Alabama’s LLC laws lay out the procedures for forming and operating an Alabama limited liability company (LLC).
In this guide, we provide straightforward explanations of Alabama LLC laws on:
Requirements for forming an LLC
Duties of a Registered Agent and Appointment
Operating Contracts
Requirements for forming an LLC
The requirements for forming an LLC are outlined in Alabama’s LLC laws. To make the process easier, the State of Alabama created the SOS online services portal and PDF Certificate of Formation.
Alabama LLC Formation Law
The Alabama Limited Liability Company Law contains the following LLC formation statutes:
Formation, Section 10A-5A-2.01.
(a) To form a limited liability company, one or more organizers must execute a certificate of formation and deliver it to the filing officer specified in subsection (e). Despite Section 10A-1-3.05, the certificate of formation must include the following information:
(1) the name of the limited liability company, as required by Article 5 of Chapter 1;
(2) the registered office address required by Article 5 of Chapter 1;
(3) the name of the registered agent at the registered office, as required by Chapter 1’s Article 5;
(4) a statement that the limited liability company has at least one member;
(5), if applicable, a statement in accordance with Section 10A-5A-11.02(b)(3); and
(6) any other matters that the members decide to include.
(b) A limited liability company is formed when its certificate of formation becomes effective, in accordance with Chapter 1’s Article 4.
(c) The fact that a certificate of formation has been filed and is effective in accordance with Article 4 of Chapter 1 constitutes notice of the matters required by subsections (a)(1), (a)(2), (a)(3), and (a)(4), and, if applicable, (a)(5), but not notice of any other fact.
(d) A limited liability company agreement may be entered into before, after, or at the time of the filing of the certificate of formation, and it may be made effective as of the filing of the certificate of formation or at any other time or date specified in the limited liability company agreement.
(e) A certificate of formation shall be delivered to the Secretary of State for filing.
(Act 2014-144, p. 265; Act 2020-73, p. 10.)
What This Means: Key Points*
The Alabama LLC statute specifies the procedures for establishing (or forming) an LLC. To meet these requirements, the State of Alabama provides online and mail-in LLC filing options.
The following information is required for the formation of an Alabama LLC:
The name of LLC (Must meet Alabama LLC naming requirements)
The street and mailing addresses of the LLC’s principal office
Name of the registered agent and address of the Alabama registered office
A statement indicating that at least one member exists.
Alabama LLC Formation Optional Information:
LLC organizers may include their own provisions as long as they do not conflict with the LLC statute.
Visit our Alabama LLC Certificate of Formation guide for assistance with completing the LLC formation forms.
Duties of a Registered Agent and Appointment
The duties and appointment of the LLC registered agent are defined by Alabama law.
Statute of Alabama LLC Registered Agent
The Alabama Businesses and Nonprofit Entities Code contains the following registered agent statutes:
Section 10A-1-5.31 Designation and upkeep of registered agent and office.
(a) Each filing entity, foreign filing entity, foreign registered limited liability partnership registered under Article 7, and any registered limited liability partnership that does not have a place of business in this state shall designate and continuously maintain in this state:
(1) an appointed registered agent; and
(2) a registered address
A registered agent is:
(1) is an agent of the entity to whom any process, notice, or demand required or permitted by law to be served on the entity may be served;
(2) may be:
(A) a person who is a resident of this state; or
(B) a domestic or foreign entity registered to conduct business in this state; and
(3) must keep a business office at the same address as the registered office of the entity.
(c) Registered address:
(1) must be located at a street address where the entity’s registered agent can be personally served with process;
(2) is not required to be the filing entity’s or a foreign filing entity’s place of business; and
(3) It may not be solely a mailbox or phone answering service.
(Act 2009-513, p. 967, §43.)
What This Means: Key Points*
The role of a registered agent is to accept service of process (legal summons to a lawsuit).
A registered agent in Alabama must:
Keep a registered office in Alabama (i.e., no P.O. boxes)
Be an individual, an Alabama corporation or LLC, or a foreign corporation or LLC with the same business address as the registered office.
Operating Contract
The laws of Alabama govern the formation and maintenance of an LLC operating agreement.
The Alabama Limited Liability Company Law contains the following operating agreement statutes:
10A-5A-1.08 Limited liability company agreement – Scope, Function, and Limitations
(a) Except as provided in subsections (b) and (c), except as otherwise provided in subsections (b) and (c):
(1) The limited liability company agreement governs the members’ relationships as members as well as the members’ relationships with the limited liability company; and
(2) This chapter governs any matter described in subsection (a)(1) that is not otherwise provided for in the limited liability company agreement.
(b)(1) To the extent that a member or other person has duties, including fiduciary duties, to the limited liability company or another member or other person who is a party to or otherwise bound by a limited liability company agreement, the member’s or other person’s duties may be expanded, restricted, or eliminated by a written limited liability company agreement, but the implied contractual covenant of good faith and fair dealing may not be changed.
(2) A written limited liability company agreement may provide for the limitation or elimination of any and all liabilities for breach of contract and breach of duties, including fiduciary duties, of a member or other person to a limited liability company or to another member or other person who is a party to or is otherwise bound by a limited liability company agreement, but it may not limit or eliminate liability for any act or omission.
(3) A member or other person shall not be liable to a limited liability company or another member or other person who is a party to or is otherwise bound by a limited liability company agreement for breach of fiduciary duty based on the member’s or other person’s good faith reliance on the limited liability company agreement for breach of fiduciary duty.
(4) A limited liability company agreement may include the following provisions:
(A) Any member or transferee who fails to perform in accordance with, or comply with, the terms and conditions of the limited liability company agreement will face specified penalties or consequences; and
(B) a member or transferee may be subject to specified penalties or specified consequences at the time or upon the occurrence of events specified in the limited liability company agreement.
(5) A penalty or consequence specified under paragraph (4) of this subsection may include and take the form of reducing or eliminating the defaulting member’s or transferee’s proportionate interest in a limited liability company, subordinating the member’s or transferee’s transferable interest to that of non-defaulting members or transferees, forcing a sale of that transferable interest, forfeiting the defaulting member’s or transferee’s transferable interest, or forfeiting the defaulting member
(6) A written limited liability company agreement may supersede the provisions of Division C of Article 3 of Chapter 1 in whole or in part.
(c) A limited liability company agreement may not include the following provisions:
(1) Under Section 10A-5A-1.04(a), modify the nature of the limited liability company as a separate legal entity;
(2) change the law that applies under Section 10A-5A-1.05;
(3) limit a person’s rights under this chapter who is not a member, dissociated member, or transferee;
(4) Modify the court’s authority under Section 10A-5A-2.05;
(5) repeal Section 10A-5A-1.08(b)(1implied )’s contractual covenant of good faith and fair dealing;
(6) eliminate or limit a member’s or other person’s liability for any act or omission that constitutes a bad faith violation of the implied contractual covenant of good faith and fair dealing, as provided in Section 10A-5A-1.08(b)(2);
(7) Exempt from the provisions of Section 10A-5A-4.04(c);
(8) Modify the law that applies under Section 10A-5A-4.06(c);
(9) shorten the limitations period specified in Section 10A-5A-4.06(d) for an action brought under other applicable law;
(10) waive the prohibition under Section 10A-5A-5.02(c) on issuing a certificate of a transferable interest in bearer form;
(11) alter a court’s power to decree dissolution in the circumstances specified in Sections 10A-5A-7.01(d) or 10A-5A-11.09(e);
(12) modify the requirement in Section 10A-5A-7.02(a) to wind up the activities and affairs of a limited liability company;
(13) Modify Section 10A-5A-8.01 provisions;
(14) amend a member’s right under Section 10A-5A-10.09; or
(15) Exempt from Section 10A-5A-11.02 requirements (b).
(Act 2014-144, p. 265, §1.)
What This Means: Key Points*
An LLC operating agreement enables LLC members to establish ground rules for how their particular LLC will operate. These rules are frequently referred to as “terms” or “provisions.”
Operating agreements are governed by state law. If the statute states that LLC members cannot dissolve an LLC unless all members agree, LLC members cannot change or override the statute with an operating agreement.
It is easier to navigate situations involving the operation of the LLC when an operating agreement is in place. In the event of a lawsuit or dispute, LLC members (or the courts) will have something to refer to.
If an LLC member cannot resolve a dispute and there is no operating agreement, the courts will use LLC statute to resolve the dispute.
Making an Operating Contract
Some LLCs, such as professional or real estate LLCs, may require unique terms, whereas others may only require standard provisions:
Responsibilities of each member
How will new members be admitted?
How can existing members transfer or cancel their membership?
How will profits and dividends be distributed?
The procedure for making changes to the operating agreement