How to Start a Business in Alabama
Alabama Business Facts
Alabama, also known as the Yellowhammer State, the Cotton State, and the Heart of Dixie, is considered to be the thirtieth largest state by area. What the state has become today is a product of the economic hardship it suffered in the past.
From a state that is completely dependent agriculture, Alabama has now diversified its interests. From management to finance, manufacturing, automotive, aerospace, healthcare, mineral extraction, retail, education, and technology, Alabama is now one of the most thriving states in America.
In terms of business development, Alabama has many reasons to be proud of. Alabama is a hub for medicine and automotive manufacturing, with recent successes ranging from Remington to Polaris. Companies such as Airbus, Hyundai, and Mercedes-Benz locating plants in the state demonstrate how pro-business Alabama can be for big companies. A new study reveals that Alabama is likewise an attractive destination for small business entrepreneurs and owners.
Major Companies Headquartered in Alabama
Alabama is the headquarters of many major companies including HealthSouth, Regions Bank, BE&K, Civil Air Patrol, and the University of Alabama.
Startup Environment
Alabama believes that by bringing in big corporation, this will lead to the development of smaller businesses that are there to offer resources but ultimately seeking ways to expand. Alabama has among the lowest rates for property tax and corporate income tax. This leads to the creation of a pro-business environment.
Step 1: Decide on a Business Structure
There are 3 basic options: a Corporation, LLC or DBA. Click here to learn more about business entities.
- A Corporation is a separate entity (provides liability protection to the owners) with a structure that includes shareholders, directors and officers. It’s more complex than a DBA but the entity of choice for large companies and startups that intend to raise funding. Some professions are required to choose what is known as a “Professional Corporation” or PC (doctors, lawyers, architects, etc.).
- An LLC or “Limited Liability Company” is a newer type of business that is both a separate entity and provides very easy management (doesn’t require directors or officers) and taxation. The LLC has largely replaced the DBA and Corporation in popularity recently as it provides liability protection but with much less complexity (and taxation) than a Corporation.
- A DBA or “Doing Business As” (also known as a “Fictitious Business Name” or FBN) is not really a separate structure, but just a different name that an individual or partners use as their business name.
Step 2: Choose a Business Name
Choosing a business name is easier said than done – many legal and business problems can arise from picking the wrong name (you can always change it later but the less times you have to do that the better). In Step 3 we’ll show you how to search for the name in Alabama, but we highly recommend you do the following before searching Alabama state databases:
- Make sure you’ve covered the basics: unique, easy to understand/pronounce (practice saying it out loud: “Thanks for calling XYZ”) and can survive over time (“DVD World” is not timely). Here are some of our tips on business identity including logo and trademarks.
- Search the web for your proposed name. Search Google, Bing and DuckDuckGo as a “first sweep” for any potential conflicts, especially in your state or local jurisdiction. NOTE: If you intend to operate nationally or even internationally it will be even more important that your name be unique. This should cover many cases where a company name is being used but not officially trademarked (see next tip).
- Do a trademark search with the US Patent and Trademark Office (USPTO). This will be a very good indicator if your name will have any conflicts. There’s an art to trademark searches (trademark specialists will charge you handsomely to do a thorough search) but in our experience if you can use Google at a fairly advanced level you can reasonably clear a name yourself. Tip: search misspellings, plurals, variations of spelling, sound-alikes and other versions of your chosen name to be sure it’s not already registered.
- Make sure your company name choice is available by searching the Alabama Business Entity Database and doing a name search on the State of Alabama website. NOTE: Make sure to search variations of spelling, plurals and misspellings as the state may reject a name that is too similar (then you have to start all over again, wasting valuable time).
NOTE: Familiarize yourself with the Alabama naming guidelines. LLC entity names need to contain the words Limited Liability Company or the abbreviation LLC, and certain words are restricted or prohibited.
Restrictions on Alabama Business Name & Business Purpose
- Alabama requires companies to have unique names. Alabama corporate names may be followed by a number of approved designations, including:
- Corp.
- Corporation
- Inc.
- Incorporated
- Restricted designations in Alabama include:
- Bank
- Banking
- Electric
- Engineering
- Insurance
- Trust
Step 3: Register the Business
Each state has its own requirements for registering a business. Now that you’ve chosen a business structure and selected your business name, here are the requirements to register your business in Alabama.
How to form an LLC in Alabama
- File the “Articles of Organization” with the Alabama Secretary of State.
- Once the articles are filed and approved you will then need to properly organize the LLC (this also applies to “1-person LLC’s”) by holding an “Organizational Meeting” which takes contributions from the members, issues Member Certificates, adopts the company Operating Agreement and more.
- Hire a professional Registered Agent.
- Hold an Organizational Meeting to take contributions from the members, issues Member Certificates, adopts the company Operating Agreement and more. (yes, even for 1 person LLCs).
- Optional: Elect S-Corporation status with the IRS by filing IRS Form 2553. Yes, even an LLC can choose to be taxed as an S-Corporation (or even a C-Corporation).
TIP: Speak to your tax advisor about this important issue because it adds complexity to your LLC most people would rather avoid.
- Optional: Create an operating agreement. This is a legal document that outlines ownership and operating procedures of your LLC.
How to Incorporate in Alabama
Considerations when incorporating or forming an LLC in Alabama
- The Alabama Secretary of State could take anywhere from 4 to 5 weeks for mail filings to process the paperwork. This may increase during peak periods.
- Tip: Check our order form to see how long Alabama is currently taking to process regular and expedited orders.
- A Registered Agent is required for every Alabama Corporations and LLC. The chosen registered agent must have a physical street address in Alabama. A professional Registered Agent who will provide their address and forward any important documents to you. This is convenient if you have to move, since you won’t have to file forms or pay fees, (just update your address with your agent).
How to File a DBA in Alabama
- Check the state database of business names.
- Complete the DBA registration form.
- Notarize and submit the form
- Pay $30 for the filing fee.
Step 4: Obtain your Federal Employer Identification Number (FEIN or “EIN”)
Your EIN is like your Social Security Number for your company. It’s required for Corporations and LLC’s and optional for DBA’s (if you don’t have any employees, then it’s required). However, if you are a DBA and don’t obtain an EIN you will be forced to use your Social Security Number on many documents so it’s typically recommended you obtain the EIN to prevent identity theft.
To obtain an EIN you can apply online with the IRS or via IRS Form SS-4.
You can read more about corporate tax laws in Alabama on the Alabama Department of Revenue Taxation Division site.
Optional Considerations when registering a Alabama business
- Hire a professional Registered Agent. Many people list their home or business address on the Articles of Organization or Incorporation. This can cause issues because it becomes public record (you’ll get lots of junk mail). A professional Registered Agent will provide their address and forward any important documents to you, this is also convenient if you have to move (you don’t have to file forms or pay fees, just update your address with your agent).
Ready to register a business in Alabama?
We specialize in registering businesses in Alabama.
Step 5: Open Company Accounts: Bank and Credit Cards
To keep business and personal expenses separate, you should open a separate account for your business. In addition, getting business credit cards is how you begin to build a company credit profile (corporation or LLC required) and can later qualify for larger loans and lines of credit. To open the account simply call your chosen bank and inquire on the steps to open a business bank account. Typically you’ll need a) your filed paperwork, b) your EIN and c) a company resolution authorizing your company to open the account (signed by the owners, members, officers or directors, etc.).
Top 5 Major Banks in Alabama
- Regions Bank
- BBVA Compass Bank
- People’s Bank of Alabama
- First Community Bank
- National Bank of Commerce
TIP: Our business formation service includes a free banking resolution for your use.
Step 6: Obtain Business Licenses and Permits
Now that you’ve registered your business name you need to obtain a business license for your company – this authorizes your company to do business in your city or county. Typically this also involves registering for state taxes and permits (the city may require them as part of the business licensing process).
TIP: We work with a company that can obtain and prepare business licenses and permits for you. Click here to learn more.
Step 7: Annual and Ongoing Requirements
DBA: Your Fictitious Business Name should be valid for 5 years (unless you change company name or other information listed on the FBN) at which point you’ll need to renew it with the county.
Corporation: Business in Alabama should file an Annual Report with the Secretary of State of Alabama.
LLC: Alabama corporations are required to file an Annual Report with the Alabama Secretary of State each year, in addition to general taxation. Information on your business’s taxes can be found here.
Important Alabama Contacts
Alabama Secretary of State
Business Services (for Corporation and LLC filings)
Alabama State House
11 South Union Street, Suite 119
Montgomery, AL 36130
Phone: 334-242-5324
Alabama Taxation Departments
Alabama Labor and Employment Departments
Alabama Startup Resources
1. Small Business Administration (SBA) Alabama District Offices
2. SCORE Alabama
- South Alabama SCORE provides free and confidential business advice and counseling tailored to meet the needs of your small business and your personal objectives.
3. Alabama Legal Statutes
4. Alabama Chambers of Commerce
- Hoover Area Chamber of Commerce
- Decatur Morgan County, Alabama, Chamber of Commerce
- Monroe County Chamber of Commerce
- Thomasville Alabama Chamber of Commerce
5. Innovation Portal
- The mission of the Innovation PortAL is to create a regional entrepreneurial and innovation hub by providing local entrepreneurs and businesses with access to state-of-the-art facilities, comprehensive training programs, extensive professional networks and mentorship.
6. Angel.co Alabama Startups
- A list of all 480+ Alabama Startups and 4,700+ Alabama angel investors registered with Angel.co. Good research resource.
7. Alabama Business News
8. IEDC
9. ADECA
10. USGBC Alabama
- USGBC Alabama is at the forefront of environmentally-sensible development and sustainability in the state working at the national and regional levels to advocate for high performance healthy buildings, and deliver high-quality sustainable building education and networking opportunities.
