Launching a new business is exciting. You’re eager to start marketing your products and earning money—but before you begin operations, you need to obtain the necessary licenses.
“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.”
Here’s an overview of the various license types required in Alabama to help you jump-start your research.
What is a business license?
A business license is a government-issued document that authorizes a business to perform a specific type of activity in a specific location.
Licensing requirements typically depend on a business’s activities and specific location. Some small businesses won’t need any licenses, while others will need federal, state, and local licensure to legally operate. Some businesses will also need to acquire permits, a specific type of business license intended to protect public health and safety.
Types of business licenses required in Alabama
Alabama businesses may require federal, state, and local licenses to operate legally. Here’s an overview of the license and permit requirements that might apply to your business:
Federal licenses
The federal government regulates certain industries—such as agriculture, mining, and firearm and alcohol sales—and businesses operating in these industries may be required to obtain a federal business license. You can view a full list of regulated industries and links to corresponding federal agencies on the US Small Business Administration website.
State licenses
Alabama requires all businesses in the state to obtain privilege licenses, which are general business licenses that apply at the state level but are administered by local county governments. Most business owners will also need to obtain a state sales tax license, and some may need to apply for a professional license from a statewide regulatory agency. Here’s an overview:
- Business privilege licenses. Alabama requires all non-exempt businesses to obtain a business privilege license from the county probate judge or license commissioner in the county in which the business is located. The Alabama Department of Revenue’s Business and License Center publishes a guide to privilege license requirements as well as a Handbook of Privilege and Store Licenses that contains up-to-date information about license types, fees, and relevant sections of state code.
- Sales tax license. Alabama-based businesses that sell or lease certain types of tangible personal property or sell taxable services in the state are required to obtain a sales tax number and license (sometimes referred to as a seller's permit) from the Alabama Department of Revenue (DOR). You’ll use this number to collect sales tax and remit it to the state.
- Regulatory licenses. You may also need to obtain a professional or occupational license from a state regulatory agency to practice specific types of work. For example, you might need a public health license from the Alabama Department of Public Health to manufacture food or operate a food and beverage store. The DOR publishes a list of all occupations that require regulatory licensure as well as a list of regulatory agencies and contact information.
Local licenses
Some businesses will also need to obtain licensure from local government entities. Here’s an overview of the license types you might need:
- County licenses. Some county governments maintain their own privilege license requirements—which means that you might need to obtain multiple privilege licenses to maintain compliance.
- Municipal licenses. You may also need to obtain licensure from any municipality in which you conduct business. Municipal requirements can include privilege licenses and professional licenses. If you operate in a regulated industry, you may need to show proof of licensure or certification from a statewide regulatory agency to obtain professional licensure at the municipal level.
- Other local licenses. You may need other local licenses or permits for specific business activities—such as local building permits or alcohol sales licenses.
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
Maintaining necessary licenses can help you avoid any fines or costly interruptions to your business, but identifying your requirements can be tricky—especially at the local level. “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."
She recommends contacting local licensing departments or small business organizations to identify your requirements. “A business licensing department can help point you in the right direction,” she says, “and a lot of cities and states have small business resource groups that can be really helpful.”
Follow these general steps to get the proper licenses for your business:
1. Register your business
Whether or not you need to register your business in Alabama depends on your business entity type. If you operate a corporation, limited liability company (LLC), or limited liability partnership (LLP), you’re legally required to register with the Alabama secretary of state. You can apply online by submitting your name reservation and a Certificate of Formation. If you still need to form your business or reserve a name (or require duplicate copies of either certificate), you can access the necessary forms on the Alabama secretary of state website.
If you operate a sole proprietorship or general partnership, you aren’t legally required to register your business with the state, but you may choose to register for a trade name (known in many states as a filing a doing business as, or DBA) to operate under a name other than your legal name. You can download the Trade Name registration form.
2. Obtain an employer identification number (EIN)
If you’re an Alabama LLC owner or sole proprietor and don’t plan to hire any employees, you don’t necessarily need an employer identification number (EIN)—but you may choose to obtain one anyway to help you separate your personal and business finances. If you operate any other business entity type (or plan to hire employees), you’re legally required to apply for an EIN from the Internal Revenue Service (IRS). You can apply online for free, and applications are typically processed within minutes.
3. Apply for federal licenses
If your business operates in a federally regulated industry, you may need to obtain federal licensure. Consult the US Small Business Administration website for a list of regulated industries and links to relevant federal agencies. You can visit agency websites to view specific information and file a federal business license application.
4. Apply for privilege licenses
Alabama requires all non-exempt businesses to obtain an Alabama business privilege license from the county in which the business is located. Use the Alabama DOR’s directory of County Probate Offices to find contact information for your local county officials. You can also consult the DOR’s Handbook of Privilege and Store Licenses for information about additional license requirements and types.
5. Apply with regulatory agencies
You may also need to apply for a license to practice certain professions. For example, if you own a cosmetology business, you’ll need to apply with the Alabama Board of Cosmetology and Barbering. You can also use Alabama’s directory of regulatory agencies to locate contact information for the relevant state agency.
6. Apply for local licenses
Alabama recommends checking with every municipality and county in which you conduct business to identify your licensing requirements. You can use the Alabama League of Municipalities website and the Alabama DOR’s directory of County Probate Offices to find contact information for the relevant city and county government officials.
You can also inquire with municipal government officials about other local licensing requirements, including permits for specific business activities.
7. Register for a sales tax number and license
Businesses that sell taxable products or services in Alabama are required to apply for a sales tax number and license with the Alabama DOR. You can apply online through the state’s online business tax registration portal, My Alabama Taxes. Here’s what you’ll need to apply:
- Sole proprietors: Submit your legal name, business address, contact information, North American Industry Classification System (NAICS) code, and commencement date. You can find your NAICS code on the US Census Bureau’s website or use the Alabama Department of Labor’s guide to codes and titles.
- Corporations, LLCs, and partnerships: Provide all of the above information plus your federal EIN, date of organization or qualification, entity owner or office information, and entity subtype.
You can also use this portal to file returns, make payments, and manage other business tax obligations, including withholding tax and business privilege tax payments.
Alabama business license FAQ
How do you start a business in Alabama?
Here’s how to start a business in Alabama:
1. Choose an entity type.
2. Name and form your business.
3. Identify your registration and licensing requirements.
4. Register your business with the Alabama secretary of state (if needed).
5. Apply for a federal EIN (if needed).
6. Apply for necessary licenses and permits.
7. Register for tax accounts with the Alabama Department of Revenue.
8. Maintain licensure and legal and regulatory compliance.
What is the privilege license in Alabama?
According to the Alabama Department of Revenue, a privilege license is a licensing requirement that applies to many Alabama businesses—specifically, “every person, firm, company or corporation engaged in any business, vocation, occupation or profession described in Title 40, Chapter 12, Code of Alabama 1975.” Consult the DOR’s Handbook of Privilege and Store Licenses or review the relevant sections of code for more information.
How much does an Alabama business license cost?
Alabama business license costs vary by jurisdiction and business activity. Contact your local County Probate Office and municipal government representatives for more information about requirements and fees.
Do I need a business license to be self-employed in Alabama?
Many sole proprietors conducting business in Alabama will need a business privilege license from their local County Probate Office. You may also need to obtain other licenses, such as municipal licenses, privilege licenses, and business permits.