Step-by-Step Guide to Forming an LLC in Rhode Island

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Rhode Island LLC Quick Facts

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

Initial LLC State Filing Fees – $150

 

Recurring State Fee: Annual Report – $50

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

By Mail: 5-10 business days

Online: 2-3 business days

In-Person: 1-3 hours

Don’t want to form an LLC by yourself?

Let IncFile or IncAuthority guide you through the LLC formation process, so you know everything was done right. Only pay state fees!

Quick Reference

The Limited Liability Company (LLC) is a popular entity structure for many businesses starting in the state of Rhode Island.  The LLC provides personal liability protection and has the potential to save money on taxes. With our guide, you can learn how to form an LLC in Rhode Island without an attorney.

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, protecting the business owner’s personal assets.

Related: How Does an LLC Protect You?

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.

 

Costs to Form a Rhode Island LLC

To form a Limited Liability Company in Rhode Island, file the Articles of Organization with the Rhode Island Secretary of State.  The LLC filing fee is $150.

Approval for the LLC is typically just a few business days when filing by mail or online, while walk-in applications are approved in a few hours.

If you have questions, contact the Rhode Island Secretary of State at 401-222-3040

Steps to Form a Rhode Island LLC

The steps for filing online or by mail are largely the same.  The screenshots show how to file online.

Forming an LLC can be both affordable and is something most people can do themselves. Entity formation companies like IncFile or IncAuthority help guide you through the process and make sure there are no mistakes.

Related: Should you use a Formation Service, Hire an Attorney or Do it Yourself?

How to Form a Rhode Island LLC

Step 1: Register the LLC Name

Enter the name you want for the Limited Liability Company.  The name of the LLC has to differ from other entity names registered with the Secretary of State.  Before filing, check on Rhode Island LLC name availability to ensure the one you want is available.

The name of the LLC must also include a designator at the end of the business name.  A designator describes the type of business entity. Available designators include:

  • 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.

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.

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

Rhode Island LLC Name Registration

Step 2: Resident Agent

To have an LLC in Rhode Island, a Resident Agent (called a Registered Agent in most states) must be identified.  The Resident Agent can either be a Rhode Island resident or a Registered Agent service.  The Registered Agent must have a physical street address in the state (Post Office Boxes are not allowed), be available during normal business hours, and act as a point of contact for service of process to receive legal documents, tax notices, summons, subpoenas, etc. on behalf of the LLC.

You are not required to pay for a registered agent. 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. This is more important for some entrepreneurs, especially when doing business from home or are still employed and don’t want their employer to find out.  Hiring a company like Northwest Registered Agent to be the Registered Agent will reduce unwanted phone calls and mailings.

Rhode Island Resident Agent

Step 3: 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 is a confusing point.  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.

The second Article 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.

Take 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.

RI LLC Tax Election

Step 4: 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.

Rhode Island LLC Principal Office

Step 5: LLC Purpose & Duration

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.

Rhode Island LLC Business Purpose and Duration

Step 6: Additional Provisions

This is an optional section and not used by most LLCs.  Here you would include additional rules for the operation of the LLC.

Additional Provisions

Step 7: 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 members to run the LLC, similar to a CEO of a corporation.

Most LLCs are member-managed.

Select how your LLC is managed and enter the names and addresses of any LLC managers.  Member’s names do not go in this section.

Rhode Island LLC Manager or Member-Managed

Step 8: Effective Date

If you want the LLC to start immediately, leave the field blank.  If you want to LLC to start later, 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.  By delaying until the following year, they will reduce the number of end-of-year filings.

Rhode Island LLC Effective Date

Step 9: Filer’s Contact Information

Wrapping up the filing, enter the filer’s contact information and their electronic signature.

Step 10: Review

Review that all the information is correct.  If there are no corrections, click “Accept.”

Step 11: Pay and File

An authorized person will sign the Articles of Organization and send in payment.

If you are filing online, expect the LLC to be approved in about 2 days.

If mailing, expect processing to take between 5-10 business days.  Send the form to:
RI Secretary of State, ​​​Division of Business Services
148 W. River Street
Providence, RI 02904-2615

Secretary of State Contact Information:
Phone: 401-222-3040, Monday through Friday, between 8:30 a.m. and 4:30 p.m.
email corporations@sos.ri.gov

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Tasks After Forming Your LLC

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 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?

Get Business Insurance

Even with the liability protection of the LLC, business insurance is important to protect the business. The most common types of insurance include:

General Liability Insurance – covers damages owed and medical expenses for accidents that happen at your place of business.
Business Property Insurance – replaces damaged, stolen, or lost business property. This includes your physical business location, equipment, supplies, and anything else you used to run your business.
Business Vehicle Insurance – covers company vehicles and may also include coverage for personal vehicles used for business-related activities. Many personal policies won’t cover your vehicle if there is an accident while being used for business purposes.
Workers Compensation Insurance – mandatory in most states if you have employees, this insurance covers medical expenses that occur because of an accident or injury that happens to one of your employees while they’re at work.

Related: 7 Types of Insurance Your Business May Need

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 When Starting An LLC

You can act as your own registered agent, provide you are a resident of the state and are generally available during normal business hours. 

It’s sometimes thought that the LLC and business license are the same, which they aren’t.  Business license requirements vary by location and the type of business being operated. 

An out-of-state LLC wanting to do business in another state will have to register as a foreign LLC with the new state’s Secretary of State.

Businesses that require state licensing and offer professional services such as accountants, attorneys, podiatrists, physical therapists, acupuncturists, etc. often must file as a Professional Limited Liability Company (sometimes referred to as a Professional LLC or PLLC) instead of an LLC. Filing for a PLLC is very similar to that of the LLC.

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