Should My New Huntsville Company be a Single Member or a Multi-Member Alabama LLC?
The decision about whether to have a single-member limited liability company or a multi-member Alabama LLC is a personal question for the new business owner and any investors.
The difference here is a question of whether you want business partners. It is good to remember that when you have an equal partner, they generally will own 50% of the business, its property, and may also have joint decision-making authority.
That situation can be good for some scenarios, and can also be bad for others. In contrast, when our law firm sets up a new Huntsville nonprofit, federal Alabama law requires the entity to have at least three directors and two officers.
Our Business Law Firm Attorneys can Structure Your New Alabama LLC for One, Single Owner or with Several Members.
We can structure a partnership differently, such as by having limited partners or minority owners who have limited rights and limited voting power, but some of the issues related to having partners will remain whenever there are is more than one person involved.
This can be addressed in the Alabama LLC operating agreement, initial business privilege tax return, and other LLC formation documents such as the certificate of formation and registered agent reports.
For instance, while it's great to have business partners in some situations, like when you have investors, if something unexpected were to happen to one of the partners in a multi-member LLC in Alabama (such as medical debt, death, bankruptcy, or divorce) then that partner's membership interest in the Alabama limited liability company may suddenly be sold or transferred to a less friendly new member, like a bankruptcy trustee or county conservator. Nobody wants that outcome, especially where there can be and unpaid business privilege tax issues.
While there are some ways to work around this problem, like making the membership interest non-transferrable without unanimous member consent, it is not possible to truly protect the other members from the unknown. This is one reason owners will choose an Alabama single-member LLC structure.
The Business Relationships and Friendships of Alabama LLC Owners Can Change over Time
Also, while business partners may start out the best of friends, people can change over time and values don’t always align years into a business relationship.
A lot of business litigation and lawsuit involve situations where, after some falling out, the partners in a business are at odds and want to fight it out in court. Again this is a bad and expensive situation for everyone involved.
In our opinion, it usually makes more sense for a new company to have only one person in charge. That person, the sole member, and possibility registered agent on file in the certificate of formation with the Alabama Secretary of State Office will own the business and make the managerial decisions on behalf of the company.
That way, there is only one head cook in the kitchen who's in charge of making decisions and act as a registered agent on file with the secretary of state.
Again, sometimes the best offense is a good defense when setting up an LLC in Alabama, and we try to prevent problems before they start, and limiting authority to one person is a way to do that. That’s the advantage of working with an attorney: our business lawyers can draft and structure contracts to deal with some of the issues.
Our Huntsville Business Lawyers can create an Alabama LLC to Fit Your Needs.
Even if the new Alabama limited liability company has only one member, it can still pay anyone who works with it - such as a spouse or employees - on an hourly wage basis, for a salary, based on commissions for sales, or however else you want to structure the arrangement.
Being the sole member does not have to mean the sole employee, just the sole person to signed the Alabama initial business privilege tax return and Alabama Secretary of State documents. Just let us know how you want to run your business and we can get it all set up any way you want.