Starting a service business in Alabama comes down to four things: picking a structure, registering with the state, getting licensed for your trade, and setting up a way to bill customers. Filing an LLC in AL costs $200–$300, ongoing reporting is not required for llcs, sales tax is 4% state + local, and personal income tax runs 2%–5%. Below is the full sequence, the fees you should budget for, the licenses most trades need, and the deadlines that catch new Alabama owners off guard.
Most new registrations come out of Birmingham, Montgomery, Huntsville and the rest of Alabama — local business licenses are issued at the city or county level, so check yours after the state filing clears.
| Item | AL cost |
|---|---|
| LLC / entity filing (one-time) | $200–$300 |
| Annual / periodic report | Not required for LLCs |
| Federal EIN (IRS) | Free |
| Sales tax registration | Typically free |
| Trade / professional license | Varies by trade |
| Local business license | Set by city / county |
Fees change — confirm current amounts with the AL Secretary of State and the Alabama Department of Revenue.
Choose your structure and file with the AL Secretary of State ($200–$300). Get your free EIN from the IRS the same day.
Register for Alabama sales tax with the Alabama Department of Revenue, then open a business bank account under the registered name.
Apply for your trade license and local business license. This is usually the longest step: State business license ($50+); Professional license (trade-specific).
Get general liability insurance (and workers' comp before your first hire), then set up estimates and invoicing so you can bill the day you're cleared to work.
LLC Filing Fee
$200–$300
Annual Report
Not required for LLCs
Sales Tax
4% state + local
Income Tax
2%–5%
Choose a business structure (LLC, sole proprietorship, corp)
Register with the Alabama Secretary of State
Get an EIN from the IRS (free)
Register for Alabama state taxes
Get local business licenses and permits
Open a business bank account
Get business insurance
Alabama requires a state business privilege license for all businesses
File your Annual Report through the Department of Revenue
Most cities require a separate business license
Filing an LLC in Alabama costs $200 with the Secretary of State. You'll also need a business privilege license starting at $50.
Yes, Alabama has a graduated income tax from 2% to 5%.
Online LLC filings with the AL Secretary of State are typically processed in a few business days, and an EIN from the IRS is issued immediately online. Trade licensing and local permits usually take longest — plan on two to six weeks before you're fully cleared to work, depending on your trade.
No — you can operate as a sole proprietor in Alabama and still invoice customers legally. An LLC ($200–$300 to file, not required for llcs) separates your personal assets from business liability, which matters most once you're on customer property, hiring help, or signing contracts.
Alabama sales tax is 4% state + local. Materials and goods are commonly taxable, while labor treatment depends on the type of work, so bill parts and labor as separate lines and register with the Alabama Department of Revenue before you start collecting.
Open a business bank account under the registered name, then invoice from a tool that applies AL tax per line item and accepts cards. Glo Invoice sends invoices by text with a one-tap pay link, and Tap to Pay lets you charge on site before you leave the job.