Alabama LLC remove member
In an Alabama LLC, in order to remove an existing member, you will need consent from the existing members before updating the Alabama Secretary of State. Learn how to remove a member in detail.
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 remove an Alabama LLC member?
Follow these 5 steps:
1. Check your operating agreement
If you have an operating agreement, check the procedure for removing a member. Follow that for the voting and transfer procedures.
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-6.02
According to the default provisions, a member of an LLC can be removed by unanimous consent of the other members.
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. Inform IRS
If the removed member was the responsible party with the IRS, then you will have to update the IRS with a new responsible party. In that case, you need to file Form 8822-B. You will have to notify IRS about the change in the responsible party within 60 days.
Notify within
60 days
If you are moving from a multi-member LLC to a single-member LLC, the way IRS treats you changes from a partnership to a disregarded entity. You will have to file Form 8832 to inform IRS about the change in classification
5. Update your operating agreement
Amend your operating agreement to update the names and details of the current members.
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.
AC §10A-1-5.06
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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.
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
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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.
Frequently asked questions
Business entities in Alabama
LLC is a flexible choice for small businesses in Alabama. However, in order to issue various classes of shares and have more investors, C-corporations are better suited than LLCs.
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