[AL] How can two owners merge their LLCs and keep one of the business names?

Lexi, Chatbot

I understand that merging LLCs can be a complex process. Have both parties agreed on which business name will be retained after the merger?

Lexi, Chatbot

Are there any specific terms or conditions that both parties want to include in the merger agreement?

BH414

I'll be happy to help you out today. Please note that this discussion is for guidance only, does not constitute an Attorney-Client Relationship, and is only to help you understand the nature of your situation from a legal standpoint and discuss options. You must engage an attorney in your local jurisdiction if you wish to take any legal action through an attorney. In addition, there may be a small wait as I review your question to provide a detailed response. Do you have any additional or clarifying information that will assist in my review?

BH414

In Alabama, you do not handle this by simply amending the articles to add the other owner. Alabama requires a formal merger process when two LLCs combine into one. The amendment route only works when you are bringing in a new member to an existing company without actually merging two separate entities. Here you are folding one company into the other, so the state expects a proper merger filing. (AL Code § 10A-5A-10.01)

The best approach is to prepare a written Plan of Merger that both LLCs approve. After that, you file the Certificate of Merger with the Alabama Secretary of State. Once the merger is effective, the surviving LLC can amend its articles to reflect any new member information if needed.

You do not file the operating agreement with the state since Alabama does not require or accept it for filing. You keep it internally as the governing contract, but you absolutely can update it now to reflect ownership percentages, management structure, and the economic arrangements you both want. (AL Code § 10A-5A-2.01)

If you want help with wording for specific sections of the operating agreement, I can draft clean language as soon as you tell me which provisions you want to tighten up. It helps to know whether you both want member-managed or manager-managed, how profits will be split, and whether either side is contributing assets from the non-surviving LLC.

BH414

Got it, thanks for clarifying!

BH414

I'll draft amendment language you can use for the surviving Alabama LLC. You can adjust names, dates, and percentages as needed.

AMENDMENT TO THE OPERATING AGREEMENT
OF (NAME OF LLC)

This Amendment is entered into by the undersigned members of (NAME OF LLC), an Alabama limited liability company, and is effective as of (date).

Admission of New Member
The members admit (New Member Name) as a member of the company. (New Member Name) accepts all rights, duties, and obligations under the Operating Agreement.

Ownership and Profit Split
Ownership will be held as follows:
(Existing Member Name) – fifty percent
(New Member Name) – fifty percent

All profits, losses, and distributions will follow these percentages.

Management
The company will be member-managed. Each member has equal authority to participate in management and decision-making unless both members agree in writing to a different process.

Restriction on New Members
No additional members may be admitted to the company at any time. This restriction can only be changed by written agreement signed by both current members.

Transfer on Death
If a member dies, that member’s entire interest will transfer to the member’s spouse. If the spouse is not living, the interest will transfer to the member’s children in equal shares. The transferee receives all economic and voting rights held by the deceased member. No other transfers are permitted unless both members previously agreed in writing.

Continuation of the Operating Agreement
All provisions of the original Operating Agreement remain in effect except for the changes in this amendment.

Execution
(Existing Member Name)
(New Member Name)

BH414

You can add a dissolution provision stating that if both members mutually agree in writing to separate, the LLC will be dissolved and wound up in accordance with Alabama law, with assets liquidated and liabilities paid before any remaining funds are distributed 50/50.

Regarding the EIN:

If you are dissolving one LLC and simply admitting a new member into the surviving LLC, you generally do not need a new EIN for the surviving entity, provided it remains the same legal entity. The dissolving LLC will close its EIN with the IRS. However, if the tax classification changes (for example, from single-member to multi-member), the IRS may require updates, though not necessarily a new EIN. It is wise to confirm with a CPA.

BH414

Correct. If you are not doing a statutory merger and are instead dissolving one LLC and admitting the individual as a new member into the existing LLC, you would file the appropriate amendment form with the Alabama Secretary of State if any information in the Certificate of Formation needs updating.

Remember, Alabama does not require you to file the operating agreement. That remains internal.

BH414

I hope this is helpful: Certificate Merger