Free Alabama LLC Operating Agreement

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Every Alabama LLC should have an Operating Agreement, but getting one doesn’t have to be expensive. You can download and customize your own Operating Agreement using our free template below.

Alabama LLC Operating Agreement (Member-managed)

Here is a Member-managed Operating Agreement template available in 3 formats. This can be used for a Single-Member LLC or a Multi-Member LLC.

A Member-managed LLC is where all the Members (LLC owners) have the ability to legally bind the LLC in contracts and agreements. The LLC Members also run the business and day-to-day operations.

Alabama LLC Operating Agreement (Manager-managed)

Here is a Manager-managed Operating Agreement template available in 2 formats. This can be used for a Single-Member LLC or a Multi-Member LLC.

A Manager-managed LLC is where one or more designated people (called Managers), have the ability to legally bind the LLC in contracts and agreements. The LLC Manager(s) also run the business and day-to-day operations.

The Members can't legally bind the LLC in contracts and agreements. They also don't take part in running the business and day-to-day operations. Instead, they take a passive/investor role.

However, the Members vote the Manager(s) into their position and are required to vote on certain things, like adding or removing an LLC Member.

Which one should I choose? It depends on how you want your LLC to be managed. Please see Member-managed vs Manager-managed LLC for more details. If you’re not sure which one to use, we recommend using the Member-managed Operating Agreement. This is the most common type of LLC management.

What is an Alabama LLC Operating Agreement?

Operating Agreement

An Alabama LLC Operating Agreement is a written contract between the LLC Members (LLC owners). This legal document includes detailed information about LLC ownership structure, who owns the company and how the LLC is managed.

Single-Member LLCs and Multi-Member LLCs should draft an Operating Agreement, keep it with their business records, and give a copy to all Members.

What should be included in LLC Operating Agreements?

Basic Information

Your Operating Agreement will include basic information about your Limited Liability Company. Some of the information will be the same as what is listed in your Alabama LLC Certificate of Formation. Operating Agreements should include:

LLC Ownership

Your Operating Agreement will list all the LLC Members and how much of the Limited Liability Company they each own.

How much of the LLC someone owns is called their “LLC Membership Interest”.

LLC Membership Interest is most often expressed as a percentage (like 5%, 50%, 100%, etc.).

Note: Some people make the mistake of saying they are “shareholders” of an LLC. This isn’t accurate. The terms “shares” or “shareholders” do not exist when talking about LLCs. The term “shares” specifically refers to ownership in a Corporation.

Initial Capital Contributions (putting money into your LLC)

After your LLC is approved, you should open an LLC bank account and put money into that account.

Each of the LLC Members makes an initial capital contribution. Capital contribution simply means a deposit of money into the LLC bank account.

You will list the initial capital contributions in your LLC’s Operating Agreement.

Matt Horwitz, founder of LLC University®Pro tip: If you complete your Operating Agreement before you have opened an LLC bank account, just enter the amount the Members plan to deposit. If the amount of your deposit changes, it’s okay to edit your Operating Agreement with the actual amounts later.

  • Related article: To learn more about capital contributions, like how much you should contribute, check out LLC Capital Contributions.

Statement about taxes

You will list how your LLC will be taxed in your Operating Agreement. There are four common ways an LLC can be taxed:

  • LLC taxed as a Sole Proprietorship
  • LLC taxed as a Partnership
  • LLC taxed as an S-Corporation
  • LLC taxed as a C-Corporation

Note: Husband and wife LLCs can sometimes be taxed as a Qualified Joint Venture LLC. To do this, the LLC must be formed in a community property state. Alabama is not a community property state, so your Alabama LLC can’t be taxed as a Qualified Joint Venture.

Voting Rights of LLC Members

The rules of membership voting will be spelled out in your Alabama LLC’s Operating Agreement.

If you use the Member-managed Operating Agreement, the voting powers are proportionate to the LLC Membership Interest.

If you use the Manager-managed Operating Agreement, the voting powers are also proportionate to the LLC Membership Interest. Then the Members vote to elect a Manager or Managers. The Manager(s) then has authority to make certain decisions on behalf of the LLC (without needing a vote by the Members).

However, certain things, like adding or removing an LLC Member, require a vote of the Members (and the Manager has no say).

Make sure all LLC Members have a copy

Once you finalize your Operating Agreement, make sure all the Members have a copy.

We recommend keeping a copy of the Operating Agreement with your LLC business records.

Operating Agreement FAQs

As per Section 10A-5A-1.08
of the Alabama LLC Act, an Operating Agreement isn’t required for an LLC in Alabama.

But while it’s not required in Alabama to conduct business, we strongly recommend having an Operating Agreement for your LLC.

Additionally, financial institutions (like banks) and other organizations may need to see a copy of this paperwork in order for you to do business with them.

It’s best to have an Operating Agreement, even if you are the only Member of your Alabama LLC (a Single-Member LLC).

If you go to court, an Operating Agreement helps prove that your Single-Member LLC is being run as a separate legal entity. And that protects your personal assets.

It’s best to have an Operating Agreement, especially for a Multi-Member LLC. This document will spell out ownership percentages, profit distribution, and management responsibilities.

If you go to court, an Operating Agreement helps prove that your Multi-member LLC is being run as a separate legal entity.

No, you don’t have to send your Operating Agreement to the Alabama Secretary of State, or any other government agency.

Operating Agreements are “internal documents”. Meaning, the Members just need to keep a copy with their business records.

The Operating Agreement is a legally binding document upon the LLC Members because of the Members’ signatures. It doesn’t need a government stamp of approval.

However, in the future, if your company were involved in a lawsuit or an audit, a court or government agency might ask to see a copy of your Operating Agreement.

Additionally, you may also need to show this document to:

  • financial institutions when you open a business bank account
  • financial institutions if you apply for a loan for the LLC
  • a title company if your LLC is buying real estate

No, your Operating Agreement doesn’t need to be notarized. Each Member just needs to sign it.

Once you (and the other LLC Members, if applicable) sign the Operating Agreement, then it becomes a legal document.

Yes, but we recommend using an Operating Agreement template.

An Operating Agreement is a legal document. You don’t have to hire a lawyer to write one, though. Using a template helps make sure you cover everything you need to.

LLC University® offers free Operating Agreement templates that you can download and customize to write your own LLC Operating Agreement.

If you wanted to write a simple Alabama Operating Agreement without using a template, you could. You’d need to check with the Alabama LLC Act to make sure it meets all the requirements.

For example, at a minimum, you’d want your Alabama LLC name, your Registered Agent information, your business purpose, the names of the LLC Members, and information about initial capital contributions.

However, there is a lot more information that is important to document about your LLC.

It’s probably a lot easier to start with an existing template. We have a free Operating Agreement template you can download on this page.

An LLC (Limited Liability Company) is a type of business structure. It’s a legal business entity that you form by filing a document called the Certificate of Formation with the state.

An Operating Agreement is an internal document that governs how your LLC is run. It contains rules about how much of the company each Member of the LLC owns, and other details about management and taxes.

Said another way, the LLC is your legal entity. And the Operating Agreement is a written set of rules for how the LLC will operate.

You could have an LLC without an Operating Agreement (but you shouldn’t). But you can’t have an Operating Agreement without an LLC.

Here are the steps to starting an LLC in Alabama:

  1. Choose an LLC name and make sure it’s available
  2. Choose who will be your Alabama Registered Agent
  3. File the Alabama LLC Certificate of Formation
  4. Complete and sign an LLC Operating Agreement
  5. Get a Tax ID Number (EIN) from the IRS
  6. Research business license requirements
  7. Open an LLC bank account

Next Step: EIN Number for an LLC

Once you have created your LLC Operating Agreement, you can proceed to the next lesson: Alabama LLC EIN Number.

Matt Horwitz
Matt Horwitz
Founder & Educator, LLC University®
Matt Horwitz has been the leading expert on LLC education for the past decade. He founded LLC University in 2010 after realizing people needed simple and actionable instructions to start an LLC that other companies weren't offering. He's cited by Entrepreneur Magazine, Yahoo Finance, and the US Chamber of Commerce, and was featured by CNBC and InventRight.
 
Matt holds a Bachelor's Degree in business from Drexel University with a concentration in business law. He performs extensive research and analysis to convert state laws into simple instructions anyone can follow to form their LLC - all for free! Read more about Matt Horwitz and LLC University.

12 comments on “Alabama Operating Agreement”

Disclaimer: Nothing on this page shall be interpreted as legal or tax advice. Rules and regulations vary by location. They also change over time and are specific to your situation. Furthermore, this comment section is provided so people can share their thoughts and experience. Please consult a licensed professional if you have legal or tax questions.

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    • Wow, what a lovely comment! I’m so glad to hear we were able to help :) Thank you for your kind words and best wishes with your business!! Let us know if you need anything else or have any other LLC questions.

      Reply
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  4. I have an EIN number that I received when I got an LLCi in another state. Can I use that number for
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  5. Your guidance is very helpful & I’ve learned a lot from your site! Do you have a sample clause for the Operating Agreement for Single member LLC where upon death – you want to transfer to spouse? Current Op Agreement you have has the LLC dissolving upon death.

    Reply
    • Hi VBS, that’s great to hear! At this time, we don’t have a sample clause for that. We recommend speaking with an estate attorney (or a few). In addition to customizing your LLC’s Operating Agreement, they may suggest using a trust in combination. Hope that helps.

      Reply

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