How to start a contracting business in Alabama (2026)
Everything a new contracting business in Alabama needs in the first months: registration, licenses, taxes, insurance and the yearly deadlines, with official links.
1. Register your business
Most owners form an LLC with the Alabama Secretary of State. Once it's registered, find it here to claim a free website and see your exact dates.
2. Licenses
Alabama licenses or registers contractors at the state level for at least some work, often home improvement or jobs above a dollar amount. Check what your trade and job size need. Alabama details
Your city or county may also require a general business license or tax receipt.
3. Taxes
Get a free EIN from the IRS first. How. Register with Alabama before your first taxable sale. Register in Alabama
If you expect to owe $1,000 or more in federal tax for the year, you pay estimated tax four times a year.
Alabama's yearly report
No annual report to the Secretary of State, but LLCs file a yearly Business Privilege Tax return with the Alabama Department of Revenue.
Your first-month checklist
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Check your contractor license
Alabama licenses or registers contractors at the state level for at least some work, often home improvement or jobs above a dollar amount. Check what your trade and job size need. Alabama details
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Get general liability insurance
General contractors and homeowners will ask for your certificate before you start a job. See options
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Get your EIN
Free from the IRS, online in about 10 minutes. Banks, clients and payroll all ask for it. You never need to pay a service for it. How to get it free
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Open a business bank account
Keeps the company's money separate from yours, which is what protects your LLC. See options
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Insure your work truck
Personal auto policies usually don't cover a vehicle used for business. See options
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Payroll and workers' comp before your first hire
Most states require workers' comp once you have employees, and payroll software handles the tax filings. See options
What insurance costs
| Coverage | Median per month |
|---|---|
| General liability | $83 |
| Business owner's policy (BOP) | $115 |
| Workers' compensation | $160 |
| Commercial auto | $270 |
| Tools and equipment | $42 |
Source: Insureon, Aug 2026. Your price depends on your work, location and history.
Other trades in Alabama
Sources: state agency sites linked above; annual report rules compiled from state sites (checked Oct 2026). Rules change, so confirm with the agency before filing.