Starting a Business in Alabama
Before we jump into how to start your own business in Alabama, it’s important to make sure you’re ready to start your own company. Whether you plan to be a sole proprietor or start an Alabama LLC, being a business owner requires hard work and dedication to be successful. Take our entrepreneur quiz and find out how ready you are to launch a startup of your own.
Step 1: Choose a Business Idea
The first step to starting your Alabama startup is finding the right business idea. If you’re having trouble coming up with startup ideas, here are a few tips from our guide on How to Come up With Startup Ideas:
- Identify and solve a problem
- Focus on what you’re passionate about
- Get creative
- Conduct a brainstorming session
Fortunately, with a bunch of startup ideas to explore, finding the right startup idea can be less challenging than you might think. Plus, there are free tools such as TRUiC’s free business idea generator that can make choosing the right startup idea easier than ever.
Step 2: Plan Your Alabama Business
You have your business idea — now it’s time to start turning it into a reality by planning your Alabama business. From choosing your business name to writing your business plan, this stage sets the groundwork for starting a business in Alabama, outlining important business milestones and steps you will need to take to reach them.
Choose a Business Name
Deciding the best business name for your startup can seem a bit daunting. Fortunately, there are resources available to help you make the right decision, such as TRUiC’s AI-powered business name generator. A few things to keep in mind when choosing a business name:
- If you are marketing your startup in more than one location, avoid using a location in your business name.
- If you want your startup to be local, use our local SEO tool to help optimize your business name.
For a more in-depth look at everything you need to know about naming a startup, check out our guide on How to Name a Startup.
Is the URL available? We recommend checking online to see if your business name is available as a web domain. Even if you don't plan to make a business website, you may want to buy the URL to prevent others from acquiring it.
Find a Domain Now
Find a Business Location
Choose your location based on a) how many resources are in the area that can help you grow and b) how much easier or harder it makes managing the business. Your business location will also determine specific requirements for your company, such as licenses and permits. Take your time, do some homework, and be strategic.
Identifying the best area for your business to set up shop is crucial to its success; a few of the most popular small business locations in Alabama to consider are Birmingham and Auburn. If you'd like to brush up on everything that goes into making this decision, refer to our guide on How to Choose the Perfect Business Location.
Conduct Market Research
Having an in-depth, concrete understanding of your market is essential to the success of your startup in Alabama. The best way to identify your competitors and target market is to conduct market research. Here are a few ways to conduct thorough market research:
- Conduct a survey.
- Hold a focus group.
- Do search engine optimization (SEO) research.
- Use existing research such as customer reviews.
The goal of this research is to develop an understanding of who your business will market to and how your business stands out from the competition. All of this research will inform your business strategy and improve your chances of success.
Write a Business Plan
Before starting your business in Alabama, you'll need to make a business plan. A well-crafted business plan is important for many reasons, such as securing funding, managing cash flow, and tracking your progress as your business grows. There are a few things to include when writing your business plan:
- Pitch: A quick, one-page summary of your plan that succinctly covers all the key points below (and more).
- Unique Selling Proposition (USP): A short phrase that captures the core mission of your business. For example, our USP at Startup Savant is "Entrepreneurship Simplified."
- Target Market: Who you're selling to and where to find them. It's essential that you define your target demographic and the most effective ways to communicate with them.
- Marketing Plan: How are you planning to market your business? Establish a primary marketing strategy and decide how much you're able to spend.
- Milestones: Where do you see your business in six months? A year? Five years? Setting up some initial goals is a great way to stay focused and track your business's performance over time.
Recommended: For a more in-depth guide, check out our business planning guide to learn about creating a USP, marketing plan, executive summary, sales forecast, and anything else you will need.
If you're feeling overwhelmed, consider using business planning software. There are several reliable programs out there that can help you create a detailed business plan. Take a look at our top 7 business planning software tools for an overview of our favorite programs.
Step 3: Choose the Right Business Structure
The first step in choosing a business structure for your Alabama business is figuring out if you need personal liability protection.
What is personal liability protection? Liability protection can create a legal separation between your personal assets and your business.
Informal business structures like sole proprietorships and partnerships don't offer protection because there isn't any separation between the business and the owner. Therefore, the owners' personal assets are completely exposed to creditors and lawsuits.
An LLC is the most popular, simple, and inexpensive way to get personal liability protection.
Considering using a reliable professional service to form your business? We recommend Northwest
Step 4: Register Your Alabama Business
If you choose a formal business structure, no matter which one, there are a few things you can expect during the formation process including naming your business, choosing a registered agent, filing formation documents, and getting an Employer Identification Number (EIN). In addition to this, each business structure will have its own unique requirements. Here are the steps you need to follow in order to form an LLC, corporation, or nonprofit in Alabama:
Start an LLC
LLCs are the easiest business structure to form and maintain, requiring little paperwork and six easy steps that you can do yourself or with the help of a professional service. Just be sure to submit a Certificate of Formation to the Alabama Secretary of State online or by mail along with the $200 filing fee and a copy of your Name Reservation Certificate.
Here is how to form an LLC in Alabama:
- Name Your Alabama LLC
- File a Name Reservation
- Choose a Registered Agent
- File LLC Formation Documents
- Create an LLC Operating Agreement
- Get an EIN
Form a Corporation
Forming a corporation is a little more complicated than other business structures such as LLCs. However, for businesses that are well suited to this business structure, the benefits are immense. If you’re ready to form a corporation, file a Certificate of Incorporation with the Secretary of State online or by mail along with the $200 filing fee and a copy of your Name Reservation Certificate.
Here are the five steps to form a corporation in Alabama:
- Create a Name for Your Alabama Corporation
- File a Name Reservation
- Choose an Alabama Registered Agent
- Choose Your Alabama Corporation’s Initial Directors
- File a Certificate of Incorporation
Read our full guide on How to Start a Corporation in Alabama.
Form a Nonprofit
Finally, forming a nonprofit requires more legwork than corporations or LLCs, including drafting bylaws, selecting board members, and (if you choose to do so) applying for tax exemption. Once you’ve done so, submit your Certificate of Formation for an Alabama Nonprofit online or by mail along with the $200 filing fee and a copy of your Name Reservation Certificate.
Here are the necessary steps you need to take in order to form an Alabama nonprofit:
- Name Your Alabama Nonprofit
- Reserve the Name in Alabama
- Appoint a Registered Agent
- Select Your Board Members and Officers
- File the Alabama Certificate of Formation
- Draft Bylaws and Conflict of Interest Policy
- Conduct an Organizational Meeting
- Get an EIN
- Register for a State Tax Account
- Apply for Exemption from Federal (501(c)(3) status) and State Taxes
Read our full guide on How to Form a Nonprofit in Alabama or have a professional service form a nonprofit for you.
Step 5: Set up Business Banking, Credit Cards, and Accounting
Using a dedicated business banking account and business credit card is essential for maintaining personal asset protection.
Once you register your Alabama business, you’ll need to take steps to protect your personal assets and establish your business as its own entity.
When your personal and business accounts are mixed, your personal assets (including your home, your car, and other valuables) are at risk in the event someone sues your business. In business law, this is referred to as piercing the 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 in Alabama, 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.
Recommended: Read our guide to the Best Banks for Startups and Entrepreneurs to find the best online bank, ecommerce banks, the best for tech startups, real estate investment banks, and more.
2. Get a Business Credit Card
A business credit card helps you separate personal and business expenses. A business credit card will also help build your Alabama company's credit history, which in turn will help you raise capital later on.
Recommended: Learn about the best small business credit cards with our guide.
3. Set up Business Accounting
Accurate accounting and bookkeeping are essential to the financial wellness and success of any startup. From preparing and filing taxes to issuing payroll and even managing business expenses — every startup can benefit from using good accounting software.
Find out how much you could be saving today by trying our recommended accounting software.
Step 6: Get Insurance for Your Alabama Business
The next step is to protect your startup in Alabama by getting business insurance. Depending on the type of business you’re operating, your insurance requirements and needs may vary. So, what is business insurance exactly? Business insurance protects your business’s assets from losses that can happen naturally while doing business, such as property damage or lawsuits. Here are the types of business insurance to consider:
- General Liability Insurance — this protects your business in the event that it faces a lawsuit.
- Professional Liability Insurance — this is typically used by business service providers such as accountants or consultants to protect you in the event of malpractice claims or other business errors.
- Workers’ Compensation Insurance — this protects you in the event that one of your workers is injured on the job.
Find out the real cost of getting insurance for your business. Get a free quote or call 855-602-1925.
Step 7: Obtain Permits and Licenses
In order to operate your Alabama business, you will most likely need licenses and/or permits. Depending on where you are located and the type of business you are operating, there may be several licenses or permits required at the state, federal, and local levels to obtain before opening your business.
In Alabama, these licenses may include a Privilege License, Municipal Business License, or a Store License. Be sure to do your due diligence to confirm the types of permits and licenses you need and avoid penalties and fines.
- Federal: The Small Business Association (SBA) website is where you’ll find all the information you need about federal licenses and permits.
- 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 need help with this step, a Business License Service is what we recommend. They determine everything required on federal, state, and local levels, get the forms, and provide step-by-step filing instructions.
Step 8: Build a Business Website
No startup is complete without a well-crafted business website. Your startup’s website serves not only as a resource for customers to learn important information about your business in Alabama — it is a visual representation of your brand. Depending on your experience level, you can build your business website yourself or use a website builder such as GoDaddy (full GoDaddy review).
Recommended: A website builder allows you to create and maintain a professional website without the headache, or massive expense, of building one from scratch. Check out our top 5 business website builders guide for prices and other information about our favorite services.
Step 9: Hire Employees
Unless you’re planning to operate your startup in Alabama alone, you will most likely need to build a team. The right team can create a strong foundation for your business and help propel it forward; however, there is more to it than just choosing the right people.
Before you start interviewing potential hires, make sure you know your employment requirements, such as registering for the proper employee taxes and setting up payroll. Take a deeper look at the process of hiring employees for your startup by reviewing this small business hiring guide. You'll also need a federal employer identification number from the Internal Revenue Service.
Register for Alabama State Employee TaxesWithholding Tax | Unemployment Tax
Step 10: Promote and Market Your Business
Promoting Your Alabama Business
It’s no secret that an effective marketing strategy is essential to growing a successful small business. Whether you’re issuing a press release, running a Facebook ad campaign, optimizing your Google listing, or a combination of these strategies, there are many marketing strategies available to promote your business in Alabama.
Press releases are a great way to communicate important information about your Alabama business to media outlets and potential clients. One of the best ways to ensure you are sending out effective press releases is to hire a press release distribution service that will not only write your press release but will ensure timely delivery to the most impactful sources.
Our favorite press release distribution service for startups is Sitetrail for its budget-friendly pricing and full-service offerings, including the writing and distribution of targeted press releases.
Creating a Facebook page is an impactful way to reach customers and expand your brand exposure. Not only does this platform give you a chance to showcase your business’s products and services, but you can also run effective ad campaigns depending on your business needs.
Keep in mind that creating a strong social media presence, especially on Facebook, requires time and effort in order to gain traction and produce results.
Google My Business
A Google My Business (GMB) account allows you to manage how your business in Alabama appears during Google’s search engine results (SERP) as well as Google maps. With a GMB account, you can share important information about your business, such as your hours of operation, your physical address, and your phone number. It also helps to increase brand awareness and communicate with customers.
Step 11: Fund Your Business
There are a variety of ways to fund your business. You can use your own personal savings, borrow money from friends or family, obtain a small business loan from a bank or other lending institution, raise money from investors, and more.
Before you apply for a loan or approach investors, it's important to have a clear idea of how much money you need and what you plan to use it for. This will help you determine the best source of funding for your business.
Here are some popular funding options to consider:
- Start with your own resources. This is called bootstrapping. This involves saving enough money to cover the costs of starting and running your business.
- Call on friends and family. Family and friends are more likely to lend money (or give you money) to help you start your business than strangers or traditional lenders.
- Bring on partners. Partners who get behind your business idea and are willing to invest may be a great option for getting your business off the ground.
- Apply for a business credit card. Once impossible for startups to qualify for, there are business credit cards now that specialize in helping startups build business credit.
- Crowdfunding. Many startups have been formed in recent years through the help of crowdfunding. You can promise a future product as an incentive for helping. You'll get funding for your business and valuable market research at the same time.
- Bank loans. Traditionally bank loans require that you have some established business credit, usually by establishing business relationships with net 30 accounts. But there are online banks and other financial institutions that make getting business loans easier.
- Small Business Administration (SBA) loans. These are loans like the most popular SBA7A loans that some small businesses may qualify for through the federal government.
- Equity funding. Many startups find their seed fund through equity partners (friends and family, incubators, venture capital companies, angel investors, etc.) who will own a stake in the business. As the business grows the company may seek more funding through a Series A, Series B, or Series C funding round.
Resources for Your Alabama Business
Below are links to our core resource guides that can introduce you to some savvy tools and insight if you’re not already familiar. You can also check out our comprehensive list of business resources.
- Business Incorporation Services: Our top pick is ZenBusiness.
- Business Planning Software: Our top pick is LivePlan.
- Business Accounting Software: Our top pick is Xero.
- Business Bank Accounts: Our top pick is Capital One.
- Business License Services: Our top pick is Incfile.
- Business Website Builders: Our top pick is GoDaddy.
- Logo Makers: One of our top picks is TRUiC's Free Logo Maker Tool.
The above content regarding how to start a business in Alabama is by no means legal advice, it’s for basic informational purposes and nothing more. For genuine legal assistance as you learn how to start a business, contact an attorney, other accredited professional, or service provider.