The Complete Guide to Alabama Business Licenses
Alabama requires a state business privilege license. You buy it from the probate judge or license commissioner in each county where you do business, and most cities add their own license. Sellers also register for sales tax.
Step 1: Form the LLC
Reserve your name, then file a Certificate of Formation with the Secretary of State for $200. Each year the LLC files the Business Privilege Tax Return and Annual Report with the Department of Revenue (no return is required if the tax is $100 or less). See the Alabama LLC guide for every formation step.
Step 2: State business privilege license (county)
Under Title 40, Chapter 12 of the Code of Alabama, businesses buy a state business license from the county probate judge or license commissioner. The fee depends on the type of business and location, plus a $1 issuance fee, and some counties add their own fees. Licenses renew every October — after October 31 a 15% penalty plus interest applies — and a half-year license is available if you start after April 1.
Step 3: Sales tax license
Sellers register for a Sales Tax License with the Alabama Department of Revenue through My Alabama Taxes (MAT). The state rate is 4%, plus city and county taxes. Employer withholding is registered in MAT too, and unemployment insurance with the Alabama Department of Workforce.
Step 4: City licenses
Most Alabama cities also license businesses. In Birmingham, many licenses are based on gross receipts with a minimum fee at the start; the license year runs January 1 to December 31, and general licenses are late after February 15.
Step 5: Contractor and professional licenses
General contractors need a license from the Alabama Licensing Board for General Contractors for projects of $100,000 or more (raised from $50,000 in October 2024). Other professions are licensed by their state boards.
Checklist
| Registration | Agency | Cost |
|---|---|---|
| Certificate of Formation | Secretary of State | $200 + name reservation |
| State business privilege license | County probate judge / license commissioner | By business type + $1; renew each October |
| Sales tax license | Department of Revenue (MAT) | Before your first sale |
| City business license | Your city | Often based on gross receipts |
| General contractor license | Licensing Board for General Contractors | Projects $100,000+ |
Frequently Asked Questions
Does Alabama require a business license?
Yes. Alabama requires a state business privilege license, bought from the probate judge or license commissioner in each county where you do business, and most cities require their own license too.
When do Alabama business licenses expire?
State business licenses renew every October; after October 31 a 15% penalty plus interest applies. Some city licenses, such as Birmingham's, run on the calendar year.
How much is a business license in Alabama?
The state license fee depends on your type of business and location, plus a $1 issuance fee and any county fees. City licenses are often based on gross receipts.
How much does it cost to form an LLC in Alabama?
The Certificate of Formation costs $200, plus a name reservation fee.
Do contractors need a license in Alabama?
General contractors need a state license for projects of $100,000 or more. The threshold rose from $50,000 in October 2024.