How to Start a Business in Alabama

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:

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?

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.

Form an LLC in Alabama

Get Started

Learn more about LLCs and how they differ from other business entities.

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.

With limited exceptions, most businesses require a Federal 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.

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.

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.

Recommended: Learn about the best small business credit cards here.

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.

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.

Business insurance helps you manage risks and focus on growing your business. The most common types of business insurance you should consider are:

• General Liability Insurance
• Workers Compensation Insurance
• Professional Liability Insurance

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

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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.

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

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.