Alabama Single-Member LLC Operating Agreement
Create an Alabama single-member LLC operating agreement with state-specific guidance on default rules, the Business Privilege Tax, and liability protection.
Introduction
A single-member LLC operating agreement is the internal document where you, as the sole owner of an Alabama LLC, set the rules for how your business runs, how profits are handled, and what happens if you close the business later. Alabama does not require the agreement to be in writing for most purposes, oral or implied agreements are legally valid, but state law also lets your agreement modify or fully eliminate most fiduciary duties you would otherwise owe the LLC, which makes writing your intentions down more important here than in states that guardrail those duties tightly. It is still the clearest evidence, if a court or the IRS ever asks, that you are running a real business.
Key Things to Know
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Alabama does not require an operating agreement to be in writing. Code of Alabama Section 10A-5A-1.02(l) defines it as any agreement, 'written, oral or implied,' and confirms a single-member LLC's agreement is enforceable even though only one person is a party to it.
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Without an operating agreement, Alabama law splits distributions EQUALLY among members, not in proportion to capital contributions (Code of Alabama Section 10A-5A-4.05(a)(1)). This is the opposite of some other states' contribution-based default.
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A charging order is the exclusive statutory remedy for a member's personal creditors against that member's LLC interest (Code of Alabama Section 10A-5A-5.03(f)). The Alabama Supreme Court has applied the state's ordinary veil-piercing standard to LLCs, holding that single ownership alone is not enough to pierce the entity (Childs v. Pommer, 2021).
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Alabama LLCs have no flat annual franchise tax like California's $800 minimum. The Business Privilege Tax's minimum bracket dropped to $50 for tax years starting after 2022, and LLCs owing $100 or less are now fully exempt from filing or paying it for tax years starting after 2023.
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Alabama allows an operating agreement to modify, restrict, or fully eliminate fiduciary duties, broader than many states. It can never eliminate the implied covenant of good faith and fair dealing (Code of Alabama Section 10A-5A-1.08(b)).
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The operating agreement itself is not filed with the state. You form the LLC by filing a Certificate of Formation ($200 fee) with the Alabama Secretary of State.
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Alabama's LLC Act includes a genuine Series LLC framework (Code of Alabama Sections 10A-5A-11.01 et seq.), letting a single LLC segregate liability among separate series of assets, a structure not every state offers.
Key decisions before you file
Before you file a LLC Operating Agreement in Alabama, a few decisions shape the document: which option to choose and what each one means. The LLC Operating Agreement guide walks through them.
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Alabama Requirements for LLC Operating Agreement
The Operating Agreement governs the relations among the Members and between the Members and the LLC. It may not, however: vary the LLC's status as a separate legal entity; vary the choice of Alabama law; restrict the statutory rights of a person who is not a member; vary a court's power under Code of Alabama Section 10A-5A-2.05; or eliminate the implied contractual covenant of good faith and fair dealing (Code of Alabama Section 10A-5A-1.08(c)). Where the Agreement is silent, the Alabama LLC Act supplies the default rule.
Members and managers are not personally liable for a debt, obligation, or liability of the LLC solely by reason of being a member or manager (Code of Alabama Section 10A-5A-3.01). This protection is not absolute: Alabama courts apply the state's ordinary corporate veil-piercing standard to LLCs, and have held that unity of interest combined with misuse of control causing harm can still expose a member, though mere single ownership alone is not enough (Childs v. Pommer, Ala. 2021).
An Alabama LLC is member-managed by default if the Operating Agreement does not specify otherwise (Code of Alabama Section 10A-5A-4.07(b)(1)). In that default structure, a matter in the ordinary course of business may be decided by a majority of the members, but amending the Operating Agreement, filing bankruptcy for the LLC, or any act outside the ordinary course requires the consent of all members (Code of Alabama Section 10A-5A-4.07(b)(2)-(3)).
Members and managers with authority to direct and oversee the LLC owe duties of loyalty and care (Code of Alabama Section 10A-5A-4.08). Unlike some states, Alabama permits these duties, including fiduciary duties, to be expanded, restricted, or ELIMINATED ENTIRELY by a written Operating Agreement. The one duty that can never be eliminated is the implied covenant of good faith and fair dealing (Code of Alabama Section 10A-5A-1.08(b)).
A member's contribution to an Alabama LLC may be made in whatever form and amount the members agree upon (Code of Alabama Section 10A-5A-4.03) -- the statute sets no default form or minimum. The Operating Agreement should state each member's initial contribution and any obligation to make additional contributions later.
Unless the Operating Agreement provides otherwise, all Members share EQUALLY in distributions made before the LLC's dissolution, not in proportion to each member's capital contribution (Code of Alabama Section 10A-5A-4.05(a)(1)). The Operating Agreement can set a different split.
An Alabama LLC may not make a distribution if, after giving it effect, the LLC's liabilities would exceed the fair value of its assets (Code of Alabama Section 10A-5A-4.06). A member who knowingly receives an improper distribution must repay it; an action to recover an improper distribution is barred if not brought within two years of the distribution.
A transferee of an Alabama LLC interest does not automatically become a member and gains no right to participate in management or access the LLC's records without the consent the Operating Agreement requires (Code of Alabama Section 10A-5A-5.02). Absent that consent, the transferee is entitled only to the distributions the transferor would have received.
The Operating Agreement should specify the circumstances under which a member may withdraw or be dissociated (Code of Alabama Section 10A-5A-6.01). By default, a member's dissociation does not by itself entitle that member to any distribution from the LLC (Code of Alabama Section 10A-5A-4.05(a)(2)) -- the Operating Agreement can set different buyout terms.
The Operating Agreement should specify events that trigger dissolution in addition to the LLC Act's own dissolution events (Code of Alabama Section 10A-5A-7.01). Winding-up mechanics, including the right to wind up the LLC's affairs and the application of assets, are addressed separately in Code of Alabama Sections 10A-5A-7.02 through 7.06.
Unless the Operating Agreement sets a different threshold, amending the Operating Agreement requires the consent of all members (Code of Alabama Section 10A-5A-4.07(b)(3)(A)(i)). This is a default rule, not merely a permitted option -- the Operating Agreement can lower the threshold if the members agree to do so.
An Alabama LLC may indemnify and hold harmless a member or manager, advance or reimburse that person's expenses, and purchase and maintain insurance on their behalf (Code of Alabama Section 10A-5A-4.10). Alabama's statute sets no carve-outs or exceptions to this power; any limits on indemnification are a matter for the Operating Agreement itself to define.
If establishing a Series LLC, the Operating Agreement must comply with Alabama's Series LLC provisions, which allow for segregated liability among different series of assets.
Frequently Asked Questions
It's the internal document where an Alabama LLC's sole owner sets the rules for running the business and handling profits. Alabama doesn't require it to be written for most purposes, oral or implied agreements are valid, but writing it down is the clearest proof the LLC is a real business, not a personal wallet.
Not by blanket legal requirement. Alabama allows an oral or implied operating agreement, and confirms a single-member agreement is enforceable despite having only one party (Code of Alabama Section 10A-5A-1.02(l)). But without a written one, state default rules fill every gap automatically, and any change to fiduciary duties needs a written agreement.
Alabama's default LLC rules fill the gap. Distributions get split equally among members rather than however you'd choose to allocate them, which matters most once you bring on a second member and haven't defined your own split (Code of Alabama Section 10A-5A-4.05(a)(1)).
It supports that protection. Alabama law makes a charging order the exclusive remedy for a member's personal creditors against that member's LLC interest (Code of Alabama Section 10A-5A-5.03(f)). Alabama courts still apply ordinary veil-piercing principles to LLCs, so keeping business and personal finances genuinely separate still matters.
Alabama has no flat annual franchise tax. The Business Privilege Tax's minimum bracket dropped to $50 for tax years starting after 2022, and for tax years starting after 2023, LLCs whose calculated tax is $100 or less are fully exempt from filing or paying it at all.
No. You file a Certificate of Formation ($200 fee) with the Alabama Secretary of State to form the LLC, but the operating agreement itself is an internal document. You keep it with your own business records; it's never submitted to the state.
Broadly yes. Alabama lets a written operating agreement expand, restrict, or fully eliminate the fiduciary duties a member or manager would otherwise owe, more permissive than states that only allow narrowing. It can never eliminate the implied covenant of good faith and fair dealing (Code of Alabama Section 10A-5A-1.08(b)).