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2022 Guide to Starting an LLC in Rhode Island

Rhode Island LLC Quick Facts

Rhode Island LLC Costs

Initial Cost:
– State LLC Filing Fee: $150

 

Recurring Cost:
– Annual Report Filing Fee: $50

Rhode Island LLC Processing Time

– Filing in Person: 1-3 hours
– Filing Online: 2-3 business days
– Filing by Mail: 5-10 business days

Not sure about filing an LLC yourself?

Want an LLC, but not sure about filing the paperwork yourself? Let Zenbusiness, IncFile, or IncAuthority help guide you through the LLC formation process, so you know everything was done right.

IncFile and IncAuthority are both currently running a special where you only pay state fees for your LLC formation!

Overview

Guide to Starting an LLC in Rhode Island

Starting a business can be a daunting task. There are so many things to consider, and it can be hard to know where to start. If you’re thinking of starting an LLC in Rhode Island, this guide will help you get started. We’ll walk you through the process step by step, and provide links to helpful resources along the way. So, what are you waiting for? Let’s get started!

What is an LLC?

An LLC, or Limited Liability Company, is a business entity that combines the personal liability protections of a corporation with the flexibility and tax benefits of a partnership. LLCs are easy to form and maintain, and they can be used for a wide variety of business ventures.

Unlike a sole proprietorship or partnership where the small business owner can be personally liable for lawsuits against the business, the LLC is a separate legal structure that protects the business owner’s personal assets.

Besides the liability protection, the Limited Liability Company provides several other benefits over the sole proprietorship, partnership, and corporation because of the multiple tax options, ease of administration, and management flexibility.

Steps to Form a Rhode Island LLC

While it can be intimidating to form an LLC for the first time, with a little research and patience, you can learn how to form an LLC in Rhode Island without an attorney.

Let’s break down the steps to complete the Rhode Island LLC formation process.

Total Time: 10 minutes

Step 1: Choose a Name for the LLC

The first step in forming a Rhode Island Limited Liability Company is to make sure the name you want is available.  

It’s critical to do a name search before registering an LLC name, as the name of each LLC must be distinguishable from other entity names registered in the state of Rhode Island. The Rhode Island Secretary of State makes it easy to search and verify if your LLC name is available.  Here is more information on how to do a Rhode Island LLC name search. 

In addition to the name being unique, the entity designator (identifier used at the end of the business name) must be either:
Limited Liability Company
L.L.C.
LLC

A comma may be used after the business name and before the designator.  “Cowboy Cleaners LLC” and “Cowboy Cleaners, LLC” are both acceptable.

If there is a name you want to use, but you are not ready to register the LLC, the Application for Reservation of Entity Name can be filed with the Department of State – Business Services Division. The name reservation filing fee is $50 and will hold a name for up to 120 days.

Before settling on a name, you may want to see if a domain name is also available in order to match your business name and website address.

Step 2: Appoint a Rhode Island Resident Agent

Every LLC in Rhode Island is required to have a Resident Agent (commonly referred to as a Registered Agent in other states). A Resident Agent will act as a central point of contact to receive legal documents, tax notices, summons, subpoenas, etc., on behalf of the LLC.

The basic requirements to be a Resident Agent in Rhode Island include:
– The agent must be a Rhode Island resident at least 18 years of age or a commercial Registered Agent service with a registered office in the state.
– The agent must have a physical address in the state (PO Boxes aren’t allowed).
– The agent must generally be available during normal business hours at the address provided to receive service of process.

Learn more about the requirements for a Registered Agent in Rhode Island.

Any individual meeting the requirements can be the agent; however, the agent’s name and address become public record, and with that comes a loss of privacy. Making their business matters private is more important for some entrepreneurs, especially when doing business from home or while still employed.  Hiring a commercial Registered Agent service like Northwest Registered Agent will help keep the owner’s names from being publicly listed.

Step 3: File the Rhode Island Articles of Organization

The paperwork to officially create an LLC in Rhode Island is called the Articles of Organization. To submit the paperwork, either file online through the Rhode Island Secretary of State’s website or download and mail the Articles of Organization (Form 400).

Related: How to fill out the Rhode Island Articles of Organization

When filling out the Articles of Organization, a few sections and terms can be confusing. Let’s go over a few of these sections to help get your LLC started right.

LLC Tax Status – In this article, you will declare the tax status of the LLC.  Here there are options for partnership, corporation, or disregarded, and can be confusing to answer.  One of the great benefits of having an LLC is the tax flexibility, and you can elect to have it taxed like a partnership, corporation, or disregarded entity (sole proprietorship).  You are still filing as an LLC but electing how the entity is taxed.

This section doesn’t actually make the election.  That will be done when filing the EIN with the Internal Revenue Service (IRS).  We have a guide to filing an EIN for a Rhode Island LLC.  It only takes about 5 minutes and doesn’t cost you anything.

Note that the IRS will automatically select the disregarded entity status for single-member LLCs, and a multi-member LLC will automatically be taxed as a partnership.

Principal Office Address – In this section, enter the street address, city, state, and zip code of the initial principal office.  This address can be the LLC’s physical address, or it can be the address where the business records are stored.  This address can be anywhere in the world; however, you may not use a Post Office Box.

Purpose – You can elect to have the business purpose of the LLC be open-ended with the generic text of “The limited liability company has the purpose of engaging in any lawful business.”  The business purpose just refers to the business activities of the LLC.  If a more specified purpose is desired, it can be entered in Article VI.

Duration – In this section, you can indicate how long the LLC will remain in existence.  Most LLCs will choose a Perpetual duration; however, some businesses (usually investment-related) will have a specific closure date.  If you have a specific end date in mind (typically used for investment-related businesses), choose a dissolution date.

LLC Management – This section asks if the LLC is Member-Managed or Manager-Managed.
– Member-Managed LLCs have an active involvement in the management of the LLC.
– Manager-Managed LLCs are hired by the LLC members to run the LLC, similar to a CEO of a corporation.

Most LLCs are member-managed.

Effective Date – If you want the LLC to start immediately, leave the field blank.  If you want to start the LLC at a later date, enter a date less than 30 days in the future to start.  The main reason for delaying the LLC start date is when the filing is being done close to the end of a calendar year, and the business isn’t going to have any activity until the start of the year.  You can eliminate the need to file a partial-year business tax return by delaying the start date until the following year.

Estimated Cost: 150 USD

Turnaround Time: It normally takes 2-3 business days when filing online or 5-10 business days when filing by mail for the state to process the LLC paperwork. Alternatively, you can hand-deliver the paperwork to the Department of State office in Providence, and the LLC will be processed in 1-3 hours.

Consider using an LLC formation service like Zenbusiness, IncAuthority, Northwest, or IncFile to guide you through the LLC formation process, so you know everything was done right.

IncAuthority and IncFile are currently running a special where you only pay state fees for your LLC formation and they do the rest!

You have a Rhode Island LLC! Now what???

Once the LLC has been formed, there are a few additional steps to take care of. Below is a list of the most common tasks.

Prepare a Rhode Island LLC Operating Agreement

The operating agreement is a document that governs the framework of an LLC.  This document covers items like ownership rights, member responsibilities, how profits and losses are distributed, and more.

Most states do not require an LLC to have an operating agreement, but it is still worth considering. Without an operating agreement:

  • The LLC could be subject to generic state rules that may be detrimental in the event of a lawsuit.
  • Member’s personal liability protection may be diminished.
  • Members may not fully understand their roles and responsibilities, which could lead to costly disputes in the future.

Related: Rhode Island operating agreement template

Obtain an EIN

The EIN or Employer Identification Number (also called a Federal Employer Identification Number or FEIN) is a unique 9-digit tax identification number assigned to a business by the Internal Revenue Service (IRS). Similar to a social security number for an individual, the EIN identifies business entities for tax purposes. The EIN will be needed to hire employees, open a bank account, build business credit, register for business licenses and permits, file federal and state taxes, and more.

There is no cost for the EIN when registering through the IRS. The number is available immediately when applying through the IRS website; however, you can also register by phone, fax, or mailing IRS Form SS-4.

Related: How to Apply for an EIN

Elect the LLC’s Form of Federal Income Taxation

One of the significant benefits of the Limited Liability Company is the tax flexibility it provides.  When applying for the Employer Identification Number, you will choose how the entity will be taxed for federal income tax purposes. While there are some limitations, an LLC may be classified for federal income tax purposes as a:

  • Sole proprietorship
  • Partnership
  • C-corporation
  • S-corporation

While this may sound confusing, this refers to how the LLC is taxed, not the legal structure.

Related: How can an LLC be taxed?

By default, the taxation of an LLC is called pass-through taxation, which means the profits or losses of the LLC flow through to the members.

Single-member LLCs will, by default, be taxed as a sole proprietorship. The members can also elect to change the taxation to a C-corporation or an S-corporation.

Multi-member LLCs will, by default, be taxed as a partnership. The members can also elect to change the taxation to a C-corporation or an S-corporation.

In general, the difference between being taxed as a corporation and being taxed as a sole proprietorship or partnership is that the profits and losses are passed to the member’s federal income tax returns based on their percentage of ownership.  As a result, the owner will pay self-employment taxes on all business profits.  As an alternative, electing to be taxed as a corporation allows the members to take a reasonable salary and then pay payroll taxes.  Any remaining profits are distributed and aren’t subject to payroll taxes, resulting in potential tax savings.

Before electing how your LLC will be taxed, consider talking with an accountant to assess which one will be best for you. Some tax elections, such as the C corporation, may be detrimental for some people due to double taxation.

Open an LLC Bank Account

Opening a bank account for your LLC is important for liability protection as the account separates the business’s funds from the member’s personal funds.

Several documents will be needed to open a business bank account, such as:

  • A banking resolution is a document that authorizes the members to open a business bank account on behalf of the LLC.
  • Copies of the original formation paperwork from the state showing the creation of the LLC.
  • Driver’s licenses of the members.
  • Depending on the age of the LLC, a Rhode Island Certificate of Good Standing may be needed to prove the LLC is active and in good standing with the state.

Related: How to Open a Business Bank Account for your LLC

Apply for Business Licenses and Permits

Depending on what your business does and where it is located, there will likely be various business licenses and permits needed before starting the business. Some common registrations include:

  • Business License – Some cities require businesses to obtain licensing before they can start.
  • Professional License – Certain services such as barbershops, accountants, salons, and others must be licensed.
  • Sales Tax Permit – In order to sell products and certain services, registration with the Rhode Island Division of Taxation will be necessary.

Related: What Business Licenses are Needed in Rhode Island?

File the Annual Report

LLCs are required to file the Limited Liability Company Annual Report with the Rhode Island Department of State.  The filing fee for the annual report is $50 and is due each year between September 1 and November 1.

Related: How to File a Rhode Island LLC Annual Report

Common Questions To Starting An LLC In Rhode Island

How much does it cost to form an LLC in Rhode Island?

To start an LLC in Rhode Island, the fee to file the Articles of Organization with the Secretary of State is $150.

How long does it take to get an LLC approved in Rhode Island?

It normally takes 2-3 business days to set up an LLC in Rhode Island when filing online or 5-10 business days when filing by mail for the state to process the LLC paperwork.

Alternatively, you can hand-deliver the paperwork to the Rhode Island Department of State office in Providence, and the LLC will be processed in 1-3 hours.

Is there a yearly fee for an LLC in Rhode Island?

Each year, an annual report must be filed, along with paying the $50 annual report fee.

Do I have to pay to hire a registered agent?

No. Anyone can act as a registered agent, provided they are at least 18 years old, reside in the state, and are generally available to receive documents during normal business hours.

If I have an LLC, is a business license required?

It’s sometimes thought that the LLC and business license are the same in Rhode Island, but they aren’t. An LLC is referred to as the business entity, which is how the business is organized to conduct business. A business license is an approval from a government entity to legally operate.

Related: What business licenses are needed in Rhode Island?

What is a Foreign Limited Liability Company?

A foreign LLC isn’t a special type of LLC. Instead, it’s an LLC that was formed in another state that wants to physically operate in Rhode Island. Physically operating means having a presence, such as having an office or hiring an employee.

Related: What is the difference between a domestic Rhode Island LLC and a foreign LLC?

What is a Professional Limited Liability Company?

The Pennsylvania Secretary of State requires certain businesses that need licensing to operate to form a Professional Limited Liability Company (PLLC) instead of an LLC. A few of these occupations include accountants, architects, veterinarians, etc.

Related: What is a Professional Limited Liability Company?

Is an LLC the same as a corporation?

The LLC is one of four main types of business entities. You can learn more about each here:
What is a sole proprietorship?
What is a general partnership?
How to form a Rhode Island corporation

Should I use an LLC formation service or do it myself?

Following our guide, most people will be able to form an LLC on their own, however, LLC formation services like IncFile and IncAuthority will guide you through the process and guarantee it’s done right – and it doesn’t cost any extra to do so!

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