Last Updated 21 July 2017 | By:

How to start a business in Alabama (7 Simple Steps)

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!

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.
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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.

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  • Federal: The Small Business Association (SBA) website is where you’ll find all the information you need about federal tax requirements and federal licenses and permits.
  • State: All state-required business taxes and licenses are outlined on this PDF from the Alabama Department of Revenue website.
  • Local: Atlas Alabama has a thorough list of small business resources by county. Search by your county name to find the location and contact info for your local chamber of commerce, business license office, and other where you’ll be able to get information about municipal requirements.

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) Create a Financial Foundation

Best Business Bank AccountIf you were planning on running your business out of your personal bank account, consider this a wakeup call. It’s so important to start your business out on a solid financial foundation, and that requires opening a business bank account. Doing this will:

  • Keep your business financials all in one place.
  • Protect your personal assets by keeping them separate from your business expenses.
  • Allow you to leverage the many financial benefits banks offer small businesses.
  • Simplify your taxes.

In order to open up a business bank account, you’ll need a Federal Tax ID (EIN) for your business. You’ll use this, instead of your social security number, to open up the account. If you didn’t obtain your EIN this during the business formation phase (step 2), you can still apply for one through the IRS website. You’ll also want to have your Articles of Incorporation/Organization handy to present to the bank.

Next, consider shopping around Alabama-based banks to find out what they have to offer small businesses. Local banks are usually small-business friendly, and it can be comforting to know you’re working with a local bank that has an office right down the road. That said, there are also some major perks to working with a national bank like Capital One or Bank of America. Do some research, compare features, and choose the option that presents the least risk and most reward for your business!

Resource Recommendation:

Opening a bank account is the first step toward organized finances — but definitely not the last. Managing your business financials is basically a never-ending responsibility. If you’re not currently in a place to hire an accountant, accounting software is a great alternative. Take a look at our comparison of the top 7 business accounting tools to find out what these programs have to offer!

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!

Thanks for reading our guide to starting a business in Alabama! Is there anything we can do to make it more helpful? We’d love to hear your opinion through our Contact Page.