How to Form a Rhode Island LLC
Limited liability companies (LLCs) are a unique type of business structure. Many small business owners choose an LLC entity because of its personal liability protection and pass-through taxation. You can create a Rhode Island LLC for your existing or new business by following the step-by-step guide below.
Steps to Form an LLC in Rhode Island
Name Your LLC
Create a Unique Business Name. Your LLC needs a unique name that follows Rhode Island's LLC naming rules. According to the Rhode Island Limited-Liability Company Act, your LLC name must end with the words "Limited Liability Company" or the abbreviations "LLC" or "L.L.C." The only exception is if you are starting a low-profit limited liability company. In that case, your limited liability designator is L3C or l3c.
Determine Business Name Availability. Your LLC's name must differ from all other registered Rhode Island business names. To find out if your desired name is available, you should check the Rhode Island Department of State's business name database. There, you can search by business entity name. You will need to choose a new name if there are any matches.
If there are no results, you should continue by performing an internet screening search. To do this, simply type your name into your favorite search engine.
It's a good idea to make sure your domain name is available, even if you don't start your website immediately. With a reserved domain name, you will have a memorable web address at hand when you're ready to create your website.
If you still have no matches, you should complete your search by checking the U.S. Patent and Trademark Office (USPTO) database. This search will help you avoid infringing on another company's trademark.
Reserve Your Business Name. If you want to reserve your LLC name before registering, you can file an online name reservation. You submit a $50 filing fee along with the reservation. This fee secures your Rhode Island LLC name for 120 days.
Protect Your Business Name. Once you decide on your name, you want to keep others from using it. There are two ways you can secure your business name:
- You can register your business name as a domain name. Use a domain name registrar to secure your domain name.
- You can register your business name as a trademark. To get a federal trademark, apply at the USPTO. Or file a trademark application with the Rhode Island Secretary of State. The cost for the trademark registration is $50.
Get a Registered Agent
Your Rhode Island LLC must have a resident agent. People may refer to this as a "registered agent," too. A resident agent is a person or business to accept legal documents on behalf of your LLC. This includes service of process if someone sues your business.
According to Rhode Island statutes, your resident agent must either be a Rhode Island resident or a business authorized to operate in the state. You should choose a company or person that is available at their physical address during regular business hours. You will list this authorized person or entity's physical street address in your articles of organization.
Consider using a professional service if you and your other LLC members cannot act as the LLC's resident agent. With a registered agent service, you pay a yearly fee to a company that agrees to accept your legal papers on your behalf.
File Your Articles of Organization
To formally start an LLC in Rhode Island, you file articles of organization with the Secretary of State.
Articles of organization establish basic identifying information about your LLC. You can think of your articles of organization as your LLC's charter. It's not a complex document but contains essential information about your business.
You will need to provide the following information for your Rhode Island articles of organization:
- The name of your limited liability company
- The name and address of your resident agent and registered office (a physical address, not a P.O. Box)
- How to treat the LLC for federal tax purposes
- The name and street address of your LLC's principal office (a physical address, not a P.O. Box)
- Whether the LLC is member-managed or manager-managed
- If manager-managed, provide the managers' names and addresses
- The effective date of the LLC (upon filing or specify an effective date no later than 90 days from the date of filing)
- The name and address of the person authorized to sign the articles of organization document
You can complete your articles of organization online at the Rhode Island Secretary of State website. The filing fee is $150 plus a $6 enhanced fee if you file online. Or you can fill out the articles of organization and mail it in with the $150 fee to the:
Division of Business Services
148 W. River Street
Providence, RI, 02904-2615
Make checks payable to the RI Department of State.
Draft an Operating Agreement
Although Rhode Island doesn't require it by law, creating an LLC operating agreement is a good idea.
An LLC operating agreement is different than the articles of organization. The operating agreement forms a consensus among members on key business issues. It is an internal company document you do not need to file with the state. However, other professionals may insist on seeing this document before doing business with your company.
In your Rhode Island LLC operating agreement, you should cover issues such as:
- Management structure
- Voting Rights
- Buyout procedures
- Percentage ownerships
- Member rights and responsibilities
- A plan for dissolving the LLC
- Any other matters that are important to your LLC
Get an EIN
Unless you have a single-member LLC with no employees, you must apply for an Employer Identification Number (EIN). An EIN is a unique number the IRS uses to identify your company for tax purposes. You can think of it as a Social Security number for businesses. You may need an EIN for employee payroll, to open a business bank account, or to get a business credit card. You can apply for an EIN by fax, mail, or online at the IRS website.
Set Up Business and Tax Accounts
The Rhode Island Department of Revenue Division of Taxation has an online new business application and registration (BAR) form where you can set up a retail sales account, income tax withholding account, and unemployment insurance account for your LLC.
You can learn more about your federal tax requirements by visiting the Internal Revenue Service (IRS) website. Find out about your state obligations by contacting your local officials and using the state resources discussed below.
Every Rhode Island LLC must register for state taxes with the Rhode Island Division of Taxation. New businesses file a new business application and registration (BAR) online form to set up the LLC's taxpayer accounts. You can also download the form and mail it to the Rhode Island Division of Taxation, One Capitol Hill, Providence, RI, 02908.
You must follow licensing and tax rules carefully to maintain your business. Your requirements will vary depending on the location and your type of business operation.
State Business Tax
If you set up your LLC for pass-through taxation, the LLC does not pay corporate income tax. Instead, the profits go on the members' individual tax returns. The individuals pay a state income tax on their income. If you set up the LLC for corporate tax treatment, the LLC pays a corporate tax to the state. Currently, the corporate income tax in Rhode Island is 7%.
State Employer Tax
If your LLC has employees, even if the employees are also members of the LLC, you must comply with tax and reporting obligations. Employers in Rhode Island are subject to Employment Security Tax (unemployment insurance), Temporary Disability Insurance, and a Job Development Fund Tax. The Rhode Island Department of Labor and Training has information about the taxes and when they apply.
Additionally, employers must:
- Report new hires to the State of Rhode Island New Hire Reporting Directory
- Withhold employee taxes in withholding accounts set up with the Division of Taxation
- Provide workers' compensation insurance to their employees
Sales and Use Taxes
If you sell, rent, or lease tangible personal property at retail, you are a "seller" in Rhode Island. When you register your LLC with the Rhode Island Division of Taxation as a new business, you can create a seller's permit. If your LLC is a seller, it charges sales tax to the purchaser, and you remit it to the state.
Business Licenses and Permits
Depending on your type of business, you may need to apply for a professional business license with the state. You should also check your local city and county governments for their business license and permit requirements.
Registration in Other States
If you want to do business in another state, you will likely have to apply to do business as a foreign LLC. You may need to show a certificate of good standing as part of the application process. You should request a certificate of good standing from the Rhode Island Secretary of State to prove your LLC exists and complies with state laws. The fee for the long-form certificate is $30.
You must file annual reports with the Rhode Island Division of Business Services to keep your LLC in good standing. An annual report is a simple form, essentially basic information about your company. You can download and complete the limited liability company annual report or file it online. There is a $50 state fee for the annual report.
The filing period is from February 1 to May 1 each year. There is a $25 penalty if filed after May 31.