Alabama Business License

If you’re planning to launch a business in Alabama, you must first secure a business license in order to conduct business legally.

Having an Alabama business license serves as proof that your business complies with local, state, and federal regulations. It legitimizes your business activities and allows you to operate within a specific jurisdiction.

This article will explore the factors to consider if you need a business license in Alabama as well as the steps and costs involved in obtaining one.

Do I Need a Business License in Alabama

In Alabama, businesses are required to obtain various licenses and permits at the local, state, and federal levels. Here’s a general breakdown:

Type of Business

Below, we’ve detailed common ways in which your business type can dictate the licenses you’ll be required to obtain, as well as specific examples of these:

• Business Privilege Licenses: Known as a “general business license,” a county Probate Judge or License Commissioner issues this license at the local level. However, businesses need to register it annually with the Alabama Department of Revenue (ALDOR). Anyone or any company doing any kind of business, job, or professional work in the state needs this license
• Business Tax Registration: If your business will rent or sell tangible personal property or goods, you’ll need a business tax registration — commonly called a “seller’s permit.” ALDOR issues this permit
• Professional Licenses: Alabama has certain professional licenses for occupations typically regulated by professional boards, such as lawyers, medical practitioners, and accountants. For example, doctors need a license from the Alabama Board of Medical Examiners & Medical Licensure Commission and lawyers need a license from the Alabama State Bar
• Environmental Permits: Some businesses also need an environmental permit to operate in Alabama. Issued by the Alabama Department of Environmental Management (ADEM), these permits help regulate what goes into the air, land, and water to safeguard both people and the environment

However, this is not the only factor influencing the exact combination of licenses you’ll need — the location of your business within Alabama plays an important role as well.

Location

In this section, we’ve provided a succinct overview of the potential licenses and permits that your business may need due to local, state, and federal requirements:

• Local: At the local level, you must obtain a business privilege license. If your company plans to sell goods, then you also must get a store license. You can obtain both licenses by filing with your county’s Probate Judge or License Commissioner. If your business serves food, offers accommodation, or affects people’s health in any way, you’ll need to get a public health license — issued by the Alabama Department of Public Health (ADPH). Some businesses also may require certain zoning, land use, building, and fire department permits
• State: At the state-level, businesses in Alabama need to register for a “business tax registration” if they plan to sell or rent out physical items for which companies would normally collect sales tax. This is also known as a “seller’s permit”
• Federal: If your business operates within certain industries or does specific types of work, you might need a license from the federal government. These include the alcohol, aviation, firearms and explosives, radio and television broadcasting, and transportation industries, among others

Since the exact permits and licenses your business will need are entirely unique to your situation, you’ll have to conduct thorough research into your own local, state, and federal regulations to smoothly launch your business.

Alternatively, many entrepreneurs opt to leverage the expertise of third-party services to handle this on their behalf.

How to Get a Business License in Alabama

In order to get your business license(s) in Alabama, you will need to complete the following steps:

• Form Your Business
• Obtain an Employer Identification Number (EIN)
• Apply for the Required Licenses and Permits

Let’s take a look at each step in more detail below.

Step 1: Form Your Business

Before setting out to obtain a business license in Alabama, it’s pivotal that you first choose an appropriate structure for your business. Sole proprietorships, general partnerships, and corporations are all common choices, however it’s often seen as the most advantageous for small businesses in Alabama to register as a Limited Liability Company (LLC). Here are a few reasons for why:

• Limited Liability: Members are protected from personal liability for business debts, safeguarding personal assets
• Tax Benefits: LLCs typically enjoy a pass-through tax treatment, avoiding the double taxation that corporations are subjected to
• Management Flexibility: LLCs allow for flexibility in management structure, either being member-managed or manager-managed based on the preferences outlined in the certificate of formation
• Ease of Formation: With the Alabama Secretary of State providing forms that meet the minimum state law requirements and the option to file online, setting up an LLC is relatively straightforward

Many small business owners opt to avoid the tricky process of forming an LLC by instead leveraging the help of third-party LLC formation services.

Step 2: Obtain an EIN

The second step you’ll need to complete before applying for your business license is to obtain your EIN. This is a unique nine-digit number assigned by the Internal Revenue Service (IRS) to businesses in the United States so that their financial transactions can be identified and tracked.

An EIN is often necessitated when applying for various permits and licenses as it allows local and state governments to ensure your business is operating within the confines of the law. You can obtain it in a number of ways:

• Online: You can apply for your EIN on the IRS’s official website by using the EIN Assistant. You should be granted your EIN shortly after completing this application
• By Fax/Mail: After completing Form SS-4, you can apply for an EIN by submitting it to the IRS via mail or fax
• By Phone: International applicants and businesses located outside US Territories are required to call the IRS at (267) 941-1099 to obtain their EIN — which they should receive during this call

Note: If you are a sole proprietor, you will be able to use your Social Security Number (SSN) instead (as long as you do not have employees).

Step 3: Apply for Licenses and Permits

After settling on the appropriate structure for your business and initiating the application for your EIN, the next step is to focus on securing the necessary licenses and permits to operate legally within your locale and industry.

• Local Licenses: You’ll need to apply for Alabama business privilege licenses from the Probate Judge or License Commissioner in the county where your business is located. You’ll also need a license from every other county in which you conduct business. The ALDOR has an online listing of county probate offices which you can use when starting out
• Statewide Licenses: Most businesses need to obtain a business tax registration if they plan to sell or rent out physical items that would usually incur a sales tax at the time of purchase. You can sign up for this license — also known as a “seller’s permit” — on the My Alabama Taxes (MAT) website. Some types of businesses or jobs in Alabama also need additional licenses so check the ALDOR website for a list of different types of professions that require extra licensing
• Federal Licenses: While the federal government doesn’t mandate licenses for general business operations, if your business falls under any government-regulated category, such as agriculture, fishing, firearms, and alcohol sales, it may be required to obtain additional federal licenses or permits

Note: For more detailed information on municipalities and their respective websites, check out Alabama’s municipal websites.

Step 4: Renewal of Licenses and Permits

In Alabama, you must renew your business privilege license, business tax registration, and store license every year.

To renew your business privilege and store licenses, you will need to contact your local county’s probate office.

A probate judge will then be able to guide you on the exact steps you’ll need to take in order to renew your local license(s). You can also renew your business tax license on the MAT website.

Alternatively, you can use a third-party service or a professional attorney for this process. This can be a good choice if you want to ensure that you avoid potential fines, as well as if you want to be as time-efficient as possible.

How Much Is a Business License in Alabama

Registering for a business privilege license is free at the state level, but there are fees at the local level. The cost of Alabama business licenses at the local level may range from $15 to $1,000, depending on your county and how your business operates.

Some businesses, such as restaurants or healthcare providers, may additionally need specialized licenses or permits. These often incur extra fees.

Keep in mind that you’ll need to renew most licenses — usually annually — and renewal often comes with a fee. In addition, Alabama can sometimes charge a small processing fee for online transactions.

Generally speaking, you will need to check with the ALDOR and MAT websites — as well as with your local county and city government websites — in order to get accurate, up-to-date information on the current Alabama business license costs of your business.