Learn about the annual report and tax filing obligations for Alabama limited liability companies.
You’ll need to prepare and submit many paperwork with the state if you wish to form and maintain an Alabama limited liability corporation (LLC). This article discusses Alabama LLCs’ most essential continuing reporting and state tax filing needs.
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Report Annual
As part of your mandatory state Business Privilege Tax return, the State of Alabama requires you to complete an annual report. More information may be found in the next section.
State Corporation Tax
Most LLCs are pass-through tax corporations when it comes to income taxes. In other words, the burden for paying federal income taxes is passed via the LLC to the individual LLC members. LLCs do not pay federal income taxes by default; only its members do.
Alabama, on the other hand, levies an annual Business Privilege Tax (BPT) on LLCs. In general, the BPT is computed using the entire amount of money distributed to LLC members. There is a minimum tax of $100. The tax is collected and paid to the Department of Revenue (DOR). The Business Privilege Tax return (Form PPT) for pass-through businesses such as LLCs contains an Annual Report form (Form AL-CAR) that must be submitted with the return. Except for the first return, BPT returns must be filed within three and a half months of the start of the LLC’s tax year. For example, if your LLC’s tax year corresponds to the calendar year, the return is due by April 15.
For the first return, there is a separate form (Form BPT-IN) (the first return filed after the creation of your LLC). The first return is due two and a half months after the LLC is established.
In certain situations, the owners of an LLC elect to have their firm taxed as if it were a corporation. This decision is made by submitting IRS Form 2553 to the IRS. (The form is available on the IRS website.) Alabama, like the majority of other states, has a corporate income tax. The corporation tax in Alabama is presently calculated at a flat rate of 6.5% of taxable net income. This tax must also be paid if your LLC is taxed as a corporation. Check the DOR website for additional information on the business privilege and corporate income taxes, including how you may be able to file or pay online.
Employer Taxes in the State
Do you have workers in your LLC? If this is the case, you must pay employer taxes. Some of these taxes are paid to the federal government (the IRS) and are not addressed in this section. (However, it is important to understand that federal employer tax duties begin with getting a federal employer identification number (EIN).) However, Alabama employers must additionally pay state taxes.
To begin, you must withhold and remit employee income taxes to the Department of Revenue. Begin by registering your company with the DOR, either online (via the My Alabama Taxes website) or on paper (through DOR Form COM:101, Combined Registration/Application). After you’ve enrolled, you must submit withholding taxes on a regular basis (for example quarterly using Form A-1 or monthly using Form A-6). Each year, you’ll also need to utilize Form A-3 to balance your LLC’s tax withholding. Check out the DOR website for further information, including information on electronic filing alternatives.
You’ll also need to register to pay state unemployment insurance (UI) taxes. The Alabama Department of Labor is in charge of these taxes (DOL). These taxes may be registered for online or by utilizing Form SR-2 (Application to Determine Liability). Then, each quarter, go online to record your salary and pay your unemployment insurance taxes. Visit the DOL website for further information.
Taxes on Sales and Use
If your LLC sells items to consumers in Alabama, you must collect and remit sales tax. This implies you’ll need to register with DOR for this reason. After you register, you will get a sales tax certificate. Then you’ll have to pay sales tax on things sold on a regular basis. Check the DOR website for further information, including online filing requirements.
Other States Registration
If you want to do business in states other than Alabama, your LLC may need to be registered in any or all of those states. The exact states concerned will determine if you are needed to register: each state has its own regulations for what defines conducting business and whether registration is required. For registration reasons, having a physical presence (a business location) in a state, recruiting personnel in a state, or soliciting business in a state (through telephone, print advertisements, mail, or the Internet) are sometimes considered conducting business. Obtaining a certificate of authority or comparable document is normally required for registration.