All businesses in Alabama are subject to the state’s license and permit requirements, and federal or local requirements may apply as well. If you’re starting a new business in the state, it’s important that you get any small business licenses or permits that your business needs. Here’s a guide to Alabama business licenses and permits.
The purpose of business licenses and permits
The purpose of business licenses and permits are to ensure that businesses operate properly with respect to public safety, public health, and the general welfare of the community. Essentially, these help make sure that businesses are obeying the regulations that they’re subject to.
License and permit requirements can vary by industry and location. It’s important that you obtain any that your business is required to have, whether because of its operations or location. Failing to get necessary licenses or permits can result in fines, penalties, and potentially even forced stoppage of your business’s operations.
Business licenses vs. permits
Business licenses and business permits are similar in many ways, and sometimes the two terms are used interchangeably. Broadly speaking, however, there are some common differences between licenses and permits:
- Business Licenses: Licenses are generally required to conduct specific business activities, especially activities where the public would be at risk if the business acted negligently or unlawfully. For example, serving food, selling alcohol, selling automobiles, and medical services often require a license.
- Obtaining a license often requires meeting specific qualifications, which could range from passing a basic exam to having advanced degrees. The business or professional then has legal approval to provide ongoing services, until the license needs to be renewed.
- Business Permits: Permits are typically more specific and limited in scope. They may be required for specific projects or work, such as building an addition, closing a road, or hosting a major public event. While permits can be for health and safety concerns, they also might be required simply to ensure that a business doesn’t disrupt a local community.
- Obtaining a permit can require providing specific details about a project, event or other work. Multiple permits could be needed for multiple projects or events. They’re often specific to one thing.
A commercial driver’s requirements serve as a good example of the typical differences between a license and a permit. A truck driver needs to have a commercial driver’s license in order to operate large commercial trucks. The license grants them general permission to drive trucks. If the driver needs to transport an oversized load, they might have to get a permit for the transport. The permit would likely only apply to that one trip, with additional trips possibly requiring their own permits.
Types of business licenses and permits you might need for your Alabama business
Business licenses and permits are issued at all levels of government, and by a variety of government agencies or departments. You’ll need to check license and permit requirements at the federal, state and local levels.
State of Alabama business licenses and permits
Alabama privilege license
In Alabama, the most commonly needed state license is a Privilege License. Virtually all businesses selling tangible goods, regardless of whether they wholesale or retail, need this license. Service businesses don’t always need it, but should still check with their local county office.
Even though the State of Alabama Privilege License is issued by the state’s Department of Revenue and its License Commission, it’s applied for locally. Applications are submitted to the county probate judge or license commissioner, and you’ll need a separate application for each county which you do business in.
Alabama has many other state license requirements for businesses in various sectors. Your business might need one or several licenses from the state, depending on what the business does.
Alabama handbook of privilege and store licenses
You can check all state business license requirements in the Handbook of Privilege and Store Licenses. Search your business industry and type (e.g. restaurant) to do a preliminary check, and then consult the table of contents to make sure you look at all places where your business type is listed.
The handbook contains a fairly comprehensive list of the state’s licensing requirements, and you’ll see fees broken out by area population size. You can further confirm what you find by checking the Business Services section of the Alabama Secretary of State’s website. Call Business Services at (334) 242-5324 if you still have questions about state licenses.
Professionals who are required to be licensed to work within the state should check with their state licensing board. For example, physicians should check credential requirements with the Alabama Medical Licensure Commission.
Local business licenses and permits
Local governments frequently have their own license and permit requirements. You’ll need to check any town requirements, city requirements and county requirements where your business operates. If you have locations or provide services in multiple counties, check the requirements in each one.
The requirements that local governments have can vary a lot. Some require that all businesses within their jurisdiction have a general business license or permit. It’s also common for local governments to have their own requirements for certain businesses, such as liquor stores, locksmiths and contractors.
Additionally, local government requirements often include more permit requirements than the state does. Your business may need a permit to sell at a festival, renovate or construct a building, or operate certain types of businesses, along with many other activities.
The best way to check local requirements is by talking with the local officials. Contact the following to ask about local business license and permit requirements:
- Probate Judge/License Commissioner: You may need to obtain an Alabama Privilege License from the local probate judge or license commissioner. They’ll also issue local Privilege Licenses if the county requires one (many counties do).
- Town Clerk/City Clerk: The town clerk or city clerk will be familiar with any municipal licenses or permits that your business needs. Municipal applications usually are submitted to the town or city clerk.
- County Clerk. The county clerk will be familiar with any other county licenses or permits that your business needs. County applications are submitted to the county clerk.
Specialty-specific federal business licenses and permits
While there’s no federal license or permit that all businesses need, the federal government regulates businesses operating in various industries. Federal licenses and permits are usually awarded through the appropriate federal agency.
For instance, businesses in the following industries often are subject to federal license or permit requirements: ammunition, firearms, and explosives, agriculture, alcoholic beverages, aviation, commercial fisheries, drilling and mining, maritime transportation, fish and wildlife, logistics and transportation, nuclear energy, and radio and television broadcasting. This is not a comprehensive list.
If your business could be subject to a federal requirement on account of the business’s industry, contact the federal agency that oversees your industry. The agency will have details on any licenses or permits that might be needed. The Small Business Administration (SBA) also has a good list of federal license and permit requirements.
How to obtain business licenses and permits in Alabama
While the exact steps required to obtain business licenses and permits in Alabama will depend on the specific licenses and permits you need, here is the general process for both state and federal licenses:
Step 1: Determine what licenses and permits your business needs
You’ll need to identify which (if any) licenses and permits your Alabama business needs to obtain. Check with the relevant federal, state and local (municipality and county) authorities as detailed above.
Step 2: Submit all required documents and application fees
Each business license and permit will have its own application process and fees.
The information required when applying can be very basic or extremely extensive. A local business permit might just ask for your business’s name and location, whereas a federal firearms license will require extensive documentation.
The fees can also vary a lot, although there are some typical ranges at each level of government. These ranges are typical but there can be exceptions:
- Local: Municipal and county licenses and permits often range between $0 and $100, with many toward the lower end of that range.
- State: State licenses and permits can range anywhere from $0 to $1,000+, depending on your industry and business.
- Federal: Federal licenses and permits are frequently much more, possibly being anywhere from hundreds to multiple thousands of dollars.
Many licenses can now be applied for online, but some still require a paper form that gets mailed in. The authority that you need a license from will likely have an application (online or paper form) somewhere on their website.
Step 3: Track the status of your application and await approval
Processing times for business licenses and permits can vary greatly. You may find information on typical processing times from a government website, or by calling the clerk or agency. Try to get an estimate of how long the application’s processing will take, but understand that this usually isn’t a strict guarantee.
State and federal licenses and permits can sometimes be tracked online. Licenses and permits that can’t be tracked online, including most local ones, can be checked by contacting the clerk or agency.
In almost all cases, times aren’t guaranteed unless you specifically pay for expedited processing. There’s usually an additional fee for this, and it’s not always available.
Step 4: Renew if needed
Some state and local licenses and permits don’t need to be renewed, but many do. It’s common for annual renewals to be required, but renewals can alternatively be anywhere from 2 to 5+ years in some cases.
Check whether any licenses or permits your business obtains need to be renewed, and keep track of any renewal deadline. Failing to renew a business license or permit could result in fines or other financial penalties, and potentially even force your business to pause operations.
Conclusion
Before you officially start a business in Alabama, first check for any license or permit requirements that it could be subject to. Be sure to apply for these prior to actually starting your business. If you’re still figuring out how to get an LLC in Alabama, this step is an important part of the process to ensure your business is compliant from the very beginning.