Doing Business in Alabama: Everything You Need to Know
Doing business in Alabama offers plenty of benefits, such as a low-cost environment, a skilled workforce, business-friendly regulations, and more.3 min read
Doing business in Alabama offers plenty of benefits, such as a low-cost environment, successful job-training programs, a skilled workforce, business-friendly regulations, and more. The state is tailored to bring in and retain businesses through their competitive climate and beneficial tax structure. Not only does Alabama offer plenty of business perks, but the great diversity of natural wilderness areas and recreational activities offers residents a variety of additional reasons to establish their homes within state boundaries.
Alabama's Major Industries
Alabama's major industries include agriculture, mining, steel-making, and hydroelectric power. Numerous renowned companies, such as Honda and Mercedes, have set up their manufacturing facilities within the state. In fact, over 300 automobile-related companies have established their businesses in Alabama.
The aerospace, aviation, and defense industries are few major players in Alabama's aerospace field. The state boasts hundreds of aerospace companies. Biotechnology is another significant industry, with over 95 biotechnology-related companies either based in or doing business in Alabama.
Alabama's Business Advantages
Alabama offers significant advantages to businesses operating or based inside the state's borders, including:
- A low-tax environment
- Policies and regulations favoring business
- A skilled workforce that still knows how to make a wide variety of things, such as luxury SUVs, aircraft, rockets, missiles, warships, artisan furniture, fire hydrants, and much more
- Workforce development and job-training programs
- Extensive infrastructure for shipping products (deep-water port, five Class 1 railroads, extensive interstate system, major airports). One of the state's major assets is the Port of Mobile, which was the nation's 13th busiest seaport in 2013, handling over 55 million tons of cargo that year. The value of exports from Alabama more than doubled over the past decade, as Alabama-made products were increasingly shipped around the world.
- Innovation centers and seven research universities
Alabama's Business Grants and Incentives
Alabama offers a variety of grants and incentives to investors, including:
- Capital Credit Law
A business that invests in a qualifying new capital project may claim an annual credit against its state income tax allocable to that specific project. Better yet, the credit may be claimed every year for 20 years, starting with the year the project is put into service. The yearly credit is equal to 0.05 percent (one-twentieth) of the capital investment, but the aggregate amount of credits you claim may not exceed the total capital cost.
- Alabama Enterprise Zone Act
The Alabama Department of Economic and Community Affairs administers this federal program, and federal grants provide the funds. To receive benefits under this Act, a business must, among other criteria, prove that at least 35 percent of its workers live in an enterprise zone and were either receiving some type of public assistance before being hired or were considered unemployable by common standards (e.g. lacking in basic skills). If the company employs at least 1,200 workers and makes investments and capital improvements of at least $75 million, additional benefits are available.
- Site preparation grants
The State Industrial Development Authority (SIDA) provides grants for qualifying projects based on their capital costs. Typically, grant amounts range from 5 percent (when total project costs are less than $200,000) to .75 percent (when total project costs exceed $10 million). Keep in mind that for projects with costs between $10 million and $25 million, grants may not exceed $150,000.
- Additional grants
Cities and counties offer additional grants and credits, including becoming indebted up to half the assessed value of taxable property.
Alabama Business Regulations and Foreign Entities
Alabama State uses a common law legal system, which means that there is a state constitution, state codes and statues, and local codes and statues. Keep in mind that the US Constitution and federal regulations take precedence over state and local laws.
Alabama State law defines foreign entities as those formed outside of Alabama, including those formed in other US states and international companies. All foreign (non-Alabama) entities are required to register with the Alabama Secretary of State in order to conduct business within state boundaries. This includes foreign entities that would require filing a certification of formation, if formed in Alabama, and entities that offer limited liability under the law of the jurisdiction of formation of any owner or member.
Alabama places no restrictions on foreign investment or foreign shareholders in the state. In addition, there are no state-specific restrictions on doing business with particular jurisdictions or counties.
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