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How to Start a Business in Alabama

If you’re looking to start a new business in the state of Alabama, you’ve come to the right place!

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With low sales and and income tax, a low cost of living, and a bounty of grants and incentives for small businesses, Alabama is an attractive location for the start-up business owner. Alabama also boasts a high quality of life with a temperate climate on the beautiful Gulf Coast of the United States. Plus, classic Southern Hospitality, barbecue that can’t be beat, and fried green tomatoes (they are a real thing, and they are delicious).

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How to Start a Business

Starting a business can be both exhilarating and challenging. It requires your full attention and energy. It all begins with an idea, an observation that there is a problem and the belief that you have a new solution – or a better one. Allow us to walk you through the steps in this free guide: How to Start A Business.

General resources for starting a business in Alabama

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Fun facts about starting a business in Alabama

Famous business founded in Alabama: Saks, Inc.

Born in Huntsville, Alabama.

“Love. It isn’t very popular in technical circles to say a lot of mushy stuff about love, but frankly it’s a very very important part of what holds our project together.”

Jimmy Wales

Famous entrepreneur born in Alabama: Jimmy Wales, founder of Wikipedia.

Saks, Inc. is a Fortune 1000 operator of high-end department stores in the United States under the nameplate Saks Fifth Avenue. It was founded in Birmingham, Alabama and is currently headquartered in New York City.

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Which type of legal structure is best for my business in Alabama?

We strongly recommend you incorporate, but you must consider the tax, legal, and liability implications carefully before deciding on the best structure.

Here are 5 helpful steps to determine what is the best legal structure for your business:

Click one of the buttons below to learn more about the different types of business legal structures and how to start them in the state of Alabama.
LLC (Limited Liability Company)
An LLC is the United States-specific form of a private limited company. It is a business structure that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation.

Steps to starting an LLC in Alabama:

  • Step 1 — Give your LLC a name.
  • Step 2 — File a Certificate of Formation with the County Probate Court.
  • Step 3 — Appoint a Registered Agent.
  • Step 4 — Create an Operating Agreement.
  • Step 5 — Determine if there are any publication requirements.
  • Step 6 — Pay your state tax obligations.
  • Step 7 — Comply with other tax and regulatory requirements.
  • Step 8 — Be aware of special Alabama rules for professional services.
  • Step 9 — Register foreign LLCs doing business in Alabama.

For help forming your LLC in Alabama we recommend CorpNet (they have fees for their service). Alternatively, visit the Alabama Secretary of State website.

Other Alabama resources for LLCs:

Secretary of State Business Name Database: Check this site to see if your business name is available in Alabama.

Secretary of State File Downloads: Use this site to file your name request for your business (Name Reservation Request Form for Domestic Entities), to file a Certificate of Formation, and to see a list of Alabama registered agents.

Alabama Department of Revenue: Visit this site to file your Business Privilege Tax Return and Annual Report, and for other applicable tax forms.

IRS EIN Online: Apply for an EIN number for your business. You must get an EIN if your LLC has more than one member, even if it has no employees.

My Alabama Taxes (MAT): Online service to fulfill tax requirements

Sole Proprietorship
A sole proprietorship is an unincorporated business with one owner who pays personal income tax on profits from the business. With little government regulation, they are the simplest business to set up or take apart, making them popular among individual self contractors or business owners.

Steps to starting Sole Proprietorship in Alabama:

  • Step 1 — Name your sole proprietorship.
  • Step 2 — File a trade name.
  • Step 3 — Obtain licenses, permits, and zoning clearance.
  • Step 4 — Get an Employer Identification Number (EIN).

For help forming your Sole Proprietorship in Alabama we recommend CorpNet (they have fees for their service). Alternatively, visit the Alabama Secretary of State website.

Other Alabama resources for Sole Proprietorship:

Alabama Secretary of State Trademark Search: Run a search here to see if your business name is available in Alabama.

U.S. Patent & Trademark Office: Federal site for your business name search. Click on the “TESS” link.

Alabama Department of Revenue: To get a privilege license (required in this state), visit a probate judge. This link provides a list of contact information for the various counties.

IRS EIN Online: Apply for an EIN for your business, if you plan on hiring employees.

My Alabama Taxes (MAT): Online service to fulfill tax requirements.

Partnership
A partnership is created whenever two or more people do business together for profit and share ownership, even if there is no written agreement to form the partnership. Each partner contributes to all aspects of the business, and each partner shares in the profits and losses of the business.

Steps to starting Partnership in Alabama:

  • Step 1 — Give your partnership a name.
  • Step 2 — File your trade name.
  • Step 3 — Create and sign a partnership agreement.
  • Step 4 — Apply for licenses, permits, and zoning clearance.
  • Step 5 — Obtain an Employer Identification Number (EIN).

For help forming your Partnership in Alabama we recommend CorpNet (they have fees for their service). Alternatively, visit the Alabama Secretary of State website.

Other Alabama resources for Partnership:

Secretary of State Business Name Database: Check this site to see if your business name is available in Alabama.

U.S. Patent & Trademark Office: Federal site for your business name search. Click on the “TESS” link.

Alabama Department of Revenue: To get a privilege license (required in this state), visit a probate judge. This link provides a list of contact information for the various counties.

IRS EIN Online: Apply for an EIN for your business, if you plan on hiring employees.

My Alabama Taxes (MAT): Online service to fulfill tax requirements.

S Corporation
An S corporation (sometimes referred to as an S Corp), is a special type of corporation created through an IRS tax election. An eligible domestic corporation can avoid double taxation (once to the corporation and a gain to the shareholders) by electing to be treated as an S corporation. In general, S corporations do not pay any federal income taxes. Instead, the corporation's income or losses are divided among and passed through to its shareholders. The shareholders must then report the income or loss on their own individual income tax returns.

Steps to starting S Corporation in Alabama:

  • Step 1 — Choose a name for your corporation.
  • Step 2 — File a Certificate of Formation.
  • Step 3 — Appoint a Registered Agent.
  • Step 4 — Set up a corporate records book.
  • Step 5 — Prepare corporate bylaws.
  • Step 6 — Appoint initial corporate directors.
  • Step 7 — Hold your first Board of Directors meeting.
  • Step 8 — Issue stock.
  • Step 9 — Register foreign LLCs doing business in Alabama.
  • Step 10 — Comply with Alabama tax requirements.
  • Step 11 — Comply with other tax requirements.
  • Step 12 — Register foreign corporations doing business in Alabama.

For help forming your S Corporation in Alabama we recommend CorpNet (they have fees for their service). Alternatively, visit the Alabama Secretary of State website.

Other Alabama resources for S Corporation:

Secretary of State Business Name Database: Check this site to see if your business name is available in Alabama.

Secretary of State File Downloads: Use this site to file your name request for your business (Name Reservation for Domestic Entities), to file a Certificate of Formation, and to see a list of Alabama registered agents.

U.S. Patent & Trademark Office: Federal site for your business name search. Click on the “TESS” link.

Alabama Department of Revenue: To get a privilege license (required in this state), visit a probate judge. This link provides a list of contact information for the various counties.

IRS EIN Online: Apply for an EIN for your business, if you plan on hiring employees.

My Alabama Taxes (MAT): Online service to fulfill tax requirements.

C Corporation
A C corporation, under United States federal income tax law, refers to any corporation that is taxed separately from its owners. A C corporation is distinguished from an S corporation, which generally is not taxed separately.

Steps to starting C Corporation in Alabama:

  • Step 1 — Name your corporation.
  • Step 2 — File a Certificate of Formation.
  • Step 3 — Appoint a Registered Agent.
  • Step 4 — Set up a corporate records book.
  • Step 5 — Prepare corporate bylaws.
  • Step 6 — Appoint initial corporate directors.
  • Step 7 — Hold your first Board of Directors meeting.
  • Step 8 — Issue stock.
  • Step 9 — Comply with Alabama tax requirements.
  • Step 10 — Comply with other tax requirements.
  • Step 11 — Register foreign corporations doing business in Alabama.

For help forming your C Corporation in Alabama we recommend CorpNet (they have fees for their service). Alternatively, visit the Alabama Secretary of State website.

Other Alabama resources for C Corporation:

Secretary of State Business Name Database: Run a search here to check on name availability for your corporation.

Secretary of State File Downloads: Use this site to file your name request for your business (Name Reservation for Domestic Entities), to file a Certificate of Formation, and to see a list of Alabama registered agents.

Alabama Department of Revenue: To get a privilege license (required in this state), visit a probate judge. This link provides a list of contact information for the various counties.

IRS EIN Online: Apply for an EIN for your business, if you plan on hiring employees.

My Alabama Taxes (MAT): Online service to fulfill tax requirements.

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Why choose Alabama for my business?

  • 1

    Non-Tax Incentives and Grants Available
    Career center, grants, other assistance. This is just one of many forms describing benefits on the “Made in Alabama” site.

  • 2

    Financing Programs
    Comprehensive guide with links to financing programs and tax incentives from the Alabama Department of Revenue. “...low sales and income tax rates, affordable utilities, and an extremely low cost of living, we make it easy for businesses of all kinds to keep more of their hard-earned money.”

  • 3

    Alabama Women’s Business Assistance Program
    Information on grants for women-owned businesses. “The Alabama SBDC Network’s Women’s Business Assistance Program is committed to developing leadership, independence and entrepreneurship for the Women of Alabama.”

  • 4

    Alabama VetStart
    Assistance for veteran-owned businesses. “Many incentive programs offer support for military veterans opening or growing a business, and Alabama’s SBDC counselors can help.”

  • 5

    Small Business Incubators
    Links to Alabama small business incubators. “Most incubators offer a range of business support, including low-rent space, shared office services, access to funding sources and more.”

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