Key Takeaways

  • An Alabama foreign LLC is an out-of-state LLC registered to do business in Alabama.
  • Registration requires filing a Certificate of Authority with the Secretary of State.
  • You'll need a registered agent and a name reservation before filing.
  • Business licenses, annual reports, and state taxes are required after registration.
  • Common missteps include not appointing a registered agent or operating before approval.

An Alabama foreign corporation is required to obtain a certificate of authority before operating within the state.

Foreign LLCs

Just because you're eligible to operate in one state doesn't mean that you're legally qualified to do so in every state. If your registered limited liability company (LLC) would like to operate outside your home state, you'll most likely need to register with the state that you're looking to operate in.

Registering your LLC in Alabama will ensure that you're conducting business legally there. For example, in Alabama all LLCs that have been created in another state are referred to as foreign LLCs. The term "foreign" doesn't indicate that the LLC is from a foreign country. Rather, it indicates that the company was formed within the jurisdiction of a different state.

Conducting Business in Alabama

Domestic LLCs are created in the state in which it's operating. To clarify, an LLC created in Wisconsin is considered a foreign business in Iowa, but a domestic LLC in Wisconsin. All LLCs looking to operate in another state must register with that state's Secretary of State (SOS) to qualify as a foreign business or LLC. All companies operating in Alabama must be registered with the state of Alabama.

State sales tax is collected on foreign LLCs by Alabama state law. Generally, the law states that a business needs to be physically present in order to operate within the state. This is also known as nexus. To have nexus in Alabama implies the following:

  • A warehouse is being operated
  • There's a store
  • There's an office
  • A sales employee works within the state

Exempt Activities

Transacting business in Alabama does not include the following activities:

  • Conducting an isolated transaction (usually one in thirty days and not one in the course of similar, repeated transactions)
  • Creating or acquiring indebtedness
  • Organizing internally
    • For example, holding manager or member meetings
  • Opening an account with a bank within the state
  • Designating an agency, office, or other individuals to handle your entity's financial investments
  • Owning without real or personal property
  • Collecting or securing particular debts
  • Allowing independent contractors to perform the majority of business
  • Settling or defending a lawsuit
  • Seeking or securing orders when they require authorization in another state prior to becoming contracts
  • Transacting business through interstate commerce

When Is Foreign Qualification Required?

Not every business interaction in Alabama requires foreign qualification. However, if your out-of-state LLC does any of the following, you’ll likely need to register as an Alabama foreign LLC:

  • Maintains a physical office or storefront in Alabama
  • Has employees or representatives regularly operating in the state
  • Owns or leases property in Alabama
  • Offers services or goods consistently within the state
  • Enters into contracts to be executed within Alabama

Failing to register when required may result in fines or loss of the right to bring legal actions in Alabama courts.

Registration Requirements

In order to register a business, a foreign LLC application must be filed with the SOS. The application may be downloaded on the SOS website. The application will request the following information:

  • A statement certifying that the LLC exists because of the laws of another state
  • An authorized signature
  • The full legal name of the LLC
  • The mailing address and street of the LLC's main office
  • The date on which the LLC will begin, or first began, conducting business in Alabama
  • The formation date of the LLC
  • The fictitious name (DBA) under which your LLC will operate in Alabama
  • The name of the registered agent
  • The state where the LLC was originally formed
  • The street and mailing address of the LLC's registered agent

The filing amount is about $150.

Steps to Registering a Foreign Business in Alabama

There are three steps in registering a foreign corporation in Alabama:

  1. Reserve the business name
    • The cost is about $28
  2. To conduct business, request the application for certificate of authority of a foreign corporation
  3. Mail/file the application for certificate of authority

Alabama Registered Agent Requirements

Every Alabama foreign LLC must designate a registered agent with a physical address in the state (P.O. Boxes are not allowed). The agent is responsible for accepting service of process and official documents on behalf of the LLC. This agent can be:

  • An individual resident of Alabama
  • A business entity authorized to operate in Alabama
  • A professional registered agent service

Make sure your registered agent remains compliant; failure to maintain one can result in administrative dissolution.

Next Steps After Forming a Foreign Corporation in Alabama

There are four steps to take after forming an Alabama foreign corporation:

  1. Request a business license in the city and county in which you're operating
  2. File the applicable reports for an Alabama foreign corporation
  3. Store all records properly
  4. Pay the correct amount of taxes in a timely manner

Ongoing Compliance for Alabama Foreign LLCs

Once registered, an Alabama foreign LLC must maintain compliance with state requirements, which include:

  • Annual Reports: Due every year along with the Alabama Business Privilege Tax return.
  • Business Privilege Tax: Calculated based on net worth and levied annually.
  • Renewals and Updates: Any changes to your registered agent, business name, or address must be reported to the Secretary of State.
  • Licensing: Depending on your industry and locality, additional licenses or permits may be necessary.

Non-compliance can lead to late fees, loss of good standing, or revocation of your authority to operate in Alabama.

How Long Does It Take to Form a Foreign Corporation in Alabama?

The typical processing time for an Alabama foreign corporation application is about 15-20 business days. An additional two to three business days will be needed to ship the documents by mail. The probate judge will send the filing to the SOS for indexing. For an additional fee of about $100, the SOS will expedite the indexing of the application once they've received it from the probate judge.

Common Mistakes to Avoid When Registering a Foreign LLC

To ensure a smooth foreign registration in Alabama, avoid these frequent errors:

  • Not reserving a business name: Alabama requires name reservation before filing the Certificate of Authority.
  • Operating before approval: Doing business prior to registration can lead to penalties.
  • Improper or missing agent: Failing to appoint or maintain a compliant registered agent may cause delays or compliance issues.
  • Incomplete or incorrect filing: Applications missing required documents or fee payments are often rejected.
  • Ignoring local license needs: Many cities and counties in Alabama require additional business licenses.

Frequently Asked Questions

  1. What is an Alabama foreign LLC?
    An Alabama foreign LLC is a business formed in another state that registers to conduct business in Alabama.
  2. Do I need a registered agent in Alabama?
    Yes, every foreign LLC must maintain a registered agent with a physical address in Alabama.
  3. What happens if I don't register my foreign LLC in Alabama?
    You may face penalties, including fines, inability to bring lawsuits, and back taxes.
  4. Is an annual report required for an Alabama foreign LLC?
    Yes, you must file an annual report alongside your Business Privilege Tax return.
  5. Can I reserve a name before registering my foreign LLC?
    Yes, name reservation is mandatory before filing the Certificate of Authority in Alabama.

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