Alabama LLC add member

Last updated on November 15, 2022

After forming an LLC in Alabama, you may need to add your spouse or another business partner to your LLC. This can be done fairly easily. Read in detail how to add a new member to an Alabama LLC.

What is an LLC?

Limited Liability Company

LLC is a business entity in the U.S that provides limited liability to its members. It has characteristics from both corporation and sole proprietorship. LLCs are permitted under State statutes of each US state.

Limited liability

Personal assets are protected for people with limited liability when they are sued.

Corporation

A business entity that can issue shares and give limited liability to shareholders.

Members

Owners of an LLC are referred to as members. They own membership interest in the LLC.

Sole proprietorship

Where an individual engages in business activity without formal organization.

Types of LLC

Depends on the number of members and whether it has elected to change its IRS classification.

Single-member LLC

Has only a single member. IRS considers it as a sole proprietorship for tax purposes.

LLC as C-corp

Owners of an LLC are referred to as members. They own membership interest in the LLC.

Multi-member LLC

Has two members. IRS considers it as a partnership for tax purposes.

LLC as S-corp

A special election for a maximum of 100 US shareholders.

Action

Here are step-by-step instructions:

How to add an Alabama LLC member?

Follow these 6 steps:

1. Check your operating agreement

If you have an operating agreement, check the procedure for adding a new member. Follow the voting and transfer procedures accordingly.

2. Default Alabama provisions

If you do not have an operating agreement, you will have to follow Alabama’s default rules as mentioned in Alabama Code § 10A-5A-4.01

According to the default provisions, all the existing members of the LLC must vote and consent to add a new member.

3. File Certificate of Amendment

To update the Secretary of State with the latest list of members, you should file a Certificate of Amendment.

4. Get EIN if necessary

Some single-member LLCs don’t require an Employer Identification Number (EIN) from the IRS. If you were one of these, now you will require one after you add a new member. If you already had one, you don’t have to do anything now.

5. Update Responsible party with IRS

If you want the new member to be the responsible party with the IRS, then you have to file Form 8822-B with the IRS within 60 days of the change. However, if you’re not changing the responsible party, you don’t have to file this.

Notify within

60 days

6. Update your operating agreement

Amend your operating agreement to include the names and details of the new member.

Certificate of Formation

In Alabama, Certificate of Formation is the form you file with the Secretary of State to form an LLC. It contains the articles of formation for the LLC.

Filing Certificate of Formation

There are a couple of ways to file.

  • You can file it online on Alabama Secretary of State website

    Visit

  • You can mail a form to Alabama Secretary of State

    PDF

Address

Secretary of State

Business Services

P.O. Box 5616

Montgomery, AL 36103-5616

Online & mailing fee

$200

Online & mailing processing time

10 days

Note

When you file by mail, you should attach the Name Reservation certificate from the Office of the Secretary of State.

Operating agreement

Operating agreement is an internal business document that outlines the general rules and policies of the LLC.

Importance

It is not a legally mandatory document. However, it is recommended to have one since many courts, banks and financial institutions use it for verification. It is also nice to clearly outline the duties and relations between multiple members of an LLC—so you avoid any confusion in the future.

Format

There is no ‘required’ format for an operating agreement. You can include anything reasonable in it. In general, it has the following sections:

Basic Business information

Contains name, address, names and details of members, purpose

Member relationship

Contains membership interest, decision making process, powers, duties.

Membership transfer

Contains details on how to add or remove members and managers.

Accounting and tax

Contains details on how company records and distributions are maintained.

Dissolution

How to dissolve, wind up and terminate, due process to follow and exceptions.

Entity name

Every LLC should have a unique name in Alabama. Alabama maintains a list of names of entities in the state. Go through it to check if your chosen name is available.

Search for names

Go to the official website of the Alabama business entity tool to see if the name you want is available.

Searching fee

Free

Reservation

You can reserve a name for your LLC for a specific duration by paying reservation fees to the Alabama business services. You will have to file your LLC formation documents within this period to keep the name. Alternatively, you can directly go ahead with the LLC formation without any reservation. That's fine too.

Reservation fee

$25

Reservation period

1 year

LLC naming guidelines

The name you choose for your LLC must follow the official naming guidelines.

Here are some of the guidelines in simple language:

  • 1

    Must have the phrase "Limited Liability Company" or the abbreviation "L.L.C." or "LLC" as the last words of the name.

  • 2

    Don’t include terms that indicate that you are doing an activity that you are not authorised to do.

  • 3

    Your name should be ‘distinguishable’ in the Secretary of State records. Adding a punctuation or ‘the’ does not make it distinguishable.

  • 4

    Don’t use words that makes it seems like you are a governmental entity or has an affiliation.

Frequently asked questions

Business entities in Alabama

LLC is a flexible choice for small businesses in Alabama. However, in order to add more investors and external shareholders, C-corporations are better suited than LLCs.

Alabama LLC

Alabama business search

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