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  • Writer's pictureSteve Sasser

FREQUENTLY ASKED QUESTIONS ABOUT LIMITED LIABILITY COMPANYS (LLCs) IN ALABAMA




1.         What is an LLC or Limited Liability Company?  

An LLC, or Limited Liability Company, is a type of business structure that combines the flexibility and tax benefits of a partnership with the limited liability protection of a corporation.

 

2.         Can I use any name I want for my LLC? 

In general, yes. There is, however, a requirement that the name be registered with the Alabama Secretary of State. If the name is already being used or is deceptively similar to another LLC or corporation, it cannot be used, and the Secretary of State will not allow you to reserve it for your company.

 

3.         What is “Limited Liability”? 

Limited liability is a legal concept that protects the personal assets of the owners of a business entity, such as an LLC or a corporation, from being used to pay the debts or liabilities of the business. This means that if the business is sued or goes bankrupt, the owners are only liable for the amount of money they have invested in the business and their personal assets are not at risk. This protection is one of the main reasons why many people choose to form an LLC or a corporation when starting a business.

 

4.         What are the Requirements to Form an LLC in Alabama? 

To form an LLC, you must first reserve a name with the Secretary of State. Once that is done you must file Articles of Formation. We also recommend that you draw up an Operating Agreement setting out various matters regarding the LLC.

 

5.         Can I Form a Single Member LLC in Alabama? 

Yes, single member LLCs are allowed in Alabama

 

6.         How are LLC Taxed in Alabama? 

Single-member LLCs are treated as sole proprietorships for tax purposes, while multi-member LLCs are treated as partnerships. However, LLCs can elect to be taxed as a corporation by filing Form 8832 with the Internal revenue Service (“IRS”).

 

7.         What is the Difference Between a Member Managed LLC and a Manger Managed LLC? 

In a member-managed LLC, all members participate in the management and decision-making of the company. In a manager-managed LLC, one or more designated managers manage the LLC and have the authority to make decisions on behalf of the company.

 

8.         Do You Have to Have an Operating Agreement for an LLC in Alabama?

 While it is not legally required, we recommend that every LLC has one, including single-member LLCs. The Operating Agreement sets out the rules and procedures for governing the LLC, addresses the split of profits and losses between the members, and helps to prevent disputes between members. It also provides for the roles and responsibilities of the members and how business decisions will be made.

 

The information contained in this article should be considered general in nature and does not constitute legal advice. If you wish to obtain further information on the topic discussed, you should seek legal or other advice specific to your situation. Steven C. Sasser and Sasser Law Firm, LLC are licensed to practice in Alabama and this article should not be seen as an attempt to solicit legal services from outside of Alabama. No representation is made that the quality of legal services performed are greater than the legal services performed by other lawyers.

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