How to Start a Business in Alabama


Business owners in Alabama can choose from a wide range of legal structures, including sole proprietorships, partnerships, and corporations. Each has its own advantages and disadvantages that may help or hinder your business. In this article, we’ll outline some key steps below that will help ensure your new Alabama business starts off on the right foot by meeting state laws requirements.

Determine your Company Structure

To determine which company structure is right for you, you must consider the following:

  • Are you planning to hire employees? If so, then a corporation or S-corporation is not an option. These structures require that owners be able to take advantage of the corporation’s profits through distributions rather than salaries.
  • Do you want to have ownership in your business and share earnings with others? If so, then a partnership may be ideal for your needs. Partnerships have unlimited liability meaning that each partner is responsible for any debts or claims made against the business.
  • Are most of your customers in one area? If so, then it may make sense to set up a shop locally since this can help minimize overhead costs such as shipping expenses and advertising costs associated with reaching more distant markets.

Pick a Business Name

Your business name is the first impression of your company. It should be short and simple.

The best way to start thinking about a name is to find out how many people in your community are already using it. You can do this by searching for existing businesses on the web using Google or another search engine. If there are no good matches available and no one else has registered a trademarked version of that name with the USPTO, then feel free to use it!

Register your Alabama Business Name

The next step to starting your business in Alabama is to register your business name. You must do this with the state of Alabama, as well as with your county and city if you plan on operating within their boundaries.

There are two types of names you can choose from a trading name or an assumed name. A trade name is what you will use when conducting business in the state, but it does not legally belong to you until it has been registered with the Secretary of State’s office. An assumed name does have legal ownership rights because it indicates personal capacity rather than corporate status, so it can be done either online or through the mail.

Meet State and Federal Tax Requirements

As a business owner, you’ll be responsible for filing taxes at the federal and state levels.

  • Paying payroll tax.

The IRS requires employers to withhold income tax from employees’ paychecks, which means that any money you pay your employees is actually just an advance on their taxes. If your business is incorporated, such as a corporation or limited liability company (LLC), then your corporation will be required to make quarterly payments of estimated taxes throughout the year.

  • Paying sales tax.

Unless your business is located in one of 16 states that don’t impose sales tax, you’ll need to collect and report sales taxes on all goods sold by your company or risk getting hit with fines if you don’t comply with state regulations regarding this matter.

Obtain Licenses and Permits

In Alabama, there are a number of licenses and permits that are required by law. In order to obtain these licenses and permits, you will need to check with your local government office. These documents provide proof that you have complied with certain rules and guidelines for doing business in the state of Alabama.

Workers’ Compensation Insurance

If you have any employees, it’s important to do your part to ensure they are covered by workers’ compensation insurance. Workers’ compensation insurance is required by law in Alabama and ensures that employees who get injured on the job can be compensated for their medical expenses and/or lost wages, as well as receive benefits if they are unable to work again. It also protects employers from being sued by injured employees for negligence or malpractice.

It is the employer’s responsibility in Alabama to pay for workers’ compensation insurance; however, it can vary based on how many employees you have. The state minimum is $6,000 per employee up to a maximum of $500,000 total coverage per year; however, if there are more than two owners involved with your business (such as husband and wife), the state minimum increases slightly:

  • 1-2 owners = $16,000 each up until $1 million total coverage annually
  • 3-4 owners = $12,000 each up until $1 million total coverage annually


It’s important to take the time to do things right so you can be successful in the long run. This means planning ahead, preparing your business plan, and making sure that you have all of the proper licenses and permits needed to operate your business. Failure to do this will inevitably lead to problems down the road and may even prevent you from being able to stay open at all.


Starting a business in Alabama is not difficult, but it does require some time and effort. There are many steps involved in the process that you can’t overlook, so make sure to take your time and do them right. We hope this article has given you the information needed to start your business in no time!

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