How To Start A Business in Alabama

Choose legal structure:

sole proprietarship
no liability protection
must pay fedral self-employment tax (currently 15.3%)

LLP - limited liability partnership
provides little liability protection

LLC - limited liability corporation
provides liability protection
pass through tax entity (avoids corporate taxation)
earnings require payment of fedral self-employment tax (currently 15.3%)
must be dissolved
operational and accounting ease and flexibility compared to S-Corp.

S corp
provides liability protection
pass through tax entity (avoids corporate taxation)
earnings don't require payment of fedral self-employment tax
subject to more stringent accounting guidelines than LLC.
Limited to 35 maximum shareholders, and no foreign capitol

C corp - (most large corporations)
provides liability protection
earnings are taxed at corporate and personal levels
stringent account reqirements
required annual reports, and board of director meetings



How to create an LLC:

1) Draft and file articles of incorporation.
-lawyer is needed for complex articles
-file with county courthouse
-you can use online service.
-also might want to create operating agreement.
2) Pay Alabama business priviledge tax. (Forms PSA)
-currently you have 30 days after forming corporation
-this is paid yearly. (from dec1 to march 15 for that year)
3) File ss4 with irs to get ein (employer identification number, aka tax id)
-choose closing month for accounting.
4) Get local business license.
5) Set up business bank account.
-this allows you to easily separate business and personal finances.
-normally banks require you to have EIN and local business license.
6) Get business insurance.
-Insurance can further protect your personal assets.

**** Yearly Taxes
http://answers.google.com/answers/threadview?id=295077

The LLC must file a form 1065 with irs.
The first year it must file a Form 8832 to be taxed as partnership.
The LLC sends members K-1 forms.
File earnings on 1040, schedule C.