FAQ · Straight answers to the questions Alabama Corporation owners ask most.
Alabama Corporation FAQ — Formation, Compliance, and Taxes
Straight answers to the questions people actually ask when incorporating in Alabama, from how the filing works to what the state expects year after year. Alabama runs a couple of things differently than most states — the name reservation comes first, and the annual tax reports to the Department of Revenue — so we've covered those quirks alongside the standard questions.
One price: $199.00/yr covers your formation, your registered agent, and your annual report, plus the $200.00 state filing fee, at cost.
State agency: Alabama Department of Revenue (Business Privilege Tax). The Secretary of State no longer collects any annual report.
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State facts
Alabama Corporation
Forming Your Corporation
What document creates a corporation in Alabama?
The Articles of Incorporation, filed with the Alabama Secretary of State. This document brings the corporation into legal existence. It lists the corporate name, the registered agent and registered office, the number of authorized shares, the incorporator, and the principal office. Once the state records it, your corporation exists as a separate legal entity.
Do I have to reserve my name before filing?
Alabama is unusual here. The state has historically expected you to reserve your corporate name before filing the Articles of Incorporation and to reference the reservation on the filing. So the practical order is: search the name, reserve it, then file the Articles. Skipping the reservation step is one of the most common reasons an Alabama filing hits a snag.
Can I incorporate in Alabama if I live elsewhere?
Yes. Alabama has no residency requirement for shareholders, directors, officers, or incorporators. The only in-state requirement is the registered agent, who must have a physical Alabama address. Out-of-state and even international owners incorporate in Alabama routinely, using a commercial registered agent to satisfy the address requirement.
How long does formation take?
Online filings generally process same day to about one business day. Mail filings take roughly a week to ten business days, with an expedite option available for an added state fee. Factor in the name reservation step ahead of the Articles if you're filing yourself.
Structure, Ownership, and Governance
Who owns and runs an Alabama corporation?
A corporation has three layers. Shareholders own it by holding stock. The board of directors oversees the company and makes major decisions. Officers — typically a president, secretary, and often a treasurer — handle day-to-day operations. In a small corporation, the same person can occupy all three roles: sole shareholder, sole director, and president.
How many directors do I need?
Alabama allows one or more directors. A closely held corporation can operate with a single director. Larger companies, and any raising outside money, typically have a board of three or more to distribute oversight and meet investor expectations. The number is set in your bylaws or by the shareholders.
Do I need corporate bylaws?
Yes, in practice. Bylaws are the corporation's internal rulebook — how directors are elected, how meetings run, what officers exist, how decisions get made. You don't file them with the state, but you're expected to adopt them, usually at the organizational meeting right after formation. Operating without bylaws leaves your governance undefined and weakens the corporate formalities courts look for.
How much stock should I authorize?
Authorized shares are a ceiling, not a mandate. Most corporations authorize far more than they issue at the start, leaving room for future investors and employee equity without amending the Articles. You issue a portion to founders at the organizational meeting and keep the rest in reserve.
Taxes and the Alabama Difference
How is an Alabama corporation taxed?
By default it's a C corporation federally: the company pays tax on its profits, and shareholders pay again on dividends. Many small corporations elect S corporation status with IRS Form 2553, which passes income through to shareholders' personal returns and avoids entity-level federal tax. The election has eligibility limits and is a decision for your accountant.
What is the Business Privilege Tax?
Alabama charges a Business Privilege Tax for the privilege of doing business in the state. It's separate from income tax, has a minimum amount, and scales with the corporation's net worth apportioned to Alabama. Corporations file it on Form CPT.
Why does the annual tax go to a different agency?
This is Alabama's signature quirk. The Secretary of State forms and maintains your corporation, but the annual Business Privilege Tax goes to the Department of Revenue, not the Secretary of State. Most states route the annual obligation through the same office that handled formation; Alabama splits them, and owners who watch only the Secretary of State miss the tax deadline.
Is there an annual report to the Secretary of State?
Alabama restructured its annual filings, and the annual obligation for corporations centers on the Business Privilege Tax filed with the Department of Revenue rather than a separate Secretary of State annual report. Because these rules have changed in recent years, confirm current requirements with the Department of Revenue or a professional when you file.
Ongoing Compliance and Changes
What do I have to do each year?
Keep the corporation in good standing by filing the annual Business Privilege Tax with the Department of Revenue, holding your annual shareholder and director meetings with recorded minutes, keeping the registered agent current with the Secretary of State, and filing the federal and state returns appropriate to your tax election. The rhythm matters more than the difficulty.
What happens if I miss the privilege tax?
Falling behind on the Business Privilege Tax can lead to penalties, interest, and loss of good standing. A corporation out of good standing can eventually face administrative dissolution, at which point it loses the ability to sue, sign contracts in its name, and rely fully on the liability shield. Reinstatement is possible but costs more than staying current.
Can I change my registered agent later?
Yes, anytime, by filing a change with the Secretary of State — as long as the corporation always has a valid agent on file with no gap. Owners commonly switch when an individual agent moves or resigns, or when they upgrade to a commercial service for privacy and reliability.
How do I close an Alabama corporation?
You dissolve it: wind up the business, settle debts, distribute remaining assets to shareholders, and file dissolution paperwork with the Secretary of State, while closing out your tax accounts with the Department of Revenue. Formally dissolving stops the ongoing obligations — simply abandoning the corporation leaves the privilege tax and compliance clock running.
Frequently asked questions
Does an Alabama corporation need a registered agent?
Yes, at all times. Every Alabama corporation must appoint a registered agent at formation and maintain one for the life of the company. The agent needs a physical Alabama street address and must be available during business hours to accept legal process and state notices. You can serve yourself with an in-state address, or use a commercial service for privacy.
What's the biggest difference between filing in Alabama and other states?
Two things. First, Alabama typically expects a name reservation before you file the Articles of Incorporation, whereas most states let you file directly. Second, the annual Business Privilege Tax goes to the Department of Revenue, not the Secretary of State that formed the company. Both trip up owners who assume Alabama works like everywhere else.
Can one person be the entire corporation?
Yes. Alabama allows a single individual to be the sole shareholder, sole director, and all officers of a corporation. Many small businesses incorporate exactly this way. You still need to observe the formalities — adopt bylaws, hold and document meetings, keep finances separate — because those are what preserve the liability protection.
Do I need a lawyer to incorporate in Alabama?
No, incorporating doesn't legally require a lawyer, and many owners form their corporation through a filing service. That said, an attorney is worth consulting for complex ownership structures, shareholder agreements, or investor deals, and a CPA is worth consulting on the S corporation election and tax planning. A filing service handles the state paperwork; professionals handle judgment calls.
What is a Certificate of Authority and do I need one?
A Certificate of Authority is what an out-of-state (foreign) corporation obtains to do business in Alabama. If your corporation was formed in another state and you have a physical presence or ongoing business here, you register for the certificate with the Secretary of State. A corporation formed in Alabama doesn't need one — it's domestic and already authorized.
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Formation, your registered agent, and your annual report. One price, $199.00/yr, with the state fee passed through at cost.
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