How to Get a Business License in Alabama

If you’re planning to start a new business in Alabama, one important thing you’ll need is a business license. Unlike some other states, Alabama requires that almost every business in the state apply for and regularly renew their business license.

Depending on the type of business you operate and which county you will be operating in, you may need additional business licenses to be in good standing with the state and county. In addition to state and local licenses, you might also need federal business licenses.

This guide gives you step-by-step instructions for setting up your business and applying for your Alabama business license.

What is a business license in Alabama?

According to Alabama law, all companies and people (this includes sole proprietors) engaged in business in the state are required to apply for and keep up-to-date “privilege licenses.” Essentially, this license gives you the privilege to do business in the state.

You will apply for your Alabama privilege license through the county probate judge or license commissioner in the county where you plan to operate your business. If your business will operate in multiple counties, you might need a license for each county unless one of the counties offers a state-wide privilege license. 

In addition to the privilege license, your business may need additional licenses, depending on your business type and the county where you operate.

Types of business licenses

In the state of Alabama, almost every business is required to have at least one business license. When figuring out if your business needs a license or not, there are a few types of business licenses to consider.

• Local licenses. These allow you to legally operate your business at the municipal or county level.
• State licenses. Alabama administers licenses through the county where the business operates. Some counties offer county-level licenses that allow the business to operate state-wide.
• Federal licenses. Certain businesses are federally regulated and must have a license from the federal government to operate in good standing. Alcoholic beverage sellers, firearms, fisheries, and nuclear energy operators are examples of types of businesses that must get federal business licenses. 

In the state of Alabama, there are a few different types of general business licenses that you might need. These other local licenses include:

• Privilege license. This is the most common business license in Alabama. Almost every business is required to have one.
• Tax registration license. If your business will sell tangible personal property to customers, you will need a tax registration license, which might also be known as a seller's permit.
• Store license. If your business will have a physical location, you will need a store license.
• Public health license. If your business does anything that may impact customer health, such as serving food or providing accommodations, you need a public health license. 

How to apply for a business license in Alabama

Most business licenses in Alabama are administered at the county level, and the vast majority of businesses will be required to have a business license to operate in the state. These steps will help guide you through the process of applying for your license. 

1. Register your Alabama LLC

If you’re planning to start a business in Alabama, the first thing you’ll need to do is decide what business entity you want to have. You can choose from:

• Sole proprietorship
• LLC or limited liability company
• Partnership
• Corporation

All business types other than sole proprietorships must be registered with the Alabama Secretary of State.

One of the most common business types is LLCs. Many people choose this type of business structure because it requires minimal upkeep and paperwork while providing liability protection to the owner or owners. 

To start an LLC in Alabama, you will file your certificate of formation with the Secretary of State. 

2. Get your EIN

Once your business is registered with the state, you may want to apply for a federal EIN or employer identification number. If you’re not planning to hire employees, an EIN isn’t a requirement.

An EIN is like a Social Security number for your business. It is used to file your taxes and to identify your business entity to different state and federal agencies. 

3. Determine if your business is exempt or non-exempt

Your next step is to determine if your business is required to get a business privilege license or not.

While the majority of businesses in Alabama are required to hold a business license, some are exempt. You can look up your industry in the Handbook of Privilege and Store Licenses. 

Under the “Business, Vocation or Occupation Privilege Licenses” section, you can find the business industries that are required to hold a privilege license. Certain people are exempt from getting privilege licenses: These can be found starting under “Exemptions of Certain Persons.  

4. Apply for your Alabama business privilege license

To apply for your Alabama privilege license, you will go to the government website of the county where you will operate your business. You can find the contact information for county probate offices on the  Alabama Department of Revenue website. 

The county website should provide you with information on how to apply and what information will be required. Many counties require an application to be submitted in person at the main office or over the phone.

If you will be opening your business in multiple counties, you’ll likely need a license in each county. Some counties also offer a privilege license that gives your business state-wide coverage.

Each county has a slightly different application process. In most counties, the process includes filling out an application and paying a fee.

For the application, you will likely need to know:

• Business name
• Business entity type
• EIN
• Products and services type
• Description of your  business
• Business contact information

The fee for a business privilege license varies by county. The fee might be based on:

• The population of the county
• The number of employees you hire
• The business’s profit
• The industry you’re in

Once you’ve paid the fee and submitted the proper paperwork, you should receive approval for your business license. Your license must be renewed annually. It expires on Sept. 30 and must be renewed before Oct. 31. You cannot renew the license early.

5. Apply for necessary licenses with regulatory agencies

Your business privilege license is only one type of business license. You might also need additional licenses to operate your business in good faith. 

Some types of businesses must have professional licenses. Some regulated industries that need professional licenses include:

• Hairdressers
• Cosmetologists
• Health care professionals
• Pilots and bus drivers
• Accountants

How much does an Alabama business license cost?

The cost of your business license in Alabama will depend upon which county you’re applying in. The business license fee is based on a number of different factors. Fees range from $1.50 to $1,000, with most falling within a range of $25 to $250. 

Factors affecting business license costs

Each county chooses how to charge for business licenses. Factors they may base their cost on include:

• The population of your county
• Business profits
• How many people you employ
• Your business industry

The Handbook of Privilege and Store Licenses from the Alabama Department of Revenue includes an estimated cost of business privilege licenses broken down by industry. You can search for your industry and see the potential cost of a license and what metric it is based on. 

The license costs vary greatly. For some businesses, it’s based on the population of the county where the business is located. For others, it’s based on an industry-specific metric. For bottling plants, it’s about the number of bottles they can produce per hour. For circuses, it’s about the number of seats they have. 

Veterans and disabled business owners can pay a reduced license fee. The license handbook has information on who qualifies and the discount they can expect.

Renewal fees for business licenses in Alabama

Your business license must be renewed every year. You’ll pay the same fee each year you renew. 

The business license expires each year on Sept. 30. It must be renewed between Oct. 1-31. You cannot renew the license early. If you don’t renew your license in the month of October, you will be charged a late penalty of 15% plus interest.

Alabama business license search: How to look up a business license

To look up a business license in Alabama, you’ll have to make a phone call. There is no online public registry to check whether a business has a license and whether the license is expired or not. 

If you need to check on your own business license or the license of another business, you’ll need to call the county office or city hall where the business is registered. 

Someone at that office can look up the business to find out which type of licenses the business has and whether or not those licenses are expired. 

To look up a business, you will need to know either the business name or address.

How to verify an Alabama business license online

Unfortunately, you cannot verify whether a business has a license or not online. The only way to verify an Alabama business license is to call the county probate court or city hall where the business is registered to verify if it has a license and whether or not that license is expired. 

What information you need for a business license lookup

If you do need to check if a business has a license, you’ll need specific information, including:

• Either the name of the business or its address
• The county where it’s registered 

Do I need a business license for my small business in Alabama?

In all likelihood, if you open a business in Alabama, you need a business privilege license. The vast majority of businesses’ need a license to operate in good standing. All business entities, including sole proprietors, need a business license. 

To find out if your business is exempt from needing a business license, you can contact the county where you plan to form your business. 

Renewing and maintaining your Alabama business license

To be in good standing, your Alabama business must have an unexpired business license. The license must be renewed each year.

How often do I need to renew my business license in Alabama?

The basic business license in Alabama must be renewed each year and is issued by the county probate judge. The license expires on Sept. 30 each year and must be renewed before Oct. 31. 

If you have other business licenses, they may expire at different times and may have different renewal periods. 

Penalties for failing to renew your municipal licenses

If you don’t renew your business license before Oct. 31, you will pay a penalty. 

The penalty is 15% of the cost of the license. If you don’t pay the renewal and penalty fee by March 1, you may be required to pay an additional late fee penalty. Some counties also charge an interest fee for each day that it’s late. 

Common mistakes to avoid when applying for a business license in Alabama

The Alabama business licensing process can be complicated. The easiest way to navigate the process is to reach out to your local county probate office. They can help guide you to the right license and fee.

Common issues that people face using the Alabama business licensing system include:

• Not knowing local requirements. Each county has a slightly different process for assigning fees and how to apply. Knowing which industry you’re in and how much you can expect to pay can be overwhelming and confusing to first-time business owners.
• Not having the needed information for application. When you apply for your business license, you will need to know detailed information about your business. You’ll need to know your industry, your EIN, business name, and more.
• Not remembering to renew your license on time. Your business license will need to be renewed each year within a small window. Your license expires on Sept. 30 and must be renewed within the month of October. It cannot be renewed early. Remembering to renew your license on time will be an annual occurrence.

There’s a lot to remember when applying for and renewing your business license in Alabama. We can help. LegalZoom offers a service that can identify which business licenses you need and help remind you to renew them on time. 

FAQs

How long does it take to get a business license in Alabama?

After submitting your application for a business license, it can take up to 10 days to receive your business license. This may vary from county to county.

Do all businesses in Alabama need a business license?

The Alabama Department of Revenue requires that businesses have a privilege license to conduct business in the state.

Where can I look up a business license in Alabama?

You cannot look up an Alabama business license online. Call the county probate court where the business is based to check on its license. You’ll need to know either the business name or address, then they can tell you whether or not the business has a license.

Can I apply for a business license in Alabama online?

No, you cannot apply for a business license online. You must apply in person at the county probate office or apply by phone. Each county has a slightly different process, so be sure to check your county’s website for more information. 

What documents do I need to get Alabama business licenses?

Each county has a slightly different process, so you may need different documents depending on where you apply. You might need to provide:

• Business formation documents
• EIN
• Business identification information, such as address and phone number
• Business plan documents
• Certificate of business insurance
• Business owner identification documents, such as driver’s license or passport

How do I renew a business license in Alabama?

The renewal process is similar to the original application process. You will receive a courtesy notice from the state to renew your license. That reminder should include instructions on renewing your business license.

What happens if I don't get a business license in Alabama?

If you do not have a business license in Alabama, your business will be considered not in good standing. Your business can incur penalties and fees in proportion to your business and the length of time you’ve been operating without a license. It can also result in up to six months of imprisonment.