Thinking about starting a business in Alabama? Our guide will help you get your new Alabama venture going in 9 simple steps.
Apr 23, 2024
This post is for information only. You are responsible for reviewing and using this information appropriately. This content doesn’t contain and isn’t meant to provide legal, tax, or business advice. Requirements are updated frequently and you should make sure to do your own research and reach out to professional legal, tax, and business advisers, as needed. Businesses outside of Alabama will have different processes and requirements. To sell products using the Shopify platform, you must comply with the laws of the geographic jurisdiction of your business and your customers, the Shopify Terms of Service, the Shopify Acceptable Use Policy, and any other applicable policies. Alabama boasts a dynamic business climate with various tax incentives and enterprise zone programs, a growing population, and fast-developing metropolitan areas. It can be a rewarding place to start a business. Here are nine steps to make it happen.
The first step toward getting your new business up and running in Alabama is identifying your business idea. Will you offer products, services, or some combination of both? After you decide on your idea, ask yourself the following key questions:
Once you have an idea for your Alabama business, the next step is to name it. There are several factors to think about. Here are a few considerations when choosing a business name:
Every business should start with a business plan. You can write a business plan from scratch, or start with a customizable template. A business plan includes seven things:
1. Executive summary
2. Detailed company description
4. Outline of organizational and managerial structure
5. List of products or services
7. Sub-plans for marketing, logistics, and business finances
You can also write a business plan suited to your goals, such as a lean plan (which keeps things simple and agile, including only information management needs to know) or a plan specific to your legal business entity type or tax status, like a nonprofit.
Your business structure determines how your company is taxed and how easily you can secure investments, among other factors. There are four primary business structures: sole proprietorships, partnerships, limited liability companies (LLCs), and corporations. Here’s how they differ:
Once you choose a formal business structure for your Alabama business, you must register for a federal employer identification number, or EIN. Although these nine-digit numbers are issued and administered by the Internal Revenue Service (IRS), federal and state tax authorities use them to identify businesses for tax purposes. They can also help secure lines of credit and obtain business credit cards. Business owners can apply for an EIN online through the IRS website, free of charge.
With an EIN, you can establish your new business in Alabama. Register your business through the Alabama Secretary of State’s office. For LLCs, you must file a Certificate of Formation online or by mail, along with a $200 filing fee. For corporations, you must file a Certificate of Incorporation online or by mail for $200.
While there’s no general business license in Alabama, almost every business entity operating in the state must obtain a business privilege license from the county or municipality in which it’s based. These cost between 25¢ and $1.75 for every $1,000 of your business’s net worth, with a minimum fee of $100. The state Department of Revenue provides instructions and local contact information for obtaining this permit. Companies that sell products ordinarily subject to sales tax also need a business tax registration, known in other states as a seller’s permit.
Purchasing business insurance is essential for managing risk and attaining a degree of liability protection for your new Alabama business. Standard insurance packages available for purchase in Alabama include:
Aside from purchasing insurance, you may need to make other investments in your Alabama business. These might include hiring certain professionals or contractors, like a lawyer, accountant, or web designer. You’ll also want to pay for web hosting services and possibly professional social media management.
Once your Alabama business is up and running, you can publicize your products or services. This is where your marketing plan comes in. You can raise your business’s profile both in Alabama and across the country by investing in paid advertising, having a robust presence on social media platforms like Facebook, Instagram, and TikTok, and building relationships with the press locally and afar.
Building a marketing campaign for your company means you can build out slogans and taglines, design logos, and develop a unified brand voice, color schemes, and fonts. All of these elements can end up in different types of marketing campaigns, including:
This small business marketing guide provides more information on marketing fundamentals, including how to build an online audience, convert customers, and sustain existing customer relationships.
Starting a business can seem easy once you’ve done your market research and have funding in place, according to Phala Mire, president and CEO of Women’s Business Enterprise Council (WBEC) South, which includes Alabama. “Don’t forget that there are steps every business owner needs to take before starting a business to ensure that the company is operating in compliance with state and local laws,” she emphasizes.
Here, Phala shares her top three startup tips for business owners launching a business in Alabama:
1. Research startup requirements on the state and local levels. Startup requirements can vary by state, geographic location, and business type. Make sure to check in with your state’s Office of Economic Development to find out exactly what steps you need to take and what resources they provide to business owners.
2. Obtain licenses, permits, and registration. Register your business with the Secretary of State and obtain any licenses and permits necessary for your business structure and industry requirements. Having the necessary licenses and permits ensures that you run the company legally—and avoid potential fines and penalties. The Alabama Secretary of State provides a comprehensive bank of forms for all business types. This is also a great time to research possible business certifications—national, state, and local—that can help your business access opportunities for certified small businesses, as well as minority-, veteran-, and women-owned businesses.
3. Take advantage of any tax breaks and business startup incentives. Check out what is offered by your state or city government. The Alabama Department of Revenue website lists tax incentives such as the Enterprise ZoneCredit or Exemption that incentivizes economic growth in economically depressed areas of the state. Used effectively, tax incentives can provide considerable financial benefits to entrepreneurs in Alabama.
You must register your business with the Alabama Secretary of State’s office by filing either a Certificate of Formation (for LLCs) or a Certificate of Incorporation (for corporations). You also need to apply for certain county or municipal business licenses.
You need a business privilege license to operate in Alabama, which costs between 25¢ and $1.75 for every $1,000 of your business’s net worth, with a minimum fee of $100. You must also complete a business tax registration online for free.
Alabama is an excellent place to start a business. It’s home to a diverse business landscape, from rich agricultural areas to growing urban regions and college towns. Alabama also offers several favorable tax programs, including those for businesses operating in economically disadvantaged areas and a state investment credit for job creators.
