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Rental property LLCs in Alabama

Yes, you can hold an Alabama rental in an LLC. You reserve the name first, then file a $200 Certificate of Formation. There's no annual report for LLCs, but every LLC must deal with the business privilege tax: small ones owing $100 or less are exempt and don't file. Rental licensing is city by city, and strictest in Gulf Shores and Orange Beach. Forming the LLC doesn't move your deed, and recording the deed carries a state deed tax.

Last checked 2026-10-21. General information, not legal or tax advice.

Local rental rules come first

Gulf Shores. Every owner renting property in the city limits or police jurisdiction must apply for a business license. One exception: an owner of no more than one long-term unit, leased to a single family under a written lease of 180 days or more, is exempt for that unit. Short-term vacation rentals also owe lodging tax (gulfshoresal.gov Rental License).

Orange Beach. A vacation rental is a one- or two-family home rented for 14 consecutive days or less. Nobody may run one within the city limits without a vacation rental license. The vacation-rental article covers the RS-1, RS-2, RS-3 and MHS zones, outside the beach overlay district, and the city publishes a map of allowed areas (orangebeachal.gov; Ordinance 2018-1283; Code ch. 50, art. XI).

Mobile. Any rental under 180 consecutive days is a short-term rental and needs a city business license for each location. The license number must appear on every listing, and a local contact must answer calls 24/7 during each stay. All Mobile business licenses expire December 31. The city's page asks an LLC to upload its formation certificate "stamped/recorded by probate court" (cityofmobile.gov business license), but an Alabama LLC's Certificate of Formation is now filed with the Secretary of State (Ala. Code § 10A-5A-2.01(e)), so a new LLC won't have a probate stamp. Upload the Certificate of Formation the Secretary of State returns to you, and ask the city's license office if it wants something else (Mobile STR ordinance; cityofmobile.gov business license).

Huntsville. Short-term rentals (179 days or less) need a city business license. Short-term rentals aren't allowed in most residential zoning districts; the city treats them as motels. Confirm zoning with Zoning Administration first (huntsvilleal.gov).

Birmingham. I couldn't confirm a citywide rental registration or STR permit on the city's official site. Check with the city before you rent.

Business privilege tax, not an annual report

Every LLC organized or registered in Alabama must file an Alabama Business Privilege Tax return, every year until it's formally dissolved, whether or not it's active. LLCs and disregarded entities file Form PPT (ADOR Business Privilege Tax).

  • First year: the initial return (Form BPT-IN). A new LLC files an initial privilege-tax return, due within two and one-half months after it's organized or starts business (ADOR 2024 BPT notice; ADOR Business Privilege Tax). A rental LLC with real net worth can owe more than $100 in year one, so the $100 exemption may not apply.
  • Small LLCs are exempt. For tax years beginning after December 31, 2023, if the tax works out to $100 or less, it's fully exempt and no return is required (ADOR notice, Jan 4, 2024).
  • Due date: an LLC's return is due the 15th day of the third month of its tax year, so March 15 for a calendar-year LLC. A disregarded entity's return is due when its owner's federal return is due (ADOR due dates; ADOR FAQ).
  • No SOS annual report for LLCs. From 2024, only for-profit and professional corporations file the Secretary of State annual report, and reports from other entities aren't accepted (ADOR notice).

What the LLC protects, and what it doesn't

Alabama's LLC law says: "A member of a limited liability company is not liable, solely by reason of being a member, for a debt, obligation, or liability of the limited liability company or a series thereof, whether arising in contract, tort, or otherwise or for the acts or omissions of any other member, agent, or employee of the limited liability company or a series thereof." (Ala. Code § 10A-5A-3.01). The protection is for liability that comes solely from being a member.

  • Guarantees still bind you. A personal guarantee you sign for a lender is your own promise.
  • Your own acts are yours. A repair you make yourself, or your own negligence, isn't shielded by the LLC; ask an Alabama attorney.
  • It isn't insurance. The LLC still needs coverage that pays claims and defense costs.

One LLC, or one per property?

Separate LLCs keep one property's judgment away from the others, at $200 plus a name reservation each. Alabama allows series LLCs: the Certificate of Formation has a box for a "Series LLC complying with Title 10A, Chapter 5A, Article 11" (SOS form). Ask an Alabama attorney whether a series fits. More: Should you have a separate LLC for each rental property?. Other states: Mississippi · Arkansas · Indiana · Louisiana · Tennessee.

Form it where the property is, or register there

An LLC from another state files a Foreign LLC Application for Registration ($150, online or by mail). It must get an Alabama Certificate of Name Reservation first, and its name must end with "Limited Liability Company," "L.L.C." or "LLC." The late-filing penalty is $150 per year (SOS LLCs page; SOS fee schedule). It also has to file the business privilege tax (ADOR).

What it costs the state

  • Certificate of Formation: $200 (SOS fee schedule, Ala. Code § 10A-1-4.31; ADOR charter fee page)
  • Certificate of Name Reservation: required before filing (SOS LLCs page). $25 by paper or $28 online (SOS fee schedule; SOS Domestic Business Entities brochure; the statutory fee is $25, Ala. Code § 10A-1-4.31(a)(1)c.)
  • Paying by card: the Secretary of State adds convenience fees of "3% of the total charge plus $2.00" (SOS Domestic LLC Formation instructions)
  • Business privilege tax: $0 if $100 or less; otherwise, file Form PPT (ADOR)
  • Foreign LLC registration: $150
  • EIN: free from the IRS

Compare services: LLC services compared.

Forming the LLC, in order

  1. Reserve the name. It must include "Limited Liability Company," "L.L.C." or "LLC" (SOS).
  2. Name a registered agent.
  3. File the Certificate of Formation with the Secretary of State ($200).
  4. Write an operating agreement.
  5. Get an EIN and open the LLC's bank account.
  6. Get the city license, and register for lodging tax if you rent short-term.

Forming the LLC doesn't move your deed

Putting your rental in the LLC takes a new deed recorded with the judge of probate in the county where the property sits.

  • The deed tax is $0.50 per $500 of value. Alabama's recordation tax on deeds is $0.50 for each $500 of value or fraction of $500 (ADOR Recordation Tax, Ala. Code §§ 40-22-1 to 40-22-12).
  • Mortgaged property: only the equity is taxed. The tax applies only to "the value in excess of any mortgages or vendor’s lien upon any property within this state on which the mortgage tax has been paid" (Ala. Code § 40-22-1(c)).
  • Prove the price or value with the Real Estate Sales Validation Form. Every deed offered for record must come with "proof of the actual purchase price paid for the property or if the property has not been sold, proof of the actual value"; the Department of Revenue's form is how you attest to it (Ala. Code § 40-22-1(c); ADOR Recordation Tax). A deed putting your rental into your own LLC usually states no price, so plan on the form. Without proof, the tax is figured on the property's most recent assessed value (§ 40-22-1(d)).
  • It's paid at recording: Montgomery County's probate court charges $0.50 per $500 ($1 per $1,000) on the value conveyed, on top of document fees (Montgomery County Probate Court).

Have an Alabama attorney prepare the deed and confirm the value to report.

Check the mortgage before you transfer

Federal law lets a lender enforce a due-on-sale clause, and a transfer to an LLC isn't one of the exceptions for 1–4 unit homes (12 U.S.C. § 1701j-3(d)). Fannie Mae allows a transfer to an LLC the borrower controls for loans it acquired on or after June 1, 2016 (Fannie Mae Servicing Guide D1-4.1-02). Ask your servicer in writing.

Insurance and taxes

Tell your insurer before title moves. For federal income tax, a single-member LLC is disregarded unless it elects corporate treatment (IRS). For Alabama, see the business privilege tax above, and short-term rental lodging taxes in the beach towns.

Keeping each LLC in good standing

  • Business privilege tax return (Form PPT), unless the tax is $100 or less: a multi-member LLC by the 15th day of the third month of its tax year; a single-member (disregarded) LLC when its owner's federal return is due, April 15 for an individual owner (ADOR due dates).
  • Renew city business licenses. Mobile's expire December 31.

Before you file or transfer a property

  • Attorney: the deed, value to report, series vs. separate LLCs
  • Servicer: is the transfer allowed?
  • CPA: business privilege tax and lodging tax
  • City: business or vacation-rental license
  • Calendar: privilege tax by March 15 (multi-member, calendar year) or April 15 (single-member LLC owned by an individual); city license renewals

Form it with Corpus

Corpus reserves the name, files your Certificate of Formation, and includes the first year of registered-agent service. The Alabama page shows the current price. Corpus isn't a law firm: the deed, the loan, taxes and city licenses are separate steps.

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Sources

Last checked 2026-10-21. Corpus is not a law firm and does not provide legal or tax advice.