Small Business Start Up Guide
Starting a business is exciting and overwhelming, much like these stacks of cookies...
Following are known steps to starting a small business in Alabama with helpful links. Your business may have tax and license requirements not listed here.
See Due Dates tab for information on annual tax and license filings.
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What type of entity?
A business can be classified as a sole proprietorship, a partnership, an "S" corporation or a C (regular) corporation and/or an LLC. Entity type is an important consideration in a business start up. Consult an attorney and an accountant to help guide your choice. Read more about entity selection.
Where do I reserve my business name?
Reserve your business name with Alabama Secretary of State.
How do I register with the State of Alabama?
A corporation should file a Certificate of Incorporation and Articles of Incorporation with Alabama's Secretary of State.
An LLC should file a Certificate of Formation and Articles of Organization with Alabama's Secretary of State.
Does my business owe privilege tax?
If your entity choice is Corporation, S Corporation, Partnership and/or LLC, you may need to file an initial business privilege tax return with state of Alabama. As of 2024, Alabama no longer requires privilege tax and report if tax calculates to be less than $100, which is the case for most taxpayers.
Do I need a federal identification number?
Receive your FEIN from IRS the same day you apply with no fee. You can use your social security number for filing taxes if you are a sole proprietor (not an LLC, partnership, or corporation.)
What about business licenses?
State of Alabama only requires certain businesses to purchase a state license. If you're not sure, contact your county license office (Jefferson County 205-325-5195.)
Most counties and cities require an annual business license.
What if my business is an LLC?
An LLC (Limited Liability Company) is a state designation and can be single-member or multi-member. An LLC can be taxed as a C (regular) corporation, an S Corporation, a partnership or as a disregarded entity (like a sole proprietor.) The managing member of the LLC will select how the business will be taxed by filing form 8832. S Corporation election is requested on form 2553.
Should I open a business checking account and credit card?
Open a business checking account and (if needed) a business credit card. Best practice is keeping business income and expense separate from personal transactions.
What about payroll?
Paying employees and filing payroll taxes on time is important. Consider a payroll service, such as Quickbooks Payroll, to handle all the company's payroll needs.
How do I sign up for a sales tax number?
Apply for a sales tax number at My Alabama Taxes, bottom left under "Businesses."
Should I keep my own books?
Consider online bookkeeping software, such as Quickbooks, for invoicing, inventory, mileage log, bank and card feed, receipt capture, expense categorizing and much more. Download the mobile app for on-the-go convenience.