Alabama Single-Member LLC Operating Agreement

Q: What is a single-member LLC operating agreement in Alabama?

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.

Q: Does a single-member LLC need an operating agreement in Alabama?

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.

Q: What happens if I don't have an operating agreement for my Alabama LLC?

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)).

Q: Does an operating agreement protect my personal assets in Alabama?

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.

Q: How much does an Alabama LLC cost to maintain each year?

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.

Q: Do I need to file my Alabama LLC operating agreement with the state?

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.

Q: Can I change or waive fiduciary duties in an Alabama LLC operating agreement?

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)).

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.

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Key Things to Know

1
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.
2
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.
3
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).
4
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.
5
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)).
6
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.
7
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.

Open the LLC Operating Agreement guide

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Alabama-Specific Provisions

Use this together with the complete LLC operating agreement template, which covers the standard provisions your agreement also needs: capital contributions, management structure, meetings, transfers, withdrawal, and dissolution. The sections below cover only what is specific to Alabama law.

1. Governing Law

This Agreement shall be governed by and construed in accordance with the laws of the State of Alabama, including the Alabama Limited Liability Company Law of 2014, Code of Alabama Sections 10A-5A-1.01 through 10A-5A-12.05.

2. Allocation of Distributions

Unless otherwise stated elsewhere in this Agreement, all Members shall share equally in any distributions made by the Company before its dissolution and winding up, as provided by Code of Alabama Section 10A-5A-4.05(a)(1) in the absence of a contrary agreement. A Member's dissociation does not by itself entitle that Member to a distribution.

3. Fiduciary Duties

The duties, including fiduciary duties, a Member or Manager would otherwise owe the Company or another Member may be expanded, restricted, or eliminated by this Agreement, as permitted by Code of Alabama Section 10A-5A-1.08(b). This Agreement does not, and may not, eliminate or limit liability for a bad faith violation of the implied contractual covenant of good faith and fair dealing, which remains in force regardless of any other provision of this Agreement.

4. Indemnification

The Company may indemnify and hold harmless a Member or Manager, may advance or reimburse expenses incurred by a Member or Manager, and may purchase and maintain insurance on behalf of a Member or Manager, as permitted by Code of Alabama Section 10A-5A-4.10. Alabama's LLC Act sets no statutory exception to this power; the scope and any limits of indemnification under this Section are governed solely by this Agreement.

5. Execution

This Agreement is effective as of the date signed below. Alabama law does not require an LLC operating agreement to be notarized or witnessed to be valid. The provisions above are effective only because they are set forth in this written, signed Agreement.

[MEMBER] Signature: _____________________ Date: _____________

Printed Name: _____________________

Alabama Requirements for LLC Operating Agreement

Operating Agreement Authority (Code of Alabama §10A-5A-1.08)
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.
Limited Liability Protection (Code of Alabama §10A-5A-3.01)
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).
Management Structure (Code of Alabama §10A-5A-4.07)
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)).
Fiduciary Duties (Code of Alabama §10A-5A-4.08, §10A-5A-1.08(b))
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)).
Capital Contributions (Code of Alabama §10A-5A-4.03)
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.
Allocation of Profits and Losses (Code of Alabama §10A-5A-4.05)
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.
Distributions (Code of Alabama §10A-5A-4.06)
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.
Transfer of Membership Interests (Code of Alabama §10A-5A-5.02)
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.
Withdrawal or Dissociation of Members (Code of Alabama §10A-5A-6.01)
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.
Dissolution and Winding Up (Code of Alabama §10A-5A-7.01)
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.
Amendment of Operating Agreement (Code of Alabama §10A-5A-4.07(b)(3)(A)(i))
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.
Indemnification and Insurance (Code of Alabama §10A-5A-4.10)
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.
Series LLC Provisions (Code of Alabama §10A-5A-11.01 et seq.)
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

What is a single-member LLC operating agreement in Alabama?

Does a single-member LLC need an operating agreement in Alabama?

What happens if I don't have an operating agreement for my Alabama LLC?

Does an operating agreement protect my personal assets in Alabama?

How much does an Alabama LLC cost to maintain each year?

Do I need to file my Alabama LLC operating agreement with the state?

Can I change or waive fiduciary duties in an Alabama LLC operating agreement?

Introduction

Key Things to Know

Key decisions before you file

Customize your LLC Operating Agreement Template with DocDraft

Alabama-Specific Provisions

1. Governing Law

2. Allocation of Distributions

3. Fiduciary Duties

4. Indemnification

5. Execution

Alabama Requirements for LLC Operating Agreement

Operating Agreement Authority (Code of Alabama §10A-5A-1.08)

Limited Liability Protection (Code of Alabama §10A-5A-3.01)

Management Structure (Code of Alabama §10A-5A-4.07)

Fiduciary Duties (Code of Alabama §10A-5A-4.08, §10A-5A-1.08(b))

Capital Contributions (Code of Alabama §10A-5A-4.03)

Allocation of Profits and Losses (Code of Alabama §10A-5A-4.05)

Distributions (Code of Alabama §10A-5A-4.06)

Transfer of Membership Interests (Code of Alabama §10A-5A-5.02)

Withdrawal or Dissociation of Members (Code of Alabama §10A-5A-6.01)

Dissolution and Winding Up (Code of Alabama §10A-5A-7.01)

Amendment of Operating Agreement (Code of Alabama §10A-5A-4.07(b)(3)(A)(i))

Indemnification and Insurance (Code of Alabama §10A-5A-4.10)

Series LLC Provisions (Code of Alabama §10A-5A-11.01 et seq.)

Frequently Asked Questions