With the 3rd-lowest tax burden and the 7th-lowest cost of labor in the nation, starting a business in Alabama is a great choice for entrepreneurs. Start your business today with our simple step-by-step guide and get on the fast track to financial and personal independence. If you get stuck along the way, connect with a business resource in your local area for help.

Steps to Starting your Alabama Business
To Start a Business in Alabama, follow these steps:
Step 1: Choose the Right Business Idea
The first step toward business ownership is deciding what kind of business to start. Look for an idea that suits your interests, your personal goals, and your natural abilities. This will help you stay motivated when the going gets tough and will greatly improve your odds of success. We have assembled a comprehensive list of small business ideas to help you get started. Need inspiration? Here were the most popular ideas among our Alabama visitors in 2020:
TRENDING BUSINESS IDEAS IN Alabama

Find the Right Business Idea for You
Our free Business Ideas Generator will help you identify great businesses that match your interests and lifestyle.
Step 2: Plan Your Business
Successful businesses are built through careful planning. Before committing a significant amount of money and other resources toward your business, critically analyze your idea and create a game plan. At a minimum, you should have good answers to the following questions.
Business Name
Naming a business can be challenging. You'll want to choose a brand name that follows Alabama naming rules, resonates with your customers, and is available as a URL.
Product Development
What problem does your business solve? What will set your product or service apart from the competition?
Sales & Marketing
Who are your potential customers? How will you get their attention and convert them into buyers?
People and Partnerships
What roles will you need to hire and what professional relationships will you need to form in order to succeed?
Financial Planning
How many clients or sales will you need in order to break even? How much money will it take to get there, and where will you get the funding?

Start Planning
- Create a robust business plan to help navigate the early years of your business. To use this free tool sign up for the Business Center.
- Need Help? Find organizations in your local area that can assist you with planning.
- If you’re a solo-entrepreneur, setting up a virtual office can add credibility to your business by having a business address on Google search, protect your personal privacy, and provide you with a business phone line and a live receptionist to answer your calls. Save $200 on a virtual office today.
- If you’re a woman in business, find funding, tools and resources with this great new series Women in Business.
Step 3: Form Your Business
Registering your Alabama company as a legal business entity, such as an LLC or a Corporation, has two major advantages:
- Increased credibility
- Protection from personal liability in the event your business is sued
For most small businesses, registering an LLC is a great option. In comparison to other business entities, LLCs are easier to set up and manage and they have favorable tax treatment. You can set up an LLC in Alabama for as little as $160-$178.
If you choose not to register your company as a business entity, you will be held personally responsible for the debts and liabilities of your business. In addition, unregistered business owners may need to file a Trade Name, also known as a "DBA." Find out if your business is required to file a DBA.
Secure Your Domain
We recommend that you check online to see if your business name is available as a web domain. Even if you don't plan to create a business website today, you may want to buy the URL in order to prevent others from acquiring it
Not sure what to name your business? Check out our Business Name Generator. Then, create a logo with our free Logo Maker.
After registering a domain name, consider setting up a professional email account (@yourcompany.com). Google's G Suite offers a business email service that comes with other useful tools, including word processing, spreadsheets, and more. Try it for free
Step 4: Register for Taxes
With limited exceptions, most businesses require an Employer Identification Number (EIN), also known as a Tax ID Number. An EIN is used to identify a business in its federal tax filings. Without an EIN, you can't hire employees or open a business bank account.
You should also be aware of important alabama taxes that may apply to your business:
- If you are selling a physical product, you’ll typically need to register for Alabama Sales Tax.
- If you hire employees in Alabama, you will have to register for Unemployment Insurance Tax and state income tax withholding on behalf of your employees.
Step 5: Create Business Banking and Credit Accounts
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Additionally, learning how to build business credit can help you get credit cards and other financing in your business's name (instead of yours), better interest rates, higher lines of credit, and more.
You can protect your business with these two steps:
1. Opening a business bank account:
- Separates your personal assets from your company's assets, which is necessary for personal asset protection.
- Makes accounting and tax filing easier.

Recommended: Read our Best Banks for Small Business review to find the best national bank, credit union, business-loan friendly banks, one with many brick-and-mortar locations, and more.
2. Getting a business credit card:
- Helps you separate personal and business expenses.
- Builds your company's credit history, which can be useful to raise capital (e.g., small business loans) later on.
Step 6: Set Up Accounting
An accounting system helps you track the performance of your business and simplifies annual tax filings. Quality accounting software lets you download your bank and credit card transactions, making accounting fast and easy. Learn more about the importance of accounting and how to get started with accounting today.

Recommended: QuickBooks has all the accounting features your small business will need.
Step 7: Obtain Permits and Licenses
To operate your new business legally, you will need to comply with federal, state, and local government regulations. In many cases, this involves obtaining one or more business permits and/or licenses. For example, a restaurant will likely need health permits, building permits, signage permits, etc.

Learn how to obtain the necessary licenses and permits for your business
- or -
Use a professional service to help you obtain required licenses
Step 8: Get Insured
Business insurance helps you manage risks and focus on growing your business. The most common types of business insurance you should consider are:
We recommend that all small businesses, including home based businesses, purchase a general liability policy. Businesses selling professional advice or services, such as consulting and accounting firms, should also consider a professional liability policy. In Alabama, businesses with five or more employees are required by law to have workers compensation insurance. Note that officers and LLC members are counted as employees.

Our recommended insurance provider can set you up with an insurance policy that is right for your business
Read our review of the best small business insurance companies
Step 9: Define Your Brand and Promote your Business
The strongest and most memorable businesses are built on a solid brand. When developing your brand, you should consider:
- What your business stands for?
- What are your core values?
- What will earn customer trust?
Once you feel confident about your answers to these questions, it’s time to move onto your business name. Your business name is the cornerstone of good branding and a successful business. To learn more about creating the best name for your business, read our How to Name a Business guide.
Last but not least, try our Free Logo Generator to get a unique logo for your business. Our logo maker is free (no sign-ups or email address needed) and it comes in all social media sizes. It’s easy and hassle free--with no design experience required!
Promoting Your Business
There are many different methods to promote your business, but the two most effective methods are:
- Press Releases
Press Releases
Press Releases are a great way to promote your brand and are one of the most cost-effective strategies as they:
- Provides publicity
- Establish your brand on the web
- Improve your website's SEO, driving more customers to your website
- Are a one-time cost in terms of effort and money
- Have long-lasting benefits
Recommended: TRUiC has negotiated a 25% discount for you on a service that will write and distribute press releases for you.
A Facebook page is a great, free way to interact with your customers. But, it does require ongoing effort to be successful.
A Facebook page can be used to:
- Establish your local business presence
- Showcase your business products and services
- Communicate with your customers
- Get and share reviews from customers
- Promote your business through ads, though this may not be suitable for your business.
Step 10: Establish a Web Presence
A professional website is critical to the long-term success of your business, regardless of what industry you are in. A website allows potential customers to find your business online and discover the products or services you offer, and it also enhances your business’s credibility.
In addition to a website, you should also consider other avenues for promoting your business online:
- Setting up social media profiles (Facebook, Twitter, etc)
- Creating accounts on review sites (Yelp, Google Reviews, etc)
- Registering for a local Google profile
Alabama Formation Guides
How to Form an LLC Alabama
- Should I Start an LLC for My Small Business?
- Cost to Form an LLC in Alabama
- Alabama LLC Name Search
- How to Choose a Registered Agent in Alabama
- How to File LLC Articles of Organization in Alabama
- Alabama LLC Operating Agreement
- How to Dissolve an LLC in Alabama
How to File a DBA in Alabama
How to Start a Corporation in Alabama
How to Start a NonProfit in Alabama
OTHER GUIDES
Alabama SBDC at Auburn University
Here are the Principle Service Areas:
- Mentoring
- Business Planning
- Financial
Offers Free Service
Description
The greatest strength of the SBDC is their free, confidential, 1-on-1 business mentoring for anyone who seeks it. Sometimes in order to be considered for mentoring from one of their professional business advisors, you may have to attend a class/workshop or at least present your business plan. SBDC's are located all throughout the state and you should use the SBDC closest to your location if possible, but you can often transfer to a different location if they do not fit your needs.
Rev Birmingham
Here are the Principle Service Areas:
- Mentoring
- Business Planning
- Research
- Legal Assistance
Description
REV Birmingham has two accelerator-style programs that entrepreneurs will find helpful for starting their small business. BIZ 1.0 helps entrepreneurs refine a concept they have for a business so they can move forward with turning it into a successful operation, or to see that the idea they had may not be viable for the time and place and can move on to something else. The second program, CO.STARTERS, is a ten week program that involves talking with potential customers in order to test the validity of their business idea and prepare for a successful launch.
Restrictions
Entrepreneurs must complete and submit an application in order to be considered for the CO.STARTERS program.
CONTACT INFORMATION:
5529 1st Ave. South
Birmingham, AL 35232
205-595-0562
julie@revbirmingham.org
Dothan Area Chamber of Commerce
Here are the Principle Service Areas:
- Mentoring
- Networking
Offers Free Service
Accepts Walks In
Description
The Dothan Area Chamber of Commerce is unlike other chambers in the fact that it can assist entrepreneurs who don't have a business yet and are just getting started. In addition to networking with established entrepreneurs, the chamber allows you to schedule appointments with counselors from the local SBDC and offers a microloan program, access to a resource library, and access to an employment law library.
CONTACT INFORMATION:
102 Jamestown Boulevard, P.O. Box 638
Dothan, AL 36302
800-221-1027
sturkoski@dothan.com
HOURS OF OPERATION:
MON - FRI: 9 am - 5 pm
The Catalyst Center for Business & Entrepreneurship
Here are the Principle Service Areas:
- Mentoring
- Business Planning
- Sales & Marketing
Offers Free Service
Description
The Catalyst center will be most useful for entrepreneurs as a mentorship and learning resource. The organization provides free one-on-one mentoring to entrepreneurs in all stages of business. They also host a series of events on varying topics ranging from sales and marketing, to small business in rural communities.
CONTACT INFORMATION:
515 Sparkman Drive
Huntsville, AL 35816
256-428-8190
info@catalystcenter.org
The Urban Emporium
Here are the Principle Service Areas:
- Mentoring
- Financial
Description
The Retail Emporium is Mobile's only Retail Incubator. It offers training in all aspects of running a retail business, including loss prevention and inventory control. Entrepreneurs can, in addition to receiving mentorship, sell their products within the Retail Emporium.
Restrictions
The Urban Emporium limits its participants to retail businesses.
CONTACT INFORMATION:
260 Dauphin St
Mobile, AL 36602
251-441-8044
HOURS OF OPERATION:
MON - FRI: 10 am - 6 pm
Alabama SBDC at Alabama State University
Here are the Principle Service Areas:
- Mentoring
- Business Planning
- Financial
Offers Free Service
Description
The greatest strength of the SBDC is their free, confidential, 1-on-1 business mentoring for anyone who seeks it. Sometimes in order to be considered for mentoring from one of their professional business advisors, you may have to attend a class/workshop or at least present your business plan. SBDC's are located all throughout the state and you should use the SBDC closest to your location if possible, but you can often transfer to a different location if they do not fit your needs.
The Edge Center for Entrepreneurship and Innovation
Here are the Principle Service Areas:
- Mentoring
- Business Planning
- Coworking
- Networking
Description
The Edge Center for Entrepreneurship and Innovation helps entrepreneurs by providing mentorship, business planning assistance, coworking space, and networking with other entrepreneurs. The Edge will be the best for business owners who want to collaborate and experience more hands on assistance with starting their small business.
Restrictions
In order to access either the incubation space or the coworking area, you must complete the appropriate applications and be admitted.
CONTACT INFORMATION:
2201 Jack Warner Blvd., Building C
Tuscaloosa, AL 35401
205-722-5166
info@tuscaloosachamber.com