Many LLC owners find it challenging to move their business to Alabama (AL) as Alabama does not allow LLC domestication. Then, how to move a business to Alabama legally? This article will talk about the alternatives to LLC domestication in Alabama.
Does Alabama Allow LLC Domestication?
Sadly, the state of Alabama does not allow LLC domestication. Now, you might be wondering, “What is LLC domestication?”
Well, LLC domestication is a legal way to move your LLC from the state where you initially set up your LLC to another state. In other words, LLC domestication allows you to change the domicile of your LLC without disrupting the ongoing LLC operations.
However, including Alabama, a few states do not allow LLC domestication, and you have to look for alternatives to move your LLC to those states.
How to Move an LLC to Alabama? Some Alternatives
It is exciting that your business is thriving, and you wish to expand it to other states. Perhaps you plan to transfer your Limited Liability Company (LLC) to Alabama. However, it is always troublesome when it comes to filing paperwork, or you have to deal with legalities.
Below, we stated the three best alternatives to Alabama LLC Domestication. Select any LLC domestication alternatives that suit your needs the most to move your LLC to Alabama.
Regardless of which method you choose to move your LLC to Alabama, you will need a registered agent in Alabama. If you do not have any physical address in Alabama yet, do not worry. You can hire registered agent services to correspond with the state on your LLC’s behalf.
We have reviewed the most reliable registered agent services for you. You can choose from them or pick the one we recommend.
You can change your Alabama registered agent and nominate yourself once you get a physical address. However, we recommend getting professional registered agent services for privacy purposes.
To know who can be your registered agent and why you should not nominate yourself or any other LLC member as a registered agent, read our article on “What is a registered agent?”
1. Operate as a Foreign LLC in Alabama
If you want to keep your old LLC and want to operate your business in Alabama as well, register your business as Alabama Foreign LLC. However, an out-of-state LLC or Foreign LLC is the most expensive way of moving your LLC to Alabama.
Still, if you want to transiently transfer your business from the state where you have submitted your Certificate of formation to Alabama, Foreign LLC is a good option. This will allow both of your LLCs to be operational in both states.
Click on the following link to register a Foreign LLC in Alabama.
Benefits of Moving your Business to Alabama as a Foreign LLC
Moving your business to Alabama as a foreign LLC will have the following advantages:
- You will have the limited liability protection of an LLC. Otherwise, the unincorporated business (sole proprietorship) in Alabama will make your personal assets liable to lawsuits, debts, and other business liabilities.
- You will be able to operate as an LLC in both states.
Disadvantages of Moving your Business to Alabama as a Foreign LLC
If you move your business to Alabama as a foreign LLC, you will face the following disadvantages:
- Your LLC will be governed under the law of the LLC registration state and the laws of Alabama where you qualify as a foreign LLC.
- You have to fulfill annual requirements and pay annual LLC fees, state taxes, franchise taxes, etc., to both states. This significantly increases the annual cost.
- If any of your (domestic or foreign) LLC faces a liability or declares bankruptcy, the other LLC’s assets will be utilized to pay the debts.
- Complying with both state laws because you have to pay LLC taxes in both states.
- Fillings and other LLC maintenance paperwork in both states add considerable hassle.
2. Dissolving the Old LLC and Forming New LLC
LLC dissolution in the home state and creating a new LLC in Alabama is a handy alternative to LLC domestication.
You might be thinking that LLC termination in one state and formation in the other state from scratch means high cost and a lot of paperwork.
However, this one-time effort and spending will save you from the repeated filings and fees in both states that you need to pay regularly in the case of a foreign LLC.
Follow your LLC governing documents including the operating agreement while dissolving your LLC. To dissolve your LLC in the previous state, click on the following link:
To dissolve an LLC in the previous state, you might need a certificate of good standing to show the state authorities that your LLC has no outstanding LLC taxes or debts. Click the following link to get a certificate of good standing in any state.
After dissolving your previous LLC, you can form a new LLC in Alabama. You may also dissolve the old LLC and form an Alabama LLC at the same time. Click on the following links to create an Alabama LLC.
Advantages of LLC dissolution in the previous state and Forming a New LLC in Alabama
- Your LLC will be governed by the Alabama state laws only.
- You do not have to pay LLC taxes and annual fees in both states.
- You do not have to comply with the filing requirements of both states.
Disadvantages of LLC dissolution in the previous state and Forming a New LLC in Alabama
- You can operate your LLC in Alabama only (LLC will no longer be operational in the previous state).
- A high one-time cost of LLC formation and LLC dissolution.
3. Move an LLC to Alabama by Merging the Old LLC with Alabama LLC
A statutory LLC merger in Alabama is the closest equivalence to a statutory LLC domestication. The Alabama statutory LLC merger is the best way to transfer an LLC to Alabama compared to the other two alternatives mentioned above.
Primarily, this method is used to merge two businesses regardless of the location. However, you can transfer your LLC from any state to Alabama using this method.
You simply need to form a new LLC through an LLC formation company or DIY method in Alabama. Once you have successfully formed an Alabama LLC, merge it with your previous LLC.
Merging the two LLCs is done using a statutory merger. So, you have to file articles of merger to the Alabama secretary of state with a plan of merger. This plan includes the terms and conditions regarding how merging will happen.
Filing the articles of merger effectively dissolves the old LLC that merges into the new LLC. Hence, it is very cost-effective as you do not have to pay annual and maintenance fees in both states.
Advantages of Alabama LLC Merger
Alabama LLC merger offers the following advantages:
- No need to obtain a new business account
- Previous business contracts are still valid
- No need to re-hire employees
- No need to transfer assets
- No need to file a new LLC tax ID number (EIN) with IRS
Disadvantages of Alabama LLC Merger
Alabama LLC merger offers the following disadvantages:
- You can only operate your LLC in Alabama (the previous LLC will no longer be operational)
Moving an LLC Out of Alabama
Since Alabama does not allow any out-of-state LLC to domesticate in Alabama, you might be wondering, “Does Alabama law allow Alabama domestic LLCs to move out or covert its domicile?”
Well, yes, the state of Alabama does permit domestically formed LLCs to convert into LLCs of any other state.
The Code of Alabama 1975, section 10A-1-8 explains how you can move your Alabama LLC to any other state.
FAQs on How to Move an LLC to Alabama
Aisha Noreen is an owner of a small business with more than 9 years of experience in the marketing industry. With the wisdom of an old soul, she always seeks innovation and mind-blowing ROI techniques. Her unique approach helped many small businesses thrive and she can surprise you in many ways as well. Believe it or not, her energy, passion, and creativity are contagious enough to transform your business and take it to another level.