So you live in Alabama? The alphabetical first state and the 22nd to officially join the union. It’s a beautiful state, with the camellia as its flower and the monarch butterfly as its insect. And what state owns that Sweet Home song that all residents of the other 49 states wish they could call their own?
Alabama is also a supportive and friendly environment to register your small escort business in. In this article you’ll find clear step-by-step advice on how to register your escort business in Alabama. For more information on why it’s important to register your business, refer to our article Don’t get busted for tax evasion: Why registering your escort business is the only option.
Step one: Define and describe your business
There are several kinds of business structures applicable for registering your escort business with the government, and picking the right one for you is important. For example, someone working completely as an independent escort and someone who wants to run an agency would file for different types of businesses. Ask yourself these questions to define what your business is / will be and under which structure you should register:
- How do I define my work? What is it, in essence, that I serve? Do I supply the connections between escorts and clients, or am I myself the escort and am providing the company?
- Am I the only one who will benefit monetarily from my business? If not, who else will and why are they collecting profits?
- Am I the only one who will manage my business – schedule clients, hire drivers etc.? If not, will it be another owner doing this or someone I employ?
- Will I be hiring regular employees to take calls, set up appointments, manage any office work on a regular basis etc., or will I maintain my business by myself?
- Will I be hiring independent consultants (freelance escorts) and, if so, how do I expect to manage and pay them?
- Who will fund costs such as buying advertisements in newspapers, renting an office or the cost of running a website?
- Would I ever want to brand my business name or logo?
- Who will be responsible for my business if I run into debt? Is this just me?
- Will I ever want to sell my business?
Write the answers to these questions down and your business model will start to take shape for you.
Another step in articulating your business is to write a one-sentence summary of what the business actually does. As an escort you’re registering a service you provide, rather than a product that you sell, and this service will need to be articulated. Having this readily on hand will save you time when filling out various forms. Make this unique to you from the questions you’ve answered above, along the lines of “We provide company to our clients in a social setting”.
For information on what terms you legally can and cannot use, refer to our article The fine legal line between escort and prostitute: some strategies for an escort to stay out of trouble.
Step two: Choose your business structure
Once you have a handle of what your business is and how it will be run, it’s time to pick out a business model. Below are four quick definitions of what it means to be one of the four business models that make sense for an escorting service: a sole proprietorship, a partnership, a corporation and an LLC.
- Sole Proprietorship: One person owns and operates the business, and is responsible for all profits and losses. Legally, there is no difference between your business and you. If you are just starting out and/or will be working and managing and collecting your fees alone, this is what you want.
- Partnership: Two or more people own and are responsible for the business. If you have a small group of close friends who will share contacts and the actual time spent with clients or will work with one person as a manager and you as the only escort, this is what you should choose. However, as you are equally responsible for losses and this structure requires more paperwork, it can be a risky investment.
- Corporation: The business is a legal entity owned by shareholders. While the shareholders may invest money and collect in profits, they are not responsible for losses or claiming personal bankruptcy if the business claims it. This model requires much more paperwork, and most likely the addition of an accountant and possibly a business lawyer as well. A corporation is definitely the way to go if you have been in business for a few years, juggle many consultants and clients, and want to expand and legitimize your work on a higher platform. If that’s not you, don’t become a corporation.
- Limited Liability Company (LLC): An LLC provides the liability insurance of a corporation with the tax efficiencies of a sole proprietorship or partnership. One or more owners are referred to as members. The taxes of the business are filed with the income taxes of the members, but they are not responsible for (most) company losses. If you have a small company involving a few close friends and want to expand to having a separate bank account and records slightly more independent than your own, an LLC is for you.
Step three: Create your name
Let’s pretend your name is “Jane Doe”. First, decide whether you simply want to call your business your name — “Jane Doe” — or take on a DBA name (‘doing business as’ name, also called an ‘assumed name’ or ‘trade name’).
With a sole proprietorship or partnership, you have the option of using your own name as your business name, and won’t be required to register your business name in Alaska. If you’re a corporation or LLC, you will have to take on a DBA name. If you’re required to or simply want to take on a DBA, have fun picking your company name.
Do you want to be brassy and devil-may-care? Pick something as straightforward as “Jane Doe Escort Service”. Want to be flirty and funny? “Jane Doe—The Company Company”. Feel like being a little more discreet and want to stay out of the limelight? Try something demure, like “Jane Doe Social Consulting”. Your name can be as simple or as flashy as you’d like, just make sure it’s honest to what you want your business to be. And keep in mind that escorting is a controversial issue in the United States. Do you want to push the envelope of acceptability or maintain a low profile?
Make sure the DBA name is not already being used in Alabama. You’ll have wasted time and money if you apply to register the name and it’s already been taken. A simple internet search and comb through the yellow pages will take care of this. Also know that you shouldn’t do business with a DBA name until the registration has been approved.
In Alabama you are not required to register “Jane Doe” or your DBA name with the state. However, you can choose to register your DBA name as a trade name with the secretary of state. For more information on whether this is a good choice for your business, refer to our article Do I want to be a sole proprietor?
To register your trade name in Alabama, you first need to have your business running and be able to provide three usages of it. These can be such as a visual from a website, a line from a contract or a name/logo used on a printed marketing material. Once you have these, you’ll need to fill out and send an lat-1 form and include a check for $30 written to the Secretary of State. You can get more information and find the download at the website for the Alabama Secretary of State or download the lat-1 form directly.
Your business name is either the title of the partnership agreement or the last names of the partners. If you choose to register a DBA name, follow the guild-lines and instructions above.
You’ll need to complete a Name Reservation form (sosnr-1) along with the required Articles of Incorporation form (sosdf-1) for the Alabama state government. You can fax the completed forms with a credit card slip for the $150 fee to 334-240-3138, or mail 2 copies of the Articles of Incorporation and one Name Reservation completed form with your check or money order (made payable to the Secretary of State) to Business Entities Division, PO Box 5616, Montgomery, Alabama, 36103-5616. These forms and more information are available at the website for Alabama’s Secretary of State. The sosdf-1 can also be found directly here and the sosnr-1 here.
You’ll need to register your business and business name with the Alabama state government through Articles of Organization (sosdf-8). You’ll include your company name (which must end with ‘Limited Liability Company’, “L.L.C” or “LLC”), how long the company plans to operate, the purpose of organization, the mailing address associated with the LLC, the names and addresses of the individual members and who is to manage the LLC. Two copies of the form and $150 in filing fees should be sent to the probate judge in your county. You can find the form at www.sos.state.al.us or download it directly form here.
For more information on registering all business models with the state of Alabama, go towww.sos.state.al.us/BusinessServices
Step four: Get an Employer Tax Identification Number (EIN)
If you are a sole proprietor in Alabama, your EIN will be your own social security number, whether you do or do not register a DBA/trade name. But if you are a partnership, corporation or LLC or say YES to any of the following questions, you’ll have to apply for a new EIN.
- Do you have employees? This means anyone you pay regularly, such as a personal assistant, office manager, driver etc.
- Do you plan to open a bank account solely for the business? Will you be collecting money from clients and then using that money to pay escort or other employees (if you have any employees, you should have a separate bank account for this)?
- Do you operate your business as a corporation or a partnership?
- Do you file any of these tax returns: Employment, Excise, Alcohol, Tobacco, Firearms? If you hire employees, you’ll need to pay employment taxes. Other than that, as an escort service this answer is most likely no.
- Do you withhold taxes on income, other than wages, paid to a non-resident alien? Are any of your employees non-Americans?
- Do you have a Keogh plan? (A retirement plan you set up for yourself in the business)
- Are you involved with any of the following types of organizations? (I’m going to save you an explanation of what all of these mean, because you’ll most likely know if your business is involved with such, and the answer is probably no.)
- Trusts, except certain grantor-owned revocable trusts, IRAs, Exempt Organization Business Income Tax Returns
- Real estate mortgage investment conduits
- Non-profit organizations
- Farmers’ cooperatives
- Plan administrators
All application processes require only basic information: your legal name and contact information, a name and description of your business, the type of entity, your social security number, employees etc. And there is no fee.
- Online: This is the currently preferred way to obtain your EIN, and you’ll get the results immediately as soon as your business is approved without needing to fill out a separate SS-4. You have 15-minutes to complete the form. Go to IRS.gov to apply for an online EIN.
- By Mail: Fill out an SS-4 form, which you can obtain on IRS.gov. and mail to Internal Revenue Service, Attn: EIN Operations, Philadelphia, PA 19255. It takes about 4 weeks to get the EIN once your application has been processed.
- By Fax: Fill out and fax an SS-4 form to (859) 669-5760. If you include your fax number on the form, they’ll fax your EIN within 4 business days.
- By Phone: Call toll-free (800) 829-4933, 7am-10pm, Monday—Friday. An assignor will take your information over the phone and then directly process the application and give you your EIN.
Step five: Register for your Alabama State and Local City Taxes
There are four basic types of taxes small businesses may register for:
- Income Tax: you will have to pay this tax, possibly with your own personal tax returns depending on your business model. This means that all money you’ve made from escorting is your income, and a percentage of that goes to your federal and local governments. If you are part of a partnership, this means that you file an information return with your taxes, which you can find at revenue.alabama.gov.
- Employment Taxes: If you hire any employees, you’ll have to pay the state for worker’s compensation insurance, unemployment insurance and (sometimes) temporary disability insurance. These are paid quarterly through a 941 form, available at IRS.gov/formpubs. You’ll also need to report all money paid to your employees at the end of the year with a W-2 form, downloadable at IRS.gov/formpubs. If you are a corporation, you definitely have to pay these taxes.
- Self-Employment Taxes: If you own and operate your business and are not paid as an employee, you’ll need to file your own self-employment taxes for social security and Medicaid. You can download the 1040 form and get more information at IRS.gov/formspubs. If you’re a sole proprietor, you’ll have to do this. If you’re a partnership and simply absorb the profits, you may not.
- Excise Taxes: Unless you’re transporting and selling motor oil or gasoline, you don’t have to pay these taxes. And if you are selling motor oil or gasoline, you’re on the wrong website.
More detailed information on these taxes can be found at IRS.gov/business/small
You can register online for most taxes in Alabama at ador.state.al.us/salestax/register.html
For more information and to download brochures on specifics such as Withholding Tax Tables and Instructions for Employers and Withholding Agents go to revenue.alabama.gov
Step six: Get necessary licenses and permits
Each state usually requires at least one license for you to run your business. As an escort service in Alabama, you most likely won’t need to be applying for building, zoning or health permits. But your city may require you to have general business license to operate your business.
For more information on licenses and permits specific to your area code go to business.gov/register/licenses-and-permits
Please note: Skipthegames.com is not a legal service, nor are we tax advisors or accountants. We do offer you what we consider our best advice, but if at all in doubt, please consult a professional.