HB54 Alabama 2015 Session

Summary

Primary Sponsor

Bill Poole

Republican

Session

Regular Session 2015

Title

Limited liability companies (LLC), application of law to foreign LLC's, taxation of LLC's, liability for wrongful distributions clarified, Secs.10A-5A-1.05, 10A-5A-1.06, 10A-5A-4.06 am'd.

Summary

HB54 updates Alabama's LLC law to clarify governing law for domestic vs. foreign LLCs, address taxation, limit wrongful-distribution liability, fix cross-references, and adjust transition rules.

What This Bill Does

It clarifies that domestic LLCs are governed by Alabama law for internal affairs and related liabilities, while foreign LLCs are governed by the law of the state where they were formed. It states that LLCs and foreign LLCs are treated as partnerships for Alabama taxes unless federal tax rules require a different classification. It sets a limit on member liability for wrongful distributions to the amount distributed, with liability applying if the member knew the distribution was improper. It also makes technical corrections to cross-references and updates transition provisions for how older LLCs join or align with the new framework.

Who It Affects

• Domestic Alabama-formed LLCs and their members/managers, whose internal affairs, member liabilities, and tax treatment are clarified under Alabama law.
• Foreign LLCs (formed outside Alabama) and their members, whose internal affairs and liabilities will be governed by their home state's law, with tax treatment aligning to federal classifications.

Key Provisions

• Domestic vs. foreign: Alabama law governs the internal affairs and liability of domestic LLCs; the home state law governs the internal affairs and liability of foreign LLCs.
• Tax treatment: LLCs and foreign LLCs are treated as partnerships for Alabama taxation unless federally classified otherwise.
• Wrongful distributions: a member who receives an improper distribution and knew about the violation is liable to the LLC for the amount distributed; a member who did not know is not liable; similar rules apply to distributions by a series.
• Technical corrections: cross-references and related drafting corrections are included.
• Transition provisions: before Jan 1, 2017 the chapter chiefly applies to new LLCs (formed after Jan 1, 2015) and to older LLCs that elect to be subject; on/after Jan 1, 2017 the chapter governs all LLCs; pre-2015 formation documents may serve as the LLC agreement, and amendments after 2015 must conform to the chapter.

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

Subjects

Corporations