Alabama is one of the best states to start a business in due to its low tax rates. In this comprehensive step-by-step guide, you will find everything you need to know about starting a business in Alabama. You’ll find information on how to pick a name, what business structure to choose, and even how to market your business successfully.

Step 1: Choose Your Idea

Before you can even begin thinking of names for your business, you need to choose an idea. Every business is started with an idea, and really thinking through this step will help you make your business successful.

When deciding on an idea to build on, you should ask yourself some critical questions:

  • Is there a need in the market for my business?
  • What can I provide that’s not already available on the market?
  • What am I passionate about?
  • How can I build this passion into a business?

The answers to these questions should point you in the right direction and help you formulate some ideas. Brainstorming is such a great way of coming up with a startup idea. Create a mindmap on the computer or bounce ideas off your friends and colleagues.

Coming up with an idea doesn’t have to be difficult, and you can even use online resources to help you land a good business idea.

Step 2: Pick a Name

Now that you have an idea for your business, you can pick a name. Choosing the right name to represent your business is very important as this will be the first thing your customers will see. People will form their first impressions about your business based on the name, whether online or offline.

So, how do you choose the name?

When deciding on a name, you want to ensure that the name tells people what kind of business it is. The name should also be unique and help you stand out from all the other businesses out there already.

Here are a few things you can do to get those creative juices flowing.

Create a Word Dump

Jot down a list of words that you feel are relevant to your business and the industry. Don’t think too much about the words; just write whatever word pops into your head first.

Use a Thesaurus

Thesauruses are helpful as you can look up synonyms and related terms, expanding your list of words. You can use this online thesaurus to get started.

Use a Name Generator

Another option is just to let technology do the work for you. With word generators, you can add a few words of your own and let the algorithm formulate a number of names for you. This is a great method of name picking because these names are unique and random, so the chances of the name being in use are slim.

You can find an online name generator here.

If you have already chosen a name, you can choose to reserve it online with the Alabama Secretary of State. The fee to do this is $25.

Step 3: Write Your Business Plan

Creating a business without a business plan is like building a house without blueprints. Every good business needs a business plan, not just for forming the business but also for day-to-day life after the business is formed. Having a plan also shows investors you are serious and know what you are doing and what they can expect from your business.

A good business plan covers everything from starting the business to its envisaged success. Your plan should include the following:

  • A summary of the business and why you feel it will be a success
  • A description of the business
  • All your market research, including your target audience and other competitors
  • The staff who will be running the business, state what roles will be needed and how they will be filled
  • Financial planning
  • Your marketing strategies
  • Any other important supporting documents
  • Milestones of where you see the business in 6 months, one year, etc

If you aren’t sure where to start, there are plenty of online templates you can use to draft your business plan.

Step 4: Get Funding

To start a business, you need money. And while Alabama is one of the cheapest and easiest states to start a business in, you’ll still need some capital to get things moving. The best way to go about this is by getting funding, whether it’s through your own savings or outside investors. Luckily, there are different ways to get funding to get your business up and running.

Before you even start seeking funds, create a financial plan so that you know exactly how much you need. Once you know what you need, you can start fundraising.


Also known as bootstrapping, this method provides business capital by using your personal savings and current income.

Friends and Family

It is always a good idea to check if your friends and family would like to invest in your business before resorting to cold-calling outsiders. To prevent disputes, you should always have a written agreement when acquiring funds from family and friends.

Business Grants

A grant is essentially a loan that you don’t have to pay back. The money is yours to invest in the business. In Alabama, the government has a program that offers grants to small businesses should they meet the requirements. You can visit the U.S. Grants website for more information about applying for a grant.

Business Loans

Getting a loan for your small business is a good idea if you need money to get the business off the ground. When applying for a loan, you can determine how much you’ll need and decide if you’re happy with the repayment rate. While most loans can be applied for at a bank, you can also apply for financial assistance at other for-profit loan companies.

Angel Investors

Angel investors are a good way of getting funds. They are typically high net-worth individuals who invest their own personal finances into a small business in exchange for some say or percentage in the business, similar to buying shares.

Step 5: Choose a Business Structure

Choosing the proper business structure is crucial to your business’s success in Alabama. There are four different types of business structures you can choose from:

  • Sole proprietorship
  • Partnership
  • Limited liability company (LLC)
  • Corporation

Sole Proprietorship

This is a more informal and common type of business structure. A sole proprietorship means that the business is only owned by one individual who is personally liable for the business.


A partnership is similar to a sole proprietorship, except in a partnership, two more people own a business together. Each of the partners owns equal parts of the business.

Limited Liability Company

A limited liability company, or LLC, is a popular business structure for small business owners as you get the tax benefits of a corporation while still maintaining the flexibility of being a sole proprietorship or partnership.

C or S Corporation

A corporation is its own entity, which makes it a bit more complex than other business structures regarding regulations and taxes. A C corporation is ideal for larger businesses with more than 100 shareholders, while S corps must have fewer than 100 shareholders. Having a corporation allows for selling stock, tax exemptions, and liability protection.

Step 6: Register Your Business

Registering your business in Alabama means that the state officially recognizes your business, and you can legally conduct business. Each business structure has slightly differing methods for registering a business.

Sole Proprietorship

  1. Choose a name
  2. File a trading name
  3. Obtain any relevant licenses
  4. Get your EIN


  1. Choose a name
  2. Register the name
  3. File an application with the state

Limited Liability Company

  1. Choose a name
  2. Appoint a registered agent
  3. File the application with the Secretary of State
  4. Create an operating agreement
  5. Obtain your EIN

More information on the process can be found in our guide on how to form an Alabama LLC.


  1. Choose a name
  2. Choose a registered agent
  3. Hold an organizational meeting
  4. File an application with the state
  5. Get your EIN

Step 7: Set Up Your Finances & Accounting

Setting up bank accounts and bank cards for the business is essential for separating your personal assets from the business. This will also help make things easier when it comes time to file taxes for the business.

The best business bank accounts in Alabama are:

It may also be worth setting up an accounts system to manage tax filings to streamline your business. Or, even better, you could hire a professional accountant to do this for you.

Step 8: Get Business Insurance

Investing in a good business insurance policy is highly recommended to prevent costly legal accidents and provide good risk management. Here are three of the most popular types of insurance plans for small businesses:

  • General liability insurance – This broad policy protects your business’s assets. Most small businesses will choose this policy.
  • Workers’ compensation insurance – This plan covers any workplace injuries or accidents and minimizes potential risks.
  • Professional liability insurance – This insurance policy covers malpractice and legal disputes.

To ensure you get the right insurance policy for your business, consult a professional insurance broker.

Step 9: Obtain Any Permits or Licenses Needed

In Alabama, different businesses in different counties will require different permits. For example, if your business sells taxable goods, you may need to apply for a seller’s permit online. Depending on what industry your business falls under, you may need to apply for other business licenses and permits. You can find more information on what license you might need here.

Step 10: Build a Website

Building a website is no longer limited to those who can type out a bunch of coding. Nowadays, building a website is straightforward as there are many programs and software that can take care of the bulk of the work for you.

Having a website for your business is an excellent way of marketing your business, expanding your business to other regions, interacting with customers, and generating more sales.

Some of the best website-building platforms you can use are Go Daddy, Wix, and WordPress. There are hundreds of website hosts online that you can choose from, so you can have your pick.

When building your website, you want to ensure that it is eye-catching, but not too busy that it becomes overwhelming. When potential customers come across your website, you want to ensure that important information is immediately visible. Your products and services must be clear to your potential customers. Using clear calls to action, such as phrases like “Buy Now,” can really make a difference in your sales.

Step 11: Hire Employees

A well-run business is usually thanks to a team of employees working to keep your business successful. Hiring employees for your business is an important part of starting a business, and you want to make sure they are qualified for the role you need to be filled.

In Alabama, all businesses that hire employees must comply with state regulations to ensure they are legally allowed to work in your business. As an employer, you will need to report new hires to the state of Alabama and pay employee taxes on a federal and state level.

Step 12: Market Your Business

Marketing a business in Alabama has never been easier. There are so many different ways to market; even if you’re on a small budget, there is something for everyone. The one thing to focus on when marketing is repetition. You want to build brand recognition, and the way to do that is with consistent branding and marketing.

Here is a list of the best ways to market your business in Alabama:

  • Facebook ads
  • Instagram ads
  • Google ads
  • Local newspapers and media
  • Business website
  • Local radio station
  • Networking events

Questions? Let us know.

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