Without a doubt, the single most common question I get is, "how much do you charge to form an LLC?" Rarely are these callers satisfied with my usual response of, "It depends."
In truth, it really does depend. To simply set up an LLC, the expenses are minimal. In fact, later in this article I will describe how you can form an LLC on your own. However, I do not recommend this for a number of reasons which I will detail in a minute. As the saying goes, "The devil is in the details." The devil in LLCs is not in getting them formed, it's operating them. Simply setting up an LLC with the state of Alabama covers about 10% of what you should be doing managing an LLC. Getting a Certificate of Formation is only the first step. It's important to have a very thorough Operating Agreement, and not just something that you've pulled off the Internet. Because LLCs are governed by partnership law, whatever is in the Operating Agreement goes. Therefore, if your business partner decides to include in the operating agreement that you have no voting rights, no rights to any distributions, no rights to see the books, and that he will have complete authority to act on behalf of the company, there will probably not be a judge in the state of Alabama that will determine that that is unconscionable. This is the biggest problem with LLCs: if it is in the Operating Agreement, it is enforced. Furthermore, if you do not keep separate bank accounts, do not pay your Business Privilege Tax, or otherwise follow the requirements for operating an LLC, you may lose the protection that an LLC provides through a legal concept called piercing the corporate veil.
Below, I will walk you through the process of setting up an LLC in the state of Alabama. Let me be very clear, this is solely to set up the LLC in the state of Alabama. This is not legal advice! The document that I am providing you is a fill in the blank form provided by the state of Alabama with instructions on where to file it. I am not telling you how to fill out the form, or even giving any recommendations on how you should fill out the form. I'm simply educating you on the process.
You might be asking yourself, "Why is an attorney giving away free legal advice?" (Again, let me reemphasize that this is not legal advice!) I think it's important for me to communicate to you why this is important. Frankly, a lot of my time is spent drafting thorough Operating Agreements to ensure that future partnership disputes between founders and other owners do not turn into full-blown litigation. Another significant side of my practice is cleaning up disputes that arose because people did not thoroughly think through or act appropriately in managing their legal entities. Therefore, my time is better spent working on deeper issues than simply filling out a form and filing it with the state of Alabama. For many of you reading this, it is probably enough to file a simple LLC with the state, get some basic protections, and hope and pray you don't face bigger problems in the future. If that's the case, I hope that you will keep my contact information on hand.
Another reason that I'm providing this information is that I believe some other legal service alternatives are providing a disservice to their customers. Companies such as LegalZoom and Rocket Lawyer claim to be able to set up these legal entities for greatly reduced costs. However, these companies are legally prevented from providing legal advice. That means that they have absolutely no responsibility to help you understand what you're completing or what the terms mean. As well, because they cannot provide legal advice, they usually provide standardized forms that address few of the issues that companies actually face. Therefore, you might have a "properly formed LLC" that actually protects you in no way whatsoever. In many instances, all these companies do is provide forms that many states already have available and mark them up to the tune of hundreds of dollars. In essence, you are often paying for convenience and a false sense of security. I think you deserve better than that.
Who Should Not Use This Form
If you have not already read my disclaimer, let me be very specific in the instances that you should not use this form below to set up an LLC:
- you are in business with anybody else who will be the lending money to your company or who will have an ownership stake in your company
- you ever intend to employ anyone other than yourself
- you ever plan to bring on a partner in the future
- you operate in a high risk industry in which legal liability can be a problem
- you plan to rent space and expect to meet clients at your office or retail location
- you have already incurred some type of legal liability, such as being sued or threatened with being sued
- you have any questions about how to complete the form, or what any of the terms mean
- you are unsure what an LLC is, or what it does
- you are unsure if an LLC is right for your type of business
If you fall in to any one of these categories, you should not use the form below. Speak to an attorney before you do anything.
Give Me the Form Already!
If you do not fall into any one of the categories above, setting up an Alabama limited liability company (LLC) is a very simple process. It typically costs about $300 in filing fees to get everything set up, but that amount will vary based upon what county you are in.
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If you start to fill out the paperwork and have any questions or have any concerns about filing the LLC, what any of the terms mean, or how to properly operate an LLC, you need to contact our office or any other attorney who focuses on business law matters before proceeding. It is very easy to get into trouble operating a limited liability company if you do not understand what the requirements are. After all, an ounce of prevention is worth a pound of cure.