How to Start a Business in Alabama Checklist
A detailed list to keep you on track while you launch your Alabama business.Download Now
How to Start a Business in Alabama:
Alabama offers four main ways to form a business. Aside from sole proprietorships, all business structures must be registered with the state. Every business in Alabama must register with the Alabama Department of Revenue and obtain a privilege license to operate in the state. Depending on your profession, you may also need an occupation license.
Form your business.
Review Alabama formation options.
Alabama offers four basic ways of forming your business. Review these closely and pick the one that fits your business best.
Name your business.
Before you can reserve a business name, you need to verify that your name is available and not currently being used by another business. All business entities in Alabama are required to reserve their business name before registering their business with the state.
Visit the Alabama Secretary of State website and perform a business entity search to find out if your name is available.
To register by mail, download the Name Reservation Request Form.
Read the instructions carefully and take note of the name requirements for each business structure.
Complete the form on your computer as the information on the application must be typed and not handwritten.
Print the completed form and sign it.
Mail the completed form along with the $25.00 processing fee to the address indicated in the instructions on the form.
To register online, visit the Alabama SOS online services.
Unless you are an Alabama Interactive subscriber, select "Non-Subscriber."
Enter your contact information and click "Continue."
Enter your chosen business name under the "New Name Reservation" section and click "Continue."
Follow the prompts and complete the online application.
Review the summary of your application and ensure that all the information you entered is correct.
Pay the $28.00 processing fee.
Download your "Name Reservation Approval" on the "Download Page." You will also receive an email with the download link.
If you need help finding a business name, be sure to check out NameSnack's free business name generator.
In Alabama, a business entity must be registered before a trade name can be registered by filing an Application to Register/Renew Trademark, Service Mark or Trade Name.
Get an employer identification number.
Nearly all businesses will need to register for federal taxes by applying for an employer identification number.
Register your business in Alabama.
Except for sole proprietorships, all business structures must be registered with the state. This can be done by mail or through the Alabama Interactive portal.
To register by mail, visit the Alabama SOS website and download the appropriate form.
Complete the form on your computer as these may not be filled out by hand and must be typed.
Print and sign the application form.
Mail the signed original with the required number of copies as well as a copy of your Name Reservation certificate and the applicable filing fee to the Office of the Judge of Probate in the county where the business's registered office is located. If you are registering a general or limited liability partnership, the forms must be filed directly with the Alabama Secretary of State.
To register electronically, visit the Alabama SOS Interactive portal.
Enter your contact details and select "Continue."
Enter the reservation ID number of your existing business name reservation and click "Continue."
Follow the prompts and complete the online application.
Review the summary of your application to make sure all the information you entered is correct.
Pay the applicable filing fee.
Obtain necessary permits and licenses.
To operate in Alabama, you will need a privilege license from the state, issued by the Probate Judge or License Commissioner in the county where your business is located. One business may need different types of business privilege licenses depending on its services and products.
To operate a restaurant in Alabama, for example, you will require a restaurant license, beverage license, and a store license. A business requires a license in every county in which it conducts business.
You might need an occupation license. Alabama licenses 151 occupations. You will need to apply to the regulatory boards of these professions to receive a license.
Check with every city office where you conduct business to find out what licenses you need and how to apply. You can find the contact information for each municipality on the Alabama League of Municipalities online municipal directory.
You can find a list of the regulatory boards and agencies that regulate licensing of occupations on the Alabama Department of Revenue website.
Licenses must be renewed annually.
Register your business for taxes.
Register with the Alabama Department of Revenue.
To stay tax compliant, you must register your company with the Alabama Department of Revenue (ADOR) through its My Alabama Tax (MAT) portal. This will allow you to conduct tax-related transactions online.
Information need to register with the ADOR:
- Company's legal name.
- Address of the location.
- Contact information.
- Officer/owner information.
- Federal Employer Identification Number.
- Date of organization or qualification.
- NAICS Code.
- Entity subtype.
- Commence date.
Visit the MAT login page.
Select an account type and enter the required information in the fields provided. Click "Next."
Create a user name and password, select a secret question, and enter your answer in the field provided.
Enter your contact information.
Next, you can select whether you want third parties, such as your accountant, to be able to access your account on MAT. If you do, create a password for third-party users.
Click "Submit Registration."
A confirmation message will be displayed on the screen which you can print. To close the window, click "OK."
Register for sales and use tax.
If you have a retail business in Alabama, you must register for a sales tax license with the Alabama Department of Revenue (ADOR).
Visit MAT and click "Obtain a New Tax Account Number" under the heading "Quick links for businesses."
Enter the required information as prompted and click "Next."
Select the tax types you want to register and click "Next."
Enter the required business/ownership information and click "Next."
Add additional addresses, if applicable, and click "Next."
Provide the required account information and click "Next."
Review the summary of your application to check that all the information is correct, then click "Submit."
Provide your email address and select "Yes" to submit the application.
Next, you will see a confirmation message which you can print.
Register for rental or leasing tax.
If your business leases or rents tangible personal property, you must register for leasing tax. This tax is only due on "true" leases whereby the leased property remains the ownership of the lessor at the end of the lease agreement.
To register for leasing tax, add a new tax account number as outlined in the directions above.
Register for withholding tax.
If your business has employees, you will need to register for state withholding tax. With a few exceptions, all wages earned in Alabama are subject to withholding tax. Exemptions from withholding tax include merchant seaman, agricultural employees, domestic employees, and duly ordained ministers.
To register for withholding tax, add a new tax account number as outlined in the directions above.
Report employees to the state and get mandatory insurance.
Report new hires.
All employees must be registered with the Alabama Department of Labor New-Hire Unit within seven days of employment.
Information needed to report new hires:
- Employee's name.
- Social security number.
- Date of employment.
- Employer's Federal Employer Identification Number.
- Employer's name.
- Employer's address.
If you have more than five employees you must register online.
If you have less than five employees, you can register them online or by sending a completed W-4 form to the New Hire unit through the mail.
Visit the Alabama New-Hire Registration page on the Alabama Department of Labor website.
Enter the required information and submit the registration.
Next, log in on the Alabama New-Hire Electronic Filing System.
Enter the required information to report your new hire(s).
Submit the report.
Obtain mandatory insurance.
In Alabama, businesses with more than five employees are required by law to carry Workers' Compensation Insurance.
Display mandatory posters.
Employers must display certain posters, including Alabama Child Labor Law, Worker's Compensation Notice, and Your Job Insurance posters in the place of business where employees can clearly see them. Posters can be downloaded from the Alabama Department of Labor website.
Alabama Business Types:
1. Sole proprietorship.
A sole proprietorship is a very simple, unincorporated business structure. It is the easiest and cheapest way to form a business and does not have to be registered with the state. All businesses, including sole proprietorships, must obtain a privilege license that must be renewed annually and register with the Alabama Department of Revenue.
The one major disadvantage of forming a sole proprietorship is that no distinction is made between the owner and the business. This means that the owner is fully liable for any debts and losses incurred by the business. Aside from being uncomplicated and inexpensive to form, another advantage of the sole proprietorship is that the owner has complete control of the business and has sole ownership of profits.
A business formed as a partnership is an association of or contract between two or more individuals to operate a business as co-owners. There are two main types of Alabama partnerships: general partnerships and limited liability partnerships. In Alabama, both enjoy pass-through taxation.
A general partnership does not afford the partners protection from liability. A limited liability partnership, on the other hand, protects each partner from losses, debts, and obligations incurred by the other partner. Both business structures must be registered with the state.
3. Limited liability company.
An Alabama limited liability company (LLC) is a formal business structure that combines features of a partnership and corporation. It enjoys pass-through taxation like partnerships and affords the owners, referred to as members, the limited liability of a corporation. It takes between five and fourteen business days to set up an LLC in Alabama.
To form an LLC in Alabama, a Certificate of Name Reservation must be obtained before filing formation documents in the county. Any LLC in Alabama must have the words "Limited Liability Company," or the abbreviation "L.L.C.," or the letters "LLC" in its name.
A Certificate of Formation must be filed with the Office of the Probate Judge in the county in which the business's offices are located. While the state filing fee is set at $100.00, county filing fees may vary.
A corporation is the most complex way to form a business in Alabama. It is a distinct legal entity, protecting its owners, the shareholders, from liability. Another advantage is the ease with which ownership can be transferred. Drawbacks include extensive government regulations and required paperwork, as well as double taxation.
Similar to the way an LLC is registered in Alabama, corporation formation documents must be filed with the Office of the Probate Judge in the county where the corporation's office is located. A Certificate of Name Reservation must be obtained before a Corporation Certificate of Formation can be filed. While the state filing fee is set at $100.00, county filing fees may vary.
Alabama Business Filing Fees:
$25.00 (+ $3.00 for online applications)
Certificate of Existence
$25.00 (+ $3.00 for online applications)
Certificate of Formation (all domestic entities)
$100.00 + $50.00 (minimum Probate Judge fee)
Filings for Domestic For-Profit Corporation