Transcription
Welcome to Defining Business Privilege Licenses. The following video is intended to be an overview of the subject matter included and is not a comprehensive explanation of all aspects of the subject matter. The information contained in this video does not represent legal advice and is not legally binding on the Department. Information regarding taxes and tax administration changes frequently and should always be confirmed through a tax professional. Please refer to the Alabama Department of Revenue website at Revenue.Alabama.Gov for additional information.
In this lesson we will define a business privilege license, determine your business entity type, discuss requirements for online businesses, and explain how to register your business.
What are business privilege licenses? A business privilege license is a license required for certain businesses or professions, as indicated in Title 40, Chapter 12, Code of Alabama 1975, to engage in a particular activity within the state.
Business Privilege License versus Business Privilege Tax. Please note that these are separate requirements. Business privilege licenses are issued via the local counties and are fees paid by businesses for the privilege of operating a business within the state. Business privilege tax is a tax administered by ADOR's Individual and Corporate Tax Division.
Require a regulatory license: Contractors, automobile dealers, cosmetologists, physicians, and many more.
Who needs a regulatory license? Contractors, cosmetologists, auto dealers, and physicians are just a few of the occupations that require a regulatory license. Many other professions require them as well. Please check with the appropriate board for licensing requirements.
Who needs a business privilege license? Not all professions or businesses require a state and/or county business privilege license. Please visit the Business and License Tax Division webpage to view the Quick Reference Guide for a list of the various licenses identified by code section. Within the same webpage, you can also visit the Handbook of Privilege and Store Licenses, which provides the general requirements for administering business licenses, as well as information on all code sections.
Online businesses. Persons operating a business via the internet with a physical presence within Alabama (mailing address, employees, etc.) are required to obtain the same licenses as a brick-and-mortar business.
There are various business entity types: Proprietorship, Partnership, Corporation, LLC's and LLP's, Subchapter S Corporation.
Proprietorship. The sole proprietorship is usually defined as a business which is owned and operated by one person.
Partnership. An association of two or more persons to carry on as co-owners of a business for-profit.
Corporation. A corporation usually is formed by the authority of a state government. However, in Alabama, a corporation is formed by authority of a probate judge. A corporation is a distinct legal entity separate from the individuals who own it.
Subchapter S Corporation. A Subchapter S corporation is a legal corporation that is afforded special tax treatment under Subchapter S of the Internal Revenue Code.
LLC's, including LLC's and LLP's. If properly structured, an Alabama limited liability company will offer the beneficial tax status of a partnership and provide all of its members with limited liability. It is treated like a corporation for limited liability purposes, but for federal tax purposes, it is treated as a partnership.
Registering your name. If operating as an LLC or corporation, you must register the name of the business with the Alabama Secretary of State office. Please visit the Secretary of State website at www.sos.alabama.gov.
Step 1: Determine your legal name.
Step 2: Determine your business structure.
Step 3: Determine your business type. What types of services or products will you offer?
Step 4: Contact the IRS to register for a Federal Employers Identification Number.
Step 5: Visit the local county license authority where your business is located.
Step 6: Provide your SSN or FEIN to the county in order to purchase your state county business privilege license.
Finding your local licensed office. A list of county license offices is available on the ADOR Probate Office Directory page in the Business License Division section of the ADOR website. Contact the appropriate section with questions or visit revenue@alabama.gov.