Alabama doesn't have a single statewide business licence. Instead, new business owners will need to obtain a county business privilege licence issued through the probate judge's office or licence commissioner, depending on the county you plan to operate from. You might also need a municipal licence if your business will be located inside city or town limits, a sales tax licence from the Alabama Department of Revenue (ADR), or federal licensing if you're in a regulated field. And businesses in some industries, such as healthcare, will need an occupational licence from a state board.
Below, we'll discuss how to get a business licence in Alabama, which licences apply to your situation, and how renewal works.
Key takeaways
Alabama licensing is managed by counties and cities rather than a single state agency. Businesses might need both a county and a municipal licence.
The state business privilege tax is an annual tax obligation that is distinct from the county or city licence required to legally operate a business.
Costs and renewal deadlines will vary by county and city. It's always worth confirming the current fees and cycles directly with your local government office.
What is a business licence in Alabama?
Alabama doesn't issue one statewide business licence the way some other states do. What you'll need is a county business privilege licence, issued by the probate judge's office or by a licence commissioner. This is required for nearly every business that is operating legally in Alabama.
If you're located inside city or town limits, you'll also need a municipal business licence. Each municipality manages its own business licence fees and applications.
If you work in a regulated field, such as general contracting, cosmetology, real estate, healthcare, or food service, you might need an occupational licence and board approval to apply for that licence.
In addition, if you sell tangible personal property, you'll need a sales tax licence, which is issued by the Alabama Department of Revenue (ADR).
Regulated industries, such as alcohol and firearm sales, and interstate transportation, require federal licences.
How do you get a business licence in Alabama?
Getting a business licence in Alabama typically means coordinating between a few different agencies and offices. Here's the process:
Register your business structure: If you're forming a limited liability company (LLC) or a corporation, file a certificate of formation with the probate judge in the county where your registered business will be located. The probate judge will forward it to the Alabama secretary of state. Sole proprietors and general partnerships can skip this step, although you'll still need to register a trade name with the county if you're operating under anything other than your own legal name.
Get an Employer Identification Number (EIN): You'll need an Employer Identification Number (EIN) from the Internal Revenue Service (IRS) if you're forming an LLC or corporation, hiring employees, or opening a business bank account.
Register with the Alabama Department of Revenue (ADR): Use the state's online tax portal, My Alabama Taxes (MAT), to set up your sales tax licence if you sell taxable goods and your business privilege tax account if you've formed an LLC or corporation.
Apply for your county business privilege licence: Contact the probate judge's office or licence commissioner in the county where your business will operate from. Requirements and forms differ from one county to the next.
Apply for a municipal business licence if you're inside city limits: Check with the city clerk's office directly. This application is separate from anything you filed at the county level.
Apply for an occupational licence if your industry requires it: General contractors, for example, need approval from the Alabama Licensing Board for General Contractors before taking on projects valued above US$50,000. Numerous other professions also need occupational licences.
How much does a business licence cost in Alabama?
Costs vary depending on which county and city you'll operate from. These are ranges rather than fixed numbers. Confirm current fees with your local office.
|
Licence type
|
Fee range
|
Renewal frequency
|
|---|---|---|
| County business privilege licence | Roughly US$15–US$1,000+, often tied to gross receipts | Annual |
| Municipal business licence | Varies by city, often calculated similarly to the county fee | Annual |
| Sales tax licence | No fee | Not applicable |
| Occupational licence (varies by type) | Varies widely by board | Annual or biennial |
The state business privilege tax is another annual fee that is calculated on a sliding scale, roughly US$0.25–US$1.75 per US$1,000 of your business's net worth, depending on your federal taxable income bracket. County and city fees typically work differently: jurisdictions might charge a base amount plus a rate applied to your gross receipts, which is why a home-based business and a multilocation retailer in the same county can end up paying very different amounts for what looks like the same licence.
How do you renew your business licence in Alabama?
Renewal timing depends on which licence you're renewing. Many counties set their business licence year to run from 1 October through 30 September, which means renewal is due by 1 October no matter when you originally applied. Others use the calendar year instead, so check with your specific county office rather than assuming your neighbour's deadline applies to you.
Though not technically a licence, the state business privilege tax is an annual obligation that businesses must comply with to remain in good standing with the state, and it follows its own separate schedule. LLCs file and pay it annually, generally three and a half months after the start of the entity's taxable year, through the My Alabama Taxes portal.
Operating on an expired county or city licence can result in fines, and some jurisdictions won't reissue the licence until you've paid back fees plus penalties. Missing the state business privilege tax deadline can add interest and penalties directly onto the tax you already owe.
What are common issues when getting a business licence in Alabama?
Certain mistakes occur frequently with Alabama licensing. Here's what often causes problems:
Confusing the business privilege tax with the business privilege licence: These are managed by different agencies and serve different purposes. Complying with these requirements will help your business to avoid extra paperwork.
Assuming a home-based or online-only business doesn't need a licence: Alabama's county licensing requirement is based on where you operate from, not whether customers visit in person. A home-based business selling only online will need a licence.
Skipping the city licence after obtaining the county licence: If you're inside incorporated city limits, you'll typically need both. The county office won't necessarily remind you that the city requires its own separate application.
Applying for an occupational licence before clearing board approval: Contractors and other regulated occupations often need certification or to provide exam results first. The licence application won't move forward without it.
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FAQs about business licences in Alabama
The content in this article is for general information and education purposes only and should not be construed as legal or tax advice. Stripe does not warrant or guarantee the accuracy, completeness, adequacy, or currency of the information in the article. You should seek the advice of a competent lawyer or accountant licensed to practise in your jurisdiction for advice on your particular situation.