Initial Registration
Visit the Alabama Department of Revenue’s webpage for information, including local taxpayer assistance centers, business workshop schedules, and tax forms.
To register as a sole proprietor in Alabama, sole owners are not required to register with the Secretary of State before conducting business. See the Secretary of State website for more information.
Mail filings take about one week to be approved, whereas online filings are approved immediately.
Costs to register a business in Alabama include:
- Name reservation: $28
- Incorporation fees: $100 + county fees
- 501(c) fees: $275-$600
- Charitable registration: $25 (potentially $0 if exempt)
Sanctions and penalties exist for not paying Alabama small business taxes. The amounts owed and the duration unpaid determine specifics.
A sales tax license is required for a business selling products or services in Alabama, which involves registering, reporting requirements, and understanding taxable products and services. See: Guide to Starting a Business in Alabama.
Perform a Business Entity Search on the Secretary of State website to check if a business name is taken. It is recommended to reserve your preferred name.
An LLC needs a name including "Limited Liability Company," "LLC," or "L.L.C.," and it must follow Alabama LLC naming guidelines.
Registering a business privilege license is free at the state level, but local fees range from $15-$1000 depending on the county and business. Special licenses or permits may incur extra costs.
Obtain an Alabama Tax ID for free through the My Alabama Taxes Portal, which takes 3-5 days to process. A Certificate of Compliance, costing $14, confirms a business’s compliance with the Revenue Department.
All Alabama businesses must annually register a Business Privilege License with the Revenue Department for a minimum tax of $100. If an LLC collects sales tax or has employees, additional registrations and taxes apply, including a 6.5% sales tax and a 2-5% payroll tax.
Business Structures and Registration Steps
Common business structures in Alabama include Sole Proprietorship, Partnership, Corporation, Limited Liability Company (LLC), and Nonprofit Corporation.
To register your Alabama business structure:
- File formation documents with the Secretary of State.
- Create an operating agreement (for LLCs).
- Apply for an Employer Identification Number (EIN) from the IRS.
Licenses, Tax IDs, and Business Setup
Depending on business activities, local, state, and/or federal licenses and registrations may be required.
- Business license – Requires a one-time registration fee plus annual renewal fees.
- Sales tax ID – Needed for selling taxable goods or services.
Whether working from home or leasing commercial space, ensure proper infrastructure. Other startup costs may include equipment, inventory, supplies, website development, marketing materials, and more.
Obtaining a Tax ID
You can acquire an EIN online for free through the IRS website.
An EIN functions like a social security number for an organization. Businesses may require an EIN in Alabama for various reasons, including filing tax returns for Alcohol, Tobacco and Firearms or having employees.
A Federal Tax ID identifies you to the Federal Government, while a state sales tax ID identifies you to the state government for sales tax-related transactions. An Alabama State Tax ID may also be necessary for state income tax and/or sales tax on items sold.
Register for Alabama sales tax, obtain business lines of credit or loans, get a business credit card, apply for licenses or permits, and handle employee payroll. Applying for an EIN for your Alabama LLC is completely free.