Form a S-Corp in Alabama
Everything you need to know about forming a S-Corp in Alabama. Filing fees, requirements, timeline, and step-by-step guidance.
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How to File
Choose a Corporate Name
Select a unique name for your S-Corporation that includes a designator such as 'Corporation,' 'Incorporated,' 'Company,' or an abbreviation like 'Inc.' or 'Corp.' Conduct a name availability search through the Alabama Secretary of State's online portal to confirm the name is not already in use.
30 minutes
Appoint a Registered Agent
Designate a registered agent with a physical street address in Alabama who is authorized to receive legal documents and official correspondence on behalf of the corporation. The registered agent can be an individual Alabama resident or a business entity authorized to operate in Alabama.
1-2 hours
File Articles of Incorporation
Prepare and file the Articles of Incorporation with the Alabama Secretary of State, including the corporate name, registered agent information, number of authorized shares, incorporator details, and principal office address. Submit the filing online via the Alabama Secretary of State's SOS Online portal or by mail with the $200 filing fee.
1-2 hours
Elect S-Corporation Status with the IRS
File IRS Form 2553 (Election by a Small Business Corporation) to elect S-Corporation tax status. This form must be filed no later than 2 months and 15 days after the beginning of the tax year in which the election is to take effect, and all shareholders must sign and consent to the election.
1-2 hours
What's Next After Filing
Once your S-Corp is officially formed, you'll want to complete these important steps:
- •Obtain an EIN and Open a Bank Account — Apply for a federal Employer Identification Number (EIN) through the IRS website at no cost, which is required for tax filings, hiring employees, and opening a business bank account. Use the EIN to open a dedicated corporate bank account to maintain separation between personal and business finances.
- •Create Corporate Bylaws and Hold an Organizational Meeting — Draft corporate bylaws that outline governance procedures, officer roles, shareholder rights, and meeting protocols, then hold an initial organizational meeting of the board of directors to formally adopt the bylaws, appoint officers, and issue stock. Alabama does not legally require bylaws to be filed with the state, but they are essential for internal governance.
- •Register for Alabama State Taxes and Obtain Licenses — Register with the Alabama Department of Revenue for applicable state taxes including sales tax, payroll/withholding tax, and the Business Privilege Tax by filing through My Alabama Taxes (MAT). Additionally, obtain any required local business licenses through the relevant county or municipal licensing offices.
Advantages
- ✓Pass-through taxation avoids double taxation, as profits and losses flow directly to shareholders' personal tax returns, bypassing corporate-level federal income tax.
- ✓Shareholders who are active in the business can save on self-employment taxes by splitting income between a reasonable salary and S-Corp distributions, which are not subject to FICA taxes.
- ✓Provides limited liability protection, shielding shareholders' personal assets from the corporation's debts and legal liabilities.
- ✓Enhanced credibility and perceived legitimacy with customers, vendors, and investors compared to sole proprietorships or partnerships.
Considerations
- •Strict IRS eligibility restrictions limit S-Corporations to a maximum of 100 shareholders, require all shareholders to be U.S. citizens or permanent residents, and allow only one class of stock.
- •More administrative burden than an LLC, including requirements to hold and document annual meetings, maintain minutes, observe corporate formalities, and issue stock certificates.
- •Alabama imposes the Business Privilege Tax and annual report fees, adding ongoing compliance costs even when the business has minimal revenue.
Annual Obligations
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