Without being engaged as employees, independent contractors are self-employed people who work for clients on a project-by-project basis. One benefit of being an independent contractor is the freedom to choose the projects you want to work on, set your own hours, and work from home. It also has obligations, such as filing for business registration, obtaining a tax ID number, and acquiring any relevant licenses and permissions.
The rules for independent contractors in Alabama vary depending on the kind of business they run. A business license is not required if an independent contractor runs a company under their own name. However, if the contractor runs a company under a trade name or fake business name, he or she must file a name registration with the Alabama Secretary of State’s office and secure a business license from the county or city where the company is based.
The term “Doing Business As” (DBA) refers to a trade name or false business name that a business owner employs to conduct business under a name other than his or her legal identity. A DBA does not establish a different legal entity or offer the business owner any kind of legal protection. The owners, also referred to as members, of an LLC (Limited culpability Company), on the other hand, are protected from personal culpability by this legal structure. An LLC is a distinct legal entity with the authority to own real estate, sign contracts, and run businesses.
The primary drawback of a DBA is that it offers the business owner no legal protection. Even if a DBA is used, the business owner is still personally responsible for any debts or legal actions brought against the company. Additionally, a DBA does not offer any tax advantages, and any business income must be reported and taxed as self-employment by the proprietor.
A DBA and an LLC are two separate kinds of corporate entities. When a business owner wants to run their company under a name other than their legal name, they utilize a DBA, also known as a trade name or false business name. A DBA does not establish a different legal entity or offer the business owner any kind of legal protection. The owners, also referred to as members, of an LLC, on the other hand, are protected from personal liability by the LLC as a legal entity. An LLC is a distinct legal entity with the authority to own real estate, sign contracts, and run businesses.
You can apply online or send Form SS-4 by mail or fax to the Internal Revenue Service (IRS) in Alabama to get a tax ID number, commonly called an Employer Identification Number (EIN). To receive an EIN, you must supply your company name, address, and other details. If you have workers, conduct business as a partnership or corporation, or submit certain tax returns, you need an EIN.
In Alabama, conducting business is commonly defined as any activity involving the sale of goods or the provision of services for compensation. This covers carrying on business, pursuing leads, or keeping a physical presence in the state. However, depending on the sort of business and where it is located, there may be different special requirements for acquiring a business license. It’s better to seek advice on your particular circumstances from the Alabama Department of Revenue or a qualified attorney.
Freelancers, consultants, independent contractors, small retail stores, and companies offering personal services like hair salons or cleaning services are examples of single proprietorship firms.