By Jake Lawson, LLC Formation Strategist
Alabama does things differently when it comes to LLC annual requirements, and I’ve seen too many business owners get confused by the state’s unique approach. Unlike most states where you file a simple annual report with the Secretary of State, Alabama combines their annual reporting with tax obligations through the Department of Revenue.
After helping over 1,200 entrepreneurs navigate state compliance requirements, I can tell you that Alabama’s system isn’t necessarily harder—it’s just different. Let me break down exactly what you need to know to keep your Alabama LLC in good standing without the headaches.
Alabama’s Unique Annual Requirements (The Quick Overview)
Here’s what makes Alabama different: instead of a simple annual report, you file tax returns that serve as both your annual report AND your state tax obligations.
What you’ll file:
- Initial Business Privilege Tax Return (Form BPT-IN) – Filed once, within 2.5 months of formation
- Annual Business Privilege Tax Return (Form PPT) – Filed every year by April 15th
Who handles it: Alabama Department of Revenue (not the Secretary of State)
Minimum cost: $50 per filing (but you might owe nothing thanks to recent changes)
Note: An Alabama LLC must have an EIN issued by the IRS prior to filing any returns with the Alabama Department of Revenue.
The Initial Business Privilege Tax Return (Your First Filing)
Form BPT-IN: The One-Time Setup
Think of this as Alabama’s way of saying “welcome to doing business here.” You file this once and never again.
Key details:
- Due: Within 2.5 months of your LLC formation date
- Minimum tax: $50 (but see the good news below)
- Form name: BPT-IN
- Where to file: Alabama Department of Revenue
Example timeline: If your LLC was approved on March 15, 2025, your Form BPT-IN is due by May 31, 2025.
What you’ll need:
- Your federal EIN (you must have this before filing)
- Your registered agent’s federal tax ID (if using a service like Northwest: 26-4375596)
- Basic LLC information
- Financial information (if any)
The Good News: You Might Owe Nothing
Here’s something that surprises most Alabama LLC owners: thanks to House Bill 391 (passed in 2022), if your calculated tax is $100 or less, you owe $0.
How this works: Alabama calculates your tax based on income and net worth. If that calculation comes to $100 or less, the state waives the entire amount.
Real-world example: Your small consulting LLC calculates to a $75 tax obligation. Under the new law, you pay $0 instead of $75.
My take: This is excellent for small businesses and shows Alabama actually cares about reducing the burden on entrepreneurs.
The Annual Business Privilege Tax Return (Ongoing Requirement)
Form PPT: Your Yearly Obligation
This is your ongoing annual requirement—think of it as your annual report and state tax filing combined into one.
Key details:
- Due: April 15th every year
- Minimum tax: $50 (with the same $100 waiver rule)
- Form name: PPT (for Pass Through Entities)
- First filing: The year after your LLC formation
Timeline example: LLC formed in July 2025 → First Form PPT due April 15, 2026
What gets attached:
- Your federal tax return
- Schedule BPT-NWI (Net Worth Information)
- Form BPT-V (Payment Voucher)
Understanding Alabama’s Tax Classification Terms
Alabama uses specific terminology that can be confusing. Here’s the translation:
“Disregarded Entity” = Single-Member LLC
If you’re the only owner of your LLC, Alabama calls it a “disregarded entity” for tax purposes. You’re still an LLC legally—this is just their tax classification.
“Limited Liability Entity” = Multi-Member LLC
If your LLC has multiple owners, Alabama classifies it as a “limited liability entity” for tax purposes.
Important: These are just tax classifications. Your LLC structure doesn’t change—only how Alabama categorizes you for filing purposes.
How the Business Privilege Tax is Calculated
The amount you owe depends on two main factors:
Factor 1: Federal Taxable Income
Alabama looks at your federal taxable income and applies their rate schedule. Higher income = higher tax (subject to the $100 waiver).
Factor 2: Net Worth
Alabama also considers your LLC’s net worth in the calculation. This includes assets minus liabilities.
Rate schedule: Available on the Alabama Department of Revenue website (rates change, so always check current schedules).
My recommendation: Unless you’re comfortable with tax calculations, hire a professional. The penalty for getting this wrong isn’t worth the savings of doing it yourself.
Required Forms and Where to Find Them
Getting the Right Forms
Alabama Department of Revenue website: revenue.alabama.gov/forms/
Forms you’ll need:
- Form BPT-IN (Initial filing only)
- Search for “BPT-IN” on the forms page
- Make sure you get the current tax year version
- Form PPT (Annual filing)
- Search for “PPT”
- Critical: Make sure it says “for Pass Through Entities” – there are different versions for different entity types
- Form BPT-V (Payment voucher)
- Search for “BPT-V”
- Used when making payments
Pro tip: Always download the most current year’s forms. Alabama updates these annually, and using old forms can cause processing delays.
Filing Methods: Paper vs. Electronic
Electronic Filing (Recommended)
Alabama offers electronic filing through their “My Alabama Taxes” (MAT) system.
Benefits:
- Faster processing
- Immediate confirmation
- Reduced errors
- Electronic payment options
How to access: Create an account at revenue.alabama.gov
Paper Filing
You can still file by mail if you prefer paper forms.
Mailing address: Check the current forms for the correct address (changes periodically)
Payment methods: Check or money order (cash not accepted)
Common Filing Mistakes to Avoid
After working with hundreds of Alabama LLCs, here are the mistakes I see repeatedly:
Mistake 1: Missing the 2.5-Month Deadline
The problem: New LLC owners don’t realize the Initial Business Privilege Tax is due so quickly after formation.
The solution: Set a calendar reminder immediately after your LLC is approved.
Mistake 2: Using the Wrong Form PPT
The problem: Using the corporate version instead of the “Pass Through Entities” version.
The solution: Double-check that your Form PPT specifically says “for Pass Through Entities.”
Mistake 3: Filing with the Secretary of State
The problem: Assuming this works like other states and trying to file with the Secretary of State.
The solution: Remember—Alabama annual reports go to the Department of Revenue, not the Secretary of State.
Mistake 4: Not Having an EIN
The problem: Trying to file without a federal EIN number.
The solution: Get your EIN from the IRS first (free at irs.gov). You cannot file Alabama returns without it.
Additional Alabama Tax Obligations
The Business Privilege Tax isn’t your only potential Alabama tax obligation:
Sales and Use Tax
If you sell products or certain services, you’ll need to register for and collect Alabama sales tax.
Employment Taxes
If you have employees, you’ll need to handle payroll taxes, unemployment insurance, and workers’ compensation.
Local Taxes
Some Alabama municipalities have their own business taxes or licensing requirements.
Income Tax
Your LLC’s income flows through to your personal tax return, where you’ll owe Alabama income tax on the profits.
Foreign LLCs: Special Considerations
If your LLC was formed in another state but does business in Alabama, you’re considered a “foreign LLC” and have additional requirements:
Must register: File as a foreign LLC with the Alabama Secretary of State
Tax obligations: Still subject to Alabama Business Privilege Tax
Annual reports: Must file both in your formation state and Alabama
Common scenario: Texas LLC buys rental property in Alabama = must register as foreign LLC and file Alabama tax returns.
Getting Professional Help
Given the complexity of Alabama’s requirements, here’s when I strongly recommend hiring help:
Always Hire an Accountant If:
- Your LLC has significant income or complex finances
- You have multiple owners with different ownership percentages
- You operate in multiple states
- You’re not comfortable with tax calculations
- You have employees
You Might Handle It Yourself If:
- You’re a single-member LLC with simple finances
- Your income is well under $100 (you’ll likely owe nothing)
- You’re comfortable with tax forms
Finding help: Look for accountants experienced with Alabama LLC taxation specifically. Not all tax professionals understand the state’s unique requirements.
Penalties for Non-Compliance
Alabama takes these requirements seriously. Here’s what happens if you don’t comply:
Late Filing Penalties
- Interest and penalties on unpaid taxes
- Potential revocation of your LLC’s good standing
- Loss of liability protection
Long-Term Consequences
- Administrative dissolution of your LLC
- Loss of your business name
- Personal liability for business debts
Bottom line: The cost of compliance is much less than the cost of non-compliance.
Staying Organized: My System
Here’s the system I recommend to my clients for staying on top of Alabama requirements:
Calendar Reminders
- Set reminder 1 month before Initial BPT due date
- Annual reminder for April 15th PPT filing
- Quarterly reminders to organize financial records
Document Organization
- Keep all Alabama tax filings in a dedicated folder
- Maintain copies of federal returns (needed for Alabama filings)
- Track business income and expenses throughout the year
Professional Relationships
- Establish relationship with Alabama-experienced accountant
- Keep registered agent service current
- Maintain accurate contact information with the state
Alabama Department of Revenue Contact Information
When you need official answers about Alabama tax requirements:
Business Privilege Tax Line: (334) 242-1170, option 8
General number: (334) 242-1170
Website: revenue.alabama.gov
Email contact: Through their website contact form
Best times to call: Mid-morning, mid-week (avoid Monday mornings and Friday afternoons)
Frequently Asked Questions
Do I need an accountant for a simple LLC?
It depends on your comfort level with tax forms and the complexity of your finances. Simple single-member LLCs might be manageable DIY, but multi-member LLCs usually benefit from professional help.
What if I don’t make any money in my first year?
You still need to file the required forms, but you likely won’t owe any tax beyond the minimum (which might be waived under the $100 rule).
Can I file my Alabama returns at the same time as my federal taxes?
The timing works out well—both are due April 15th. However, you’ll need your completed federal return to file your Alabama return.
What happens if I miss the 2.5-month deadline for the initial filing?
Contact the Alabama Department of Revenue immediately. There will likely be penalties, but addressing it quickly minimizes the damage.
Do I need to file if my LLC never started operating?
Yes, once your LLC is formed, you’re subject to Alabama’s filing requirements regardless of business activity.
Can I cancel my Alabama LLC to avoid these taxes?
You can dissolve your LLC, but you’ll still owe any outstanding tax obligations through the dissolution date.
The Bottom Line on Alabama LLC Compliance
Alabama’s annual requirements are different from most states, but they’re not impossible to handle once you understand the system. The key is recognizing that your “annual report” is actually a tax return filed with the Department of Revenue, not a simple form filed with the Secretary of State.
Key takeaways:
- Two different filings: initial (one-time) and annual (ongoing)
- Both go to the Department of Revenue, not Secretary of State
- You might owe nothing thanks to the $100 waiver rule
- Get professional help if your situation is complex
- Never skip filings—penalties are severe
My final advice: Set up your compliance system from day one. Mark the deadlines in your calendar, organize your financial records, and establish a relationship with an Alabama-experienced accountant. The small upfront investment in organization will save you massive headaches later.
Need help choosing the right formation service for your Alabama LLC? I’ve reviewed all the major providers and can help you avoid the companies that overpromise and underdeliver. Check out my detailed service comparisons to find the best fit for your needs.
This guide is for informational purposes only and doesn’t constitute tax or legal advice. Alabama tax laws can be complex and change over time. Consult with a qualified Alabama tax professional for guidance specific to your situation.
About Jake Lawson: With over 15 years of experience in LLC formation and state compliance, Jake has helped more than 1,200 entrepreneurs navigate complex state requirements. He believes in breaking down complicated regulations into actionable steps that save business owners time and avoid costly mistakes.