Single-Member LLC Operating Agreement — Alabama

Single-Member LLC Operating Agreement (Alabama)

This Single-Member Limited Liability Company Operating Agreement (this "Agreement") is entered into and effective as of [__/__/____] (the "Effective Date") by and between [________________________________] (the "Sole Member") and [________________________________], an Alabama limited liability company (the "Company").

Quick-Reference Summary

Article I — Formation

1.1 Formation. The Company was formed as an Alabama limited liability company on [__/__/____] by the filing of a Certificate of Formation with the Alabama Secretary of State pursuant to Ala. Code § 10A-5A-2.01 (and the supplemental filing requirements of Title 10A, Chapter 1). The Sole Member adopts and ratifies that filing.

1.2 Name. The name of the Company is "[________________________________]." The name complies with Ala. Code § 10A-1-5.06 and includes the words "limited liability company," "LLC," or "L.L.C."

1.3 Principal Office. The principal office of the Company is located at [________________________________].

1.4 Registered Agent and Registered Office. Pursuant to Ala. Code § 10A-1-5.31, the Company's registered agent is [________________________________], whose registered office address is [________________________________].

1.5 Duration. The Company has perpetual existence under Ala. Code § 10A-5A-1.04, unless dissolved as provided in Article VII or under Ala. Code § 10A-5A-7.01.

1.6 Operating Agreement Authority. This Agreement is the "operating agreement" of the Company within the meaning of Ala. Code § 10A-5A-1.02 and § 10A-5A-1.08. It governs the Company's internal affairs to the maximum extent permitted by the Alabama Limited Liability Company Law of 2014.

Article II — Purpose and Powers

2.1 Purpose. The Company is formed to engage in the following business: [________________________________]. The Company may also engage in any other lawful business or activity permitted under Ala. Code § 10A-5A-1.04.

2.2 Powers. The Company has all powers granted to a limited liability company under Ala. Code § 10A-5A-1.04 (Powers and Privileges) and applicable Alabama law.

2.3 No Unlawful Activity. Nothing in this Agreement authorizes any business or activity prohibited by Alabama or federal law.

Article III — Member (Sole Member)

3.1 Identity of Sole Member. The Sole Member is [________________________________], whose address is [________________________________]. The Sole Member owns one hundred percent (100%) of the Company.

3.2 Initial Capital Contribution. The Sole Member has contributed to the Company the following property and/or services, valued at $[____________]:

[________________________________]

3.3 Additional Contributions. Pursuant to Ala. Code § 10A-5A-4.03, the Sole Member is not obligated to make additional contributions except as agreed, but may do so at any time. Additional contributions shall be credited to the Sole Member's capital account.

3.4 Limited Liability. Pursuant to Ala. Code § 10A-5A-3.01, the debts, obligations, and other liabilities of the Company, whether arising in contract, tort, or otherwise, are solely those of the Company; the Sole Member is not personally liable for them solely by reason of being a member.

3.5 Admission of Additional Members. No additional member may be admitted without (a) the written consent of the Sole Member, and (b) an amendment to this Agreement converting it into a multi-member operating agreement compliant with the Alabama Limited Liability Company Law of 2014.

Article IV — Management

4.1 Management Structure. The Company is (check one):

☐ Member-managed (default under Ala. Code § 10A-5A-4.07(b)). The Sole Member manages and conducts the Company's business and affairs.

☐ Manager-managed. Pursuant to Ala. Code § 10A-5A-4.07(a), the Sole Member designates [________________________________] as the initial Manager. This Agreement designates the Manager; § 10A-5A-2.01 does not require the Certificate of Formation to state the management structure.

4.2 Authority. Subject to Section 4.1, the Sole Member (or Manager) has the authority to take any action permitted under Ala. Code § 10A-5A-3.01 and § 10A-5A-4.07, including without limitation the authority to:

(a) execute and deliver contracts, deeds, leases, notes, and other instruments;
(b) open, maintain, and close bank, brokerage, and credit accounts;
(c) hire, supervise, and terminate employees, independent contractors, and agents;
(d) acquire, hold, encumber, and dispose of real and personal property;
(e) borrow money and incur indebtedness; and
(f) institute, defend, settle, or compromise legal actions in the name of the Company.

4.3 Officers (Optional). The Sole Member or Manager may appoint officers as part of the "other governance structure" permitted under Ala. Code § 10A-5A-4.07(a)(3) who shall serve at the pleasure of the appointing authority.

4.4 Standards of Conduct. Standards of conduct under Ala. Code § 10A-5A-4.08 (duty of loyalty, duty of care, obligation of good faith and fair dealing) apply. Because the Company has only one member, the duties owed to other members do not give rise to actionable claims by any other member, but the duties remain relevant to creditor and veil-piercing analyses.

4.5 Agreement Limits. This Agreement does not vary the Company's separate-entity status, the law applicable to its internal affairs, or the rights of persons outside the categories named in Ala. Code § 10A-5A-1.08(c). Section 10A-5A-1.08(b) permits a written limited liability company agreement to expand, restrict, or eliminate certain duties, but it does not permit elimination of the implied contractual covenant of good faith and fair dealing or liability for a bad-faith violation of that covenant. This Agreement does not restrict or eliminate those duties.

4.6 Separate Existence; Recordkeeping. To preserve the Company's limited liability shield, the Sole Member shall:

(a) maintain the Company's books and records separately from personal records;
(b) maintain a bank account in the Company's name;
(c) avoid commingling Company assets with personal assets;
(d) sign contracts in the Company's name (e.g., "[Company Name], a Limited Liability Company, by [Member Name], Sole Member"); and
(e) maintain the records required by Ala. Code § 10A-5A-4.09.

Article V — Capital Accounts and Distributions

5.1 Capital Account. The Company shall maintain a capital account for the Sole Member in accordance with U.S. Treasury Regulations § 1.704-1(b)(2)(iv) to the extent applicable.

5.2 Distributions. Pursuant to Ala. Code § 10A-5A-4.05, the Sole Member may cause the Company to distribute cash or other property at any time, subject to Section 5.3.

5.3 Limitations on Distributions. Under Ala. Code § 10A-5A-4.06(a)(1), no distribution shall be made to the extent that, after giving effect to it, the liabilities counted by that subsection exceed the fair value of the Company's assets counted there. The Sole Member acknowledges liability to the Company under § 10A-5A-4.06(a)(2) for a distribution knowingly received in violation of subsection (a)(1) or this Agreement. The Sole Member or authorized Manager shall document the statutory calculation before a distribution.

5.4 Federal Tax Classification. The Company is treated for federal income tax purposes as (check one):

☐ A disregarded entity (the default under Treas. Reg. § 301.7701-3(b)(1)(ii)).

☐ An association taxable as a corporation, effective [__/__/____], pursuant to IRS Form 8832.

☐ An S corporation, effective [__/__/____], pursuant to IRS Form 2553.

5.5 Alabama Business Privilege Tax. The Sole Member (or Manager) shall determine the Company's initial and annual liability under Ala. Code §§ 40-14A-21 to 40-14A-29. For taxable years beginning after December 31, 2023, § 40-14A-22(c)(3) exempts taxpayers otherwise subject to the minimum tax from that tax and its associated filing requirement, except taxpayers subject to the separate levy in § 20-2A-80. The Sole Member (or Manager) shall cause the Company to:

(a) file an Initial Business Privilege Tax Return (Form BPT-IN) within 2.5 months after the applicable formation, qualification, registration, or commencement date if the initial return is required;
(b) file an annual Business Privilege Tax Return (Form PPT for pass-through entities or Form CPT for entities taxed as corporations) for each year in which a return is required; and
(c) pay any tax due, subject to the minimum-tax thresholds and exemptions in effect for the applicable tax year.

Article VI — Transfer of Interest / Charging Order (Ala. Code § 10A-5A-5.03)

6.1 Transferable Interest. Under Ala. Code § 10A-5A-5.01, the Sole Member's "transferable interest" is the right to receive distributions from the Company and is personal property. The transferable interest is distinct from management and informational rights.

6.2 Transfer of Transferable Interest. Pursuant to Ala. Code § 10A-5A-5.02, the Sole Member may transfer all or part of the Sole Member's transferable interest. A transferee acquires only the right to receive distributions, not management or informational rights, unless and until admitted as a member by the Sole Member.

6.3 Charging Order Remedy (Exclusive; No Foreclosure). Under Ala. Code § 10A-5A-5.03:

(a) on application by a judgment creditor of the Sole Member or a transferee, a court may charge the transferable interest of the judgment debtor with payment of the unsatisfied judgment with interest;
(b) the Company, upon being served with the charging order, may deposit distributions into the registry of the court issuing the order;
(c) the charging order constitutes a lien on the judgment debtor's transferable interest, but the judgment debtor retains all rights and obligations of a member subject to the lien;
(d) the charging order is the EXCLUSIVE remedy by which a judgment creditor of a member or transferee may satisfy a judgment out of the judgment debtor's transferable interest;
(e) the judgment creditor has NO right to foreclose, under this chapter or any other law, upon the charging order, the charging order lien, or the judgment debtor's transferable interest; and
(f) the judgment creditor has no right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, Company property, and a court may not order accounts or inquiries to enable the creditor to satisfy the judgment from the transferable interest.

6.4 No Management or Informational Rights for Creditor. No charging order, assignment, or other involuntary transfer confers upon any creditor or transferee any right to participate in the management of the Company or to inspect Company records.

6.5 Foreign-LLC Caveat. The Sole Member acknowledges that Alabama courts have disagreed on whether the exclusive-remedy language of § 10A-5A-5.03 applies to charging orders against members of foreign (non-Alabama) LLCs. Compare SE Prop. Holdings, LLC v. Unified Recovery Group, LLC, 2014 U.S. Dist. LEXIS 159254 (S.D. Ala. Nov. 12, 2014), with McElroy v. Sumrall, 2021 U.S. Dist. LEXIS 84121 (S.D. Ala. May 3, 2021). For maximum protection, the Sole Member should maintain Alabama as the state of formation.

6.6 Death or Incapacity of Sole Member. Upon the death or adjudicated incapacity of the Sole Member, the Sole Member's transferable interest passes by will, intestate succession, or pursuant to the Sole Member's estate plan. To avoid dissolution under Ala. Code § 10A-5A-7.01, the personal representative or successor trustee should promptly admit a successor member.

Article VII — Dissolution

7.1 Events of Dissolution. Pursuant to Ala. Code § 10A-5A-7.01, the Company is dissolved upon the first to occur of:

(a) an event specified in this Agreement;
(b) the written consent of the Sole Member;
(c) the passage of 90 consecutive days during which the Company has no members (unless a successor member is admitted under § 10A-5A-7.01(c));
(d) the entry of a decree of judicial dissolution; or
(e) administrative dissolution under applicable Alabama law.

7.2 Winding Up. Upon dissolution, the Company's affairs shall be wound up in accordance with Ala. Code § 10A-5A-7.02, including by liquidating assets, paying creditors, and distributing the remainder to the Sole Member.

7.3 Statement of Dissolution / Termination. The Sole Member shall cause appropriate dissolution and termination filings to be made with the Alabama Secretary of State and the Alabama Department of Revenue (including final BPT return).

Article VIII — State-Specific Provisions

8.1 Alabama LLC Law Controls. This Agreement is governed by the Alabama Limited Liability Company Law of 2014 and other applicable Alabama law. To the extent permitted by Ala. Code § 10A-5A-1.08, the provisions of this Agreement control over inconsistent default rules.

8.2 Business Privilege Tax Compliance. The Company shall remain in compliance with the Alabama Business Privilege Tax under Ala. Code §§ 40-14A-21 et seq., as described in Section 5.5.

8.3 Filing Requirements With Alabama Secretary of State. The Sole Member shall cause the Company to maintain a registered agent and registered office in Alabama and to make any required filings (such as amendments to the Certificate of Formation, statements of resignation, and statements of cancellation) under Title 10A, Chapter 1.

8.4 Series LLC (Optional). If the Sole Member elects to establish one or more series under Ala. Code §§ 10A-5A-11.01 to 10A-5A-11.16, the Sole Member shall:

(a) ensure that the Certificate of Formation contains the statement required by § 10A-5A-11.02(b)(3);
(b) maintain records that account for the assets associated with each series separately from the other assets of the Company, as required by § 10A-5A-11.02(b)(1); and
(c) execute and attach a series addendum to this Agreement establishing each series.

The Sole Member acknowledges that the inter-series liability shield under § 10A-5A-11.02(a) is dependent on strict compliance with § 10A-5A-11.02(b) and may not be recognized in courts of states that do not authorize series LLCs.

8.5 County Business Licensing. If the Company conducts business in an Alabama municipality requiring a business license under Ala. Code § 11-51-90 et seq., or in a county requiring a separate county license, the Sole Member shall obtain and maintain those licenses.

8.6 Sales/Use Tax; Employment Taxes. If the Company makes taxable sales or has employees in Alabama, the Sole Member shall register the Company with the Alabama Department of Revenue (and Department of Workforce for unemployment) and obtain applicable tax accounts.

Article IX — General Provisions

9.1 Amendment. This Agreement may be amended at any time by a writing signed by the Sole Member.

9.2 Severability. If any provision of this Agreement is held invalid or unenforceable, the remaining provisions remain in full force and effect.

9.3 Entire Agreement. This Agreement constitutes the entire agreement between the Sole Member and the Company regarding the subject matter hereof.

9.4 Governing Law; Venue. This Agreement is governed by the laws of the State of Alabama without regard to its conflict-of-laws principles. Venue for any dispute shall lie in the state or federal courts located in [____________] County, Alabama.

9.5 Successors and Assigns. This Agreement binds and inures to the benefit of the Sole Member's heirs, personal representatives, successors, and permitted assigns.

9.6 Counterparts and Electronic Signatures. This Agreement may be executed in counterparts and by electronic signature, each of which is deemed an original.

9.7 Effective Date. This Agreement is effective as of the Effective Date set forth in the preamble.

Signature Block

IN WITNESS WHEREOF, the undersigned has executed this Single-Member LLC Operating Agreement as of the Effective Date.

SOLE MEMBER:

Signature: [________________________________]

Printed Name: [________________________________]

Date: [__/__/____]

COMPANY:

[________________________________], an Alabama limited liability company

By: [________________________________]

Name: [________________________________]

Title: ☐ Sole Member ☐ Manager

Date: [__/__/____]

Pre-Execution Checklist

☐ Certificate of Formation has been filed with the Alabama Secretary of State and the Company is in good standing.
☐ The Company has obtained a Federal Employer Identification Number (EIN) from the IRS.
☐ An Alabama registered agent has been appointed.
☐ A bank account in the Company's name has been opened.
☐ Initial capital contribution has been documented and deposited.
☐ The Sole Member has selected member-managed vs. manager-managed and decided whether to form as a series LLC.
☐ Initial Business Privilege Tax liability has been calculated; if Form BPT-IN is required, filing has been calendared within 2.5 months of the applicable trigger under § 40-14A-25(a). Annual PPT/CPT filing will be checked against § 40-14A-22(c)(3).
☐ If electing C-corp or S-corp taxation, Form 8832 and/or Form 2553 has been timely filed with the IRS.
☐ The Sole Member has reviewed Ala. Code § 10A-5A-5.03 charging-order protections and § 10A-5A-1.08 operating-agreement restrictions.
☐ County/municipal business licensing has been confirmed and obtained as required.
☐ The Sole Member has registered with the Alabama Department of Revenue and, if employees, the Alabama Department of Workforce for applicable accounts.
☐ The Sole Member has consulted with Alabama-licensed counsel and a qualified tax professional.
☐ All [PLACEHOLDER] fields have been completed and check-the-box selections have been made.

Sources and References

• Alabama Limited Liability Company Law of 2014, Ala. Code Title 10A, Chapter 5A: https://law.justia.com/codes/alabama/title-10a/chapter-5a/
• Ala. Code § 10A-5A-5.03 (Charging order — exclusive remedy; no foreclosure): https://law.justia.com/codes/alabama/title-10a/chapter-5a/article-5/section-10a-5a-5-03/
• Ala. Code § 10A-5A-11.01 (Series LLCs): https://law.justia.com/codes/alabama/title-10a/chapter-5a/article-11/section-10a-5a-11-01/
• Alabama Secretary of State, Business Entities: https://www.sos.alabama.gov/business-entities
• Alabama Department of Revenue, Business Privilege Tax: https://www.revenue.alabama.gov/business-privilege-tax/
• Watson, "Charge It! Please: How To Use Charging Orders To Enforce Judgments In Alabama," CSAttorneys.com (July 27, 2021): https://csattorneys.com/2021/07/27/charge-it-please-how-to-use-charging-orders-to-enforce-judgments-in-alabama/
• IRS Form 8832 (Entity Classification Election): https://www.irs.gov/forms-pubs/about-form-8832
• IRS Form 2553 (Election by a Small Business Corporation): https://www.irs.gov/forms-pubs/about-form-2553