Starting a Business in Alabama
There are many advantages to starting a company in Alabama. It offers a pro-business environment that comes with a low tax burden, experienced and skilled labor force, and a manageable regulatory system. The transportation infrastructure is also solid with a network of interstates, seaports, railways, and major airports. After starting a business in Alabama some other actions you could take are to pay Alabama sales tax, look up an Alabama sales tax rate, and check the status of form COM 101. Additionally, you can search for the relevant Alabama business licenses for your company to meet compliance requirements. Alabama businesses can benefit from many available programs and incentives. The most notable of these are tax reductions through the application of abatements and tax credits, and for companies who physically situate themselves inside a state designated Enterprise Zone.
STEPS TO STARTING A BUSINESS IN ALABAMA
The Alabama Department of Revenue regulates the Alabama business privilege tax, while the good standing of a business is checked and verified by the Alabama Secretary of State business search. After conducting an Alabama corporation search, and once you have a company set up with the Alabama Secretary of State, you can complete an online registration for an Alabama Sales Tax Permit. If you have not already previously done so, you may also want to see how to obtain an EIN and see which Business Licenses you need for compliance. After finalizing administrative tasks, you can focus on searching benefit programs. Here are some of the excellent incentive programs offered to Alabama businesses. Tax credit categories are broken down into job act credits, industry credit or hybrid credit. The four main employment credits in Alabama are the Income Tax Capital Credit, Investment Credit, General Job Act Credits and the Apprenticeship Credit.
- The Capital Credit is available to businesses that are already grandfathered into the program through qualified projects. Up to 5% of the capital cost of the project can be applied to the Alabama income tax liability from the income generated by the project. New qualifying businesses that are not grandfathered into the Capital Credit program are eligible to apply for the Investment Credit which replaced the Capital Credit program.
- Under the Investment Credit Program, companies with qualified projects that facilitate the creation of new jobs in the state are eligible for the credit. This amounts to up to 1.5% of the capital contribution to the qualified project annually for up to 10 years. Additionally, the credit can be carried forward for up to 5 years.
- The General Job Act Credits are subdivided into four credits.
- The first allows businesses that qualify to apply up to a 3% credit or refund for wages paid to employees in the previous year. An additional 0.5% credit can be taken if project employees are honorably discharged military veterans who exceed 12% of total workforce.
- The second job credit is for businesses that have eligible employees working on projects that are physically located in a closed and reassigned former active duty military installation. This credit also amounts to a 0.5% job credit.
- The third general job credit applies to a qualified business so they can reduce utility taxes due or be refunded for utility taxes already paid.
- The last major employment credit is the Apprenticeship Credit which allows a qualifying business to take a $1000 credit per apprentice.
- The industry credit known as the Film Rebate is available to a qualified production company engaged in the production of a state certified production project located in Alabama. The rebate can be taken against Alabama taxes due in the same year the production project occurred. If the project spans multiple years then the rebate can be taken in each year of production as long as tax filings are current.
- A hybrid credit, known as the Port Credit, is awarded to qualifying businesses that bring jobs and economic development into Alabama port facilities. It is based on the company’s cargo volume through distribution, manufacture, or warehousing in any of Alabama’s air, railway, or water ports.
- Enterprise Zone stimulus is taken in the form of credits or an exemption. Specifically three types of stimulus are available: Alabama Sales Tax Exemption, Business Privilege Exemption or Credit, and the Income Tax Exemption or Credit. These exemptions and credits are offered to foster economic growth and expansion to economically depressed areas in Alabama.
- Certain businesses within qualified industries are eligible for a tax abatement of all state and local (non-educational Sales and Use) taxes related to building and furnishing a qualified project. A seller’s permit will be needed to collect and remit sales tax before it can be abated. Alabama offers a tax abatement program to companies that have a qualified data center. Sales Tax Abatements are given to any data center support equipment, computer software, and electricity that is used in daily operations. A minimum investment of $400 million is required to qualify for abatements. Additionally, a company must create at least 20 new jobs paying at least $40,000 annually.