Operating a Business in Alabama: Resources for Starting a New

Operating a Business in

Alabama:

Resources for Starting a

New Business

Business Essentials for State

Taxpayers (B.E.S.T.)

Rev. 06/15/2022

B.E.S.T. Webinar Series

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Disclaimer

The information in this presentation is intended to be an

overview. It is not a comprehensive explanation of all aspects of

the subject matter, does not represent legal advice, and is not

legally binding on the department. Information regarding taxes

and tax administration changes frequently and should always be

confirmed through a tax professional.

Please refer to the Alabama Department of Revenue website at

revenue.alabama.gov for additional information.

Purpose of this Webinar

To provide useful resources for information on starting a business

in Alabama.

This presentation will cover:

• Common types of businesses and business entities

• Things to consider when starting a new business

• Resources for new businesses

Common Types of

Businesses and

Business Entities

Common Types of Businesses

• Retail – Sales to end users – sales tax license is required and must be

renewed annually. (There is no charge for this license.)

Examples: clothing stores, restaurants, grocery stores, car lots, antique

malls, parts stores

• Wholesale – Sales to dealers that resell items – sales tax certificate of

exemption is required (contact the Sales Tax division at your local

Taxpayer Service Center)

Examples: Car auctions, restaurant food suppliers, consignment

businesses

• Manufacturing – Uses materials to make a product

Examples: Making furniture, jewelry or clothing; tool & die shops

Common Types of Businesses

• Service – No transfer of ownership

Examples: Janitorial, lawncare, daycare, building

contractors, barber

• Repair – Only sells parts when installing to repair

Examples: Garage, body shop, appliance repair

• Nonprofit – Usually subject to sales tax (contact Sales Tax

division at your local Taxpayer Service Center)

Common Business Entity Types

• Sole Proprietor – Individually owned and not a separate legal

entity

• Partnership – Two or more owners/partners

• S Corporation – Pass through taxation – must register with the

Alabama Secretary of State and submit an initial Business

Privilege Tax Return* within 2½ months after formation of the

corporation. Thereafter, a regular Business Privilege Tax return

must then be filed annually. (See Business Privilege Tax

Webinar or Learning Modules.)

*Use Form BPT-IN

Common Business Entity Types

• C Corporation – Taxed at corporate and shareholder level, must register

with Alabama Secretary of State and an initial Business Privilege Tax

Return* is due within 2½ months after formation of the corporation.

Thereafter, a regular Business Privilege Tax return must then be filed

annually. (See Business Privilege Tax Webinar or Learning Modules.)

• Limited Liability Entities – (includes LLC, LLP, etc.) Must register with

Alabama Secretary of State and submit an initial Business Privilege Tax

Return* within 2½ months after formation of the entity. Thereafter, a

regular Business Privilege Tax return must then be filed annually. (See

Business Privilege Tax Webinar or Learning Modules.)

*Use Form BPT-IN

Which Entity Type is Best?

The Alabama Department of Revenue does not recommend one

type of business entity over another. The advantages and

disadvantages of one type if entity over the other depends on

individual factors and should be discussed with someone

knowledgeable of the applicable laws and your individual

business situation, such as a tax attorney or CPA.

Things to Consider

When Starting a

New Business

Location

• City limits

• Need to purchase a city license and meet building codes

• Need to collect city tax if taxable transactions are made

• Police Jurisdiction (PJ)

• May need to purchase a city license and permits

• May need to collect city’s police jurisdiction tax if taxable

• transactions are made

Location

• Outside city limits and police jurisdiction

• No city licenses or permits

• No city taxes collected

• No city services

• Zoning requirements

• Bars and restaurants can only operate in certain areas

• Alcohol sales may not be allowed within 300 feet from

main entrance of any church building, schools, etc.

• Restrictions on signs

• Restrictions on operating hours

Licenses and Permits

• State Privilege License – Purchased at county courthouse

(see Business Privilege Licenses Webinar or Learning Modules)

• County License – Usually purchased with state license at

courthouse

• City License – In city limits and some police jurisdictions

Licenses and Permits

• Regulatory License – Cosmetology, Auctioneers,

Chiropractors, etc.

http://inform.alabama.gov/agencysearch.aspx

• Food Service Permits - by local county health department

https://www.alabamapublichealth.gov/about/locations.html

• Alcohol and Tobacco Licenses - Alabama ABC Board

https://alabcboard.gov/licensing-compliance

Website Resources

for Starting a New

Business

revenue.alabama.gov/

revenue.alabama.gov

Alabama Department of Revenue

Contact Numbers

• 334-242-1170, Option #1 – Individual Income Tax

• 334-242-1170, Option #7 – Withholding Tax

• 334-242-1170, Option #6 – Corporate Tax

• 334-242-1170, Option #8 – Business Privilege Tax

• 334-242-1170, Option #6 – Pass-Through Entity

• 334-242-1189 – Certificate of Compliance

• 334-242-1584 – Business Registration

• 334-242-1490 – Sales and Use Tax

Alabama Department of Revenue

Taxpayer Service Centers

The Alabama Department of Revenue has nine Taxpayer Service

Centers located throughout the state to assist you. Contact

information for the service centers can be found at:

https://www.revenue.alabama.gov/help-center/

Alabama Secretary of State

sos.alabama.gov

• S Corporations, C Corporations, and LLEs must register with

the Alabama Secretary of State on their website or call 334-

242-5324

• Reserve Corporate Name

• Complete Domestic (incorporated in Alabama) Business

Corporations, LLCs, LLPs and LPs Certificate of Formation

• Complete Foreign (incorporated outside of Alabama) Business

Corporations, LLCs, LLPs and LPs Application for Registration

Internal Revenue Service

• www.irs.gov/

• IRS Forms: 1-800-829-3676

• IRS Assistance: 1-800-829-

1040

• FEIN: Submit Federal Form

SS4 by mail or fax; or go to

www.irs.gov/ and search for

EIN online

Internal Revenue Service - Resources

The IRS has a series of Small Business Tax Workshops available

online that are free and contain useful federal tax information for

new business owners and employers. The topics include:

• Federal Taxes and Your New Business

• Schedule C and Other Small Business Taxes

• Business Use of Your Home

• Federal Taxes When Hiring Employees or Independent Contractors

• Managing Payroll to Withhold the Correct Amount of Tax

Internal Revenue Service - Resources

 IRS Small Business & Self-Employed Tax Center – The links on

this webpage provide important information for all small

businesses and self-employed individuals.

 Publication 5557 - A Guide to Starting a Small Business

 Publication 4591 - Small Business Federal Tax Responsibilities

 Publication 583 - Starting a Business and Keeping Records

 Publication 334 - Tax Guide for Small Businesses

U.S. Small Business Administration

https://www.sba.gov/

Local Governments to Contact

County Courthouse

• Combined County/State business license (see Business

Privilege Licenses Webinar and Learning Modules)

• County Sales Tax account number if not state-administered

• Property Tax account information (see Business Personal

Property Tax Webinar or Learning Modules)

• Effective January 1, 2020, corporations and LLEs file formation

documents directly with Alabama Secretary of State instead of

at the courthouse.

Local Governments to Contact

City Hall

• City business license

• City Sales Tax account number if not state-administered

• Occupational Taxes

• Zoning requirements

• Building permits

Other Resources

• Regulatory Boards – http://inform.alabama.gov/agencysearch.aspx

Cosmetology, Auctioneers, Chiropractors, Pharmacists, etc.

• CPA or Accountant

• Attorney

• Trade Associations – https://directoryofassociations.com/index.asp

• Local Chambers of Commerce

• Alabama Small Business Development Centers – http://asbdc.org/

• Other webinars for small businesses

• Atlas Alabama

https://atlasalabama.gov/

Thank you for being

ALDOR’s B.E.S.T.!

B.E.S.T. Webinar presentations can be found at

https://www.revenue.alabama.gov/b-e-s-t

/webinar-series-schedule/

Also available are B.E.S.T. Learning Modules at

https://www.revenue.alabama.gov/b-e-s-t

/watch-learning-modules-online/

Questions?

Please use the Q&A feature in Webex to ask

the presenter questions or

email Carol.Murphy@revenue.alabama.gov after the webinar.