An Alabama business license is an authorization from a state, county, or municipal agency that allows a company to operate. The licenses and permits a business needs depend on its activities and location.
“Licensing is something that people want to get right immediately,” says Mary Nobles Hancock, a Birmingham-based associate attorney at Bradley Arant Boult Cummings. “If you’re just starting out or are expanding into a new city or location, take the time to research your requirements. Otherwise, you may have to put your business on hold while you get things straightened out.”
Business licensing is one part of how to start a business. This guide covers Alabama business license types and the requirements that may apply.
This article provides general information, not legal advice. Licensing requirements can change and may vary by jurisdiction and business activity. Consult a qualified attorney or the appropriate state or local agency for guidance based on your circumstances.
What is a business license?
A business license is government authorization to conduct a specific activity in a particular jurisdiction. Requirements vary by business type and location.
The Alabama Department of Revenue says that county probate judges or license commissioners issue state and county privilege licenses. A business may need a license in each county where it operates, as well as separate municipal licenses. Businesses in regulated industries may also need certification from an industry board or commission.
Types of business licenses required in Alabama
Alabama uses activity- and location-specific licenses instead of a statewide general business license. A business may need federal, state, county, and municipal approvals.
Federal licenses
Businesses in federally regulated industries might need licenses or permits from the relevant federal agency. Examples include alcohol sales, firearms, agriculture, and mining.
The US Small Business Administration names regulated industries and directs applicants to the appropriate agencies.
State licenses
Alabama businesses may need several state licenses or tax registrations:
Business privilege license
Alabama’s privilege license requirements come from Title 40, Chapter 12 of the Code of Alabama. The law covers the businesses, occupations, vocations, and professions listed in that chapter. County probate judges or license commissioners issue the licenses. A business generally needs one in each county where it conducts covered activities.
A business privilege license and the Alabama Business Privilege Tax are separate requirements. The license authorizes covered business activities under Title 40, Chapter 12.
The privilege tax applies to certain entities for the privilege of being organized or doing business in Alabama. Tax rules appear in Sections 40-14A-21 through 40-14A-29 of the Code of Alabama.
Sales tax license
Businesses that sell taxable goods or services have to register for an Alabama sales tax account. Registration is available through My Alabama Taxes. The business uses its sales tax number to collect sales tax from customers and remit it to the state.
Professional or regulatory license
Certain occupations require a license, permit, or certificate from an Alabama regulatory board or agency. A business might need to present that approval before receiving a municipal business license. The Alabama Department of Revenue keeps a list of regulatory boards and agencies.
Local licenses
County and municipal requirements depend on where the business operates. A company could need a state and county privilege license plus a separate city license. Building, zoning, health, and alcohol permits may also apply.
The table below has official application routes for five major Alabama jurisdictions.
| Jurisdiction | License route | How to apply |
|---|---|---|
| Jefferson County | State and county business licenses | New businesses can submit the county’s online Application for Tax or License Number. Jefferson County reviews the application and identifies applicable licenses. |
| Shelby County | State business privilege license | Review the Shelby County business license requirements and apply at one of the county’s three license offices. Online service is available for renewals. |
| Birmingham | Municipal business license | Apply through the Birmingham Tax and License Division. New applications are accepted in person at City Hall. |
| Huntsville | Municipal business license | Submit Huntsville’s General Business Application online or in person. The city reviews the application before calculating the license fee. |
| Mobile County | State and county business privilege license | Follow the Mobile County License Commission’s application process. Application forms can be returned by mail, fax, or in person. |
How to get a business license in Alabama
- Register your business
- Obtain an employer identification number (EIN)
- Apply for federal licenses
- Apply for privilege licenses
- Apply with regulatory agencies
- Apply for local licenses
- Register for a sales tax number and license
Alabama licensing requirements vary by business activity and location. State, county, and municipal agencies may each have separate requirements.
“Many Alabama counties and cities have their own business license requirements,” Mary says. “They each use different measures for what qualifies as doing business in that county or city. A lot of cities and states have small business resource groups that can be really helpful.”
Mary recommends contacting each local licensing department where the business operates. “A business licensing department can help point you in the right direction,” she says. Owners can also explore business coaching and follow small business tips.
Add these licensing steps to your starting a business checklist:
1. Register your business
Corporations, limited liability companies (LLCs), and limited liability partnerships (LLPs) must register with the Alabama secretary of state. Sole proprietorships and general partnerships generally operate under their owners’ names and may not require state entity formation.
To start an LLC in Alabama, reserve its name before filing its certificate of formation. The secretary of state charges $25 for a mailed domestic entity name reservation. Online reservations include an additional processing fee.
The cost to start a business can include entity formation and licensing fees. The filing fee for a domestic LLC certificate of formation is $200. The formation filing must include the name reservation certificate. Applicants can access current forms and online filing options through the secretary of state’s Business Downloads page.
A sole proprietor or general partnership can register a trade name when operating under a name other than the owner’s legal name. Alabama’s trade name registration form is available from the secretary of state.
2. Obtain an employer identification number (EIN)
An employer identification number is a federal tax ID issued by the IRS. The number identifies a business on federal tax returns and other federal filings.
Partnerships and corporations need an EIN. Businesses with employees also need one. LLC requirements depend on the LLC’s tax treatment and federal filing obligations.
An EIN differs from an Alabama tax account number. The IRS issues an EIN for federal purposes. The Alabama Department of Revenue issues state tax account numbers for obligations such as sales tax and income tax withholding.
Businesses can apply for an EIN directly through the IRS. The application is free. Online applicants typically receive their EIN in minutes.
3. Apply for federal licenses
Use the US Small Business Administration’s licensing directory to find the federal agency that regulates your business activity.
Follow that agency’s application process and confirm its documentation, fee, and renewal requirements. Secure any required approval before beginning the regulated activity.
4. Apply for privilege licenses
Alabama’s state and county privilege licenses apply to the activities listed in Title 40, Chapter 12 of the Code of Alabama. County probate judges or license commissioners issue these licenses.
Fees vary by business activity. Other factors may include the business location, municipal population, number of employees, or gross receipts. The Alabama Department of Revenue’s county probate office directory provides contact information for each county.
State and county privilege licenses follow Alabama’s fiscal year. The annual license period runs from October 1 through September 30. Businesses must renew in October. A license becomes delinquent on November 1.
5. Apply with regulatory agencies
Certain professions and industries require approval from an Alabama board or agency. For example, cosmetology businesses may need licenses from the Alabama Board of Cosmetology and Barbering.
A regulatory permit or certificate may be required before a county or municipality issues a business license. The Alabama Department of Revenue has a list of state regulatory boards and agencies.
6. Apply for local licenses
County and municipal licenses are separate. A county license does not replace a city license. A business operating in several jurisdictions may need licenses from each one.
Contact the county licensing office and every municipality where the business conducts covered activities. The Alabama Department of Revenue provides a county probate office directory. The Alabama League of Municipalities provides city contact information.
Local governments may require additional permits for zoning, construction, signage, food service, or alcohol sales. Requirements and application routes vary by jurisdiction.
7. Register for a sales tax number and license
An in-state retail business must register with the Alabama Department of Revenue before obtaining an Alabama sales tax license. Apply through My Alabama Taxes.
ALDOR provides online business tax registration at no charge. The department states that applicants generally receive their tax account number within three to five days. A sales tax license is mailed after registration.
Applicants need the following information:
- Legal business name
- Physical and mailing addresses
- Contact information
- NAICS code
- Business opening date
- Owner or officer information
- EIN for corporations, LLCs, and partnerships
- Entity formation or qualification date
- Entity subtype
Alabama applies several state sales tax rates:
- 4%: General tangible personal property and amusement sales
- 2%: Food and groceries
- 2%: Automotive vehicles
- 1.5%: Manufacturing and mining machinery
- 1.5%: Qualifying farm machinery and equipment
- 3%: Food sold through vending machines
- 4%: Other vending-machine sales
County and municipal sales taxes may apply in addition to the state rate. The final rate depends on the customer’s location and the product sold.
Shopify Tax can calculate sales tax at checkout based on the customer’s address and product category. Merchants select the states where they’re registered to collect tax. Shopify then applies the relevant state and local calculations to eligible orders. Businesses are responsible for registration, returns, and remittance.
This article provides general information, not legal or tax advice. License requirements, fees, and tax rates can change. Consult a qualified attorney, tax professional, or government agency for guidance based on your circumstances.
Alabama business license FAQ
How do you start a business in Alabama?
To start a business in Alabama, follow these steps:
- Choose a structure and name.
- Register a corporation, LLC, or LLP with the Alabama Secretary of State.
- Obtain an EIN if required.
- Register applicable tax accounts.
- Apply for federal, state, county, and municipal licenses.
Do I need a business license as a sole proprietor in Alabama?
Possibly. Alabama licensing depends on business activity and location rather than entity type. A sole proprietor might need state and county privilege licenses plus municipal or professional licenses. Confirm requirements with county and city licensing offices.
What Alabama businesses don't need a license?
Alabama has no universal license exemption list. Businesses outside the activities covered by Title 40, Chapter 12 may not need a state or county privilege license. Municipal, federal, or professional requirements can still apply. Check with each relevant licensing agency before opening.
What is the privilege license in Alabama?
An Alabama privilege license authorizes a person or entity to conduct an activity covered by Title 40, Chapter 12. County probate judges or license commissioners issue state and county licenses. A business generally needs one in each county where it operates.
How much does it cost to get a business license in Alabama?
Alabama has no flat business license price. Fees vary by activity and may depend on location, population, employee count, or revenue. County and municipal licenses may carry separate fees. Contact the applicable county and city licensing offices for an exact amount.
