirement for tax and filing purposes absent an in state operation.A limited liability company (LLC):
The LLC is a relatively new type of hybrid business structure that is now permissible in most states. It is designed to provide the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership. Formation is more complex and formal than that of a general partnership.The owners are members, and the duration of the LLC is usually determined when the organization papers are filed. The time limit can be continued if desired by a vote of the members at the time of expiration. LLC's must not have more than two of the four characteristics that define corporations: Limited liability to the extent of assets; continuity of life; centralization of management; and free transferability of ownership interests.
- An LLC is a type of business ownership combining several features of corporation and partnership structures
- An LLC is not a corporation or a partnership
- An LLC may be called a limited liability corporation, the correct terminology is limited liability company
- owners are called members not partners or shareholders
- number of members are unlimited and may be individuals, corporations, or other LLC's
Advantages and Disadvantages of LLC
Advantages of Limited Liability Company
- Limited Liability: Owners of a LLC have the limited liability protection of a corporation.
- Flexible Profit Distribution: Limited liability companies can select varying forms of distribution of profits. Unlike a common partnership where the split is 50-50, LLC have much more flexibility.
- No Minutes: Corporations are required to keep formal minutes, have meetings, and record resolutions. The LLC business structure requires no corporate minutes or resolutions and is easier to operate.
- Flow Through Taxation: All your business losses, profits, and expenses flow through the company to the individual members. You avoid the double taxation of paying corporate tax and individual tax. Usually, this will be a tax advantage, but circumstances can favor a corporate tax structure.
Disadvantages of Limited Liability Company
- Limited Life: Corporations can live forever, whereas a LLC is dissolved when a member dies or undergoes bankruptcy.
- Going Public: Business owners with plans to take their company public, or issuing employee shares in the future, may be best served by choosing a corporate business structure.
- Added Complexity: Running a sole-proprietorship or partnership will have less paperwork and complexity. A LLC may federally be classified as a sole-proprietorship, partnership, or corporation for tax purposes. Classification can be selected or a default may apply.
Tax Details on Business in Alabama
The Alabama income and property taxes are among the lowest found anywhere in the United States. In addition, Alabama offers statutory incentive programs such as a corporate income tax credit for qualifying companies. This includes the cost of land, buildings, machinery and equipment. The program provides an annual corporate income tax credit of five percent of the total capital cost of the project for 20 years. Assuming a total cost of $20 million in building and equipment, the abatement provides up to $1 million in credit against Alabama corporate income taxes each year for a term of 20 years.- The rate of corporate income taxation is 6.5%. With a net effective rate (after the federal income tax deduction) of 4.42%, Alabama still maintains one of the lowest corporate income tax rates in the nation. (Alabama Constitution, Amendment 212)
- The Capital Investment Tax Credit, available each year for 20 years, is calculated at five percent (5%) of the total capital costs of the qualifying project and the credit begins in the year the qualifying project is "placed in service:' The capital credit is available to all types of business entities, including, but not limited to: C corporations, S corporations, limited liability companies (LLCs), partnerships, trusts, and sole proprietorships.
- Act 2001-965 amended the income tax capital credit law to allow for lower thresholds for the requirements for new employees and for capital costs for projects locating or expanding in a "favored geographic area.”
| Alabama Corporate Tax Rate
Alabama Corporate Licensing
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