Business Law in Shelby County
Operating and Partnership Agreements in Columbiana, Alabama
Every Alabama LLC has an operating agreement. The only question is whether you wrote it or the Legislature did. When owners put nothing in writing, the Alabama Limited Liability Company Law fills in every blank: who runs the company, how money is split, what happens when someone wants out. Carden Legal Services drafts and reviews operating agreements and partnership agreements for business owners in Columbiana, Shelby County, and Central Alabama, so the rules your company runs on are the ones you actually chose. Grady Carden does the work himself and explains the fee before anything starts.
Three situations that bring owners to this page
You are forming a company with more than one owner.
business. The agreement is where you decide, calmly and in advance, every question that would otherwise be decided in an argument.
You formed online and the operating agreement is a template, or missing.
The formation service gave you a generic document or nothing at all. You have never read it, and if a bank or a buyer asked for it tomorrow you are not sure what it says.
You and a partner have been running a business on a handshake.
No entity, no paperwork, and it has worked so far. Under Alabama law you are already a general partnership, and that comes with rules you did not pick and liability you did not sign up for. Section 5 is for you.
What happens when nothing is in writing
These are Alabama's default rules for an LLC with no written operating agreement. Each one can be changed by agreement. None of them changes on its own.
| The question | Alabama's default answer | What an agreement can say instead |
|---|---|---|
| Who gets the money? | Members share distributions equally, regardless of who contributed more. | Distributions follow ownership percentages, contributions, or any formula the members agree on. |
| Who runs the company? | Every member has an equal say in management. | Members run it by percentage vote, or managers run it and members vote only on major decisions. |
| Who can sign contracts and borrow money? | Authority comes from the agreement, the statute, or other law. With no agreement, it is unclear and often disputed. | Named people with named limits, so a bank or vendor knows exactly who can bind the company. |
| What if a member sells their interest? | The buyer receives only the right to the member's share of money. The buyer does not become a member or get a vote without the other members' consent. | Rights of first refusal, approved-buyer rules, and a procedure for admitting a new member. |
| What if a member dies, divorces, or goes bankrupt? | The statute has no agreed price and no agreed process. The interest may end up with an heir, an ex-spouse, or a creditor who cannot vote but is owed money. | Buyout triggers, a valuation method, payment terms, and who is allowed to buy. |
| How do owners settle a deadlock? | No default mechanism. A deadlocked two-member company can end up asking a court to dissolve it. | Tie-breaker provisions, mediation first, and a buyout option before anyone files anything. |
The defaults are not wrong for every company. They are wrong for most, because they assume every owner put in the same money, does the same work, and wants the same thing. If that describes your company, you still want it in writing. If it does not, the agreement is where you fix it.
WHAT IS INCLUDED
What we put in an operating agreement
Every agreement is drafted for the company it governs. These are the questions it answers.
01
Ownership and contributions
Who owns what percentage, what each member contributed, and what happens if the company needs more money later.
02
Management and authority
Member-managed or manager-managed. Who signs contracts, who opens accounts, who can borrow, and the dollar limits on each.
03
Voting
Which decisions need a vote, which need a majority, which need everyone, and how votes are counted.
04
Distributions
How profits come out, when, and in what order, including tax distributions so no member owes tax on money they never received.
05
Transfers
Whether a member can sell, to whom, and the other members' right to buy first.
06
Exit events
Death, incapacity, divorce, bankruptcy, retirement, and simply wanting out. Each one with a trigger, a price, and a payment plan.
07
Dispute resolution
What happens before anyone sues: notice, a cooling-off period, mediation, and a buyout option.
08
Records and amendments
What the company keeps, where, and how the agreement itself gets changed.
Partnership agreements in Alabama
Here is what catches people: under Alabama law, two or more people who carry on a business together for profit have formed a general partnership, whether or not they meant to and whether or not anything was signed. Once that happens, three default rules apply. Profits are split equally. Each partner can bind the partnership in the ordinary course of business. And each partner is personally liable for the partnership's debts, including debts another partner ran up.
A written partnership agreement replaces the first two defaults with terms you chose: contributions, profit and loss shares, management authority, decision-making, how a partner withdraws, and how the partnership winds down. It does not fix the third. Personal liability is built into the general partnership form. For most Alabama partnerships, the better move is to form an LLC and put the same terms in an operating agreement, or to register as a limited liability partnership. We walk through which fits your situation.
For partnerships that will stay partnerships, including professional practices and family land partnerships, we draft the agreement with the same care as an operating agreement and coordinate it with each partner's estate plan.
Already have one?
Reviewing an operating agreement you already have
Most agreements that come through the door were produced by a formation service or downloaded from a template site. They are written for fifty states at once, so the Alabama-specific questions are either generic or blank. The usual gaps: no valuation method for a departing member, nothing about incapacity, transfer rules that do not match what the owners assume, and signing authority that would let any member borrow against the company.
We read it with you, explain in plain English what it says and what it leaves out, and recommend either an amendment or a replacement. If the company has changed since the agreement was signed, a new owner, a divorce, a loan, a building, the agreement probably needs to change with it.
The exit is where agreements earn their keep
An operating agreement is read most carefully on the worst day: a member dies, a marriage ends, a partner stops showing up. On that day the questions are simple. Who owns the interest now? What is it worth? Who pays, and how fast? If the agreement answers them, the company keeps running. If it does not, the company stops while lawyers and a probate court work it out.
That is why the exit provisions in an operating agreement are drafted alongside each owner's estate plan. The agreement, the will or revocable living trust, and the durable power of attorney need to name the same people and allow the same actions. Carden Legal Services handles both sides, so they agree. For a full buy-sell arrangement, see Business Succession and Buy-Sell Agreements
One question to ask your co-owner.
If one of us died this year, does our agreement say what happens to the ownership, or does it say nothing? If neither of you knows, that is the first thing to find out.
Fees and how it works
Fees explained before work begins Business formation at Carden Legal Services is generally handled on a flat-fee basis. The fee depends on the entity and the documents it needs, and you will know it before any drafting starts. State filing fees are separate and are passed through at cost. Complex ownership structures may require a different arrangement, and that is discussed up front.
What to expect
Schedule a consultation. By Google Meet, by phone, or in person by appointment in Columbiana, Alabaster, or Calera. Tell us what the business does and who owns it.
Get a recommendation and a fee. You leave knowing whether an LLC is the right entity, how it should be structured, and what it will cost.
We file and draft. Name reservation, certificate of formation, operating agreement, and organizational records.
Sign and launch. You review everything, sign, and leave with a record book and a first-year checklist.
Frequently asked questions
Does Alabama require an LLC to have an operating agreement?
Alabama does not require you to file one, and the statute allows the agreement to be written, oral, or implied. In practice that means every Alabama LLC has an agreement whether the owners wrote one or not. If nothing is in writing, the Alabama Limited Liability Company Law supplies the terms, and those default terms were not written for your business.
What happens if my LLC has no written operating agreement?
Alabama's default rules apply. Members share equally in distributions and in management regardless of who contributed more. A member who sells or gives away an interest transfers only the right to receive money; the buyer does not become a member without the other members' consent. There is no agreed method for valuing a departing member's interest, so an exit, a death, or a divorce becomes a negotiation or a lawsuit instead of a procedure.
Can you review an operating agreement I got from an online formation service?
Yes. Most template agreements are written for every state at once and leave the important Alabama questions blank or wrong: how a member leaves, how the interest is valued, what happens on death or incapacity, and who can sign for the company. We read what you have, explain what it actually says, and either amend it or replace it.
My partner and I never formed a company. Do we still need a partnership agreement?
Yes, and probably a conversation about forming an entity first. Under Alabama law, two or more people who carry on a business together for profit have formed a general partnership whether they meant to or not. Each partner is personally liable for the partnership's debts, and profits are split equally by default. A written partnership agreement fixes the terms; forming an LLC fixes the liability problem too.
What should an operating agreement cover?
Who owns what percentage and what each person contributed. Whether members or managers run the company and who can sign contracts and borrow money. How and when money is distributed. What decisions need a vote and what the vote threshold is. How a member can sell, and to whom. What happens when a member dies, becomes incapacitated, divorces, goes bankrupt, or simply wants out, including how the interest is valued and paid for. And how disputes between owners are resolved short of a courtroom.
How often should an operating agreement be updated?
Review it whenever ownership changes, a member marries or divorces, the company takes on significant debt or real estate, or the tax classification changes. Absent one of those events, a read-through every two or three years is enough to catch drift between what the agreement says and how the company actually operates
Write the rules before you need them
Call (205) 201-1297
or schedule a consultation. Tell us what the business does, who owns it, and where you want it to be in five years. We will tell you which entity fits and what it takes to set it up.
No representation is made that the quality of legal services to be performed is greater than the quality of legal services performed by other lawyers.
Carden Legal Services, LLC serves clients in the following Alabama locations: Birmingham, Alabaster, Helena, Pelham, Jefferson County, Shelby County, Chilton County, Montgomery, Prattville, Millbrook, Wetumpka, Tuskegee, Selma, Troy, Greenville, Autauga County, Montgomery County, Elmore County, Tri-County Region, River Region, Central Alabama, Alabama statewide.