Alabama business license

Are you thinking of starting a new small business in Alabama? Many industries may require a business license from the State of Alabama in order to operate within the regulations set by the state.

BY: MARK ANDREW ON WEDNESDAY, SEPTEMBER 25, 2019
Alabama business license

1) Alabama Tax Registration for your Small Business

If you are planning to start an Alabama small business, you must first obtain certain licenses, permits, or identification numbers to be used for tax purposes. Some common forms of tax that Alabama small businesses use include state sales tax, income tax withholding, and unemployment tax. These are only a few of the taxes you may encounter as the nature of your business may require you to pay other forms of taxes. A few others you may encounter include:

  • Lodgings tax
  • Mobile communication services tax
  • Nursing home privilege tax
  • Pharmaceutical provider tax
  • Rental tax
  • To get started, go to the Alabama Business Tax Online Registration System. If you need more information on small business taxes, you can check out the Alabama Department of Revenue’s homepage. There you will find the locations of local taxpayer service centers. You may also search for online tax forms and see when business workshops are scheduled.

    2) Business Licenses

    Alabama state law requires businesses and those engaged in certain occupations to secure licenses and/or permits before they can operate. The number and type of permits as well as their cost will vary based upon the type of services you offer. As an example, an automobile dealership would have to apply for a different type of license than someone engaged in rebuilding or dismantling. The Alabama Department of Revenue features a Business Licensing page, where you will find handy information concerning licensing laws, in addition to answers to some frequently asked questions about Alabama business licenses. For even more information and resources, you can navigate to the state’s official website, which is Alabama.gov.

    3) Local Permits for Alabama Businesses

    Your city or county government may require certain permits aside from what the state of Alabama requires. It’s best to check with your municipality to see what if any permits or licenses are required. Here are a few different ones that Alabama residents often require:

  • Zoning Permit
  • Signage Permit
  • Occupational Permit
  • Health Permit
  • Business License and/or Tax Permit
  • Building Permit
  • Alarm Permit
  • 4) Incorporation Filing

    Certain businesses operating within the state of Alabama must register their companies with the Alabama Secretary of State’s Business Services. Those businesses include:

  • Corporations
  • Limited Liability Companies (LLC)
  • Partnerships
  • Non-Profit Organizations
  • Information on how to register as well as the required forms can be found on the Alabama Secretary of State’s official website.

    Sole proprietors are not required to register their businesses with the Alabama Secretary of State, so long as they operate under the owner’s personal name. If you operate a sole proprietorship and do not wish to do business under your own name, Alabama law requires you to register for a trade name or Doing Business As.

    5) Trade Name: Doing Business As (DBA)

    To provide your business with a different name than your own, you will need to file for a trade name. This is also referred to as “Doing Business As” or DBA. Visit the Alabama Secretary of State’s website to find information on how to register trademarks, trade names, or service marks. On that web page, you can also search trade names that are already in the database. That way, you can make sure that the name you plan to use has not already been claimed by someone else.

    Employer Requirements

    6) Withholding Taxes

    After filing taxes for the fourth quarter of each year, employers in Alabama are required to retain records relating to employment taxes for at least four more years. The information you must keep on file includes personal information about your employees, their wages, annuities, and pension payments; your Employer Identification Number (EIN), and data related to tax deposits. If you need tips on keeping tax records, visit the IRS page concerning employment tax recordkeeping. By maintaining concise, accurate records, you will be better able to track sources of income, monitor how your business is growing, prepare state and federal tax returns, and determine what expenses you may deduct.

    W-4 and W-2 Forms

    Upon hire, each employee must supply you with a completed IRS form W-4, which is a withholding exemption certification. You are then responsible for submitting this form directly to the IRS.

    In Alabama, employers are also required to handle information relating to the amount of wages paid and taxes withheld for each employee. At least annually, you should submit wage and tax information from the previous 12 months to the federal government. Do this by using an IRS Form W-2, which is a wage and tax statement. Send the “A” copy of this form to the Social Security Administration (SSA). The deadline for submission is the final day of February if submitting the form manually, or the final day in March if you are sending it electronically. You should also ensure each employee receives a copy no later than January 31 for the previous year’s earnings.

    Follow these links if you need further assistance with filling out your required tax forms:

  • The Social Security Administration’s (SSA) Instructions and Information page for Employer W-2 Filing
  • The Internal Revenue Service (IRS) Employer Tax Guide
  • 7) Employee Eligibility Verification (Form I-9)

    Each new employee should also complete an I-9 form. An I-9 form provides proof of that person’s eligibility to work in this country. Ensure the form is completed no later than three days after an employee’s start date. You are required to keep this form on file regardless of whether someone claims U.S. citizenship.

    You may find the I-9 form by visiting the official website of the Department of Homeland Security’s United States Citizenship and Immigration Services (USCIS).

    8) New Hire Reporting

    Alabama employers are required to submit information about new or recalled employees to the Alabama Department of Industrial Relations. Do this within 20 days of a new hire’s start date. Among the information you will include is personal data such as the individual’s name and Social Security number. You can submit this information electronically by visiting the home page of the Alabama Department of Industrial Relations. There you will find the electronic filing system for new hires as well as some frequently asked questions.

    9) Insurance Requirements

    Any Alabama business that hires employees is required to pay unemployment compensation tax. This tax is used to provide some aid to those who later become unemployed but are capable of holding down a job. The Alabama Department of Industrial Relations has an Employer Information page that provides more detailed information as it related to unemployment tax.

    If you hire employees, you may also be required to pay for workers’ compensation insurance. This is a form of insurance that covers workers that become injured while on the job or acquire an illness related to it. For more information, go to the Insurance Coverage Information page of the Alabama Department of Industrial Relations. Keep in mind that you may be exempt from paying this tax if you hire four or fewer employees. This is true regardless of whether they are working full time or part time.

    About the Author

    Mark Andrew

    Mark is a freelance content writer specializing in topics such as Internet marketing for small businesses. His goal is to help small businesses owners understand what types of services and products truely bring in more business.

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