How to start a business in Alabama 7 Simple Steps

Man starting a business in Alabama.

Step 1) Plan Your Business Idea

Write a Business PlanWriting a business plan is the first step you need to take toward turning your business idea into a reality. Through planning, you’ll be able to determine whether or not your idea has what it takes to thrive.

  • Without knowing your target market, you’ll struggle to sell.
  • Without writing a killer business pitch, you’ll be out of luck when it comes to getting funding.
  • Without creating a sales forecast, you’ll have no way of knowing if you’re on the right track or if something needs to change.

In the process of writing your business plan, you’ll be forced to think critically about all of these things, and much more. Of course, some of this stuff gets pretty complicated, and it’s important to make well-informed estimations - you can’t just pull numbers out of thin air. Unless you’ve got an MBA, odds are you could use a little help here.

Resource Recommendation:

If you’re totally unfamiliar with business planning, check out our definitive guide to writing a business plan to get the ball rolling. We outline everything you’ll need to keep in mind.

A business plan software is also a great solution if you need some help sorting out the details, getting organized and distilling big ideas. There are tons of services out there, several of which cost less per month than a few trips to the coffee shop. Take a look at the top 7 options to get information on our favorite providers!

Business Ideas: Find the Idea That Fits You Image

Don’t know what kind of business to start?

Our friends over at have compiled a massive list of business ideas, ranging from personal styling to axe-throwing businesses.

If you’re having trouble finding the perfect business idea for you, we encourage you to check them out!

Step 2) Register Your Business

How to Choose a Business StructureThe next big step is to get your business registered to protect yourself from business liability. However, before you can do that, you’ll need to figure out what structure your business is going to take: LLC, S Corp, C Corp, or Sole Proprietorship.

  • LLC: Limited Liability Companies are the most popular structure because they allow entrepreneurs to enjoy the protection of a corporation without the double taxation. Plus, you’re able to select whether you want to be treated as a Corporation, Partnership or Sole Proprietorship for federal tax purposes. Keep in mind that even if you’re the sole member of your company, you can still form a single member LLC (SMLLC) in Alabama. SMLLCs are taxed the same as sole proprietorships.
  • S Corp: More formal structure, including up to 100 shareholders, a board of directors and corporate officers. Considered a pass-through entity for tax purposes, meaning the business itself doesn’t get taxed - the responsibility instead falls on the shareholders. Preferred over LLCs for IPO and outside investors.
  • C Corp: Same structure as S Corp. The primary differences are that there’s no limitation on the number of shareholders you can have, and the company and shareholders both get taxed.
  • Sole Proprietorship: What your business is automatically classified as if you’re the sole member and don’t register one of the entities above. The only thing you may want to file with the state is a DBA in order to give your business a trade name other than your own personal name. This is the simplest structure by far, but also the riskiest option since there’s nothing protecting you from liability.

Resource Recommendation:

This is a super important step, and one that needs to be taken seriously to avoid legal and financial repercussions. If you’re not sure what structure your business should take, read through our business structure comparison guide for more detail on your options. Once you’ve figured out which will work best for your business, check out our guides on how to form an LLC or corporation in Alabama to get going!

Step 3) Tackle Tax & License Obligations

Business LicensesNow that you’ve formed your business, it’s time to take care of any permits, licenses and special taxes your business type requires. It’s totally possible that all you need is a general business license. Regardless, you’ll have to check federal, state and local requirements to make sure you’re not missing anything your business needs to operate legally.

Resource Recommendation:

  • Federal: The Small Business Association (SBA) website is where you’ll find all the information you need about federal licenses and permits. They also have a decent article on small business taxes, but the best resource for detailed tax requirements is the IRS website.
  • State: All state-required business taxes and licenses are outlined on the Alabama Department of Revenue website. Their FAQs page is pretty thorough, too.
  • Local: Reach out to your local Chamber of Commerce for municipal requirements in your area.

If you come to find that running your business is going to require a whole lot more permits and licenses than you expected, it might be worth investing in a business license service. Basically, these services do all the research for you, acquire all the necessary forms (federal, state and municipal), and provide instructions on how to fill them out. It’s not necessary for everyone, but depending on your circumstances it could save you a whole lot of time, stress, and even money.

Step 4) Separate Your Personal and Business Assets

Best Business Bank AccountUsing dedicated business banking and credit accounts is essential for personal asset protection.

Now that you’ve made it through registering and setting up taxes and licensing for your business, you’ll need to take steps to protect your personal assets and establish your business as an independent entity.

When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.

You can go a long way in protecting your assets with these three steps:

  1. Open a business bank account.

A business bank account separates your personal assets from your company's assets, which is necessary for personal asset protection. A designated business bank account also makes accounting and tax filing easier.

To open up a bank account for your business, you’ll need to obtain an EIN (Employer Identification Number). You’ll use your EIN in place of your social security number so that this account is completely separate from your personal finances. After this, start doing your research on various business bank accounts. Local options and national banks, like Chase, both have their perks.

Get $200 when you open a business checking account with Chase. Learn more

  1. Get a business credit card.

A business credit card helps you separate personal and business expenses. A business credit card will also build your company's credit history, which can be useful to raise capital later on.

Learn about the best small business credit cards here.

  1. Designate an authorized representative.

Make sure all documents are signed by a representative of your LLC and not by you (or other LLC members) directly. This will help separate you from liability incurred by the LLC.

  1. Keep your accounting and bookkeeping up to date

Make sure to sync up your banking and credit card accounts with an accounting software like QuickBooks as soon as you get the chance. It’s never too soon to start organizing your business’ finances!

Step 5) Finance Your Business

How to Finance a BusinessMore funding methods exist today than ever before. Crowdfunding, trade credit, microloans, angel investors -- there are tons of valid options for financing your business. So which should you choose? It’s important to pick a primary funding method that’s compatible with your sales forecast, current level of financial security, the size of your business, and other important details.

Resource Recommendation:

First off, we highly recommend taking a look at our how to finance a business guide to start mulling over which funding option might work best for you. After that, check out the Alabama Small Business Development Center:

  • Their capital access program is a good resource for identifying the best funding opportunities for your business.
  • Although they don’t directly provide funding (except under very specific circumstances), they can recommend certain loans and help you put together a loan package.
  • There are ten SBDC offices throughout the state, so odds are there’s one relatively near you.

Step 6) Build A Brand

Build a Business WebsiteNow that your business is planned, formed, financed and legally compliant, it’s time to focus on building your brand. Having a professional, presentable brand image is a great way to gain credibility and build an enthusiastic customer base. There are a lot of factors that contribute to your brand image, but two of the main ones are your business logo and website.

Your logo shouldn’t just be a random symbol -- it should capture the essence of your business, your product, your mission. Keep in mind:

  • Certain colors raise certain emotions.
  • Different shapes bring different images to mind.
  • Various fonts convey various tones/moods.

To start generating ideas for your logo and where you can have one designed, read through our free guide on choosing the perfect logo for your business.

Resource Recommendation:

When it comes to crafting a beautiful website for your business, using a website builder is a great way to go. They allow for tons of customization so your brand can create and maintain a professional website without the headache, or massive expense, of building one from scratch. Check out our top 6 business website builders guide for prices and other information about our favorite services.

Step 7) Market Your Business

Social Media ChannelNow that you’ve got all the logistical tasks checked off your to-do list, it’s time to shift your attention to marketing your business. Marketing is an art, and unfortunately there are as many ways to do it poorly as there are to do it well. Here are a few tips to help you avoid making any major marketing mistakes:

  • Know your target audience. To effectively market your business, you need to know who you’re selling to and where to find them. And we don’t just mean “young people on social media” -- we mean “recent college graduates between the ages of 20 and 25 who are active on LinkedIn.” Specificity is key.
  • Don’t spread yourself too thin. If you try to master social media, direct mail, SEO, and online advertising all at once, you’re bound to fail. Instead, focus your time and budget on one approach based on your knowledge of your target audience.
  • Make sure your strategy is measurable. No matter how much research you put into anticipating consumer behavior, you can’t predict exactly how folks are going to respond to your marketing efforts. Make sure you have a method in place to measure profitability and customer engagement so you know where and when to make adjustments to your strategy.
  • Plan short-term. Your business isn’t going to be the same in six weeks as it is in two years. Plan short-term to allow your marketing strategy to evolve alongside your business, instead of creating a detailed two-year plan and throwing it out when it no longer applies.

Resource Recommendation:

Of course, you’ll need a lot more information than these four bullet points to launch a successful marketing campaign. Head over to our definitive guide for an in-depth discussion of marketing myths, approaches, and helpful tools!

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