In many ways, starting your own business is the purest expression of the American dream. Getting the chance to put your expertise and know-how to work, all while controlling your own financial destiny is a prospect that many find appealing. Entrepreneurship is at the core of the engine that drives the U.S. economy, and if you are considering joining those noble ranks, you will have to make a thorough and sound business plan. At the outset, of course, it just starts with an idea: maybe you have a great idea for a product or service and there is an underserved market in your corner of Alabama. While identifying those opportunities is a great first step, there are other details that you should also think about addressing. Will you be working out of your home or garage in the early days, or will you require office space or a retail storefront? How will you legally structure your business? Will a limited liability company (LLC) suffice, or do you need to learn how to form a corporation in Alabama? These are important questions that warrant thoughtful answers.
Whether you are setting up a shop in Birmingham, Tuscaloosa, or anywhere in between, Alabama offers a business-friendly environment with low taxes. Once you have settled on a location and business plan, deciding on your business’s legal structure should be a top priority. For smaller operations, a sole proprietorship or a general partnership (GP) may provide adequate structure when coupled with a profit-sharing agreement. In other scenarios, the low maintenance and valuable incentives afforded by an LLC offer a logical appeal. For some businesses, however, it may be time to form a corporation in Alabama, as it allows you certain high-level benefits. Read on to learn more about incorporating your business in Alabama, as well as how you can do it online with our forms.
Why You Should Form a Corporation in Alabama
When you hear the term “corporation,” you likely make an association with large, multinational companies. In truth, however, businesses of all sizes can choose to incorporate, and one common reason they choose to do this is that in a corporation you are allowed to issue stock. By selling fractional shares of ownership in your business to outside investors, you can efficiently raise the capital necessary to grow your business. You can use these funds to open a new location, increase your marketing budget, or hire additional employees. In return, investors will be able to share in the success and growth of your business.
You should know, however, that corporations must adhere to stricter rules than, say, an LLC. They are a bit more rigid in how they can be managed and will have certain reporting requirements to meet. There are also tax considerations to think of, as some forms of corporate structures receive “pass-through” status with the Internal Revenue Service (IRS) and others do not. With a pass-through designation, your company does not pay taxes on its profits until they flow through to the business’s owners–as you can likely deduce, this is a sizable tax advantage.
How to Form a Corporation: Getting Started
If you have done all the research and decided that a corporation is right for you, there is a process that you will need to follow with the state of Alabama. First, you will need to choose a name for your business that does not match or appear too similar to any other corporations on file with the Alabama Secretary of State’s office. Your name will also need to include the word “Incorporated” or “Corporation”, or a suitable abbreviation. Once you have chosen a name, you will need to reserve it by submitting a Name Reservation Request for Domestic Entities.
With a name chosen, you will then want to designate a registered agent. This person will be responsible for receiving all legal, tax, and government correspondence on behalf of your business. Some corporations opt to fill this role with in-house legal counsel, though that is not required by law.
Next, it is time to do some paperwork. You will need to file a Domestic Business Corporation Certificate of Formation with the Secretary of State’s office. This document will ask for some basic information about your business, its incorporators, and its registered agent. You will also need to provide the number of shares that you plan to issue. You can submit this form by mail or by using our easy-to-fill online forms.
Processing Your Forms Online
At Corporation Center, we have simplified web forms for all of your Alabama business structure needs. To learn more about our services and how you can help your business, take a moment to browse our site, or visit our Frequently Asked Questions page. You can also contact us on our website or through email.
