Understanding Alabama LLC Laws
The rules for starting and running an Alabama limited liability company (LLC) are laid out by Alabama's LLC laws.
In this guide, we offer simple explanations to Alabama LLC laws about:
To learn more about starting an LLC, visit our form an LLC guide.
LLC Formation Requirements
Alabama's LLC laws set out the requirements for forming an LLC. The State of Alabama has created the SOS online services portal and PDF Certificate of Formation to simplify the process.
Alabama LLC Formation Statute
The following LLC formation statutes are from the Alabama Limited Liability Company Law:
Section 10A-5A-2.01 Formation.
(a) In order to form a limited liability company, one or more organizers must execute a certificate of formation and deliver it for filing to the filing officer provided for in subsection (e). Notwithstanding Section 10A-1-3.05, the certificate of formation shall set forth:
(1) the name of the limited liability company, which must comply with Article 5 of Chapter 1;
(2) the address of the registered office required by Article 5 of Chapter 1;
(3) the name of the registered agent at the registered office required by Article 5 of Chapter 1;
(4) a statement that there is at least one member of the limited liability company;
(5) if applicable, a statement as provided in Section 10A-5A-11.02(b)(3); and
(6) any other matters the members determine to include therein.
(b) A limited liability company is formed when its certificate of formation becomes effective in accordance with Article 4 of Chapter 1.
(c) The fact that a certificate of formation has been filed and is effective in accordance with Article 4 of Chapter 1 is notice of the matters required to be included by subsections (a)(1), (a)(2), (a)(3), and (a)(4) and if applicable, (a)(5), but is not notice of any other fact.
(d) A limited liability company agreement shall be entered into either before, after, or at the time of the filing of the certificate of formation and, whether entered into before, after, or at the time of the filing, may be made effective as of the filing of the certificate of formation or at any other time or date provided in the limited liability company agreement.
(e) A certificate of formation shall be delivered for filing to the Secretary of State.
(Act 2014-144, p. 265, §1; Act 2020-73, §10.)
What This Means: Key Takeaways*
The Alabama LLC statute provides the requirements for setting up (or forming) an LLC. The State of Alabama offers online and mail-in LLC filing to meet these requirements.
Required Information for Alabama LLC Formation:
- LLC’s name (Must meet Alabama LLC naming requirements)
- LLC principal office’s street and mailing address
- Registered agent’s name and Alabama registered office address
- A statement indicating that there is at least one member
Optional Information for Alabama LLC Formation:
- LLC organizers can add their own provisions as long as the provisions don’t conflict with LLC statute.
Recommended: For help with completing the LLC formation forms, visit our Alabama LLC Certificate of Formation guide.
Registered Agent Duties and Appointment
Alabama's LLC laws define the duties and appointment of the LLC registered agent.
Alabama LLC Registered Agent Statute
The following registered agent statutes are from the Alabama Businesses and Nonprofit Entities Code:
Section 10A-1-5.31 Designation and maintenance of registered agent and registered office.
(a) Each filing entity, each foreign filing entity, each foreign registered limited liability partnership registered pursuant to Article 7, and any registered limited liability partnership that does not maintain a place of business in this state shall designate and continuously maintain in this state:
(1) a registered agent; and
(2) a registered office.
(b) A registered agent:
(1) is an agent of the entity on which may be served any process, notice, or demand required or permitted by law to be served on the entity;
(2) may be:
(A) an individual who is a resident of this state; or
(B) a domestic entity or a foreign entity that is registered to do business in this state; and
(3) must maintain a business office at the same address as the entity's registered office.
(c) The registered office:
(1) must be located at a street address where process may be personally served on the entity's registered agent;
(2) is not required to be a place of business of the filing entity or foreign filing entity; and
(3) may not be solely a mailbox service or a telephone answering service.
(Act 2009-513, p. 967, §43.)
What This Means: Key Takeaways*
A registered agent’s job is to accept service of process (legal summons to a lawsuit).
An Alabama registered agent must:
- Maintain a registered office in Alabama (i.e., no P.O. boxes)
- Be an individual, an Alabama corporation or LLC, or foreign corporation or LLC with a business address that is the same as the registered office address
Alabama's LLC laws provide guidelines for creating and maintaining an LLC operating agreement.
The following operating agreement statutes are from the Alabama Limited Liability Company Law:
Section 10A-5A-1.08 Limited liability company agreement - Scope; function; and limitations.
(a) Except as otherwise provided in subsections (b) and (c):
(1) the limited liability company agreement governs relations among the members as members and between the members and the limited liability company; and
(2) to the extent the limited liability company agreement does not otherwise provide for a matter described in subsection (a)(1), this chapter governs the matter.
(b)(1) To the extent that, at law or in equity, a member or other person has duties, including fiduciary duties, to the limited liability company, or to another member or to another person that is a party to or is otherwise bound by a limited liability company agreement, the member's or other person's duties may be expanded or restricted or eliminated by a written limited liability company agreement, but the implied contractual covenant of good faith and fair dealing may not be eliminated.
(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 to another person that is a party to or is otherwise bound by a limited liability company agreement, but a limited liability company agreement may not limit or eliminate liability for any act or omission that constitutes a bad faith violation of the implied contractual covenant of good faith and fair dealing.
(3) A member or other person shall not be liable to a limited liability company or to another member or to another person that is a party to or is otherwise bound by a limited liability company agreement for breach of fiduciary duty for the member's or other person's good faith reliance on the limited liability company agreement.
(4) A limited liability company agreement may provide that:
(A) a member or transferee who fails to perform in accordance with, or to comply with the terms and conditions of, the limited liability company agreement shall be subject to specified penalties or specified consequences; and
(B) at the time or upon the happening of events specified in the limited liability company agreement, a member or transferee may be subject to specified penalties or specified consequences.
(5) A penalty or consequence that may be 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, the lending by other members or transferees of the amount necessary to meet the defaulting member's or transferee's commitment, a fixing of the value of the defaulting member's or transferee's transferable interest by appraisal or by formula and redemption or sale of the transferable interest at that value, or other penalty or consequence.
(6) A written limited liability company agreement may supersede, in whole or in part, the provisions of Division C of Article 3 of Chapter 1.
(c) A limited liability company agreement may not:
(1) vary the nature of the limited liability company as a separate legal entity under Section 10A-5A-1.04(a);
(2) vary the law applicable under Section 10A-5A-1.05;
(3) restrict the rights under this chapter of a person other than a member, dissociated member, or transferee;
(4) vary the power of the court under Section 10A-5A-2.05;
(5) eliminate the implied contractual covenant of good faith and fair dealing as provided under Section 10A-5A-1.08(b)(1);
(6) eliminate or limit the liability of a member or other person for any act or omission that constitutes a bad faith violation of the implied contractual covenant of good faith and fair dealing as provided under Section 10A-5A-1.08(b)(2);
(7) waive the requirements of Section 10A-5A-4.04(c);
(8) vary the law applicable under Section 10A-5A-4.06(c);
(9) reduce the limitations period specified under Section 10A-5A-4.06(d) for an action commenced under other applicable law;
(10) waive the prohibition on issuance of a certificate of a transferable interest in bearer form under Section 10A-5A-5.02(c);
(11) vary the power of a court to decree dissolution in the circumstances specified in Section 10A-5A-7.01(d) or in Section 10A-5A-11.09(e);
(12) vary the requirement to wind up a limited liability company's activities and affairs as specified in Section 10A-5A-7.02(a);
(13) vary the provisions of Section 10A-5A-8.01;
(14) vary the right of a member under Section 10A-5A-10.09; or
(15) waive the requirements of Section 10A-5A-11.02(b).
(Act 2014-144, p. 265, §1.)
What This Means: Key Takeaways*
An LLC operating agreement allows LLC members to create rules for how their unique LLC operates. These rules are often called “terms” or “provisions.”
Operating agreements are limited by state statute. For example, if the statute says LLC members can’t dissolve an LLC without all members agreeing, LLC members can’t change or override the statute with an operating agreement.
When an operating agreement is in place, it’s easier to navigate situations involving the operation of the LLC. And, if a lawsuit or dispute arises, LLC members (or the courts) have something to reference.
If a dispute arises that can’t be resolved by LLC members and there isn’t an operating agreement, the courts will use LLC statute to resolve disputes.
Creating an Operating Agreement
Some LLCs, such as professional LLCs or real estate LLCs, might need unique terms, while others might only need to cover standard provisions:
- Each member’s responsibilities
- How new members will be admitted
- How existing members may transfer or terminate their membership
- How profits and dividends will be distributed
- The process for amending the operating agreement
Use our free operating agreement template or learn more with our What Is an Operating Agreement guide.
*This information is provided for educational and entertainment purposes only. Please consult a lawyer for legal advice.