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Start a Business in Alabama

Alabama rests in one of the Southeastern regions of the USA and is considered to be the 5th best state in terms of business climate. You, like many other entrepreneurs, can start a business in Alabama to leverage several advantages that the state offers including a slew of economic development tax incentive programs. The economy grows steadily as the state focuses on ways to stimulate economic growth through entrepreneurship, technology, and innovation. Alabama’s startup environment is in the growing stages with several incubator programs in place making this a perfect time to incorporate in Alabama.

An entrepreneur’s guide to forming a business in Alabama

Alabama is home to some high-performing businesses that have a strong global presence. The state is ranked in the top tier, not only for a favorable business climate, but also in several other aspects like manufacturing output, customized training, manufacturing employment, overall low tax burden, affordable utilities, and state industrial development grant programs. These are some of the reasons that attract entrepreneurs to start a business in Alabama. An Alabama registered agent like IncParadise can assist you with the process of establishing your startup in the state.

This guide was specifically created for small business owners and entrepreneurs to help them register a business in Alabama with ease. The primary objective is to help you understand the various requirements for forming a new business and making it operational in the state. This guide will also provide valuable insight into the various stages of a small business from preparing a business plan, choosing the right location for your company, obtaining an EIN, applying for an Alabama business license, and even attending entrepreneurial training programs.

Why do companies prefer to incorporate and register in Alabama?

Alabama is home to 408,374 small businesses with some businesses listed in the Fortune 500. Some of the top companies based in this state include Regions Financial Corporation, Vulcan Materials Company, Encompass Health, American Cast Iron Pipe Company, Brasfield & Gorrie, Buffalo Rock, Delchamps, and Southern Natural Gas among others. As an entrepreneur, you can start a small business in Alabama as it is considered to be one of the best destinations for startups and small businesses. The state offers several advantages that you can leverage if you plan to incorporate in Alabama. Some of the top advantages are:

  • Tax-Friendly – One of the most vital aspects for most businesses is the tax rate or the taxes they are required to file. Each state has a different tax structure and tax benefits. If you register a business in Alabama, taxes will be the least of your worries as it is one of the most tax-friendly states in the nation. The state has low-income tax, sales, and property taxes, and is lower than the tax rates in South Carolina and Nevada.
  • Startup Ecosystem – Alabama is home to a vibrant and growing innovation ecosystem, that’s perfect for entrepreneurs who want to start a small business in Alabama. The state offers the right blend of an innovative environment, digital resources, networks for mentorship, and accelerator and incubator programs.
  • Grants and Other Funds – An essential detail for any successful business is keeping the startup costs low. Oftentimes this is easier said than done, and that is why you may need grants and other forms of startup funding. This is also a key component of your starting a business in Alabama checklist.

The state of Alabama provides several advantages to first-time entrepreneurs and new small business owners. Once you get your Alabama business license, these benefits can help minimize your startup costs while providing you with the much-needed financial cushioning and stability.

Steps to start a business in Alabama

Forming a startup from scratch is never easy and there are several processes, documentation, and state requirements that you need to adhere to. If you’re planning to register a business in Alabama then you have to focus on several key areas from business planning to choosing the right business structure or location and obtaining the necessary Alabama business licenses. Let’s take a look at the key areas for starting a new business in this state.

1. Prepare an Alabama Business Plan

A business plan is the starting point for any new business and the most important aspect of your starting a business in Alabama checklist. It is an important and strategic tool especially if you’re planning to start a small business in Alabama. The need for a good business plan lies in the fact that it will help entrepreneurs focus on all key elements of a business from financing to marketing and licensing.

Some of the key elements or focus areas to include in your business plan are:

  • Executive summary
  • Company description
  • Management and Organization
  • Market analysis
  • Revenue model
  • Competitive analysis
  • Products and services
  • Marketing Plan
  • Sales strategy

2. Attend Entrepreneurial Training or Development Programs in Alabama

One of the more important aspects to consider before you register a business in Alabama is the availability of small business resources. There are several types of business resources with the most favoured being entrepreneurial training or small business development programs. One of the more popular programs is the Alabama Innovation & Mentoring of Entrepreneurs (AIME) program; its objective is to nurture high-tech startups into profitable businesses. Some of the other similar programs include the Auburn Business Incubator (ABI), Bessemer Business Incubation System (BBIS), Enterprise Business Incubator, and Innovation PortAL entrepreneurial hub among others.

3. Choose a Business Structure for your Alabama Business

As a new or first-time business owner, one of the most important decisions to make regarding your company is choosing the right entity structure. Each entity structure has its own advantages and benefits. For example, if you register a business in Alabama as a Business Corporation then it will be easier to raise capital vis-à-vis a sole proprietorship or an LLC. The different types of entity structures you can choose from in Alabama are:

A top Alabama registered agent like IncParadise can help you form a new company in this state with ease.

4. Naming Your Alabama Business

Whether you’re planning to incorporate in Alabama as a domestic entity or a foreign company, one of the most important requirements is selecting a good business name. The importance of a company name lies in the fact that it summarizes the brand identity of the entity. Hence, there are several aspects to consider when choosing a name for your business. These aspects include:

  • Follow the Alabama state naming guidelines
  • Choose a name that is not similar to any other company name in Alabama
  • Ensure that there is no trademark infringement
  • Keep your business name simple, easy, and memorable
  • Ensure that the domain names are available

It’s important to note that the legal aspect of your business name can vary according to the type of business structure that you have chosen. lf you’re planning to register a business in Alabama as a Limited Liability Company then the entity name will be governed by AL Code § 10-12-5 (2020). You’ll also need to conduct a name availability search with the Alabama SOS to identify the uniqueness of the name selected. If the chosen name is unique and available then you’ll need to reserve it using the Name Reservation Request Form for Domestic Entities.

5. Choose the Location for your Alabama Business

The success of a business can often be credited to its location. Several characteristics of a good location can be determined by geography, demography, competition, the availability of business resources, and a skilled workforce. Some cities offer many advantages and are hence considered ideal for people who want to start a business in Alabama. Some of the top cities in the state include Millbrook, Prattville, Foley, Cullman, Daphne, Montgomery, Helena, Fairhope, Troy, and Pell City. According to a WalletHub report, 4 of the top cities in your starting a business in Alabama checklist should be Mobile, Montgomery, Huntsville, and Birmingham.

6. Register Your Alabama Business

If you want to register a business in Alabama then you’ll be required to follow the state-governed processes and requirements. You’ll need documentation consistent with the type of entity structure you’ve chosen. The governing laws, processes, forms, and fees will vary according to the entity structure. You have to file registration documents with the office of the Alabama Secretary of State. Let’s look at an example to understand this.

Example: If you want to form a C Corporation then you will have to follow state requirements, which is filing a Certificate of Incorporation pursuant to Sections 10A-1-3.05 and 10A-2A-2.02 of the Code of Alabama 1975. The articles have to be filed with the Alabama Secretary of State, Business Services along with a processing fee of $200. Similarly, if you want to form an LLC then you will be required to file Certificate of Formation along with a filing fee of $200.

New business registration may seem like a complex process, but a reputable Alabama registered agent like IncParadise can help you to register your company with the state.

Do you want to start a new business in Alabama?

7. Get Your EIN

An Employer Identification Number or EIN is a unique identifier that is assigned to a business entity by the Internal Revenue Service (IRS). This unique ID is most commonly used by companies or entrepreneurs to file state business taxes. The EIN is a unique nine-digit number that has several benefits for business owners as it helps to prevent identity theft, adds credibility to a company, and is often required for starting a business bank account.

8. Open a Business Bank Account for your Alabama Business

One of the first things you will need when you start a small business in Alabama is a bank account. Most first-time business owners start by using their personal accounts for business transactions; but is that really a viable option? If you’re starting a new business then you’re thinking in the context of long-terms; hence you’ll require a banking account that can handle long-term business requirements. This is where a dedicated business bank account also known as a checking account or merchant account can offer you many benefits.

One of the business banking alternatives for small business owners is to open an account online with Cheqly. This is a neo-bank for startups that’s growing in popularity due to the many advantages offered like online transactions and balance checks. This is a US bank account that allows you to receive and make payments; its efficient banking platform will ensure business transactions are made easier.

9. Obtain Necessary Alabama Business Licenses and Permits

Once you register a business in Alabama, the next step will be to make your business operational. This can be made possible by obtaining the necessary state business licenses and permits. It is important to note that the licensing regulations vary from one state to another. Hence, the Alabama business license requirements and laws would be different from the laws and regulations of any other state. You may also be required to apply for multiple licenses in the state depending on your company’s type of business activity. Permits and licenses in Alabama can be categorized as under:

  • Business Privilege License – A business privilege license is a type of Alabama license requirement that is true for any person, company, firm, or corporation that is engaged in any form of business, profession, or occupation. This license requirement is for several categories of business activity and professions right from Automobile dealers to abstract companies, mining, and even warehouses. You’ll need to apply for this license with the Department of Revenue and the fee will vary depending on the business activity or profession.
  • Municipal business licenses – Once you start a business in Alabama, you may need to apply for municipal licenses. This type of Alabama business license is applicable if you form a company in a municipality with its separate business license ordinance.
  • City or County licenses – Apart from the privilege license and municipal license, you may be required to apply for city or county licenses and permits. This can vary according to the county your firm is located in and the business activity you are engaged in.
  • If you want to know more about what type of Alabama business license is required for your company then you can select our “Business License Research Report” service. This is a specialized service that will provide you with a detailed list of filing instructions, and the supporting document requirements for business licenses and permits in the state.

10. Get Business Insurance

One of the finer aspects that most small business owners are unaware of is that of company insurance. Insurance should be included in your starting a business in Alabama checklist as certain types of company insurance can help you cover the variable costs associated with property damage and liability claims. All startups and new companies face some form of risk at any given time when running company operations. This is where good business insurance can protect the owners and the business. If you register a business in Alabama then the most common forms of business insurance are:

  • General liability insurance
  • Professional liability insurance
  • Product liability insurance
  • Business interruption insurance
  • Employment practices liability insurance
  • Business Owner’s Policy (BOP)
  • Workers’ compensation insurance
  • Home-based business insurance

11. Annual and Ongoing Requirements

Once you register a business in Alabama, there are certain annual requirements that you or your company must be compliant with to maintain a good standing with the state. The annual requirements will vary from one state to another and will also depend on the type of business structure you form. The various annual requirements for doing business in Alabama are:

  • Annual Report – Most states in the USA require businesses to submit some form of report annually; they are most commonly known as the annual report. In Alabama, however, there are no annual report requirements for corporations or limited liability companies.
  • Taxes – Once you incorporate in Alabama, one of the important annual filing requirements for an LLC or Corporation is that of business taxes. The taxes applicable to businesses are:
    • Business Privilege Tax (BPT)
    • Corporate Income Tax
    • Sales and Use Tax

Some Important Quick Resources for Alabama Businesses

It’s never an easy task to start a business and there are a variety of resources that can be quite helpful. Many state agencies and private institutions provide a wide variety of resources in the form of knowledge concerning Alabama state regulations, guides to starting a business in Alabama, and financial assistance among others. We’ve compiled a list of agencies where you can find any information and guidance for doing business in Alabama and making it operational.

Alabama Secretary of State

The office of the Alabama Secretary of State (SOS) is responsible for keeping state records and providing a variety of services. Whether you want to register a business in Alabama or require information concerning business laws in the state; the office of the Georgia SOS can assist you with the same. The website of the Alabama Secretary of State provides access to a variety of information and services for business entities; you can even download their Business Entities brochure, as well as other business-related forms.

Alabama Department of Revenue

The Alabama Department of Revenue (ALDOR) is a resource of information related to taxes applicable in the state. If you register a business in Alabama you may be required to file certain business tax returns through the ALDOR. They provide detailed information about various taxes, their payment information, tax incentives in the state, the certificate of compliance, Alabama business licenses, and a list of taxpayer service centers across the state.

Small Business Administration (SBA) Alabama

The Alabama Small Business Administration is an independent agency that was specifically created to provide resources and support to startups and small businesses. The services can vary from funding programs to counseling, credit risk management, disaster recovery, entrepreneurship education, and federal contracting certifications.

Economic Development Partnership of Alabama

Alabama takes pride in its vibrant culture and innovation; if you start a business in Alabama you should look into the Economic Development Partnership of Alabama (EDPA) because they provide important resources. It’s a private non-profit organization with several levels of objectives; like attracting and retaining world-class talent across industries. They also play an important role in supporting and inspiring both industry and emerging startups. EDPA also organizes an annual innovation and inspiration event that’s aimed at cultivating a dynamic business environment or culture within the country.

  • Economic Development Partnership of Alabama
    1320 1st Ave S, Birmingham,
    AL 35233, United States
    Phone: (205) 943-4700
    Website –

The Chamber of Commerce Association of Alabama (CCAA)

The Chamber of Commerce Association of Alabama (CCAA) plays an important role in providing exceptional services in a wide spectrum of areas like professional development, advocacy, and the communication of various issues that have an impact on the local business community. One of their primary goals is to enhance the quality of life for the state’s residents by promoting the interests of the ever-expanding business community. If you incorporate in Alabama then you’ll find extremely valuable resources here including information on networking events throughout the state.

  • The Chamber of Commerce Association of Alabama (CCAA)
    2 North Jackson Street,
    Suite 607
    Montgomery AL 36104
    Phone: 334-264-2112
    Website –

Alabama Department of Economic and Community Affairs

The Alabama Department of Economic and Community Affairs (ADECA) is responsible for providing several kinds of grant programs and services aimed at encouraging economic and community development. ADECA has strategic partnerships with different agencies like non-profit groups and local governments.

Ready to start a business in Alabama?

Alabama has a favorable business climate for entrepreneurs and startups; this is one of the many advantages that the state offers. If you want to start a business in Alabama efficiently and quickly then IncParadise can help you. We provide professional guidance and have a team of incorporation experts to assist you with your new business formation.

IncParadise is an expert registered agent and incorporation service provider in Alabama that has already helped thousands of businesses start their LLCs or Corporations in this state. We also offer additional services like EIN assistance and foreign qualification among others.

IncParadise can help you to start a small business in Alabama!