An Alabama LLC operating agreement is a document that outlines management strategies, legally protects the owners, offers tax benefits, and is simple to register. It enables a corporation’s economic safety to merge with a sole proprietorship’s freedom.
You can form three types of limited liability companies in Alabama: A single-member LLC has a sole owner. A series LLC creates a parent company with varying divisions beneath it. Multi-member LLCs split ownership between several owners.
General laws are outlined in Title 10A, Chapter 5A – Limited Liability Companies of the Code of Alabama, covering three operating agreement statutes:
- Section 10A-5A-1.08: Limited liability company agreement – Scope; function; and limitations.
- Section 10A-5A-1.09: Limited liability company agreement – Effect on limited liability company and persons admitted as members.
- Section 10A-5A-1.10: Limited liability company agreement – Effect on third parties and relationship to writings effective on behalf of limited liability company.
Costs and Fees
Forming an LLC in Alabama only requires two main fees:
- Certificate of formation filing fee – $200 ($208 for online filing). For foreign LLCs, the filing fee will be $150.
- Name reservation fee – $25 ($28 for online reservation).
The only other expense is an annual Business Privilege Tax Return and Report. It’s a once-a-year payment, and the minimum amount is $100.
How to Form an LLC in Alabama
These are the steps to follow when forming a limited liability company in Alabama:
Step 1 – Reserve Your Name
You must select a distinctive name from other business entities operating in Alabama. You can use the Secretary of State’s Business Entity Records to check availability. Also, the title of your limited liability company cannot imply that it’s been created with any intent other than what is stated in your documents.
Once you’ve ensured your chosen name meets the requirements, you can apply for a name reservation. Download and fill out a Certificate of Name Reservation [10A-1-4.02(f)] from the government website. Alternatively, you can file for a name reservation online. The approval is immediate.
Step 2 – Nominate a Registered Agent
This person or company agrees to accept legal documents on your behalf. These include tax and business notices and court papers if you are sued. Make sure your chosen agent has an Alabama address and is available within standard work hours (9 AM to 5 PM).
The Secretary of State provides a helpful list of registered agents. You can also select a lawyer, friend, spouse, or trusted individual. If you have an Alabama-based street address, you can take out the middleman and nominate yourself as your agent. Keep in mind the address cannot be a PO Box or mailbox.
Using a company as a registered agent is a good option for those wanting to keep their address off the record. This service can range from $100 to $300 per year.
Step 3 – File the Certificate of Formation
Filing your documents can be done online or by mail.
If you apply through the postal service, send your packet to PO Box 5616, Montgomery, AL 36103. But first, make sure you go through these steps:
- Download the certificate of formation.
- Complete it on your computer (no handwriting).
- Include the $200 (check, credit card, or money order).
- Send two copies of the certificate plus a self-addressed, stamped return envelope.
- Include your name reservation certificate.
This option provides a streamlined service to help you file faster. Your application will be instantly submitted and approved. Visit the Secretary of State Online Services and choose whether you want the domestic or foreign option. Then follow the directions and submit.
Step 4 – Create Your Operating Agreement
Since the operating agreement isn’t required by law in Alabama, you don’t need a lawyer to draw it up. You can create it on your own. Use the Alabama LLC operating agreement template. You’ll only need to fill the blank spaces with the corresponding information.
Step 5 – Apply for an Employer Identification Number (EIN)
The final step is your EIN application. You’ll need to register this number with the IRS, as it will identify your LLC as a business for tax purposes. Even if you don’t have any employees, you’ll need to obtain an EIN.
You can apply online or by mail. If you choose the mail option, you must download Form SS-4 and send the completed packet to Internal Revenue Service Attn: EIN Operation, Cincinnati, OH 45999.
Below you can download an Alabama LLC operating agreement template in PDF & WORD.