Alabama LLC Operating Agreement

When you (alone or together with partners) decide to launch a limited liability company (LLC), you have to sign several legal forms as evidence of partnership (or of company existence, if you act alone). Among such documents in Alabama, the most essential is Alabama LLC operating agreement template.

Regardless of the state where you sign this fillable operating agreement template, there are conditions under which all entity members and shareholders further act and cooperate.

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It is a straightforward document that contains various details describing the company, its owners, management, and their future behavior patterns, including:

  • Organization details

The details include the entity’s name, each owner’s share in percentage, location of the company, capital contribution of each member, management description, the company’s founding date, liquidation conditions, company’s purpose and terms, and other relevant info.

  • Miscellaneous conditions
  • The record’s signing date
  • Proprietors’ names and signatures.

The agreement creation is not compulsory for Alabama public authorities. However, the company’s management usually completes the form and passes the copies to whom it may concern, including owners, managers, officers, particular employees, and other people. Usually, signatories of operating agreements prefer to notarize the document.

In Alabama, people commonly use two types of such agreements: single-member and multi-member. As it appears from their names, the entity should choose the first type if it has only one proprietor. On the other hand, the second type is required if the entity has at least two proprietors.

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Alabama LLC Laws and Definition

We will now explain the agreement basics for those still unsure about the term “limited liability company.” In brief, limited liability means that each member investing in the entity is liable only in the framework of a certain sum (limit). If the entity runs into losses or debts, its proprietors would not be obliged to pay more than that specific limit.

Generally, such companies have features of both a mega-corporation and a modest sole proprietorship. They take the constrained liability from corporations and the possibility to avoid double taxation from sole proprietorships or partnerships. In the US, this type of entities is popular among business owners due to its many pros, such as:

  • Possibility to choose the tax treatment from many options
  • Variety of members (both individuals and entities may own the company);
  • Protection from losses as the members’ liability is constrained.

Laws regulating such companies and relevant documents are a part of Title 10A of the Code of Alabama. The whole Chapter 5A is dedicated to the LLCs. Section 10A-5A-1.08 of the Code states the purpose of operating agreements in Alabama, applicable limitations, and other details involving such papers.

It is worth mentioning that in Alabama, the LLC operating agreement may be concluded either in written or oral form;  it can even be implied (see Section 10A-5A-1.02(l)). However, to have proof of agreed terms and restrictions for each member, it is reasonable to create and sign written agreements.

If you decide to form a limited liability company in Alabama, we recommend reading this article in full. It includes step-by-step instructions on how to complete the LLC agreement form to register your entity correctly with the right to exist and operate in the state.

Popular Local Operating Agreement Forms

An LLC operating agreement is an instrument that customizes the provisions of a limited liability company according to the specific needs of its owners and details the decision-making in a structured fashion. Learn about the most common states searched by our users in terms of operating agreements.

Steps to Forming an LLC in Alabama

The company-forming process in Alabama may seem complicated and frightening. However, it is much easier than one may think. Here are our recommendations and guidelines on the founding process. Although the steps may differ from state to state, they all have some common grounds.

1. Pick Your Company Name

No entity can exist officially without a name. Thus, your first step should be selecting a name for your company. You have to comply with several conditions when selecting an entity name. The name should:

  • Contain the words “limited liability company” or their abbreviations. This provision is included in Title 10A of the State Code. No matter the name you pick, it should end with either these three words or acronyms LLC or L.L.C. Other abbreviations or phrases are inadmissible.
  • Be vacant. Unfortunately, if someone else has chosen the same name before, you cannot use it. There is a specialized website that you can use to check through the entities in Alabama (as well as in any other American state) to ensure the availability of the name you have chosen.
  • Avoid confusion with public authorities. It is prohibited to select names that can lead to mistaking your company for governmental bodies.

Once you come up with a perfect name for the company, you have to book it. There are two ways to do so: through the Official Website of the Alabama Secretary of State or regular mail. You must also pay a fee of 25 US dollars.

2. Appoint the Registered Agent

Each LLC in Alabama must assign the registered agent to deal with the entity’s tax matters, letters from public authorities, claims (if your company gets any), and other documents. The agent can be either a trustworthy individual who resides in Alabama or an agency located in the state.

Your agent should be trustworthy because they are responsible for plenty of matters. Many company owners designate themselves as registered agents in the US (Alabama, in particular).

3. Submit the Certificate of Formation

Once the responsible authorities have checked and approved your company’s name, you will receive a relevant certificate of formation. You need to submit this certificate, along with the legal record where you insert specific data about your new company. You must fill in the corresponding form, print it out, and deliver it to the Probate Judge. Do not forget to pay the required fees.

You can only send the document by regular mail. Additionally, you should provide two copies of the document, a cover letter, and a certificate stating the LLC’s name acceptance.

4. Prepare the Alabama LLC Operating Agreement

As we have mentioned above, the government of Alabama does not demand signing such an agreement. However, it is vital for the company itself and all its members. We highly recommend discussing the agreement in board meetings before drafting, signing, and sharing it to avoid uncertainties.

At the beginning of this article, we have described all the essential details of these agreements. Please make sure to get acquainted with them.

5. Receive Your Company Tax Number

Every company should have its tax identification number, which is unique for each entity. This number is either called EIN, FTIN, or FEIN (depending on the state and county).

You should apply to the Internal Revenue Service (or IRS) to receive the number. Without it, you cannot run a business legally and adequately (obtain a company bank account, employ workers, pay taxes, and so on).

You can submit your application either by regular mail or via the official IRS website. If you have doubts regarding your company’s tax number, you can always consult the IRS office representatives.

6. Obtain the Needed Permission

If your company requires specific permits to work in Alabama, you must contact the County Licensing Commission or County Probate Office in your area. These institutions are responsible for issuing permission certificates in the state.

7. Remember about the Mandatory Reports

When you have completed registering your entity in Alabama and started working, do not forget to submit the necessary accountability reports regularly.

For instance, when you have just created a company, you must send the Initial Business Privilege Tax Return before the end of two and a half months.

It is mandatory to submit a Business Privilege Tax Return regardless of your company’s sphere of operation and the revenue you have gained during the year. The Annual Report is another mandatory document. When submitting your reports, you should also pay the required fees (no less than 100 US dollars depending on your company’s size and revenues).

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Published: Jul 24, 2022