4. Create an operating agreement

Alabama does not require an operating agreement, but it is an essential component of your business—because it’s the document that outlines the way your LLC will conduct business. Having a readily accessible, written operating agreement is helpful for various reasons, including settling internal disputes among LLC members that may arise over profits, finances, and other aspects of the business arrangement; protecting your personal assets from potential business-related litigation; and following your own rules of operation instead of those set by state law. Without an agreement in place, the courts make determinations based on state law, not necessarily what is in the best interest of the LLC and its members.

The following is the basic information that your operating agreement should include:

• Name of the LLC and its principal business address
• Duration of the LLC (in Alabama, the duration of LLCs is perpetual until terminated, dissolved, canceled, or revoked)
• Name and address of the registered agent
• Information about the certificate of formation
• Purpose of the business
• Members, including their names, addresses, titles, and contributions
• The way profits and losses will be divided
• How the LLC will be taxed
• Procedure for admitting new members, as well as outgoing members
• Management of the LLC
• Indemnification and liability clauses
• Procedures for dissolving the LLC

A great place to start is with an Alabama LLC operating agreement template, which can help you cover important bases without drafting one from scratch. Think of it as a framework, not a final product. If your business has multiple members or unique needs, consider looping in an attorney. They can help turn your operating agreement into a legally solid agreement.

5. Get an Employer Identification Number and open a business bank account

Not all LLCs need a federal Employer Identification Number (EIN), but those that do are multi-member LLCs, single-member LLCs taxed as a corporation, or those that have or plan on hiring employees. But even if you’re a single-member LLC taxed as a sole proprietorship, you may choose to get an EIN instead of using your Social Security Number on business documentation, helping to protect your sensitive information. 

Regardless of how your LLC is structured, the purpose of an EIN is to help you do the following:

• File and manage taxes at the state and federal levels
• Open a business bank account
• Hire employees
• Apply for business licenses

The nine-digit EIN is assigned by the Internal Revenue Service (IRS). You can apply for your EIN by mail, fax, or online. You can also get an EIN easily with LegalZoom.

Once you have your EIN, you’ll use it to open a business bank account. Doing so helps to keep your business and personal finances separate and allows for simpler tracking of your LLC’s income and expenses. To open a business account, most financial institutions require the following: 

• EIN
• Formation documents, like a copy of your certificate of formation or a business license
• Proof of identification for account holders, like a driver’s license or passport
• Information about your LLC, including its members 

6. Keep certain LLC records on-site

Alabama LLCs must keep certain records at the principal office for its members. This list includes, but is not limited to:

• The most current list of names and recently updated addresses of all the LLC members
• A copy of the filed certificate of formation, along with any amendments and executed powers of attorney for action(s) already taken
• A copy of the effective operating agreement and any amendments
• Copies of financial statements from the past three years
• Copies of federal, state, and local tax returns and reports from the past three years

7. File a Business Privilege Tax return

LLCs must file an annual Alabama Business Privilege Tax return with the Alabama Department of Revenue. Within 2.5 months of registering your LLC, you’ll need to file an Initial Privilege Tax Return (Form BPT-IN). Then, every year thereafter for the duration of the LLC, you will file the annual Privilege Tax Return (Form PPT).

All Business Privilege Tax returns must include the following documents (plus any additional LLC forms):

• One copy of pages 1 to 5 of the federal tax return (if no federal tax return is included, a copy of the balance sheet and income statement are required)
• A copy of Alabama apportionment schedule Form 65
• Documentation to support exclusions and/or deductions claimed
• A copy of the balance sheet used to compute the taxpayer's net worth