Alabama Business Privilege Tax for LLCs (2026): The $100 Exemption Explained
Most guides still tell Alabama LLC owners they owe a $50 minimum Business Privilege Tax every year. Since tax years beginning in 2024 that is no longer true for most small LLCs: if the computed tax is $100 or less, it is fully exempt and no return is filed. Here is how to tell which side of that line you are on.
The short answer
For taxable years beginning after December 31, 2023, Alabama law grants a full exemption from the Business Privilege Tax when the tax due is $100 or less, and entities that qualify are not required to file the return. The change comes from Act 2022-252. Source: Alabama Department of Revenue.
What the Business Privilege Tax is
Alabama does not have an annual report for LLCs at the Secretary of State. What it has instead is a tax on the privilege of being organised in or doing business in Alabama, administered by the Department of Revenue. It is computed on the entity's Alabama taxable net worth, not on revenue or profit, which is why an LLC with no sales could historically still owe something.
| Element | How it works |
|---|---|
| Base | Taxable net worth apportioned to Alabama |
| Rate | From $0.25 to $1.75 per $1,000 of Alabama taxable net worth; the rate rises with the entity's federal taxable income |
| Maximum | $15,000 for most entities |
| Old minimum | $100, reduced to $50 for tax years after 2022 |
| Exemption | Tax due of $100 or less is fully exempt for tax years beginning after December 31, 2023, and no return is required |
Because anything at or below $100 is now exempt, the $50 minimum you still see quoted has effectively stopped mattering. An LLC either owes more than $100 or owes nothing.
Who is likely exempt
The exemption turns on the computed tax, so the useful question is how much Alabama net worth it takes to go above $100:
| Rate that applies to you | Alabama net worth where tax reaches $100 |
|---|---|
| $0.25 per $1,000 (lowest) | About $400,000 |
| $1.00 per $1,000 | $100,000 |
| $1.75 per $1,000 (highest) | About $57,000 |
A freelancer, consultant or new online business with modest equity in the LLC is usually well below every one of those figures, and therefore exempt. An LLC holding Alabama real estate, inventory or significant retained earnings is the case to check carefully. The rate bracket and the apportionment rules are in the Form PPT instructions; if you are anywhere near the line, have an Alabama CPA run the numbers.
Which forms, when
| Form | Who files | When |
|---|---|---|
| BPT-IN, initial privilege tax return | A new LLC whose computed tax is above $100 | Within two and a half months after formation or starting business in Alabama. There is no extension. |
| PPT, annual return | LLCs taxed as partnerships or disregarded, if the tax is above $100 | Same due date as the corresponding federal income tax return; an automatic extension follows the federal one, but it does not extend the time to pay |
| CPT, annual return | LLCs that elected to be taxed as a corporation, if the tax is above $100 | Same due date as the federal corporate return |
Returns and payments go through the Department of Revenue's My Alabama Taxes portal. For a multi-member LLC taxed as a partnership, the federal return date for a calendar year is March 15. For a single-member LLC, check with your preparer which federal due date the department applies to your return.
What this does not change
- You still form the LLC with the Alabama Secretary of State for $200, and Alabama still requires a name reservation before filing.
- You still need a registered agent with an Alabama street address for as long as the LLC exists.
- Income tax is separate. A pass-through LLC's profit is still reported on the owners' Alabama income tax returns.
- If the LLC grows, re-check each year. The exemption is based on the computed tax for that year, not a one-time status.
Mistakes we see
- Paying $50 every year out of habit, because an older guide or a formation service reminder said so.
- Assuming "no revenue" means exempt. The tax is based on net worth, so an LLC that owns property can owe it with no sales at all.
- Missing the BPT-IN window on a larger LLC. There is no extension, and the clock starts at formation.
- Treating the exemption as permanent. It is recalculated every year.
For the formation steps and costs, see our Alabama LLC guide.
Frequently asked questions
Do Alabama LLCs still pay a $50 minimum Business Privilege Tax?
Not if the computed tax is $100 or less. For taxable years beginning after December 31, 2023, Alabama fully exempts Business Privilege Tax of $100 or less, and exempt entities do not file the return. Since the $50 minimum sits below that line, most small LLCs now owe nothing.
Does an exempt Alabama LLC need to file anything?
The Department of Revenue states that entities qualifying for the $100-or-less exemption are not required to file the Business Privilege Tax return. The LLC still has to keep its registered agent current with the Secretary of State.
How is the Alabama Business Privilege Tax calculated?
It is based on the LLC's taxable net worth in Alabama, at a rate from $0.25 to $1.75 per $1,000 that rises with federal taxable income, up to a $15,000 maximum. At the lowest rate the tax reaches $100 at about $400,000 of Alabama net worth.
Sources
Related: How to Start an LLC in Alabama
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Checked against the official sources listed above in September 2026. Rules and fees change; confirm with the agency before acting. General information only, not legal or tax advice.