SB113 Alabama 2015 Session

Summary

Primary Sponsor

Arthur OrrSenator

Republican

Session

Regular Session 2015

Title

Limited Liability Law, governing law clarified, liability for wrongful distributions clarified, Secs.10A-5A-1.05, 10A-5A-1.06, 10A-5A-1.07, 10A-5A-4.06 am'd.

Summary

SB113 clarifies which state's law governs foreign LLCs' internal affairs, how LLCs are taxed, and that a member's liability for wrongful distributions is limited to the amount distributed.

What This Bill Does

It specifies that the state where a foreign LLC was formed governs its internal affairs in Alabama. It confirms that LLCs and foreign LLCs are treated as partnerships for Alabama tax purposes unless federal tax classification says otherwise. It clarifies that, under normal circumstances, a member's liability for wrongful distributions is limited to the amount of distributions they received, with a knowledge standard outlined for recovery. It also makes technical corrections to cross references in the LLC statutes.

Who It Affects

• Members and managers of Alabama LLCs (including any series), who face clarified liability limits for wrongful distributions and governance rules.
• Foreign LLCs operating in Alabama and Alabama tax authorities, who are affected by the internal-affairs rule and clarified tax treatment.

Key Provisions

• Clarifies that the law of the state where a foreign LLC is formed governs the internal affairs of that foreign LLC or series.
• Clarifies tax treatment of LLCs and foreign LLCs for purposes of Alabama taxation (treated as partnerships unless classified otherwise for federal tax purposes).
• Clarifies that, under normal circumstances, a member’s liability for wrongful distributions is limited to the amount of distributions received, with a knowledge requirement for liability and specific rules for series.
• Makes technical corrections and updates to cross references in the LLC statutes (Sections 10A-5A-1.05, 1.06, 1.07, 4.06).

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