Alabama: what each business structure costs a year
At $100,000 profit, an LLC taxed as an S corp costs $4,944 a year less than a sole proprietorship in Alabama. All figures are 2026 tax and fees.
$4,944 a year
less as an LLC taxed as an S corp than as a sole proprietorship in Alabama, at these numbers. That includes the state's pass-through entity tax election.
Alabama, 2026: $100,000 profit, single filer
| Structure | Yearly cost | vs yours | To set up | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Sole proprietorship yours | $26,747 | $0 | |||||||||||||||
Itemized: $26,747
| |||||||||||||||||
| Single-member LLC | $26,747 | +$0 | $200 | ||||||||||||||
Itemized: $26,747
| |||||||||||||||||
| LLC taxed as an S corp lowest | $21,803 | −$4,944 | $200 | ||||||||||||||
Itemized: $21,803
| |||||||||||||||||
| S corporation | $21,803 | −$4,944 | $200 | ||||||||||||||
Itemized: $21,803
| |||||||||||||||||
| C corporation | $31,270 | +$4,523 | $200 | ||||||||||||||
Itemized: $31,270
| |||||||||||||||||
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What these figures count
- State income tax, and state taxes on the business itself: franchise, LLC, S corp, gross receipts and excise taxes.
- Social Security and Medicare on both sides of an owner salary, federal unemployment tax and the state's new-employer rate.
- The 20% qualified business income deduction with its income limits and the professional-service rule.
- Yearly report fees, and a cost you can change for payroll and the business tax return.
Many S corp calculators leave out state taxes and the QBI deduction, which can make the election look better than it is.
When an S corp election pays in Alabama
Electing S corp tax treatment for an LLC starts to pay in Alabama at about $50,000 of profit, with the default salary and $1,800 a year for payroll and the extra tax return.
An S corp in Alabama can elect to pay the state's income tax itself, a pass-through entity tax of 5%, and the owner gets a credit for it. The company deducts it on the federal return, so it is not held to the SALT cap. The calculator uses it when it lowers the totalrevenue.alabama.gov.
| Profit | Sole prop | LLC | LLC as S corp | C corp |
|---|---|---|---|---|
| $30,000 | $6,310 | $6,310 | $7,720 | $8,223 |
| $50,000 | $11,790 | $11,790 | $11,512 | $14,111 |
| $75,000 | $18,715 | $18,715 | $15,042 | $21,568 |
| $100,000 | $26,747 | $26,747 | $21,803 | $31,270 |
| $150,000 | $44,312 | $44,410 | $36,478 | $52,377 |
| $200,000 | $62,459 | $62,606 | $52,041 | $72,731 |
| $300,000 | $106,087 | $106,181 | $85,458 | $114,665 |
Single filer, no other income, revenue taken as 1.5 times profit, default salary. The lowest cost in each row is marked.
State fees and taxes in Alabama
| LLC | Corporation | ||
|---|---|---|---|
| Filing to form | $200Certificate of Formation (Domestic LLC) | $200Certificate of Formation (Domestic Corporation) | sos.alabama.gov |
| Yearly report | No yearly report fee | No yearly report fee | revenue.alabama.gov |
| Report due | none | none | |
| Alabama Business Privilege Tax0.1% of net income, none up to $100,000 | yes | yes | revenue.alabama.gov |
- Alabama taxes personal income in 3 brackets, from 2% to 5% (2025, single filer). revenue.alabama.gov
- C corporations pay 6.5% of net income. revenue.alabama.gov
- Alabama follows the federal S corp election.
- New employers pay state unemployment tax of 2.7% on the first $8,000 of each employee's wages. That applies to an owner's salary from an S or C corp. workforce.alabama.gov
- A name reservation is required before filing and has its own small fee, not included. LLCs pay the Business Privilege Tax instead of an annual report. Paying by card adds a convenience fee of 3% plus $2 (about $8).
- The Secretary of State says corporations are no longer required by law to file an annual report. For 2024 the report was a separate $10 filing with the Secretary of State, and before that it was folded into the Business Privilege Tax return. A name reservation is required before formation. Paying by card adds a convenience fee of 3% plus $2 (about $8).
Not in the calculator: Several cities levy an occupational tax on wages and self-employment earnings (Birmingham 1%, Bessemer, Gadsden, Opelika, and Jefferson County areas among others). Cities and counties also require their own business licenses, priced by local schedules.
Switching calculators for Alabama
- Sole proprietorship vs LLC
- LLC vs S corp
- Sole proprietorship vs S corp
- S corp vs C corp
- LLC vs C corp
- Sole proprietorship vs C corp
- LLC taxed as S corp vs S corporation
- What an LLC costs in Alabama
- Take-home pay in Alabama
- Quarterly estimated tax in Alabama
By profession in Alabama
- Management consultant
- Software developer
- Graphic designer
- Photographer
- Real estate agent
- Insurance agent
- Financial advisor
- Therapist
- Physical therapist
- Nurse practitioner
- Physician
- Dentist
- Lawyer
- Accountant
- Freelance writer
- Web developer
- Marketing consultant
- Electrician
- Plumber
- General contractor
- Truck driver
- Hair stylist
- Personal trainer
- Rideshare driver
Questions
Is an S corp worth it in Alabama?
On these figures, from about $50,000 of profit. At $100,000 an LLC taxed as an S corp costs $21,803 a year against $26,747 for a plain LLC, $4,944 less. The saving comes from paying Social Security and Medicare tax on a salary instead of on all profit.
How much does an LLC cost per year in Alabama?
The state charges no yearly report fee. LLCs can also owe Alabama Business Privilege Tax. Forming one costs $200.
Does Alabama recognise the S corp election?
Yes. The federal election carries over with no separate state form. Alabama follows the federal S election. S corps file Form 20S and can elect to pay an entity level tax (Electing Pass-Through Entity), not modelled.
What income tax does Alabama charge?
Alabama taxes personal income in 3 brackets, from 2% to 5% (2025, single filer). C corporations pay 6.5% of net income.
Sources checked 2026-10-20. Each figure links to the state or IRS page it comes from.
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