Starting a Business in Alabama

Alabama recognizes several business structures:

Sole Proprietorship
• Simplest structure - no formal registration required
• Owner personally liable for all business debts
• Business income reported on personal tax return
• Good for low-risk businesses and testing ideas

Limited Liability Company (LLC)
• Protects personal assets from business liabilities
• Flexible taxation (choose pass-through or corporate)
• Less paperwork than corporations
• Most popular choice for small businesses in Alabama

Corporation (C-Corp or S-Corp)
• Strongest liability protection
• C-Corp: Separate tax entity, potential double taxation
• S-Corp: Pass-through taxation with corporate protection
• Required for businesses seeking investors or going public

Partnership
• For businesses with multiple owners
• General Partnership (shared liability) or Limited Partnership
• Income passes through to partners' tax returns

We help you choose the right structure based on your goals, industry, and tax situation.

Registering your business name in Alabama depends on your structure:

For LLCs and Corporations:
• File formation documents with the Alabama Secretary of State
• Name must be unique and include proper designator (LLC, Inc., etc.)
• Filing fee: $200 for LLC, $200 for Corporation
• Process takes 3-5 business days

For Sole Proprietorships and Partnerships (Trade Name/DBA):
• File a Trade Name Certificate with your local County Probate Court
• Must include owner information and business address
• Fee varies by county (typically $10-25)
• Doesn't provide liability protection

Name Availability:
• Search the Alabama Secretary of State's database first
• Consider federal trademark search as well
• We can help ensure your name is available and properly registered

Important: Registering a business name does NOT protect it as a trademark. Consider federal trademark registration for brand protection.

License requirements vary by business type and location:

State Licenses:
• Alabama Business Privilege License - Required for most businesses
• Professional licenses (contractors, accountants, healthcare, etc.)
• Seller's permit for collecting sales tax
• Special permits for regulated industries (food service, alcohol, etc.)

Local Licenses:
• City/Municipal business license
• County occupational license
• Zoning permits for physical locations
• Home occupation permits if operating from home

Federal Licenses (if applicable):
• Alcohol, tobacco, firearms
• Transportation and logistics
• Agriculture and fishing
• Broadcasting

Steps to Get Licensed:

1. Determine your business classification
2. Contact your city/county for local requirements
3. Apply for state licenses through Alabama.gov
4. Renew annually (most licenses expire December 31)

We help identify all required licenses and assist with applications to ensure you're fully compliant.

An EIN (Employer Identification Number) is like a Social Security Number for your business. Here's how to get one:

Who Needs an EIN:
• All LLCs and Corporations
• Businesses with employees
• Businesses with bank accounts
• Businesses that file certain tax returns

How to Apply:

1. Online (Fastest) - Apply at IRS.gov, receive EIN immediately

- Available Monday-Friday, 7am-10pm Eastern
- Must have valid SSN or ITIN

2. By Mail - Complete Form SS-4, mail to IRS

- Takes 4-5 weeks

3. By Fax - Fax Form SS-4 to IRS

- Takes about 4 business days

What You Need:
• Your SSN or ITIN
• Legal name and address of business
• Type of business entity
• Reason for applying

Important Notes:
• EIN is free - never pay for one
• One EIN per business (cannot be transferred)
• You can apply with an ITIN if you don't have an SSN

We assist clients with EIN applications, especially for those with ITINs or complex business structures.

Alabama has several business taxes you need to know about:

Business Privilege Tax (BPT)
• Annual tax on the privilege of doing business in Alabama
• Rate: $0.25 per $1,000 of net worth (minimum $100)
• Due by April 15th each year
• Filed with Form PPT

State Income Tax
• Corporate rate: 6.5% flat rate
• Pass-through entities (LLC, S-Corp): Taxed at individual rates (2%-5%)
• Due April 15th (or 15th of 4th month after fiscal year end)

Sales Tax
• State rate: 4%
• Combined with local taxes: 7-11% depending on location
• Monthly, quarterly, or annual filing based on volume

Withholding Tax
• Required if you have employees
• File Form A-1 monthly or quarterly
• Deposit withheld taxes by required dates

Estimated Taxes
• Quarterly payments if you expect to owe $500+
• Due April 15, June 15, September 15, January 15

Our accounting team handles all your tax filings and ensures you never miss a deadline.

While not legally required for all businesses, having a separate business bank account is strongly recommended for several reasons:

Legal Protection:
• Maintains the "corporate veil" for LLCs and Corporations
• Mixing personal and business funds can pierce liability protection
• Essential for defending your personal assets in lawsuits

Tax Benefits:
• Simplifies tax preparation and bookkeeping
• Makes expense tracking clear and organized
• Required documentation for business deductions
• Easier to handle IRS audits

Professional Image:
• Accept payments in your business name
• Write checks from your business account
• Build business credit history
• Looks more professional to clients and vendors

What You Need to Open a Business Account:
• EIN (or SSN for sole proprietors)
• Business formation documents (LLC Articles, etc.)
• Personal identification
• Initial deposit (varies by bank)

Our Recommendation:
Open a business checking AND savings account. Keep 3-6 months of expenses in savings for emergencies.

We partner with local banks and can recommend the best options for your business needs.