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Rhode Island may be a small state, but it provides a wealth of business opportunities. Unfortunately, these are accompanied by some significant challenges. These must be navigated strategically to ensure your business thrives.
Starting an LLC may be one of your best chances for leveling up your business, but it won’t be easy. A little help can go a long way, so we’ve compiled a guide that introduces you to all the essentials for launching an LLC in Rhode Island.
Before you begin doing business in Rhode Island, you’ll need to think carefully about which type of entity best serves your purposes.
In many situations, a limited liability company (LLC) will be your best bet. This provides a wonderful middle ground for anyone in need of liability protection but also hoping to avoid extensive filing fees or other obligations.
Launching an LLC frees you from many of the complicated processes required of C- and S-corps—but there’s still a great deal of effort involved. That being said, the credibility and protection you gain from this entity could make the extra work well worth your while.
Thankfully, you’ll find plenty of resources to guide you through every step of this process. To streamline your efforts and clear up any confusion, we’ve outlined the main steps to forming an LLC in Rhode Island:
Do you know one of the most important steps on the path to LLC success? You have to find an original name that suits your new business. This will play a huge role in your branding efforts moving forward, so it represents one of the most important decisions you can possibly make for your LLC.
When it comes to LLCs, naming is not always as easily achieved as you might think. Several steps must be taken to ensure that your business name is unique—and that it receives adequate protection.
Rhode Island uses the phrase “distinguishable upon the record” to describe when or whether business names are available for use. Essentially, this means the state will not approve any name identical to (or not distinguishable from) names currently on file in the state’s corporate database.
A variety of small differences prevent business names from achieving the status of “distinguishable upon the record.” These concerns include the following:
Once you feel confident your preferred name follows the state’s guidelines, search for it in the Rhode Island Department of State Corporate Database. This tool can help you determine whether the name in question is already in use. Keep in mind, however, that your search does not guarantee your preferred name will be available. Instead, the Rhode Island Department of State will make the final determination at the time of filing.
Doing Business As (DBA) allows your business to operate under a separate name. Also known as a fictitious name, this approach may be favorable if you plan to open a single-member LLC but don’t want to do business under your personal name.
To pursue a DBA setup in Rhode Island, you’ll need to file the Fictitious Business Name Statement. Be prepared to look up your ID number and verify your entity name via the aforementioned Corporate Database.
Next, list a business name distinguishable from other names on file with the Department of State. Other details required in this application include the type of business in which your LLC is engaged, along with the date of incorporation and the address of your registered office. Finally, you’ll need to pay a filing fee of $50.
It takes considerable effort to come up with a great name and reserve it. At this point, the last thing you need is for another business to get in the way after you’ve worked so hard to establish your brand.
Do you know the best option for preventing this problem? Register your business name for trademark.
There are two main approaches to getting your name trademarked: federal (via the United States Patent and Trademark Office) or state. The protection you gain via the USPTO can be valuable, but the process takes considerable effort and will be costly.
If you prefer a more affordable and less time-intensive alternative, consider registering for trademark through the state of Rhode Island. Begin by conducting a thorough search via the state’s official trademark database.
Once you’ve confirmed your business name is available for trademark, complete your application with the Business Services Division. This should be accompanied by a $50 fee, along with three samples of your mark.
Later, you’ll either confirm your filing in the aforementioned trademark database or examine the Rejected Filings Viewer if your application is turned down.
Filed with the Business Services Division of Rhode Island’s Department of State, articles of organization play a key role in forming an LLC. This essential document highlights who your LLC’s registered agent is, where your registered office will be located, and how the LLC will be managed.
We will dive more into the need for a registered agent below—but for now, it’s important to understand that an initial registered agent and office must be selected before your LLC becomes official. These designations can be changed later if desired.
Once you’ve completed the articles of organization application, you’ll need to submit a filing fee of $150. This payment can be mailed or submitted in person at the Business Services Division in Providence. Checks should be payable to the RI Department of State.
In Rhode Island, LLCs are required to file Form 400, Articles of Organization for a Domestic Limited Liability Company. This should be typed; rejection is a risk if you submit an illegible form. The application includes detailed instructions, plus a reminder that all Rhode Island LLCs will exist perpetually unless they are formally dissolved.
In addition to requirements such as the registered agent, registered office, and management structure, articles of organization can contain extra provisions if desired. Examples could include limitations on the duration or purpose of the LLC. These will typically also be referenced in an operating agreement.
Eventually, you may need to make significant changes to your LLC’s articles of organization. These can be completed via Form 401, Articles of Amendment to Articles of Organization for Domestic Limited Liability Company.
This lengthy name reflects the detailed nature of the required form. The document must include the entity ID number from the state’s corporate database, plus adjustments to the LLC’s name, principal office address, management structure, or tax status. A filing fee of $50 is also required.
All entities registered with the Rhode Island Department of State—including LLCs—must keep a registered agent on file, as well as a registered office. Also known as the resident agent, the registered agent receives official documents on behalf of the LLC. This is an important task, so choose wisely.
To qualify for this role, the registered agent must possess a street address in Rhode Island. This location is known as the registered office. A P.O. box does not qualify. Furthermore, the registered agent must be available during normal business hours, as this is when service of process must be handled.
It’s possible to eventually change your LLC’s registered agent, but you’ll need to notify the Department of State at that time. This involves filing Form 642, Statement of Change of Resident Agent. If the registered agent’s location changes, submit Form 642A, Statement of Change of Resident Office. The filing fee for changing a resident agent is $20, but there is no charge for changing the resident office.
Articles of organization are important for establishing a location for service of process, but they otherwise only have a marginal impact on your day-to-day functioning as an LLC. Instead, this will be determined in your operating agreement. This useful document allows you to outline the specifics of how your LLC will be run.
While Rhode Island articles of organization follow a strict format, there is a lot more freedom to create an operating agreement as you see fit. These documents can look substantially different from one LLC to the next, but the following key elements are commonly included:
The Rhode Island Limited-Liability Company Act provides modest guidance for developing an LLC operating agreement. It asserts that operating agreements can involve oral or written formats—although any expert will remind you that written agreements are always preferable.
Either way, this legislation explains that a Rhode Island operating agreement will delve into “the affairs of a limited liability company and the conduct of its business.”
An operating agreement is not an outright requirement in Rhode Island, nor is it in most states. That being said, it’s highly recommended that you draft this document regardless of state requirements. Without it, LLC members could be vulnerable in the event of a dispute.
The operating agreement is also important from a practical standpoint, as it is often required to obtain a business bank account or take advantage of other resources.
You’re familiar with social security numbers, but did you know that your business receives a similar form of identification?
Known as the Employer Identification Number (EIN), this nine-digit requirement is assigned by the IRS. It’s required for many types of businesses, including multi-member LLCs and organizations with employees.
The IRS provides an easy-to-follow online process for EIN applications. Every step must be completed within a single session, but don’t worry—a digital assistant is on hand to provide the guidance you need.
It all begins with highlighting your intentions to start an LLC. The application will also prompt you to explain where your business will be located and how many members your LLC will involve.
Next, you will provide the legal name of your LLC, along with the DBA if relevant. The application also contains a series of questions pertaining to the role of gambling or alcohol sales for your LLC.
Rhode Island’s tax situation may not be as favorable for LLCs as some states, but it’s still possible to conduct business in a favorable manner, from a taxation perspective. First, however, you need to understand the various types of taxes your LLC—and its members—might owe.
Tax requirements can vary significantly from one LLC to the next. A lot depends on how your LLC’s members choose to be taxed. Beyond this, however, you may also be subject to sales taxes or even obligations from other states.
A few of the most common tax concerns are explained in detail below.
Rhode Island maintains multiple types of income taxes. These include a graduated individual income tax and a corporate income tax. If your business is taxed as a C-corp, you will need to file Form RI1120C and pay the state’s business corporation tax, which is typically 7 percent of net income.
Unfortunately, you’re not off the hook if you opt to avoid treating your LLC as a corporation for tax purposes. Instead of paying the 7 percent corporate tax, you’ll be assessed a charge that equals the minimum level of the business corporation tax, $450. Additional requirements include filing Form RI-1065.
In Rhode Island, a variety of goods and services are taxed at a standard rate of 7 percent. Collected by local vendors, these taxes must be directly remitted to the state.
Examples of products or services that typically involve sales taxes include:
For some businesses, the state’s standard sales tax may be accompanied by a 6 percent hotel tax, which is applied to the rental of rooms at local hotels or motels.
If your LLC is responsible for remitting sales taxes, you will need to register with the Division of Taxation. This involves filing a Business Application and Registration Form and paying a $10 fee.
Many types of business owners pay self-employment taxes. This is common among sole proprietors and general partners—and it can also be a favorable setup for LLC members. These obligations would otherwise be handled via payroll taxes.
Self-employment tax totals 15.3 percent. This consists of 12.4 percent for Social Security, along with 2.9 percent for Medicare.
How self-employed taxes function for an LLC largely depends on the number of members involved. With a single-member LLC, this resembles self-employment taxes for sole proprietorships. When there are multiple members, however, these taxes will be paid according to each member’s share of the LLC’s profits.
Do you plan to hire employees to work for your business? If so, you’ll almost certainly need to cover payroll taxes on their behalf. This can complicate matters for your LLC, as you may simultaneously be responsible for self-employment taxes and payroll taxes.
Your LLC will report the Federal Unemployment Tax Act (FUTA) tax by filing IRS Form 940. Also necessary is IRS Form 941—the Employer’s Quarterly Federal Tax Return. At the state level, you will need to withhold and remit income tax for Rhode Island.
Additional taxes or fees may be assessed above and beyond the state’s income and sales taxes. Examples include:
You’ve completed all the necessary paperwork and are excited to move forward with your LLC. It’s tempting to charge ahead, but this is actually the best time to take a step back and assess your situation.
A little extra attention right now could prove hugely beneficial for the future of your business. Don’t forget to take care of these essentials.
At this point, one of your main goals should be to avoid blurring the lines between personal and professional conduct. This means keeping your finances from your everyday life and your business completely separate. This is most easily achieved with help from a business bank account.
A bank account exclusively dedicated to your LLC serves several purposes. First, it may help you secure resources such as business loans or credit cards. It could also streamline the many tax processes we discussed previously.
Most importantly, a business bank account helps you avoid piercing the corporate veil. This phenomenon occurs when LLC members are held personally liable for business debts.
The decision of whether to open a separate bank account should be simple, but you’ll also need to choose the right bank. A variety of considerations will play into this decision, but opening deposits, transaction limits, and debit card access are all worth thinking about.
Filing fees abound during the initial stages of launching an LLC—and unfortunately, this burden doesn’t completely end once your business is up and running.
Like every legal business entity in Rhode Island, you’ll need to keep your LLC status current by filing annual fees. At $50 per year, this obligation is modest but essential.
If you fail to file your Rhode Island Department of State Annual Report, you could be in a world of trouble. Take your time, and you’ll be assessed a late filing penalty. If you don’t file at all, your Certificate of Organization could be revoked, as explained in Title 7, Chapter 16 of the State of Rhode Island General Laws (the Rhode Island Limited-Liability Company Act).
Thankfully, this report is easy to file, so you shouldn’t need to worry about adverse consequences. Both online and PDF versions of the report are available. Simply enter relevant information about your LLC’s name, purpose, and principal office.
Plan to file an annual report each year between February 1st and May 1st. While it’s important to keep track of these dates on your own, you can expect a courtesy reminder to be mailed prior to February 1st.
Every type of business requires exceptional bookkeeping. This is particularly true for LLCs, which need to make the most of every dollar. Attention to detail is key to keeping your finances on track. If your LLC is like most small or midsize businesses, however, you have little time or few staff members available to tend to bookkeeping.
Don’t be afraid to seek outside assistance. A tax advisor, accountant, or lawyer can provide valuable insight into all things bookkeeping while also helping you avoid piercing the corporate veil. Not only will this clear up any lingering confusion about tax obligations or compliance, but it will also provide valuable peace of mind.
Once you’ve started your Kansas LLC, it’s important to understand what fees you have to pay on an ongoing basis. The state charges a $50 fee annually, and you may or may not have other fees associated with your industry or type of business.
Your need to get a license to do business in Rhode Island will largely depend on the industry you occupy and the types of goods or services you handle.
To determine whether your LLC needs to obtain a license or permit prior to opening, check in with the Rhode Island Department of Labor and Training’s Licensed Occupations resource. There, you will find a detailed list of the various agencies that handle licensing for specific types of businesses.
The Department of Business Regulation’s Division of Commercial Licensing is another example of an agency that many Rhode Island LLCs must navigate. This department maintains regulatory oversight for the manufacture, import, export, and sale of alcoholic beverages. It issues licenses to manufacturers, wholesalers, and certain caterers. Other businesses that intend to serve alcohol may need to seek appropriate licensure from the cities or towns in which they are located.
Once you’ve acquired the proper licenses or permits, you’ll be ready to do authorized business in the state of Rhode Island. As with LLC filing, you may need to occasionally update your license to remain current.
This portion of our website is for informational purposes only. Tailor Brands is not a law firm, and none of the information on this website constitutes or is intended to convey legal advice. All statements, opinions, recommendations, and conclusions are solely the expression of the author and provided on an as-is basis. Accordingly, Tailor Brands is not responsible for the information and/or its accuracy or completeness.