key signature for alto sax

It depends.

First of all, whatever you are working from create a score with alto sax as the instrument. Musescore knows that an alto sax transposes down a major sixth and knows what range of notes it can play.

If you are transcribing something already written for alto sax, start with the concert pitch option off (bottom right of window). Then select a key signature with three more flats or three fewer sharps than are in the key signature of the part you are working from. So, if the also sax part has one flat, use a 4 flat key signature from the key signature pallet. It will show correctly as one flat in the alto sax part. Or if the alto sax part has 5 sharps use a 2 sharp key signature from the palette. Or if it has one sharp use a 2 flat key signature etc.

However...

If you are transcribing a part originally written for piano, say, then that is written at concert pitch. So, start with the concert pitch option on and use whatever key signature is used in the piano part. When done, turn concert pitch off and Musescore will automagically transpose the notes and key signature ready to play on an alto sax.

See https://musescore.org/en/handbook/4/working-instruments

and https://musescore.org/en/handbook/4/transposition#transposing-instrumen…

No.
Set up your score with the key signature of a flute, a trombone or a piano or other non-transposing instruments. Now add an Eb alto saxophone to your score. The key will adapt. Write the notes for the alto saxophone as a player would like to see them.
When composing a score, you may find it better to see or place the notes as they sound. Then switch to concert pitch in the bottom right-hand corner.