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Forming an LLC for Your Alabama Hair Salon: Name Reservation First, Then the Filing

The parent guide gives you the short version: reserve the name, file the Certificate of Formation for $200, and never file an annual report. This page is the long version. Alabama runs its LLC sequence in an order most states do not, with the name reservation as a mandatory first step, and then swaps the annual report other states charge for into a tax return at the Department of Revenue, the Business Privilege Tax, which is where Alabama LLCs actually get into trouble. Here is the whole sequence and the calendar that keeps it clean.

Researched from Alabama state sources. Our guides are free. We may earn a commission when you use a partner service, at no additional cost to you.

LLC, sole proprietorship, or corporation for an Alabama salon

The parent guide gives the short version of this choice. Here is the long one. A sole proprietorship is what you are by default if you open a salon in your own name and file nothing with the Secretary of State: there is no formation step, and legally there is no business separate from you, which means the salon's debts, lease obligations, and legal claims reach your personal assets. A sole proprietor still needs everything else in the parent guide, the shop license, the county privilege license, the tax accounts. Only the entity filing is skipped, and skipping it creates no shield at all.

A limited liability company creates a separate legal entity between you and the salon. Formed properly and kept separate, it holds the business's debts and claims at the business level instead of following you home. Two limits deserve plain words. The shield covers the business's obligations; it does not protect you from claims about your own work behind the chair, and it weakens if you run the salon's money through your personal accounts, which is why the bank account section below matters. An LLC is also taxed flexibly: by default its income passes through to the owners, and the entity can elect corporate taxation at the federal level if that ever fits better. That election changes which Alabama privilege tax form you file, Form CPT instead of Form PPT, not which entity you are.

A corporation is the third route: a separate entity formed with the Secretary of State, owned through stock, and run with more formal machinery, directors, officers, and records, than most single salon operations need. It earns its keep for multi location groups and outside investors. For a first salon, the LLC is the structure Alabama owners usually land on, and it is the one the rest of this page walks through. Whichever you choose, remember that the entity is separate from licensing: your board shop license and your stylists' individual licenses are still required, exactly as the Alabama hub lays out.

Step one is the name reservation, step two is the Certificate of Formation

Alabama adds a step before the formation filing that most states skip, and it is not optional. Under Section 10A-1-4.02(f), the Secretary of State requires a Certificate of Name Reservation before the formation documents are filed. Work through the sequence in order:

1. Reserve the name first. Check the name against the Secretary of State's records, then file the Certificate of Name Reservation: $25, or $28 requested online. The name itself must contain the words Limited Liability Company or the abbreviation L.L.C. or LLC, and comply with Section 10A-1-5.06. Until the reservation issues, the formation filing cannot go in.
2. Name one registered agent. The formation form names a single registered agent, with a registered office at a street address in Alabama. A post office box does not qualify. The agent's county matters more in Alabama than elsewhere: of your $200 formation fee, the Secretary of State pays $100 to the county treasurer of the county where the registered agent's office sits, which is why the form asks for the county by name.
3. File the Certificate of Formation and pay the $200 fee. The filing is made under Section 10A-5A-2.01 with the Secretary of State, as the original and one copy by mail, or online. A copy of your Name Reservation Certificate must be attached. The organizer certifies the LLC has at least one member. Filing takes effect on the date the Secretary of State receives it, or on a delayed date you specify within the window the form allows.
4. Keep the filing confirmation. Your bank, your landlord, your board shop application, and your payment processor will all ask for proof the LLC exists. Save the stamped confirmation with your lease and licenses.

Two Alabama features then work in your favor. There is no general state business license to buy beyond the board's licenses and the county privilege license in the parent guide. And the Alabama LLC files no annual report with the Secretary of State, which removes the chore, and the administrative dissolution trap, that most other states attach to it. Your recurring state obligation is a tax return instead, covered in the taxes section below. If the day comes to close or undo the entity, that is also a Secretary of State filing: Articles of Dissolution to dissolve, and, for an owner who dissolved and changed their mind, a Certificate of Reinstatement under Sections 10A-5A-7.07 and 10A-5A-7.08, filed with the Secretary of State with a $100 processing fee.

Assumed names in Alabama: no DBA filing exists

Owners arriving from other states go looking for the DBA filing, and in Alabama there is not one to find. No statute requires a sole proprietor or an LLC trading under a different name to file an assumed name certificate anywhere, with the Secretary of State or with the county, whatever older checklists say about a probate court fictitious name form. Your operating name is carried by the records that do exist: the shop license application, the county privilege license, your Department of Revenue accounts, and your lease, and those records should all tell the same story. A mismatch among them is a small thing that stalls bigger things, including the loans on our Alabama business loans page.

What Alabama does run is a marks registry. The Secretary of State's Trademarks Division administers trademark, service mark and trade name registrations under Title 8 Chapter 12. Registering a trade name costs $30 with an application and three specimens showing the name in use, the registration runs five years, and renewal is another $30 with one specimen. Read it for what it is: a brand record that identifies your business to the state, useful against a copycat across town, and not a license, a permission, or a substitute for any filing in this guide. It also works only for a name already in use, because the specimens are the proof. If your storefront name is exactly your LLC's legal name, you may never need either conversation; if it is not, the trade name registration is the only name filing Alabama offers you, and it is optional.

Your EIN from the IRS

Your EIN is the business's federal tax ID, issued by the IRS. You need one to hire employees, to file business taxes, and in practice to open the business bank account, because most banks require it even for a single member LLC. It is free. Apply directly through the IRS and ignore any website that offers to obtain one for a fee; those sites charge for a form the government gives away. Alabama keys its registrations to the federal number: the Department of Revenue opens your sales tax and Business Privilege Tax accounts against it, the Department of Labor builds your unemployment account on it, and the county probate office records it on the privilege license. After you register with the Secretary of State, expect the Department of Revenue's Online Filing Info letter within about four to six weeks, carrying the account number and codes you use to register for My Alabama Taxes.

Alabama tax accounts: Business Privilege Tax, sales tax, and withholding

The signature account is the Business Privilege Tax, Alabama's entity level tax on the privilege of being organized under Alabama law or doing business in the state, levied under Section 40-14A-22 and computed on the entity's net worth. The Department of Revenue draws the rate from a rate schedule keyed to the entity's federal taxable income apportioned to Alabama, applied to that net worth. The calendar has two entries. The initial return, Form BPT-IN, is due within two and a half months after the entity organizes, and the Department allows no extension of time to file it. Annual returns follow the federal calendar, Form PPT for a pass through LLC (an LLC taxed as a corporation files Form CPT instead), and a six month extension to file is automatic although it does not extend the time to pay.

Act 2022-252 then relieves most small salons of the paperwork: for tax years beginning after December 31, 2023, an entity whose calculated tax comes to $100 or less is exempt from filing the return, and for tax years beginning on or after January 1, 2024, an entity that would owe only the minimum tax is exempt from the tax itself. Two warnings survive the exemption. The tax remains due every registered year until the entity is legally dissolved or withdrawn through the Secretary of State, regardless of whether the salon was active, so an abandoned LLC keeps accruing obligations until someone files the dissolution. And if a lender or landlord ever requires proof of standing, it comes as a Certificate of Compliance from the Department, requested online for $13.30, which the Department issues only after confirming every required return is filed and every tax paid; for an exempt year, it may first require the exemption affidavit, Form BPT-NFR.

The register accounts are simpler. The sales tax account, opened through My Alabama Taxes, exists for the retail shelf: hair services are not taxable in Alabama, while take home products are, at the 4 percent state rate plus the local taxes at your address. Buy resale inventory without tax under the account, and expect the mirror rule on your own purchases, because the back bar supplies you consume and the equipment you use are taxable purchases. The withholding account is also a Department of Revenue registration through My Alabama Taxes, and the unemployment account sits with the Department of Labor: newly liable employers pay unemployment tax at 2.70 percent on the first $8,000 of each employee's wages, with later rates experience rated on your own claims history. Alabama sets no state minimum wage, so the federal floor carries the wage file, as the parent guide's hiring section explains.

The business bank account, and keeping the separation real

Open a business bank account in the LLC's name as soon as the EIN arrives, using your formation confirmation and your EIN letter. Then run everything through it: card settlements, booth rent, payroll, product purchases, rent. The liability separation you paid $225 or $228 in state fees for is only as strong as the separation you actually keep. Money that flows back and forth between the salon and your personal account blurs the line the LLC exists to draw, and Alabama adds a practical reason of its own: the Business Privilege Tax is computed on net worth taken from your books, so a salon whose books are a blend of business and personal spending hands the Department, and any lender reading the same statements, a number nobody can defend. Pair the account with the insurance decision in our Alabama salon insurance guide, and your salon's legal and financial structure is genuinely in place rather than filed and forgotten.

Your Alabama LLC annual duties calendar

• Within two and a half months of organizing, once: Form BPT-IN, the initial Business Privilege Tax return, to the Department of Revenue. No extension exists for this one.
• Every year, on the federal schedule: Form PPT, the annual Business Privilege Tax return, unless your calculated tax is $100 or less and you are exempt from filing under Act 2022-252. The six month extension to file is automatic; the tax itself is due on the original date.
• Not on your calendar: an annual report to the Secretary of State. Alabama LLCs do not file one.
• Every year by October 31: the county privilege license renewal at the county probate office, at the Section 40-12-61 amounts for your shop, with a 15 percent penalty plus interest when late.
• By October 31 of odd numbered years: shop license renewal, $150, after its September 30 expiration. Cosmetologists renew separately, in their birth month of odd numbered years, at $100.
• On the Department of Revenue's schedule: sales tax returns and remittance for retail product sales through My Alabama Taxes, at your assigned filing frequency.
• Quarterly: unemployment wage reports to the Department of Labor, with tax on the first $8,000 of each employee's wages.
• Every five years, only if you took it: trade name registration renewal with the Secretary of State, $30 with one specimen.
• As things change: keep your registered agent and address current with the Secretary of State, and the name on your shop license, privilege license, tax accounts, and lease telling one story.

That calendar is the whole recurring burden of an Alabama salon LLC at the state level, and its shape is the state's signature: nothing annual at the Secretary of State, everything annual at the Department of Revenue and the county probate office. The expensive mistakes are the skipped BPT-IN in the first ten weeks, the privilege tax quietly accruing on an entity nobody dissolved, and the personal card swiped for salon expenses until the entity and the owner are the same pile of money again.

This page is general information researched from official Alabama and federal sources, not legal, tax, or insurance advice. Requirements, fees and forms change; verify the current rules with the agency or regulator linked above before you file, sign or spend.

Frequently asked questions

How much does it cost to form an LLC in Alabama?

The state fees are $225 by mail or $228 online. Alabama requires a Certificate of Name Reservation before you form, which costs $25, or $28 requested online, and the Certificate of Formation itself costs $200, paid to the Secretary of State. Those fees are the same whether you file yourself or pay a formation service to file for you.

Does an Alabama LLC file an annual report?

Not with the Secretary of State. Alabama LLCs file no annual report with that office. The recurring state obligation is the Business Privilege Tax return at the Department of Revenue: Form BPT-IN within two and a half months of organizing, then Form PPT each year on the federal schedule. Under Act 2022-252, an entity whose calculated tax is $100 or less is exempt from filing the return.

Why does Alabama make me reserve my LLC name before I form?

Because Section 10A-1-4.02(f) of the Code of Alabama builds the reservation into the formation sequence. The Secretary of State requires the Certificate of Name Reservation before the formation documents are filed, and a copy of the reservation certificate must be attached to the Certificate of Formation. Alabama is one of the few states that works this way, so owners arriving from other states are the ones it catches.

Do I need a DBA for my Alabama salon?

No filing exists to need. Alabama has no DBA or assumed name filing, with the Secretary of State or with the county, whatever older checklists say. What the state offers instead is an optional trade name registration with the Secretary of State's Trademarks Division: $30 with an application and three specimens showing the name in use, good for five years. It is a brand record, not a license or a permission.

What is the Alabama Business Privilege Tax?

It is Alabama's entity level tax on the privilege of being organized under Alabama law or doing business in the state, levied under Section 40-14A-22 and computed on the entity's net worth. Every LLC owes it for every year it stays registered, until the entity is legally dissolved or withdrawn, whether or not the salon was active. Most small salons calculate a tax of $100 or less and are exempt from filing under Act 2022-252.