One of the requirements for maintaining an LLC in Alabama is filing an Annual Report and paying the Alabama Business Privilege Tax each year. The Annual Report is used to confirm and update the company’s information with the Alabama Secretary of State, such as the name and address of the registered agent, principal office address, and information of the members or managers of the LLC. The Business Privilege Tax is a tax for the “privilege” of doing business in Alabama, which is called a franchise tax in some states.
Related: How To Form An LLC In Alabama
Who must file the Alabama Business Privilege Tax and Annual Report?
All Alabama corporations, LLCs, and LLPs must file an Annual Report and Business Privilege Tax each year. The Annual Report differs from the Initial Business Privilege Tax Return (Form BPT-IN), which is due 2.5 months after the entity is formed.
What is Needed to File an Alabama Business Privilege Tax Return and Annual Report
The Business Privilege Tax Return and Annual Report are filed using Form PPT (for Pass-Through Entities such as sole proprietorships, partnerships, S-Corporations, and LLCs taxed as a pass-through entity) or Form CPT for C-Corporations or LLCs taxed as a C-Corporation. Be sure to find the correct PPT form, as different entities must use a different PPT form.
Forms are available from the Alabama Department of Revenue My Alabama Taxes Website.
In addition to filling out the form, there are several additional attachments to include, such as:
- Copy of your federal tax return
- Copy of the balance sheet used to compute the taxpayer’s net worth, if not provided with a copy of the federal tax return
- If no federal return is included, a balance sheet and income statement are required
- Documentation to support an exclusion or deduction in the computation of the taxpayer’s net worth, if one is being made
The Tax Return and Annual Report are sent to the Department of Revenue
If sending a return without a payment, send it to:
Alabama Department of Revenue
Business Privilege Tax Section
PO Box 327431
Montgomery, AL 36132-7431
Returns with payment will be sent along with Form BPT-V and payment to:
Alabama Department of Revenue
Business Privilege Tax Section
P.O. Box 327320
Montgomery, AL 36132-7320
How Much Does The Business Privilege Tax Cost?
The Business Privilege Tax is calculated by multiplying the taxpayer’s net worth in Alabama (assets minus liabilities) by the corresponding tax rate. The minimum tax is $100. The PPT and CPT form will calculate the amount based on your figures.
Annual Report Deadline
The due date for the Alabama Business Privilege Tax Return and Annual Report is based on the entity’s federal taxable year.
LLC and LLP returns are due no later than 2.5 months after the taxpayer’s taxable year begins. For most LLCs and LLPs, this is usually March 15th.
Corporation returns are due no later than 3.5 months after the beginning of the taxable year. For most Corporations, this is usually April 15th.
Penalty for a late filing
A late filing penalty will result in a fee that equals 1% of the amount of tax due on the tax return for each month late, not exceeding 25%. The minimum late fee is $50. Not reporting and paying the tax could result in the entity losing good standing with the state of Alabama and eventually dissolving the entity. An annual notice reminder will be sent before the due date; however, it’s important to make an additional reminder for yourself should you not receive it.
