Alabama Small Business Statistics

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Last updated November 21, 2022
Written by Dmytro Kondratiev
Editor, lawyer
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In the economic sense, Yellowhammer State doesn’t look as impressive as, say, California. Yet, Alabama shows consistent economic growth. Under the IBISWorld survey, the state has demonstrated GDP growth at a 1% annualized rate over the last five years.

In the 2022 CNBC “Top States for Business” rating, Alabama takes the 33rd position out of 50 states. While workforce quality and lower cost of running a business are among its strength, access to capital, infrastructure, and inclusion are the areas where it lags behind.

With such giants as Toyota, Mercedes-Benz, Hyundai, Boeing, and Airbus choosing to operate in the state, Alabama’s economy is led by heavy industries. Still, small enterprises (SMEs) are yet another backbone of the state economy and employment market.

If you think about launching your private venture in the state, our small business guide will help you better understand the small business landscape in AL before you delve in.

Key Small Business Stats for Alabama

  • Based on a Statista survey, Alabama’s GDP in 2021 was $204.88 billion showing a 4% growth against the previous year. In 2022, the state GDP grew up to $206.9 billion;
  • SMEs represent 81% of all exporters in the state and generate over 15% of AI exports;
  • Small companies account for 408.374 entities and make up 99% of all businesses in AI;
  • Despite overall economic stagnation due to the pandemic crisis, the number of SMEs in the state has still increased by 1.5% in 2021;
  • SMEs dominate in other services and construction sectors, with 60.830 and 49.497 firms operating in those areas accordingly;
  • The utility sector is the least popular for smaller companies, with only 251 SMEs in it. At the same time, 10% of those are bigger private companies employing from 20 to 499 workers;
  • SMEs employ 809.024 workers in the state maintaining a 46.7% share of AI total workforce;
  • Over 80% of Alabama SMEs are non-employer firms, and about 16% of them are companies employing from 1 to 20 persons;
  • The highest employment rates are observed in healthcare and social services and accommodation and food service sectors featuring 121.232 and 105.643 workers in each of them accordingly;
  • Following the CRA data, in 2019, banks issued $5.1 billion through loans to SMEs;
  • The average income of registered AI entities is $50.000 per annum while non-registered businesses earn around $24.000 a year;
  • An average hourly wage in Alabama lingers at the $26 mark;
  • The unemployment rate in 2022 is 3.3% showing a 0.9% decrease as compared to the previous year;
  • At the same time, a 15.3% poverty rate is still higher than the national average.

Top 10 Industries for Small Businesses in AL

IndustryCompany Count
Other services (excluding public administration)60.830
Administrative, support, and waste management49.497
Construction48.835
Professional, scientific, and technical services44.250
Retail trade40.625
Real estate, rental, and leasing36.667
Healthcare and social services32.128
Transportation and warehousing20.895
Entertainment and recreation15.024
Financial services12.256

AL Small Business Demographics

  • Female-owned small companies in AL total 1554.112 making 43.3% of  businesses in the state, and only 8% of those have hired employees;
  • Male-owned SMEs account for 219.746 entities, and over 20% of them are employer companies;
  • About 4% of all SMEs in Alabama are managed by men and women together;
  • Female employees comprise nearly 48% of the total workforce in the state;
  • According to the Census Bureau survey, veterans control 9.1% of SMEs and represent 6.4% of the state workforce;
  • The two biggest ethnic groups in Alabama are Black or African Americans (1.31 million citizens) and Hispanics (133.000 citizens);
  • While Hispanics own about 3% of SMEs in the state, the rest of the racial minorities possess 21.9% of small companies;
  • Following the University of Alabama research, around 20% of SMEs fail within 18 months, and 80% of them are Black-owned enterprises;
  • Nearly 90% of Black-owned companies are non-employers;
  • Over 41% of Black-owned SMEs didn’t survive the pandemic crisis against 29% of white-owned private firms.

AL Small Business Formation

  • Alabama LLCs and corporations should designate an Alabama registered agent to handle legal mail and match the state compliance requirements as well as maintain those requirements;
  • To establish an LLC or corporation in AL, you should register your formation documents with the state and pay a $200 filing fee;
  • All businesses in the state should acquire a privilege license, which is applicable to each county, hence, the fees vary by county accordingly;
  • Registered entities in AL are exposed to a privilege tax, which is payable on an annual basis and depends on the company’s profit during the taxable year. The rate varies from 0.00025% to 0.00175% on net worth and is not lower than $100;
  • The corporate income tax rate in the state is 6.5%;
  • The exact sales tax rate in AL is calculated based on your company’s registered street address taking into account a 4% state sales tax and a 2% county sales tax.

References

  1. Alabama Small Business Economic Profile 2021
  2. Alabama Small Business Statistics (2022)
  3. How Many Small Businesses Are There in Alabama?
  4. The State of Microbusiness in Alabama