HB2 Alabama 2014 Session

Updated Feb 26, 2026

Notable

Summary

Primary Sponsor: Paul DeMarco
Republican
Session: Regular Session 2014
Title: Limited liability companies, formation of company agreement, filing, notice third parties, rights where operating agreement silent, Alabama Limited Liability Law of 2014, Secs. 10A-1-1.03, 10A-1-1.08 am'd.; Secs. 10A-5-1.01 to 10A-5-9.06, inclusive, repealed; Secs. 10A-5A-1.01 to 10A-5A-12.08, inclusive, added
Summary: HB2 creates a new Alabama Limited Liability Company Law of 2014 (Chapter 5A) with comprehensive rules for forming, operating, transferring interests, dissolving, and creating designated series of assets for LLCs formed after Jan 1, 2015, while replacing the old LLC law.
What This Bill Does
It establishes Chapter 5A (Sections 10A-5A-1.01 to 10A-5A-12.08) defining LLC formation, governing documents, notice rules, and the authority of members and managers. It allows the creation of one or more designated series with separate assets and liabilities, and sets how distributions, contributions, and fiduciary duties work. It also details how LLCs can convert or merge with other entities, how disputes are resolved, and how existing LLCs transition to the new regime. It repeals the old LLC sections in 2017 and applies to new LLCs (and, under transition rules, some preexisting ones).

Who It Affects
Group 1 affected and how: Members and managers of Alabama LLCs formed after Jan 1, 2015 (including those in professional services LLCs and those operating under a series structure) will be governed by the new LLC law, the duties, rights, and governance rules, and their ability to manage, wind up, and distribute assets.
Group 2 affected and how: Creditors, transferees, and other third parties dealing with LLCs or their series will see changes to how transferable interests can be charged, when distributions can be made, and what rights transferees gain or lose under the new framework.

Key Provisions
Creates Alabama Limited Liability Company Law of 2014 (Chapter 5A) with 10A-5A-1.01 to 10A-5A-12.08; old LLC law repealed in 2017.
Defines key terms: certificate of formation, limited liability company agreement, member, transferrable interest, and series of assets.
Allows for designated series with separate assets and liabilities, and sets how they are treated under the law.
Specifies how and when notices are effective; when a member is deemed to know or have notice of facts.
Outlines powers, governing law, and construction rules for LLCs and its series; includes tax treatment as a partnership for federal purposes.
Governs the limited liability company agreement, including limits on restricting duties and liabilities and the implied covenant of good faith.
Sets formation, amendment, and filing procedures with probate or Secretary of State; defines when formation becomes effective.
Defines distributions, capital contributions, and penalties; requires equal sharing before dissolution and sets rules for distributions in kind.
Details fiduciary duties (loyalty, care) for managers and the consequences of breaches; outlines records access and indemnification.
Provides transfer rules, charging orders for creditors, and limits on transferees' rights absent notice; sets dissolution, wind-up, and reinstatement processes, including series dissolution.
Outlines conversion and merger procedures, effect, and filings; transition rules for existing relationships; special rules for professional LLCs and requirements for transferring transferable interests to qualified persons.

AI-generated summary using openai/gpt-5-nano on Feb 24, 2026. May contain errors — refer to the official bill text for accuracy.
Subjects: Business Entities