- Step 1. Naming Your Rhode Island LLC
- Step 2. Choosing a Registered Agent
- Step 3. Filing the Certificate of Formation
- Step 4. Operating Agreement and Management of the LLC
- Step 5. Getting an EIN/Tax ID Number
- Step 6. Keeping Your LLC Running
- Paying Federal, State, and Local Taxes
- Filing an Annual Report
- Permits and Licenses
- LLC Bank Accounts
- Avoiding Automatic Dissolution
- Rhode Island LLC Resources
- Rhode Island LLC FAQ
Whether your business is already established and thriving or you’re just starting from scratch, it’s always a good idea to start an LLC in Rhode Island. If you make your business official, it will be easier to attract customers, especially in this day and age where scammers are rampant, and customers are becoming warier of everything.
The whole process is pretty simple, and you can get approved in just a few days. The filing fee is $150.
Step 1. Naming Your Rhode Island LLC
Deciding on a business name—if you haven’t already—is the first and one of the most important steps to setting up an LLC. It should be memorable, pack a punch, and capture the essence of your brand or business. On top of all this, you have to follow the necessary naming guidelines, which you can find below.
Legally Required Designation
The state of Rhode Island has a strict requirement for naming an LLC. It must include the phrase “limited liability company” or one of its abbreviations:
- Ltd. Liability Co.
Uniqueness of the LLC Name
You also have to make sure your business name is unique and not identical to the name of an existing LLC or business in the state. To check if your desired business name is available, run it through the Secretary of State’s business database.
Apart from the important considerations above, you should also know that there are restricted words when choosing a name for your LLC. Here are the guidelines:
- Your desired LLC name cannot contain words that might confuse your business with government agencies such as “FBI,” “Treasury,” “State Department,” and the like.
- Other words such as “Bank” or “Attorney” will require that you have a member with the appropriate license. You might need to do additional paperwork as well.
Once you’ve thought of a name, you might want to consider checking if the domain name for that name is available, especially if you’re planning on running a website later down the line. You should do this now—and buy the domain name as soon as possible—because other people might want that same domain as well. If someone else buys it before you do, you might have to buy it from them at a hefty price.
Reserve a Name
If you have already picked a name but aren’t quite ready to file the Articles of Organization just yet, you have the option to reserve the name, so it doesn’t get taken by other people. This will give you 120 days to gather everything you need to do the filing.
You can either reserve your desired name online or do it traditionally by sending in your application by mail. However, there will be a $50 fee regardless of which method you choose.
Go to this website and find File New Business Entity. Click on it, then find Domestic Liability Company. Click on Reservation of Entity Name. Fill out the form, then submit it. You’ll have to use your credit card to pay for the name reservation.
If you don’t feel comfortable entering your credit card details, you may file by mail instead.
Download and fill out this form, then sign it. Don’t forget to write a $50 check payable to the Rhode Island Secretary of State. Mail it with the form to this address:
Office of the Secretary of State: Corporations Division
148 W. River Street
Providence, Rhode Island 02904
Step 2. Choosing a Registered Agent
Before you can go ahead and file the Articles of Organization, you need to designate your LLC’s registered agent. Basically, a registered agent is a person or a company who will be responsible for receiving legal mail on your LLC’s behalf. It can be anyone as long as they are at least 18 years old and have a Rhode Island street address. It can be you, another member of the LLC, or a trusted friend or family member.
Another option is to hire a commercial resident agent provider that is authorized and registered to conduct business in Rhode Island. Commercial resident agents specialize in keeping track of your LLC’s annual report due dates and deadlines, and other requirements, and keeping your official documents organized in general.
If you hire them, you won’t need to worry about random people knowing your personal details (whatever information you provide in the Articles of Organization will be made available to the public) since it’ll be your registered agent’s address and phone number that will be listed in the form.
Step 3. Filing the Certificate of Formation
You’ve finally chosen a unique name and a registered agent for your LLC. Now it’s time to start filing the Articles of Organization.
You’ll need to provide the following information in the form:
- Your LLC name
- The address of the LLC’s main office
- The name and address of your LLC’s registered agent
- How it will be taxed (as a single member, a partnership, or corporation)
- Whether the LLC will be member-managed or manager-managed, and if member-managed, you’ll need to write down the manager’s name and address
- The effective date
- Your signature (or the authorized person’s signature)
How to File
There are three ways to file your Articles of Organization: online, by mail, or in person. Whichever method you choose, you’ll need to pay a $150 filing fee.
You may file your articles online using the Secretary of State’s online portal. Click File New Business Entity, then find Domestic Limited Liability Company. Select Articles of Organization. Fill the form out with the necessary details, click submit, and pay the fee using your credit card. Once this is all done, you should get approved within one to two days. This is the fastest way to get approved.
Note that filing online may cost you additional fees for the maintenance of the online portal. If you’d like to avoid the extra fees, you should file by mail or in-person instead.
By Mail or In-Person
Download and complete this form. If filing by mail, don’t forget to include a $150 check made payable to the Rhode Island Department of State. If filing in person, just bring the form and the check with you.
Once you’re ready, you can mail the form and check, or go personally to this address:
Division of Business Services
148 W. River Street
Providence, RI 02904
Step 4. Operating Agreement and Management of the LLC
Just because you’ve filed the Articles of Organization (and gotten approved) doesn’t mean your work here is done. You also need to create an operating agreement and get a tax ID number for your LLC.
Creating an Operating Agreement
Writing an operating agreement is not required in the state of Rhode Island, but it’ll still be good to have since it can help reduce the risk of conflict within the LLC. It’s a legal document outlining the important aspects of the business, including ownership responsibilities and your LLC’s operating procedures. If you have a partnership or a multi-member LLC, you should definitely create an operating agreement in case there’s a disagreement among the members in the future.
Some of the benefits that an operating agreement offers are:
- It outlines how members will share the profits
- It outlines how taxes will be paid
- It helps protect the members’ assets in case the LLC is sued
If you want to create an operating agreement but don’t know where to start, you can use this template as a guide.
Step 5. Getting an EIN/Tax ID Number
Next on your list of things to do is getting an Employer Identification Number (EIN). Also known as Federal Tax ID Number, it’s a 9-digit tax identification assigned by the Internal Service Revenue (IRS). You can think of it as your business’s Social Security Number. If your LLC is a sole proprietorship, you don’t need to get an EIN since you can just use your Social Security Number when filing your taxes.
You only need an EIN if you have a multi-member LLC, intend on opening an LLC bank account, or will eventually hire employees.
Getting an EIN is really easy and can be done by mail or online free of charge.
You can apply for your LLC’s EIN through the IRS’s EIN assistant. It’s the fastest way to get an EIN since you’ll get it right after submitting your application.
If filing by mail, you need to download and fill out this form, then mail it to:
Internal Revenue Service
Attn: EIN Operation
Cincinnati OH, 45999
Step 6. Keeping Your LLC Running
Congratulations, your business is now official! What’s next is learning how to run your LLC smoothly, from paying taxes to obtaining permits and licenses to annual filings.
Paying Federal, State, and Local Taxes
One of the first few things you need to know about filing LLC taxes is that LLCs are pass-through entities by default. What this means is that LLCs do not pay income taxes. It is the LLC’s members who are responsible for paying taxes on whatever income they receive from the business.
As for the amount, it depends on many factors, such as how the LLC is taxed (whether it’s a sole proprietorship, a partnership, or a corporation), the profits, the members’ income tax brackets and how they choose to file, and the LLC’s expenses and deductions.
Since this can get complicated, you might want to look into hiring an accountant to do all this for you. Not only will it save you a lot of time, but it’ll also save you from making potentially costly mistakes.
If you have a single-member LLC, you’re in luck, as it will be a lot less complicated to file and pay your taxes. Your LLC will be considered as a “Disregarded Entity” and therefore will be taxed as an individual. You will need to report the LLC’s profits on your tax return and pay taxes on those.
Transferring money from your LLC’s bank account to your personal bank account won’t cost money in taxes. You will, however, need to pay self-employment tax, which will be discussed below.
If you have a multi-member LLC, all members will need to pay both federal income and self-employment taxes on the profits they receive from the LLC.
Typically, you split this amount with your employer, but since you are your own employer in this case, you have to pay it in full. It’s definitely a huge chunk depending on how big the profits are, but there is a way to pay less in self-employment taxes. You’ll have to change your LLC’s type to S Corp.
Changing your LLC type to S Corp will reduce how much you’ll owe in self-employment taxes. This is how it works: you will pay yourself a salary and distributions. Your salary has to be a reasonable amount for the kind of work that you do. You’ll pay income and self-employment taxes on your salary, but you’ll only need to pay income taxes on distributions.
For example, if your LLC brings in $100,000 in profits annually and your LLC is an S Corp, you can pay yourself a salary of $60,000, pay income and self-employment taxes on that, and then pay yourself $40,000 in distributions, which you’ll only owe income taxes on. That’s about $6120 in self-employment tax savings.
However, you’ll also need to consider other expenses, such as hiring an accountant, if you choose to go this route. As long as your LLC makes at least $70,000, your LLC should be fine as an S Corp.
This is another option, but it’s not recommended for small businesses since C Corps are taxed twice. It’s perfect for larger businesses that want to attract investors since they won’t need to pay self-employment taxes on dividends.
You’re required to pay state taxes on the income you receive from your LLC. The rate is between 3.75% and 5.99%, depending on your tax bracket.
LLC Annual Tax
LLCs in Rhode Island are required to pay an Annual Charge of $400 regardless of whether the LLC earned profits.
How much you owe in local taxes will depend on your locality. You’ll need to contact the local authorities to figure out the current rates and how to pay them.
Filing an Annual Report
You’re required to file your LLC’s Annual Report each year. The filing fee is $50, and it must be filed between September 1st and November 1st. Annual reports can be submitted online or by mail using this form. If filing online, you’ll need your Customer Identification Number (CID) and PIN, which are typically sent to the registered agent before the filing period.
New LLCs are not required to file an annual report until they’ve reached their first year since founding, though still keep the schedule in mind because late reports will be subject to penalties and fees.
Permits and Licenses
You may need to obtain certain federal permits and licenses depending on the nature of your LLC. As for state-level business licenses and permits, there are none in Rhode Island. Instead, business licenses are issued locally.
Use this portal as a guide to figure out which business licenses and permits you need to obtain. You may also get in touch with your local officials or even ask for assistance from your legal representative.
LLC Bank Accounts
You should open an LLC bank account to separate your business assets from your personal assets. It makes bookkeeping and filing taxes so much easier since you don’t have to sift through pages and pages of both your personal and business transactions. Having a separate bank account for your LLC will also protect your personal assets in the event that your business gets sued.
You’ll need the following to open a business bank account:
- A copy of your Articles of Organization
- Your EIN confirmation from the IRS
- Your driver’s license or passport
If you have a multi-member LLC, you will also need an authorization agreement signed by all the members confirming you’re authorized to open the account. Different banks may require more official documents as well, so it’s best to call the bank of your choice to make sure you have everything you need.
Avoiding Automatic Dissolution
As long as you don’t miss any of your state filings, you won’t have to worry about automatic dissolution.
Rhode Island LLC Resources
- Naming your LLC: Rhode Island Business Portal
- Domain name search: com
- Reserving your LLC name: online or by mail
- Forming your LLC: online or by mail
- Operating Agreement template
- Getting your federal tax ID number: IRS EIN Assistant
- Filing an Annual report: online or by mail
- Obtaining federal licenses and permits: SBA list of federal licensing and permitting agencies
- State licenses: Rhode Island Business Portal
Rhode Island LLC FAQ
To further help you in understanding the basic processes of setting up and running an LLC, here’s a list of commonly asked questions.
It costs $150 to file the Articles of Organization.
Filing online is the cheapest way to do this since you won’t need to drive to any location or pay for postage. It’s also the fastest—you can get approved in just a day or two.
LLCs in Rhode Island are considered pass-through entities, so the LLC itself will not need to pay income taxes. This responsibility, instead, falls on the LLC’s owners and members. These members will have to pay federal, state, and local income taxes as well as self-employment taxes. The amount can vary depending on your LLC’s profits and type, your income tax bracket, how you’re filing your taxes, and deductions
Rhode Island LLCs are required to file annual reports between September 1st and November 1st. Non-compliance might result in the automatic dissolution of your LLC.