The Alabama House of Representatives recently passed House Bill 2 (HB2), sponsored by Rep. Paul DeMarco (R-Vestavia Hills), sending it to the Alabama State Senate.  HB2, tentatively named the “Alabama Limited Liability Company Law of 2014,” seeks to modernize Alabama law applicable to LLCs in order to attract new businesses.

One significant change in HB2 includes the official recognition of Series LLCs which are currently available in other jurisdictions.  The series Limited Liability Company (LLC) concept takes its name from the fact that it can have multiple (a “series” of) members, managers, or business lines within it. Each series within the company can hold assets, have members, and pursue its own business objectives, all while enjoying protection from legal claims against other series within the company.

In short, a series LLC allows a company to separate and protect multiple assets without the need to form additional entities.

Reasons to form a series LLC could include:

  • Reduced cost: Just one filing fee is required to form a series LLC, regardless of how many series it contains;
  • Asset protection: By design, the assets of each series are safe from judgments against the others, although bankruptcy may undermine this protection.
  • Versatility: A series LLC allows for variation in business purposes within it. This structure is often used to safeguard real estate or intangible assets.

If passed, the Alabama Limited Liability Company Act of 2014 would apply to entities formed after January 1, 2015 and would not replace the current Limited Liability Company Law (Ala. Code § 10A-5-1.01 et seq) until January 1, 2017.