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Alabama Business License Basics

Alabama Business License Basics

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Alabama Business License Basics

Starting a small business in Alabama often means registering with several federal, state, and local agencies. Let’s review common Alabama business license registrations so your business starts off right.

Related: Guide to starting a business in Alabama 

First Step – Set Up the Business

Sole proprietorship: In Alabama, a sole proprietorship is a business owned by one person. It is the simplest form of business structure, with no legal distinction between the owner and the business. The owner has complete control over the business but is also personally liable for all debts and obligations.

General partnership: A general partnership in Alabama is an agreement between two or more individuals to operate a business together. No formal setup is needed, but a partnership agreement, but it’s a great idea to draw up a partnership agreement to outline operations and responsibilities.

Corporation: An Alabama corporation is a legal entity separate from its owners, known as shareholders. It offers limited liability protection, meaning shareholders are not generally personally responsible for the corporation’s debts and liabilities. The downside is that corporations are the most complex structure to start and operate. 

Limited Liability Company (LLC): An Alabama LLC combines aspects of a sole proprietorship or partnership and a corporation. It provides limited liability protection to its owners, called members, shielding their personal assets from the company’s debts and liabilities, in addition to a flexible management and tax structure.

Related: Comparison of Business Structures

What Licenses Do Alabama Businesses Need?

With the business structure out of the way, we can begin looking at the different types of registrations businesses in Alabama may need. There isn’t a standard business license, as requirements vary depending on where the business is located and its activities. Here is a general overview of the different registrations your business may need.

State & County Business Privilege Licenses

The State of Alabama requires anyone conducting business to obtain a Business Privilege License. While the Department of Revenue administers the licensing, the license is issued at the local level by the county Probate Judge or License Commissioner. It is important to note that one business may require several different types of Business Privilege Licenses depending on the business’s products or services. Most businesses will also need a Business Privilege License in every county where business is conducted. ​​​The Privilege License runs from October 1 through September 30 and must be renewed annually.

The costs for the Alabama Privilege Tax vary depending on the type of license required and, in some cases, upon the population of the area where the business is located or the business’s sales volume. Some businesses may require several different types of business privilege licenses depending upon the business’s services or products.

Additionally, some licenses first require applying for State Regulatory Permits, such as auto dealers, food establishments, and air conditioning contractors.

City Business Licenses

Many cities in Alabama require businesses to be licensed in order to operate. Rules for business registration vary depending on location and what the business does. Below are a few cities that have licensing requirements.

  • Birmingham: The City of Birmingham requires an annual business license for certain businesses, including; those that sell alcoholic beverages, dance or pool table licenses, street vendors, and more.
  • Montgomery: The Montgomery Division of License and Revenue requires all businesses within city limits to apply for a business license.
  • Mobile: A business license is required to operate a business within the City of Mobile.
  • Huntsville: The Huntsville City Clerk Treasurer’s Office requires a business for commercial and residential-based businesses operating in city limits. Additional licenses are required for Airbnb rentals, businesses selling alcohol, taxis, or rideshare businesses.
  • Tuscaloosa: All businesses are required to get a business license from the City of Tuscaloosa. The cost of a Tuscaloosa business license varies depending on the type of business and annual sales.
Take the guesswork out of figuring out what licenses and permits are required to start your business with license research packages from Bizee and LegalZoom.

For as little as $99, you can save a lot of time and know your business is in compliance with local, state, and federal requirements. 

Assumed Name Registration

Sole proprietorships and partnerships in Alabama that want to operate under a business name other than the full name of the owner(s) will register for an Alabama Trade Name (also known as a Doing Business As or DBA) with the Alabama Secretary of State.

Occupational Permit

Depending on the location of the business, it’s important to verify whether the business needs an occupancy permit or has specific regulations to operate in the zoning district. Even businesses operating out of the home may need approval from the city as well.

Alabama Sales Tax License

Alabama businesses collecting sales taxes, lodging taxes, or will have employees will need to register for an Alabama Sales Tax License with the Alabama Department of Revenue. The sales tax charged will vary by the product or, in some cases, the service sold.

While there is a state sales tax, some counties also levy an additional tax on the sale of tangible property at retail or from revenue generated from the operation of machines or places of entertainment or amusement.

Resale Certificate

Businesses purchasing merchandise to resell will usually want to obtain an Alabama resale certificate to not pay sales tax for merchandise that is resold to customers.

Alabama Store License

Every person or business that opens one or more physical stores in Alabama is required to get a Store License for the privilege of operating in the state. Licenses are obtained by filing with the Probate Judge or license commissioner of the county in which the store is located.

Vocation or Occupational Privilege License

A variety of occupations or professions in the state are regulated and need licensing before offering certain services. A few common occupations that require licensing in Alabama include; beauty shops, photographers, restaurants, diaper services, fruit stands, contractors, and many more.

Learn more about the types of occupational licensing requirements in Alabama from the Alabama Department of Labor.

Employer Identification Number (EIN)

The Alabama Employer Identification Number (EIN), also known as a Federal Tax Identification Number, is a unique nine-digit number assigned by the Internal Revenue Service (IRS) to businesses operating in Alabama. It is used for tax filing and reporting purposes, similar to how an individual uses a Social Security number. Companies can apply for an EIN through the IRS website or by submitting a paper form.

Next Steps

While it’s a good start, there are so many different licenses that may be needed. Double-check with the City Clerk’s Office, Chamber of Commerce, and/or Economic Development office in your area before opening your doors.


  • Greg Bouhl

    With over two decades as an entrepreneur, educator, and business advisor, Greg Bouhl has worked with over 2,000 entrepreneurs to help them start and grow their businesses. Fed up with clients finding and acting on inaccurate and outdated information online, Greg launched StartUp101.com to be a trusted resource for people starting a business.

Alabama Business License Basics

Alabama Business License Basics

2 Responses

  1. Hi Greg.I’m a ford dealer in newnan georgia. my neighbor wants to buy a new explorer and finance with ford credit. He wants to title it in his llc company name that he owns in alabama. He has lost his business license. Does he need a new business license for me to get his new vehicle tagged and titled in alabama? tks mike fitzpatrick

    1. Hi Mike – When you say lost his business license, does that mean it was taken away by the city/state or just can’t find it? Adding to the complexity, the state has a Business Privilege License but different cities may have a business license requirements as well. While the LLC and business license are two completely different things, if the state took away a business license, the LLC could be in jeopardy.

      Technically, if you do a search for the LLC on the Secretary of State’s website and the LLC shows that it is in good standing, then the LLC is still fully functional. He may want to get an Alabama attorney to weigh in on this though.


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