How to get an Alabama business license: Step-by-step guide

Published 25 November 2025

Table of contents

• What is an Alabama business license?
• Who needs an Alabama business privilege license?
• How to obtain a business license in Alabama
• Mistakes to avoid when getting a State of Alabama business license
• Get started in Alabama with Xero
• FAQs on getting an Alabama business license

Key takeaways

• There's no general state business license in Alabama
• Most local governments require a business privilege license.
• Before getting a privilege license, you may need to register your business with the Secretary of State and get an EIN from the IRS.
• Businesses with a license must pay business privilege tax to the state.
• You may also need occupational or trade licenses.

What is an Alabama business license?

A business license gives you the right to operate a business in a certain location. In Alabama, there's no general statewide business license, but you need a business privilege license from the county where you plan to operate.

You might also need municipal licenses and occupational licenses.

Who needs an Alabama business privilege license?

Almost anyone who wants to run a business in Alabama must get a business privilege license – that includes every person, firm, company, or corporation. There are only a few exceptions.

The Alabama Department of Revenue’s (DOR) quick reference guide has more information on the requirements for almost every business type – from bounty hunters and butchers to go-go clubs and go-kart tracks.

How to obtain a business license in Alabama?

To get a business license, Alabama entrepreneurs need to work through these steps.

1. Register with the Alabama Secretary of State

You must register all formal business entities and trade names with the state. That includes limited liability companies (LLCs), limited liability partnerships, corporations, and nonprofits.

You don't need to register sole proprietorships or general partnerships with the state, but if you want to operate either of those types of businesses with a name different from your own, you must register that name with the Alabama Secretary of State.

2. Get an EIN

Short for employer identification number, EINs identify your business on tax forms and for bank purposes.

Partnerships, corporations, and any business that wants to hire employees needs an EIN from the IRS. Apply for an EIN on the IRS's website or through the mail.

Although sole proprietors don’t have to get an EIN – they can just use their Social Security number (SSN) or individual tax identification number – you can choose to get an EIN to keep your SSN private.

3. Set up a tax account with the Alabama Department of Revenue

Most businesses need to set up a tax account with the DOR. Why? Although you get your Alabama business permit at county level, you must pay a business license tax to the state as well. You also need this tax account to pay sales tax, withholding tax, and corporate income tax.

To set up a tax account, you need basic information about your business, including its name, contact details, and industry, and its NAICS code, which you can find on the North American Industry Classification Number website. The DOR issues you an account number in 3–5 business days.

4. Get your Alabama business privilege license

Now that you’ve registered your business with the DOR, get your privilege license from your local county office.

The office’s name may vary, but it's typically something like the probate office, county licensing commissioner, or revenue commissioner. A quick internet search for "Alabama business license" with your county's name will point you in the right direction.

Learn more about the business privilege license from the DOR.

5. Check industry and municipal requirements

You may need extra licenses depending on your industry and the rules in your town or city. For example:

• A restaurant needs a permit from the health department, and may also need a liquor license and/or a local business license.

• Your business might also need an Alabama trade license – such as a license to be a certified public accountant, an electrician, or a cosmetologist.

• Some municipalities require businesses that deliver into an area to have a delivery license. If that affects your business, check the area’s licensing requirements.

If you're unsure, reach out to your local government for more details about how to get an Alabama business license in your area and to find out the rules for your industry.

• Use the state's agency directory to find out the rules for your industry.
• The Alabama Department of Revenue has a municipal directory to help you find the rules in your local area.

Mistakes to avoid when getting a State of Alabama business license

To get it right the first time, keep these tips in mind.

• Give yourself plenty of time – registering the business, setting up tax accounts, and getting local licenses can take several weeks.
• Don't operate until you have a license – running a business without the right licenses is illegal and can have financial and legal consequences.
• Check the rules in any area you plan to do business – you may need a license in the county where you operate, but also in any counties where you deliver goods or services.
• Make sure you understand renewal rules – most licenses need to be renewed annually.
• Check federal requirements – you might also need to meet federal requirements in certain industries. For instance, if you run a distillery or use heavy trucks, you may need to register to pay federal excise taxes.

Get started in Alabama with Xero

If you're starting a new business in Alabama, Xero makes it easier. Our accounting software is built to help you get your small business finances organized, so you can track your cash flow and stay on top of your bookkeeping right from the start.

Connect your bank account to track expenses, and send invoices, manage sales tax, and more – Xero means less admin and more time to grow your business.

FAQs on getting an Alabama business license

Here are some of the most common questions new business owners have about getting a business license in Alabama.

How do you get a business license in Alabama?

Contact your county government for a business privilege license. But first, don’t forget to register your entity with the Secretary of State, get an EIN from the IRS, and set up a tax account with the Alabama DOR.

How much is a business license in Alabama?

License costs vary by location and industry, and typically range from fifteen to several hundred dollars. Check with your county to find the cost in your area.

What should I do with my business license?

You must display the license in your place of business.

Do you have to renew your Alabama business license?

Yes – renew your business privilege license every year in October. If you don't renew your license by the last day of October, there’s a 15% penalty (plus interest).

What if I don't receive my renewal notice?

Unfortunately, the onus is on you – you must renew on time, whether you receive a reminder or not. Some counties send out renewal notices as a courtesy, but it's not legally required – so put the renewal date in your business diary!

Can I transfer State of Alabama business licenses?

Yes. If you sell your business, you can transfer the license to the new owner. You need to register the transfer with your county and pay a $1 transfer fee.

Does my web-based business need a business privilege license?

If you have a physical presence in Alabama, then yes – you must get a business privilege license. If you don't have a physical presence, you may need a business privilege license if you have substantial nexus. Check out the DOR's definition of substantial nexus for corporations.

What licenses do I need if my business is a chain?

You should get all of your business privilege licenses in the county where you opened your first store. Then check with the county or municipality for each location to see if you need licenses in each place.