Alabama Business License Requirements (2025 Update)

The Alabama business license (commonly known as a business privilege license) is required for all businesses operating in the state. It must be obtained from the county where the business is located and renewed annually. Additional municipal licenses may be needed depending on the city.

Each county and municipality may have its own specific requirements and fees, so it’s important to check with local offices. Compliance with these regulations ensures your business operates legally within Alabama. Understanding how to obtain a business license in Alabama is essential to ensure proper registration and avoid legal complications.

Does Alabama Require a Business License?

Yes, Alabama requires all businesses to obtain an Alabama Business License. This is mandated by the state under Title 40, Chapter 12 of the Code of Alabama 1975. The Alabama Business License registration is handled at the county level, where the Probate Judge or License Commissioner issues the license.

In addition to the state-level requirement, municipalities (cities and towns) may have their own licensing rules. Businesses may need to obtain additional licenses or permits depending on the city in which they operate.

Alabama Business License vs Municipal License

In Alabama, businesses are required to obtain both a state-issued Business Privilege License and, depending on their location, municipal licenses. The state mandates the business license in Alabama under Title 40, Chapter 12 of the Code of Alabama 1975, which must be obtained from the county where the business operates.

However, municipalities have the authority to impose additional licensing requirements specific to their jurisdictions.

Key Differences

The following points highlight the key differences between an Alabama business license and a municipal license:

  • State Business Privilege License: Required statewide for most businesses, issued by the county Probate Judge or License Commissioner.
  • Municipal Licenses: Additional licenses that may be required by cities or towns where the business operates. These can include general business licenses, health department certifications, and specialized licenses for specific industries.

Requirements in Alabama’s Largest Cities

The following points highlight the requirements of three of the largest cities of Alabama:

  • Birmingham (Jefferson County): Requires a city business license in addition to the state license.
  • Montgomery: Businesses must obtain a city business license and may need additional permits, such as a Certificate of Occupancy, depending on the nature of the business.
  • Mobile: Requires both a county-level Business Privilege License and a separate city business license.

Alabama Business License: Occupational & Professional Permits

In Alabama, certain professions require additional Alabama business licenses beyond the standard business privilege license. These licenses ensure that professionals meet the necessary standards of competence. The main professions that require additional licensing are:

  • Contractors: Must obtain a license from the Alabama Licensing Board for General Contractors. Requirements include a notarized application, insurance proof, financial statements, and exams.
  • Cosmetologists: Licensed by the Alabama Board of Cosmetology and Barbering after completing an approved training program and passing exams. 
  • Certified Public Accountants (CPAs): Must be licensed by the Alabama State Board of Public Accountancy after meeting educational and experience requirements and passing the CPA exam.

Alabama Sales Tax License (Certificate of Authority)

In Alabama, businesses must obtain a Sales Tax License (Certificate of Authority) to legally collect and remit sales tax. This applies to both in-state and remote sellers who establish nexus in the state.

Nexus can be created through activities such as having a physical location, storing inventory, making over $250,000 in sales, or attending trade shows where sales occur. The following steps highlight how to apply for a sales tax license in Alabama:

  1. Visit the My Alabama Taxes (MAT) portal.
  2. Select “Business Tax Online Registration.”
  3. Complete the form with your EIN and business details, then submit.
  4. You’ll receive a confirmation number and sales tax account within 2-3 days, with the official permit arriving by mail in 3-5 days.

Renewal of Sales Tax License

The Alabama business license renewal must be completed annually by December 31 via the MAT portal. There’s no fee for renewal. If completed by 4:00 p.m. CST, your new license is available the next business day.

Federal Licenses Needed in Addition to an Alabama Business License

Obtaining an Alabama business license from the county probate office is mandatory for most businesses. Certain industries are federally regulated and require additional licenses or permits:

  • Alcohol Production and Distribution: Businesses involved in manufacturing, importing, or selling alcohol must obtain a permit from the Alcohol and Tobacco Tax and Trade Bureau (TTB). 
  • Firearms and Explosives: Engaging in the business of manufacturing, importing, or dealing in firearms or explosives requires a Federal Firearms License (FFL) from the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF).
  • Aviation Services: Operating aircraft or providing aviation-related services requires certification from the Federal Aviation Administration (FAA).
  • Food and Drug Products: Manufacturers of food, drugs, medical devices, and cosmetics must register with the Food and Drug Administration (FDA).
  • Agricultural Products: Businesses involved in the import or transport of animals, plants, or biotechnology across state lines must obtain permits from the U.S. Department of Agriculture (USDA).

Note: Holding a state-issued business license does not fulfil federal licensing requirements.

How to Get an Alabama Business License?

Starting a business in Alabama requires obtaining the necessary licenses and permits. The following are the steps for how to get a business license in Alabama:

  1. Decide on your business entity (e.g., LLC, corporation) and select the appropriate NAICS code that best describes your business activities.
  2. Register your business online through the Alabama Secretary of State’s website.
  3. Register for a sales tax license via the MAT portal.
  4. Contact your local city or county office to determine if additional business licenses or permits are needed. Requirements vary by location.
  5. After approval, pay any applicable fees and display your business license at your place of operation.

How Much Is an Alabama Business License?

If you’re wondering, “How much is a business license in Alabama?” the fees differ based on your business activities and location. The cost of a business license varies depending on the business type and location. The state and municipal governments have separate fee structures, and businesses need to comply with both.

Typical Filing Fee Range

The state-level fees for an Alabama Business License typically start at $100, with fees increasing based on annual gross receipts. For example, businesses with receipts exceeding $250,000 may incur fees of up to $750.

Municipal fees also vary significantly. For instance, the City of Vestavia Hills charges around $162 annually, while Prichard charges $600 for certain businesses like real estate agents.

High-Risk and Regulated Trades

Specific industries are subject to higher fees due to the nature of their operations. The following are a few examples:

  • Manufacturing: Fees are calculated at $0.0005 per $1 of gross receipts, with a maximum fee of $10,000.
  • Health Care Providers: Fees range from $50 for receipts up to $19,999.99, increasing with higher receipts.
  • Retail and Food Services: Base fees start at $100, with additional charges based on gross receipts.

Renewing an Alabama Business License

To keep your business in good standing and avoid penalties, it’s essential to renew your Alabama Business License on time. Below are the key details for the renewal process:

  • Renewal Period: Annual renewal is required by October 31 each year. The license covers the period from October 1 to September 30 of the following year.
  • Online Renewal: You can renew your license quickly via the MAT portal, which is the most efficient way to complete the renewal.
  • Mail Renewal: Some counties may send renewal notices by mail, but online renewal through MAT is encouraged.
  • Late Fees: A 15% penalty and interest will be added if the renewal is not completed by October 31.
  • Grace Period: No official grace period exists after October 31, so it’s important to renew promptly to avoid penalties.

Penalties for Operating Without an Alabama Business License

Operating without the required business licenses or permits in Alabama can lead to serious consequences. Depending on the nature of your business, you may face:

  • Cease-and-Desist Orders: Authorities may halt business operations until licensing issues are resolved.
  • Criminal Charges: Repeated noncompliance in regulated industries can lead to misdemeanor charges and possible license revocation.
  • Loss of Revenue or Permits: Noncompliance can result in delayed payments, inability to collect sales tax, and reputational damage.

Best Alabama Business License Filing Services

Filing a business license in Alabama can be a complex and time-consuming task, but several services are available to simplify the process and ensure compliance. Commenda is the #1 choice for many businesses, offering fast, affordable, and reliable service.

The following are the best Alabama business license services that can help make the whole process efficient:

1. Commenda

  • Price: Affordable pricing with various packages to suit different business types.
  • Turnaround: Fast processing, typically within 1 to 3 business days.
  • Support: U.S.-based live support with personalized assistance.

2. Harbor Compliance

  • Price: Fees vary depending on the business type and location.
  • Turnaround: 5 to 7 business days standard.
  • Support: Email and phone support during business hours.

3. Incfile

  • Price: Starts at $0 plus state fees, offers add-ons for compliance tracking.
  • Turnaround: 3 to 5 business days.
  • Support: Online chat and help center.

While all three offer solid service, Commenda stands out for its hands-on support and ability to handle both state and municipal filings in one place.

How Commenda Makes Alabama Business Licensing Easy

Commenda takes the complexity out of business licensing in Alabama with:

  • All-in-One Dashboard: Manage and track both state and local licenses seamlessly from a single platform, simplifying the entire filing process.
  • Compliance Reminders & Auto-Renewal: Stay on top of your deadlines with automated compliance reminders and auto-renewal tools to ensure you never miss critical updates.
  • Expert Live Support: Receive personalized guidance from experienced, U.S.-based professionals available to assist you every step of the way.

Conclusion and Next Steps

Obtaining your Alabama business license doesn’t have to be complicated. Here’s a quick recap:

  • Choose your business structure and NAICS code.
  • Register with the Secretary of State, if applicable.
  • Apply for state and local licenses.
  • Confirm whether your industry needs special permits.
  • Renew on time to stay in compliance.

Let Commenda handle the paperwork so you can focus on growing your business. Book a free demo today to learn more.

Alabama Business License FAQs

Q. How do I get a business license in Alabama if I run an online-only store?

You still need to register your business with the Alabama Department of Revenue and obtain a Sales and Use Tax Permit. You may also need a local zoning or home business permit.

Q. How much does a standard Alabama business license cost, and are city fees extra?

An Alabama business license is required for businesses that sell tangible goods or taxable services in Alabama. City permit fees will depend on your business’s location and type.

Q. What happens if I operate without a valid Alabama business license — fines or shutdown?

You may face civil penalties, cease-and-desist orders, and in some cases, criminal charges for repeated violations.

Q. Do home-based businesses in Alabama need both a municipal permit and a state license?

Often yes. You may need a zoning permit or local business license in your town, along with state-level registration for tax collection or regulated services.

Q. Is a Sales Tax Certificate of Authority the same as an Alabama business license?

Not exactly. It allows you to collect sales tax, but it is not a substitute for industry-specific or local business permits, according to the business license regulations.

Q. How long does approval take when you apply for a business license in Alabama online?

Approval for a business license in Alabama can take anywhere from a few days to several weeks, depending on the type of permit and the specific municipality.

Q. Can I transfer my Alabama business license if I move the company to another county?

You must update your address with the state and likely reapply for permits in your new city or town.

Q. What documents are required to renew an Alabama business license each year?

Typically, you need your current license number, business information, and proof of compliance, such as insurance or inspection records for regulated industries.

Q. Are professional and occupational licenses mandatory in addition to a general Alabama license?

Yes. Professions like contractors, barbers, accountants, and real estate agents require additional state-issued licenses.

Q. Which service offers the best done-for-you Alabama business license filing and renewal?

Commenda is highly rated for its all-in-one platform, expert help, and automatic renewal tracking.

Q. Do non-U.S. owners need a registered agent before getting an Alabama business license?

Yes. If you are a foreign entity, you must appoint a registered agent with a physical address in Alabama for Alabama business license registration.

Q. Does the federal government ever override Alabama licensing, such as ATF, FDA, FAA permits?

Yes. Federal permits are required for regulated activities and take precedence over state licenses in those sectors.