Is the LED lit solid or is it blinking?
Is the LED lit solid or is it blinking? If the LED is lit solid your system is in valet mode, and simply flipping the switch with the ignition on should take it out of valet mode. Valet mode would cause the system to behave as you are describing, while in valet mode the convenience features of the system will still function but none of the security features would. If this does not help please post the exact make and model of your alarm and I will see what I can find on valet mode for that system.