The rules where you work $17
A first 30 days checklist, everyday forms, licenses, workers’ comp and taxes for Alabama, with a yearly calendar. Instant PDF download.
Buy the packet: $17Digital product, all sales final. Informational only, not legal, financial, tax or business advice.
What Alabama expects from a new trade business
Alabama splits licensing by the size and type of job: a home builders board for residential work over $10,000, and a general contractors board for other jobs at $100,000 and up. Roofing has its own lower line at $2,500. Comp usually starts at five employees, unless you build new single-family homes, where it can start sooner.
Two boards, and the line depends on the job
Home Builders Licensure Board: you need its license to build, repair or improve a residence of up to three floors and four units when the job exceeds $10,000. That number includes your overhead and profit. For residential roofing, the line is $2,500. Doing that work without the license is a class A misdemeanor, and an unlicensed builder can't sue to enforce the contract. Licensed builders must use a written contract with the license number on it.
Licensing Board for General Contractors: covers jobs at $100,000 or more, up from $50,000 since October 2024. Subs at that size need their own license before they start. The construction or repair of a residence is exempt from this law. Changes effective October 1, 2026 also exempt residential pools and certain routine maintenance and repair. The board tells you to ask before you bid.
Electrical and HVAC have no dollar floor. Electrical work takes a license from the state board or from the county or city you're working in, and a local license stops at that line. HVAC needs a certified contractor in responsible charge. Plumbing and gas fitting has its own state board. Unlicensed general contracting, electrical or HVAC work is a class A misdemeanor. Under the building lines, a handyman still has to check these trade rules and local ones. A construction attorney can tell you which side your job falls on.
Source: Alabama Licensing Board for General Contractors, 2024 changes ($100,000 line, Act 2024-277) · Alabama Licensing Board for General Contractors, contractor licensing law · Alabama Licensing Board for General Contractors, exemptions effective October 1, 2026 · Act 2026-396, amending Code of Alabama 34-8-7 · Alabama Home Builders Licensure Board, law and rules effective October 1, 2026 · Alabama Home Builders Licensure Board, how to get licensed · Alabama Board of Electrical Contractors, how to get licensed · Alabama Board of Heating, Air Conditioning and Refrigeration Contractors, how to get licensed · Alabama Plumbers and Gas Fitters Examining Board, law · Code of Alabama 34-8-6, prohibited acts and penalties · Code of Alabama 34-36-13, electrical license required and exemptions · Code of Alabama 34-36-16, electrical violations · Code of Alabama 34-31-24, certified HVAC contractor · Code of Alabama 34-31-32, HVAC violations
Who to call: an attorney near you
Five employees, but new homes are different
Alabama generally requires workers' comp at five or more employees, full or part-time. Corporate officers and LLC members count toward the five.
Under five, you're generally not required to carry it, with one big exception. A business constructing or assisting on-site in the construction of new single-family, detached homes has to keep coverage even under five. Others under five can elect in by written notice to the state and withdraw the same way, with written notice to employees and a posted notice.
A corporate officer or individual LLC member can elect out by filing with the comp carrier, but still counts toward the five.
If you're required to carry comp and don't, it's a misdemeanor with a $100 to $1,000 fine. You're liable for twice the compensation that would have been payable, and a court can add up to $100 a day.
Before you count on being under five, talk to an insurance agent who writes contractors about who counts on your crew, how your subs count and what happens if a sub has no coverage.
Source: Alabama Department of Workforce, workers' compensation FAQ · Workforce Alabama, insurance compliance · Alabama WC-14, employer's notice to cover · Code of Alabama 25-5-50, applicability and exemptions · Code of Alabama 25-5-8, securing compensation and penalties
Who to call: an insurance agent near you
Getting paid: the deadline depends on who you are
Alabama has one set of lien rules for homes and commercial jobs. You file a sworn statement with the probate judge in the property's county, or the lien is lost. Your time depends on who you are, counted from the last work or materials. Count from your own last day:
- Original contractor: 6 months.
- Journeyman or day laborer: 30 days.
- Everyone else, including subs and suppliers: 4 months.
If you aren't the original contractor, give the owner written notice of your claim, the amount and who owes it before you file. A contractor's employee or supplier generally reaches only what the owner still owes that contractor, so send it early.
A supplier who gives written notice before delivering, listing materials and prices, can lien for the full price, unless the owner objects in writing before the material is used.
Sue within 6 months after the entire debt comes due. That clock is separate from filing. The lien law has no separate owner-occupied rule, but Alabama's homestead exemption sits outside it. How that limits a lien is a question for a construction attorney before you go after someone's home.
Alabama's counting law appears to reach these deadlines. Skip the first day and count the last. A Sunday, legal holiday or day the office is legally closed moves to the next working day. Don't plan on it. File early.
Source: Code of Alabama 35-11-210, lien declared · Code of Alabama 35-11-213, verified statement · Code of Alabama 35-11-215, time for filing · Code of Alabama 35-11-218, notice · Code of Alabama 35-11-221, limitation of actions · Code of Alabama 1-1-4, computation of time · Code of Alabama 6-10-2, homestead exemption
Who to call: an attorney near you
Sales tax: you're the one using the materials
Alabama doesn't treat a contractor as reselling building materials. You're using or consuming them on the job, so you pay sales tax to the Alabama vendor when you buy. If an out-of-state vendor didn't collect, you pay use tax directly to the Department of Revenue. The same goes for your tools, equipment and supplies. The general state rate is 4%, and local rates are added on top, so build it into your bid.
Materials for contracts with certain governmental entities can be exempt, with their own certificate and paperwork. A CPA who works with contractors can walk you through that.
Source: Alabama DOR, who is a contractor? · Alabama DOR Rule 810-6-1-.46, contractor's liability · Alabama DOR, sales and use tax rates
Who to call: a CPA or tax pro near you
LLC: reserve your name, and watch the privilege tax
Forming an LLC with the Alabama Secretary of State costs $200, and you have to get a name reservation first ($25 by mail, $28 online).
Alabama has a Business Privilege Tax, based on net worth, with a $100 minimum. For tax year 2026, the state says taxpayers who would owe only the minimum have no filing requirement. If you'd owe more than $100, there's an initial return within two and a half months, and a yearly return with your federal return. Ask a CPA where you fall.
Income passes through to your personal return, taxed from 2% to a top rate of 5%, which starts at just $3,000 of taxable income for single filers. When an S-corp election helps is a numbers question for a CPA who works with contractors.
Source: Alabama Secretary of State, LLCs · Alabama Secretary of State, domestic name reservation form · Alabama DOR, 2026 business privilege tax quick reference · Alabama DOR, individual income tax rate
Who to call: a CPA or tax pro near you
Education, not legal or tax advice. Rules change. Confirm anything here with a licensed pro in Alabama before you rely on it. Last updated November 2026.