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  • What is an Electing Family Limited Liability Entity?
View All Business Privilege Tax FAQs

What is an Electing Family Limited Liability Entity?

An Electing Family Limited Liability Entity is defined in Section 40-14A-1, Code of Alabama 1975. Upon meeting certain requirements, an Electing Family Limited Liability Entity would qualify for a maximum Alabama Business Privilege Tax of $500.

To qualify the LLE must be more than 80 percent owned, directly or indirectly, by an individual and the members of the individual’s family (See 40-14A-1(h)(4), Code of Alabama 1975, for attribution rules to follow in determining ownership).

The LLE must have more than 90% of its gross receipts from interest, dividends, rents, and certain other passive income. At least 90% of the adjusted basis of the assets owned by the LLE must consist of cash, stock, securities, timber, annuities, and certain other “non-business” type assets. Again, see Section 40-14A-1, Code of Alabama 1975, for a more thorough explanation of the Electing Family Limited Liability Entity ownership, income, and asset requirements.

A qualifying LLE would make the election to be treated as an Electing Family Limited Liability Entity by completing Schedule BPT-E, Family Limited Liability Entity Election Form, and attaching the completed Schedule to the Alabama Form PPT being filed for the LLE. Page 1, line 17 must be checked to indicate that the election form is attached to the Form PPT. Single-member LLCs that are treated as a disregarded entity for federal income tax purposes do not qualify as an electing family limited liability entity, in accordance with Section 40-14A-1(h), Code of Alabama, 1975.

An Electing Family Limited Liability Entity is defined in Section 40-14A-1, Code of Alabama 1975. Upon meeting certain requirements, an Electing Family Limited Liability Entity would qualify for a maximum Alabama Business Privilege Tax of $500.

To qualify the LLE must be more than 80 percent owned, directly or indirectly, by an individual and the members of the individual’s family (See 40-14A-1(h)(4), Code of Alabama 1975, for attribution rules to follow in determining ownership).

The LLE must have more than 90% of its gross receipts from interest, dividends, rents, and certain other passive income. At least 90% of the adjusted basis of the assets owned by the LLE must consist of cash, stock, securities, timber, annuities, and certain other “non-business” type assets. Again, see Section 40-14A-1, Code of Alabama 1975, for a more thorough explanation of the Electing Family Limited Liability Entity ownership, income, and asset requirements.

A qualifying LLE would make the election to be treated as an Electing Family Limited Liability Entity by completing Schedule BPT-E, Family Limited Liability Entity Election Form, and attaching the completed Schedule to the Alabama Form PPT being filed for the LLE. Page 1, line 17 must be checked to indicate that the election form is attached to the Form PPT. Single-member LLCs that are treated as a disregarded entity for federal income tax purposes do not qualify as an electing family limited liability entity, in accordance with Section 40-14A-1(h), Code of Alabama, 1975.

Related FAQs in Business Privilege Tax

https://www.alabamainteractive.org/sos/

Go to our website, www.revenue.alabama.gov. Click on Forms. Enter Business Privilege into the Search box. Sort the forms by Year by clicking on the box “Year” to find the needed Form. Click on the needed Form. Instructions, Forms with calculations, Printable Forms, and our Voucher (BPT-V) are located here.

Where to apply-

revenue.alabama.gov
Click Businesses (along top left in dark blue)
Certificate of Compliance (last option in first column, bottom left)
Request a Certificate of Compliance (link within paragraph)
Please Read: Important Information Regarding Certificate of Compliance and Special Notes (in red)
Request a Single Certificate of Compliance
Fee is $10(with an additional $4 service charge)
Payment Options: American Express, Discover, Master Card or Visa

*Sometimes the taxpayer may not know the 6-digit Secretary of State ID. They can enter all nines in that field, but it must be in the correct format, 999-999. Also, if they do not have a FEIN number, they can do the same, but must be in correct format, 99-9999999. In order to ensure accuracy in verifying the entity for compliance, it is not recommended that a request be made without the proper identifying numbers for the entity. Either the correct FEIN or SOS ID must be on the application*

Certificates of Compliance are issued if the Department verifies that an entity has filed all returns required to be submitted and paid the taxes as shown due as payable on those returns.

If an entity has not filed all returns required to be submitted and not paid the taxes as shown due as payable on those returns, the certificate will be denied.

Disregarded entities requesting a Certificate of Compliance must provide their owner’s information (name, FEIN) in order for the Department to be able to verify the income tax filing requirements for the disregarded entity have been met, since the disregarded entity’s income is reported on its owner’s return for income tax purposes. Failure to provide the owner’s information for a Certificate of Compliance request made for a disregarded entity is the number one reason a request for a Certificate of Compliance is erroneously denied.

Forms and information needed can be accessed through one of the following websites provided by the Office of the Secretary of State or Atlas Alabama.

https://www.sos.alabama.gov/ Main page for Office of the Secretary of State

https://www.sos.alabama.gov/business-entities Business Entities main page

https://www.sos.alabama.gov/business-entities/business-downloads Business downloads/ forms

https://atlasalabama.gov/ – Atlas Alabama

All fees associated with the Office of Secretary of State business entities can be found at the following website:

Business Entity Fees

https://www.sos.alabama.gov/sites/default/files/2020-12/2021FeeSchedule.pdf

The steps for withdrawals and dissolutions are outline below:

Dissolutions- Domestic entity

Complete Articles of Dissolutions Form based on the entity type.
https://www.alabamainteractive.org/sos/welcome.action
Follow the instructions on the form pertaining to the type of entity you are dissolving.
DOMESTIC BUSINESS CORPORATION ARTICLES OF DISSOLUTION
https://www.sos.alabama.gov/sites/default/files/2020-12/DomesticBusinessCorporationDissolution.pdf

DOMESTIC LIMITED LIABILITY COMPANY (LLC) ARTICLES OF DISSOLUTION
https://www.sos.alabama.gov/sites/default/files/2020-12/DomesticLLCDissolution.pdf

DOMESTIC LIMITED PARTNERSHIP (LP) STATEMENT OF DISSOLUTION
https://www.sos.alabama.gov/sites/default/files/2020-12/DomesticLPDissolution.pdf
Withdrawals- Foreign entity

Complete a Request for Certificate of Compliance from ADOR. https://www.alabamainteractive.org/ador_tax_compliance/welcome.action
Provide any missing returns and payments as determined by ADOR staff, if found not to be in compliance to ADOR.
Receive Certificate of Compliance from ADOR.
Complete Certificate of Withdrawal Form https://www.alabamainteractive.org/sos/welcome.action
Submit two (2) signed completed Certificate of Withdrawals with Certificate of Compliance (from ADOR) and filing fee to Secretary of State’s address on the form.
Certificate of Compliance cannot be more than 6 months old to be accepted by SOS.

Office of the Judge of Probate- County Offices contact link page- https://www.sos.alabama.gov/city-county-lookup/probate-judges