How to Start a Business in Alabama

With the 3rd-lowest tax burden and the 6th lowest cost of labor in the nation, Alabama is a great place to launch your business. 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 resources in your local area for help.

Steps to Starting Your Alabama Business

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. Need inspiration? Here were the most popular ideas among our Alabama visitors in 2017:

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Find the Right Business Idea for You

Our free Business Ideas Tool will help you identify great businesses that match your interests and lifestyle.

Business Ideas
Tool

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.

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?

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Start Planning

Our Business Planning Guide helps you analyze your business idea and gets you access to free planning tools.

Need Help? Find organizations in your local area that can assist you with planning.

Secure your Domain

We recommend that you check to see if the business name you are planning is available as a web domain. Even if you aren't ready to make a business website today, you may want to buy the URL in order to prevent others from acquiring it.

Find a Domain Now

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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 3: Form your Business

Registering your company as an Alabama 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.

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.

Obtain an EIN

You should also be aware of important alabama taxes that may apply to you 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.
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Register for Alabama State Taxes

Sales Tax | Employer Tax

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.

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.
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Recommended: Get $200 when you open a business checking account with Chase. Learn 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 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.

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Recommended: QuickBooks has all the accounting features your small business will need.

Try QuickBooks for free

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.

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.

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Our recommended insurance provider can set you up with an insurance policy that is right for your business

Get a Quote

Step 9: Define Your Brand

The strongest and most memorable businesses are built on a solid brand.

When developing your brand, think about what your business stands for. What are the core values that drive your business? Customers and clients are looking for companies that have a compelling brand, as much as they are shopping for high quality products and services.

Learn more about branding and how to build a brand 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’ 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
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More than ever, people are looking for reviews before doing business. Yelp is an important aspect of social validation for your business, claim your page today and get $300 in Yelp advertising credit.

Sign up for our Business Center

Sign up for a free Business Center account for access to tools, legal documents, and discounts that will help you start and grow your business

Signup Now

Get Help From Local Resources

To help you start your business, we have identified the best resources across the state of Alabama that can support you in your entrepreneurial endeavors.

Select your Region

Auburn Local Resources

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.

CONTACT INFORMATION:

570 Devall Drive, Suite 303
Auburn, AL 36832

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Auburn Resources

Birmingham Local Resources

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

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Birmingham Resources

Dothan Local Resources

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

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Dothan Resources

Huntsville Local Resources

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

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Huntsville Resources

Mobile Local Resources

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

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Mobile Resources

Montgomery Local Resources

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.

CONTACT INFORMATION:

915 South Jackson Street
Montgomery, AL 36104
334-229-4138

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Montgomery Resources

Tuscaloosa Local Resources

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

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Tuscaloosa Resources