How to Start a Business in Alabama

Before starting a business in Alabama, there are essential and legal steps you will need to take to avoid errors and mistakes.

The state of Alabama is truly a wonderful place to launch any business, being a state with a significantly low tax burden, a low cost of living, and a commendable cost of labor.

Get started with your business planning today and cut down on the number of bumps you could encounter along the way, by following our simple guide.


Choose a Business Idea

First, you will need to decide the kind of business you plan on starting.

The easiest thing to do when choosing a niche is cutting down on options by looking for ideas that best suit your natural inclinations and personal interests.

Of course, business ventures can always stray off the path of personal interest, but the upside of running a business that suits your personal goals is that you will always stay motivated to work on it, and it won’t feel too much like hard work.

Here are some of the top business ideas in Alabama

  • Legal consulting firm
  • Pottery business
  • Clothing store
  • Screen business
  • Vape shop

Construct a Comprehensive Business Plan

The second step towards bringing your business to life will be by writing a business plan.

Putting your plans down in print will give you more of an idea of how plausible your business plan is and the chances of it coming to fruition.

Analyze your idea and build upon it. Include some goal-oriented questions in your business plan.

  • Who is your target audience?
  • How will you attract these customers?
  • How will your business be set apart from other rival businesses?
  • What solutions will your business be proffering?
  • Will your business need employees? and what kind of employees will you need
  • How much will you need to fund the business, and how will you get proper funding?

Constructing a comprehensive business plan might prove to be too tasking for some, and if you require some assistance with making your plan, organizing it, and properly detailing it out, there are web and software services available for help.

Register your Business

Now, with an idea of the details concerning your proposed business plan, you will need to figure out the kind of structure your business will fall under.

There are essentially 4 structures here; S Corp, Sole Proprietorship, C Corp, and Limited Liability Company (LLC).

S Corp

An S Corp business structure is a more formal kind; it includes more shareholders (up to a hundred), corporate officers and a board of directors. For tax purposes, the shareholders get the responsibility, and the business does not get taxed.

C Corp

This structure differs very little from the S Corp structure. The main difference between the two is that both the shareholders and the company bear the burden of taxation.

Sole Proprietorship

A sole proprietorship structure is automatically given to a business that does not register as any other structure and is owned by a single (sole) proprietor.

This structure has its many pros and cons, but one of the most significant is that it offers a fairly simple structure, and on the other hand, there is a high risk of liability.

You will need to register with the DBA to properly register your trade name that differs from your business name.

Limited Liabilities Companies

LLCs give entrepreneur’s the chance to enjoy the benefits of a corporation’s protection, minus the increased taxing.

This benefit makes it the most popular structure. Also, you can select if you want your business to be handled for tax purposes as a Sole proprietorship, or Partnership business.

An LLC in Alabama can be set up for as little as $160- $178.

Licensing and Taxes Registration

Taking care of all special taxes and permits that your business might need is another important step.

According to your region, you will need to check and confirm the requirements your business needs to legally exist.

Most businesses will simply need a tax ID number, also known as a Federal EIN. An EIN is essential for hiring employees and functional business bank accounts.

In Alabama, business owners will also need to register for Alabama sales tax, if they are selling physical products, and also register for state income and unemployment insurance tax for businesses hiring employees.

Set up Accounting and Business Banking Details

A proper accounting system will help you keep track of all aspects of your business and simplify your tax filings.

Also, it will give credibility to your business and allow for fast, easy and reliable accounting.

Fund your Business

Business owners are lucky to have more funding options today than in past times. There are a lot of legal financial choices today; from Crowdfunding to microloans.

The choice is left to you to pick the option that best suits your business plan. Picking a funding method that is well compatible with your financial needs, sales level, and the size of your business is very important.

Get Insurance

Common and popular types of business insurance are; Workers Compensation Insurance, Professional Insurance, and General Liability Insurance.

For smaller or home-based businesses, general liability insurance might be the best bet. For the state of Alabama, businesses are required to have worker’s compensation insurance as long as they have five or more employees.

Build your Brand

Build a strong and impressionable logo to solidify the standard of your business.

Now that your business is firmly in place to kick off, you will need to design a logo that properly exudes the values of your business.

Remember that customers will be more mindful of companies with memorable and high-quality brands.


Build a professional and informative website affiliated with your business. Remember to keep the URL as closely related to your business name as possible.

Also, set up social media accounts (Facebook, Twitter, and LinkedIn) for advertising and marketing.

With these easy to follow steps, setting up a business in Alabama should not prove to be as difficult as you thought.