Whether you’re starting a new business or restructuring an existing business, the decision to form an LLC is a big one.
If you want to learn more about how to form an LLC in Rhode Island, it’s a good thing you found this site. I’ll tell you everything you need to know about forming a Rhode Island LLC, but first I’ll explain some fundamental LLC topics, such as what a Limited Liability Company (LLC) is and some of the benefits of LLC ownership.
(To skip to the “How to Form an LLC” section, click here.)
What Is a Rhode Island LLC?
A Rhode Island LLC is a Limited Liability Company formed in the state of Rhode Island that is governed by the laws, regulations, and statutes of the state of Rhode Island.
Why Choose an LLC?
LLC owners enjoy a plethora of benefits. Here are the three key advantages of choosing to form a Rhode Island LLC that you won’t receive if you choose another business structure:
1. Limited Liability and Asset Protection
The first benefit is the biggest advantage for any business owner: limited liability protection. As the owner of a Rhode Island LLC, you can’t be held responsible for the financial and legal obligations of your LLC in Rhode Island.
When you form a Rhode Island LLC, the Secretary of State recognizes a legal distinction
between your personal assets and liabilities and those of your LLC. If your LLC in Rhode Island runs into legal or financial trouble, the creditors of your LLC aren’t legally permitted to request or take items such as your house, car, personal finances, or any other personal assets to compensate them for the obligations of your LLC. They can only request compensation in the form of assets owned by the Rhode Island LLC.
Because unexpected events (like natural disasters or economic fluctuation) can bring any business to its knees, this personal asset protection is vitally important for any business owner.
The second benefit of forming an LLC in Rhode Island is the option to protect your personal information and your identity upon formation.
This is an important benefit because cyberpunks have adapted their skills. They can now steal your identity using as little as your name and address. . Even more frightening is that they can use this information to run up thousands of dollars in debt in your name, take out loans, and completely trash your finances and credit score before you’re even aware of the attack.
If you choose to operate as a partnership or sole proprietorship rather than an LLC in Rhode Island you’re forced to register your personal information with the Rhode Island Secretary of State. They will then list your information on the public record on their website, so anyone can access it, no matter how impure their intentions.
When you form an LLC in Rhode Island, you have the option to protect your personal information by using a Rhode Island LLC formation service. They will register their information with the Rhode Island Secretary of State, instead of yours, protecting your information and safeguarding you against identity theft.
The third key benefit of forming an LLC in Rhode Island is the numerous tax benefits that Rhode Island LLCs enjoy. The first of these tax benefits is most obvious when you compare the taxation of a Rhode Island LLC with that of a corporation.
If you choose a corporate structure for your business entity, you’ll be subject to what is known as “double taxation.” Here is a breakdown of how double taxation works:
A corporation’s profits are taxed at steep corporate tax rates and then the profits (which have already been heavily taxed) are disbursed to corporate shareholders as dividends (which are also heavily taxed). Because the profits are taxed twice before they even reach the corporate shareholders, it’s called “double taxation.”
If you choose a Rhode Island LLC, you completely circumvent double taxation. Here’s how Rhode Island LLCs are taxed:
By default, LLCs are considered “pass-through entities” for federal tax purposes. The profits of the Limited Liability Company are taxed at minimal company rates and then given to LLC members in the form of personal income. Members will have to pay personal income tax, of course, but your LLC won’t pay that tax in the same way that corporations pay taxes for dividends. So, your Rhode Island LLC will only pay taxes once.
LLCs enjoy additional tax benefits, as well.
In 2017, the Tax Cuts and Jobs Act was instituted, bringing with it the Qualified Business Income Deduction (QBID). QBID is a 20% tax discount exclusive to LLCs.
So, not only do Rhode Island LLCs avoid double taxation, they get a 20% tax break, which is an excellent reason to form a Rhode Island LLC today.
How to Start an LLC in Rhode Island
Now that you know more about Rhode Island LLCs and the benefits of forming an LLC rather than a sole proprietorship or corporation, you can make the decision to form an LLC.
*IMPORTANT* If you’ve never formed an LLC or you’re inexperienced with LLCs, don’t worry. There is a type of professional service that is designed to help in this situation.
It’s called a Rhode Island LLC formation service. Formation services guide you through the process of forming your LLC and legally establishing it with the Rhode Island Secretary of State. They’re inexpensive too, with prices as low as $0. (However, my personal favorite formation service is Northwest Registered Agent, which charges $39.)
If you’d like to learn more about what a formation service can do for you or want to find the best LLC service for your business, check out my article on the best LLC service.
Here are the five steps to start an LLC in Rhode Island:
1. Obtain Articles of Organization Form
The first step in the formation process is to get your hands on a copy of the Rhode Island LLC Articles of Organization.
You can get the PDF version of the Articles of Organization form here.
Because this is the primary formation form necessary in Rhode Island, the following steps will refer back to this form.
2. Choose Your Business Name
Next, choose a name for your Rhode Island LLC.
This isn’t as simple as you would think. You can’t just write down the first business name you think of.
Each business and LLC in Rhode Island must use a unique business name, so if another business in the state is using the business name you chose, it’s not available for you to use as your LLC name.
It’s easy to find out if a business name is available for use, however. Just perform a search on the business name database provided by the Rhode Island Department of State.
Once you’ve chosen a name and checked its availability, it’s time to file a Reservation of Entity Name form, which is provided by the Rhode Island Secretary of State. It’s designated as Form 620 and you can quickly find it by using the search bar at the top of the page. The filing fee is $50. Certain terms like “credit union,” “attorney,” or “bank” may require additional documentation and licensure paperwork, and your LLC cannot use words that name a government agency.
If you’re less than satisfied with the LLC name you’ve registered, don’t worry. You can apply for what’s known as a trade name, fictitious name, or DBA (“Doing Business As”) name. This is the name you’ll present to the world on signage, websites, in advertisements, etc. To register, you need to file a Fictitious Business Name Statement online.
3. Choose a Rhode Island Registered Agent
The next step is to name a registered agent. Every LLC in Rhode Island must list what is known as a “registered agent.”
A registered agent is an individual or business entity that will be available during regular business hours to accept mail, documents, and service of process on behalf of your business.
When it comes to choosing your registered agent, you have two options: you can become your own registered agent, or you can hire a registered agent service. I’ll go over the pros and cons of each so you can make an informed decision.
The first thing you need to know about becoming your own registered agent is that your personal information will be listed on the public record, which opens you up to cybercrime and identity theft. This is because the business address of your LLC as well as your LLC’s registered agent information is listed on the public record.
It’s also risky to act as your own registered agent. You have to make yourself available to receive correspondence for your business during normal business hours, and most LLCs also operate during normal business hours. And until the day scientific advancement makes it possible, you can’t be in two places at once.
If you miss a service of process, it may result in a devastating default judgment against your LLC. Furthermore, if the Secretary of State finds that you aren’t available to receive mail when you’re supposed to, they can revoke your “good standing” status. Losing this status means you’ll no longer be legally permitted to conduct business in the state.
The only upside of taking on the registered agent role yourself is you won’t have to pay any fees for registered agent services.
If you hire a registered agent service, you’re guaranteed to receive the correspondence that is sent to your business. The downside is that you’ll have to pay between $99–$299 per year for their services.
Because of the high risk associated with taking the registered agent duties yourself, it’s well worth the expense. For this reason, I ALWAYS suggest that any new business or LLC hires a registered agent service.
If you’re interested in hiring a registered agent service to protect your personal information and lighten your workload, check out my article on the best Rhode Island registered agent.
4. Choose Your LLC Address
The name of your LLC isn’t the only important piece of information you’ll add to your Articles of Organization form. The address you list for your business on your Articles of Organization form is just as important as the name you’ve chosen. Every business in Rhode Island must list a principal business address on the public record.
If you’ve chosen not to hire a registered agent service, you can list the physical street address of your business. However, if your business doesn’t have a physical address you’ll be forced to use your home or office address. This isn’t ideal because of the potential for identity theft.
If you’ve hired a registered agent service, you can rest easy. They will give you an address to list on the form that isn’t associated with you, which will keep your personal information and your credit score safe.
5. Sign and File Your Articles of Organization
The last step is to file Rhode Island Articles of Organization for your LLC. But before you do, it’s important to ensure that you’ve included all the necessary information.
Some of the information you must provide on the Rhode Island Articles of Organization form includes:
- Your LLC name
- Your registered agent’s information
- The tax designation for your LLC
- Your LLC’s principal business address
- Whether your LLC is a member-managed LLC or a manager-managed LLC
- The effective date
- Your LLC organizer’s signature
Once you’re sure all the information is included and accurate, you can sign the form and file it. If you sign the form yourself, this will unfortunately ensure that your information is on the public record. If you use an LLC formation service, they’ll sign and file the form on your behalf.
You can file online or by mail. Both options include a filing fee of $150. Click here to file online.
If you’d like to file by mail, send the form and payment for the filing fee to the following address:
Rhode Island Department of State
Business Services Division
148 W. River Street, Ste. 1
Providence, RI 02904
When you’ve submitted your form and the payment, the Rhode Island Secretary of State will contact you via mail or email once everything has been processed. It can take 1–2 days to process online filings and 10–14 days to process filings by mail.
Other LLC Activities
While filing your Articles of Organization is a significant milestone for your business, it is far from the last activity you will perform as an LLC owner. Several of the actions you'll be asked to participate in to maintain your LLC's good standing with the Secretary of State are as follows:
Each LLC in Rhode Island is required to produce an “annual report.” An annual report allows the Secretary of State to maintain current information about your LLC on file while also collecting a filing fee. You must file and pay for your annual report between September 1 and November 1 of the year following the formation of your LLC.
You can file the annual report for your LLC online or via postal mail. Both options are subject to a $50 filing fee.
All businesses in the state must register with the Rhode Island Division of Taxation (DOT) and submit a Business Application Registration through the DOT website. Registration with the DOT is required. The Rhode Island Division of Taxation levies a minimum annual tax of $400 on all businesses regardless of profit or loss.
The majority of businesses in Rhode Island are required to obtain business licenses based on the type of business they conduct in the state and whether they collect sales tax or employ people. You may be required to obtain these local business licenses. Local licensing can be obtained by contacting the city or county clerk in the area in which your LLC conducts business. To obtain a state license, visit the website for the Rhode Island Department of Business Regulation.
Apart from these activities, you'll be required to get a Certificate of Good Standing from the Secretary of State, pay taxes, and comply with certain requirements to maintain your good legal standing with the Secretary of State.
Rhode Island LLC Fee Summary
The cost of establishing an LLC is a frequently asked question, and you’re bound to incur some fees as a part of this process. Here are some of the costs associated with incorporating an LLC in the state of Rhode Island:
Articles of Organization: $150
Name Reservation: $50
Registered Agent Fee: $99–$299 per year
Annual Report: $50
State Personal Income Tax: 3.75%–5.99%
State Corporate Income Tax: 7%
After Starting Your Rhode Island LLC
Establishing your LLC is a significant accomplishment and one that you should be proud of. Therefore, take time to arrange a celebratory party, enjoy a wonderful dinner at a fancy restaurant, spend time with your significant other, or go on a shopping spree (you’ve earned it!).
Keep in mind that there is still work to be done, so don't let yourself get too relaxed. The following are the three steps necessary to establishing a strong business foundation for your LLC:
Step 1. Create an Operating Agreement
Although Rhode Island law does not require Rhode Island LLCs to have Operating Agreements, I strongly advise you to adopt one for the reasons explained below.
Your LLC Operating Agreement is a concise set of instructions outlining the many managerial, structural, financial, and operational facets of your organization. The Operating Agreement identifies LLC members, outlines their jobs, the individuals with whom they should collaborate most closely, their supervisors, and their share percentages and profit and loss percentages.
Additionally, your Operating Agreement specifies which LLC members have the right to make significant business decisions on behalf of the company. Prior to drafting your Operating Agreement, you should select whether your LLC will be member-managed or manager-managed and whether it will be a single-member or multimember LLC. This will allow you to outline your LLC's management system in the agreement.
Your Operating Agreement should also include a section describing the LLC members' succession order. Many small business owners omit this section, but it is essential to have these clear guidelines in the event of an LLC member falling out with other members and members leaving or joining. A well-written Operating Agreement will cover the redistribution of profit/loss shares and responsibilities in detail.
Your business is obligated to operate in accordance with the procedures you define in your Operating Agreement, so it is key that your Operating Agreement contains the appropriate language to clearly define your operating procedures. A poorly written Operating Agreement can stifle your organization and hinder future growth and innovation. With a carefully crafted agreement, however, you can watch as your firm soars to new heights, unencumbered by bad operational guidelines.
Due to the essential nature of Operating Agreements, I'll present you with several options to ensure you draft it properly.
The first is a free and simple-to-use Operating Agreement template from Northwest Registered Agent. The next option is to subscribe to online legal services. An online legal service will assist you in drafting an enforceable document. Finally, you can use a business formation service to draft an agreement on your behalf as part of their services.
Step 2. Apply For an Employer Identification Number
The next step is to apply for an Employer Identification Number or EIN. You’ll be required to obtain an EIN if your business collects sales tax, has more than one member or will hire employees.
Some of the perks of obtaining an EIN include:
- An EIN will qualify your LLC for business permits and licenses it wouldn’t otherwise qualify for.
- You can use your EIN in place of your Social Security Number on many forms, which protects your identity.
You aren’t required to collect taxes or have staff in order to obtain an EIN. It is simply a business's federal tax identification number. An EIN is also typically required when managing the paperwork for your federal and state taxes.
Applying for an EIN with the Internal Revenue Service (IRS) is relatively simple. Visit the IRS website’s Online Application Portal between the hours of 7 a.m. and 10 p.m. Monday–Friday, and fill out and submit the application.
If you prefer a simpler approach, the majority of business formation services will file for an EIN on your behalf as part of their services.
Step 3. Open a Business Bank Account
The final step in ensuring that your Limited Liability Company has the right business underpinnings is to register a separate business bank account for your new Limited Liability Company.
Many business owners forget this stage, yet it is important to the success of your LLC.
Business owners frequently use their personal bank account to conduct both business and personal financial operations, incorrectly believing that using one account for two purposes is more convenient or saves time. I strongly advise against this practice for two compelling reasons.
The first reason is that while you might imagine that you'll be able to distinguish between personal and business transactions later on, you simply won't. When comparing two transactions that occurred within a few days of one another, it's easy to notice the difference. When comparing hundreds of transactions that occurred many months ago, it's nearly impossible to tell whether a transaction was for personal or business reasons.
In addition, using your personal account for business finances related to your LLC voids the personal liability protection that you are entitled to when you form an LLC. Personal asset protection only applies when you maintain separation between yourself and your business. Mixing your business and personal accounts creates a situation known in business law as “piercing the corporate veil” and it negates the protection provided by forming an LLC.
If you want to secure your personal finances as well as your identity, and you also want to make tax season easier, register a business bank account for your Limited Liability Company.
To open a business bank account, you'll need to assemble what's known as a “bank kit.” A bank kit should contain certified copies of your LLC’s formation documents, including your employer identification number (EIN), Articles of Organization, initial resolution, and Operating Agreement.
You can, of course, make your own kit from scratch. And, as with every step of the formation process, a formation service will build it for you, saving you the time and work of doing it yourself.
Rhode Island LLC FAQs
Can I form an LLC in Rhode Island from out of state?
If your LLC is located outside of Rhode Island and you wish to expand into the state, or if you are not a Rhode Island resident, you must complete the foreign LLC registration process. This process is similar to forming a domestic LLC. The key distinction is that a foreign Limited Liability Company must file a Registration Application. This must be accompanied by a copy of the LLC's current Certificate of Good Standing from its home state from no more than 60 days prior to the registration. Additionally, you must select a registered agent with a Rhode Island street address. The application must be mailed at a charge of $150.
Can I form a Professional LLC in Rhode Island?
If your Rhode Island LLC provides professional services such as legal or accounting, you must follow the rules for forming a Professional Limited Liability Company (PLLC). PLLCs are limited to providing a single licensed professional service and all members must possess all the required business licenses and permits, or be registered with the state, in order to conduct the licensed professional service for which the LLC was founded. Supplying a copy of each LLC member's current business license or state registration is part of the LLC formation process.
Registered Agent vs. Resident Agent
Some services and documents in Rhode Island may refer to a “resident agent” instead of a registered agent. The term resident agent refers to the same entity as a registered agent and is merely an older term. Some services may still use resident agent as part of their branding, but the term does not refer to a separate entity or a different kind of service.
Are there specific Rhode Island LLC taxes?
Rhode Island imposes an annual tax on LLCs equal to the minimum business corporation tax of $400, regardless of the LLC’s tax treatment. Typically, LLCs are regarded as pass-through entities for federal tax purposes, meaning that they are exempt from most federal taxes. For more information on state and federal tax requirements, visit the Rhode Island DOT website or the website for the Internal Revenue Service.
Starting an LLC is always an exciting decision, so congratulations! If you’ve chosen to forgo an LLC formation service (which can cost as little as $0*), complete the following steps to form your Rhode Island LLC:
(*Does not include state filing fees)
- Obtain the Articles of Organization form
- Name your LLC
- Choose your registered agent
- Choose your LLC address
- Sign and file your Articles of Organization
Whether you're beginning a new business or reorganizing an existing one, forming an LLC can be a time-consuming and complicated process. Red tape, paperwork, and legal jargon can disorient and overwhelm you. If you manage to get through it all on your own, nothing can compare to the sense of success you will have.
Congratulations on your decision to form a Rhode Island LLC today, and best of luck in your business endeavors!