Rhode Island LLC (6 Step Guide) – How to Form an LLC in Rhode Island

Start an LLC in RI Easily With Professional Help

Starting a Rhode Island LLC can be a great way to get your business off the ground right. Rhode Island has been making its way up the lists of business-friendly states in recent years, and many entrepreneurs are starting to take notice of the opportunities a Rhode Island LLC can provide.

Between protection from personal liability for debts, reduced tax burden, and the burgeoning opportunities the state offers, there are many reasons to consider a Rhode Island LLC. Let’s take a look at everything this structure can offer and how you can start your own LLC in only six easy steps.

Why Would You Want a Rhode Island LLC?

A Rhode Island LLC can offer your business a lot of advantages that certainly explain why you would want a Rhode Island LLC. Here are some of the biggest:

  • Low Personal Liability: With a Rhode Island LLC, your personal assets are protected from liability for business debts. This is great for giving entrepreneurs the confidence to pursue their business ideas. With this business structure, you do not have to worry about your home, car, or personal bank accounts being held liable for business debts.
  • Pass-Through Taxation: With a Rhode Island LLC, your business will not pay income tax on the entity level like a C-type corporation that receives similar liability protection. Instead, earnings will simply pass through the business to be taxed on your personal return saving you money.
  • Easy Maintenance: Running a business is hard enough without worrying about holding regular investor meetings, taking minutes, and completing piles of paperwork every year. With a Rhode Island LLC, maintenance is easy and rarely takes much more than filing an Annual Report with basic business information.
  • Small Business Loan Program: Start-up companies in Rhode Island can use this loan program to obtain up to $500,000 in capital to help their business grow and expand.

Quick Rhode Island LLC Pros & Cons

Forming a Rhode Island LLC is a big decision, and you should always consider the pros and cons before you get started. We know you are busy, so we will make it quick and take a look at the biggest pros and cons to help you decide.

Pros

First off, the pros include:

  • Small Business Capital Investment Tax Incentives: LLCs in Rhode Island are eligible for a couple of different kinds of incentives. These are Modifications or Deductions and a Capital Gains Exclusion.
  • Protection From Creditors: Rhode Island provides excellent protection against creditors for the members of LLCs in Rhode Island. The only remedy a creditor has against a member of an LLC that is in debt to them is to obtain a charging order. This charging order puts a lien on the member’s interest in the LLC. The creditor then can receive any distributions that the member would have received from the LLC. However, this often leads to the creditor receiving nothing since the creditor does not have the right to force the LLC to make distributions.
  • Privacy: You are not required to list the members of your LLC in the Articles of Organization.  You can choose an organizer to submit your Articles of Organization to the state.

Cons

Where there are pros in a big decision like this, there are always cons, and these include:

  • Above Average Cost of Doing Business: With a high cost of energy, transportation, and other factors slightly higher than the national average, Rhode Island suffers from a higher-than-average cost of doing business. In the past few years, this has begun to recover, but it still stands above average among the states.
  • Low Entrepreneurship: Rhode Island has had some of the lowest rates of entrepreneurship in the country in several recent years. Although, this has begun to increase as some businesses have chosen to move to Rhode Island as the costs of doing business have decreased.

How to Form Your Rhode Island LLC in Six Easy Steps

If you have settled on a Rhode Island LLC for your formation, then we have got good news for you. Forming your new business is quick, easy, and can be done in only six easy steps, so let’s get started.

Step 1: Choose A Name for Your Rhode Island LLC

Choose-your-LLC-Name-1

The first thing you need to do when forming your LLC is to choose a name for your business. It’s good to choose a name that will catch people’s attention while still giving them an idea of what your business does. There are some rules you will need to follow when naming your business, such as:

  • Your business name needs to be distinguishable from the business or trade name of any other business registered in Rhode Island.
  • Your chosen name cannot include any restricted phrases or words, such as university, bank, or attorney.
  • The name you use for your business must include the words limited liability company, limited company, or the abbreviations LLC or L.L.C.

Once you’ve decided on the name you want for your business, you’ll need to do a check to see if your name is available. You can do this on the Rhode Island Business Entity Database.  If you find your business name is available, you can use it when filing your Articles of Organization. However, before you commit to your chosen business name,  you might want to make sure there is a URL available for your business name as well as a good social media handle. If not, you may want to consider choosing a different name.


Step 2: Appoint A Registered Agent for Your Rhode Island LLC

Appoint-Registered-Agent

After you choose a name for your business, you should choose a registered agent for your LLC. Every LLC in Rhode Island is required to have a registered agent to accept service of process and other legal documents from the state. This registered agent will need to be available to accept these documents during all regular business hours.

You can choose a person or a registered agent service for your registered agent. You can even act as your own registered agent, but there are a number of advantages to choosing a registered agent service which we will discuss.

 Advantages of a Registered Agent Service

There are several advantages to using a registered agent service, such as:

  • Preserving Your Privacy: If you choose to be your own registered agent, your address will become part of the public record. Therefore, whether you use your home or work address, it will become available to members of the public. This could result in annoying unwanted sales calls. If you choose a friend or family member, they could have the same problem. But, if you hire a registered agent service, the address of the registered agent service will appear on the public record. This can help preserve your privacy.
  • More Flexibility: Some businesses operate outside of normal business hours,  which can make it difficult for these owners to act as their own registered agents since it could be hard to be available during all normal business hours. However, a registered agent service will be available during all regular business hours, so you won’t have to be.
  • Keep Your Documents in One Place: It’s easy to put your important documents in different places when you’re in a hurry, and then it can be difficult to find them if you need them. But with a registered agent service, you’ll know where your important documents from the state are. A registered agent service will keep all your important state documents, so you’ll know where they’re at, and most registered agent services keep these documents for as long as you need them.
  • Protect Your Image: If you choose to be your own registered agent, you could easily find yourself receiving service of process at your home or place of business. Should this happen, it could be quite embarrassing, and if it occurs at your place of business, it could easily hurt your reputation. However, with a registered agent service, the documents would be served at the registered agent service’s address.
  • Expanding Your Business: If you decide to expand your business beyond Rhode Island, you won’t be able to be the only registered agent for your business. In this situation, you may find it easier to hire a registered agent service since many of these services have locations in every state. Also, if you are considering expanding your business out of state at a later date, it may be easier to hire a registered agent service now rather than changing your registered agent later.

Step 3: File the Articles of Organization for Your RI LLC

File-your-Atricles-of-Organization

Now it’s time to file your Articles of Organization, which will actually form your LLC. You will file your Articles of Organization with the Rhode Island Department of State. You can file online or by mail, and the filing fee is $150.

There is some information you will need to fill out your Articles of Organization, such as:

  • The name of your business
  • The name and address of your registered agent
  • Whether your company will be treated as a corporation, partnership, or disregarded entity for tax purposes
  • The address of your LLC’s principal office
  • Whether your LLC will be member-managed or manager-managed

You can file your Articles of Organization online by using Rhode Island’s Business Services Online Filing System.

You also have the option of filing by mail. Just download, print, and fill out Form 400, Articles of Organization for a Domestic Limited Liability Company, and then mail it to: Services Online

Division of Business Services
148 W. River Street, Providence
Rhode Island 02904-2615


Step 4: Create an Operating Agreement

Operating-Agreement

Although Rhode Island does not require operating agreements for LLCs, every LLC should have an operating agreement. An operating agreement is a legal document that outlines the structure of your business and details the rights and responsibilities of its members. It also includes information about how the LLC will be run, such as how voting rights will be handled and how profits will be distributed, along with other details. Having this agreement can help avoid arguments between members and make running your LLC easier. This agreement is particularly important if you have an LLC with a lot of members where arguments could become frequent without some sort of guidance.

There are no specific rules for what must be included in an operating agreement, but there are certain items that are generally included in operating agreements, which we will discuss below.

  • Percentage of Ownership: You should include the names of all the members of your LLC and their percentage of ownership of the LLC. This percentage is generally based on the percentage of the original investment that the member contributed. However, this does not need to be the case. Members can choose to allocate the percentage of ownership using a different method. But, whatever method members choose should be included in the operating agreement.
  • Voting Rights:  If you have a multi-member LLC, voting will probably be an important part of the way your members make decisions for your business. So it’s best to include in your operating agreement how voting will be handled. Will you require a vote for every decision you make? Also, you’ll need to decide how voting rights will be distributed. You could allocate voting power based on a percentage of ownership. Or, the members of your LLC could choose another method. You’ll also want to decide what type of vote will be necessary to make a decision. You could choose a majority vote, a supermajority vote, or even a unanimous vote. You may want different requirements for different types of decisions. All of these things should be included in your operating agreement to avoid arguments.
  • Management: You’ll want to include the type of management your LLC will have in the operating agreement. You could have member-managed, which is the more common choice, or manager-managed. Most businesses choose to have a member-managed LLC. In this type of management, all of the members of the LLC run the daily affairs of the business as well as make decisions for the business. Whereas, with a manager-managed LLC, members of the LLC choose a manager or managers to manage their LLC for them. This manager will then run the business on a daily basis and make the decisions for the LLC.
  • Profits and Losses: The distribution of profits and losses is one of the most important details to include in your operating agreement in order to avoid arguments between members. Profits and losses are typically distributed on the basis of the percentage of ownership in the LLC. However, members can choose a different method of distribution. It’s just important that you include whatever method the business will be using in the operating agreement.
  • Member Withdrawal: You’ll probably have some changes in membership during the life of your business, and this can easily disrupt your business. But by planning ahead, you can minimize the disruption to your business. So you should include what will happen when a member chooses to withdraw from the LLC. Will their shares be distributed among the other members, or will they be required to offer to sell their shares to other members before selling them to any outsiders? You can also choose to place restrictions on whom they can sell their shares to.
  • Dissolution: Although you probably prefer not to think about it while you’re just starting your business, you may choose to end your LLC one day. Therefore, it is a good idea to specify in the operating agreement what will happen should you decide to end your business. You should include how any assets that remain after your LLC’s debts are paid will be divided. You should also include if any of the members will be allowed to continue with the idea of the business on their own after the LLC is dissolved.

Step 5: Get an EIN

Filing-for-an-EIN-1

The next step you should take is to get an Employer Identification Number (EIN) for your business. This is a nine-digit number that is very similar to a Social Security number, which the I.R.S. will use to identify your business for tax purposes. This number is also important for filing taxes, hiring employees, and opening a business bank account.

It’s easy to obtain an EIN. You can apply by mail, fax, or online, and it is free.  International applicants also have the option of applying by phone. You will need a Taxpayer Identification Number to apply; a Social Security number will do just fine.

The quickest and easiest way to get your EIN is by applying online on the I.R.S. website. If you apply online, you will receive your EIN as soon as you complete the process. You do need to be careful to complete your application in one session because if you exit the process, your application will not be saved. There is no option to save it and return and finish it.

You also have the option of applying by mail or fax. For both of these options, you need to fill out Form SS-4, which is found on the I.R.S. website. If you choose to mail the form, you can mail it to:

Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999

Your application should be processed in approximately four weeks.

To fax the form, the number is (855) 641-6935. You should receive a return fax in about four business days.

International applicants can apply by phone. They can call on weekdays from 6 a.m. to 11 p.m. Eastern Time. It is important to ensure that the person calling has the authority to answer any necessary questions on Form SS-4 and to receive the EIN.


Step 6: Open a Business Bank Account in Rhode Island

Open-a-Business-Bank-Account

This step is a very important one, even though it’s not required to form an LLC. It is important for helping you keep your limited liability. Additionally, it can help your business to appear more professional, which can help attract customers. It should also make your bookkeeping easier, which should help you to do a better job running and maintaining your business. We will discuss how a business bank account can help you with these things.

Easier Bookkeeping

A lot of LLC owners who are just starting out in business haven’t had any real experience in bookkeeping, so it can be a difficult chore for them. This can be even more difficult if business transactions are not separated from personal transactions. It can be practically impossible to conveniently separate these transactions.

However, with a business bank account, they will be kept separate from the start. This will save you the trouble of trying to separate these transactions and allow you to more easily keep track of your revenue and expenses. It could even make it easier for you to stay on a budget. It will also make tax time a bit easier.

Limited Liability

Your LLC has limited liability as long as it is its own separate entity. So, the owners of the LLC are not personally responsible for its debts. If an LLC fails to pay its debts or is sued, the LLC’s assets can be taken but not the owner’s assets in most cases.

However, in order to maintain this limited liability, an LLC must keep its finances separate from the finances of its owners. If the owners failed to do this, a court could remove the business’s limited liability, in which case the personal assets of the owners would be at risk. This is called piercing the corporate veil. Sadly, mixing personal and business finances is one of the most common mistakes small business owners make. But, by having a business bank account, businesses can avoid this problem by keeping business transactions totally separate from personal transactions.

Forming A Relationship with a Bank

Having a business bank account is also a great way to form a relationship with a bank. This relationship could be helpful if you ever want to take out a business loan or open up a business line of credit. A business bank account will also allow you to accept credit card payments which can help increase your business.

Necessary Documents for Starting a Business Bank Account?

You’re going to need some documents for starting a business bank account. The documents you need will vary from bank to bank, but there are some documents that almost all banks are going to ask for, and we will list these below.

  • Employer Identification Number:  In order to open a business bank account, a bank is going to want you to verify the identity of your business. To do this, they are likely to ask you for your EIN. If you have a single-member LLC, it’s possible some banks will allow you to use your Social Security number. However, you may want to get an EIN even if the bank is willing to allow you to use your Social Security number. With an EIN, your business will be able to establish a tax presence, which could be useful in the future.
  • Identification: Typically, banks are going to ask for at least one form of I.D. They may even require two forms of I.D. Generally, these IDs will need to be government IDs, such as passports, driver’s licenses, or state IDs. Also, the person who opens the business bank account for the LLC is likely going to need to be either an officer or owner of the LLC.
  • Business License: If the state or local area that your business is located in requires a business license for you to do business, the bank is probably going to want to see this. Not all areas require a business license, but it is best to check for this before you go to open your business bank account so that you’ll be prepared if they do.
  • Operating Agreement: The bank will also probably want a copy of your operating agreement. An operating agreement has a lot of information that could be useful to the bank if any legal issues come up. It could also give them some information about your LLC that will help them decide whether or not they want to offer to open a line of credit for your business or offer your business a loan.
  • Articles of Organization: Another document you’re going to want to have on hand to show to the bank is your Articles of Organization. This document will give your bank important information about your business, such as the owners of your LLC, the name of the business, the registered agent for your business, and the address of your business.
  • Fictitious Business Name Statement: LLCs in Rhode Island that use a trade name are required to file a Fictitious Business Name Statement. If your business uses a fictitious name, the bank is probably going to want to see this statement to verify that the name you are using is connected to your business.

Steps for Growing and Maintaining Your Rhode Island LLC

You may have finished forming your Rhode Island LLC, but now it is time to get started growing and maintaining your new business. Here are a few steps to get started.

1. Create a Business Website

Start-a-Business-Website

It is a good idea to create a website for your business, even if your business is only done offline. This could help draw customers to your business since many people like to look up a business online before they shop at it. It could even hurt your business not to have a website since if a potential customer does not find your business when they’re looking online, they are sure to find another business.

It’s not hard to make a website even if you’ve never done so before. There are many tools online that make it easy to create a website. It shouldn’t even take you very long to get your website up and running. Also, if you’re using an LLC formation service to help you form your LLC, one of their services may be creating websites. So, you may be able to get the service to create your website for you.


2. Obtain Business Insurance

Get-Business-Insurance

It can be tempting to skip getting business insurance to save some money since you know your personal assets are likely protected by having a limited liability company. However, it’s still a very good idea to purchase general liability insurance to protect your business assets. If your business is sued and you lose the case, your business assets could be used to satisfy the debt. But, if you have general liability insurance, this should protect your business assets.

Another type of insurance that your business should purchase is liability insurance for all of your members. Although the assets of all the members of your LLC are generally protected from being used to satisfy business debts, they can be accessed to satisfy debts from judgments that are a result of negligence or wrongdoing.

Another type of insurance you want to purchase for your LLC is Workers’ Compensation Insurance. Rhode Island requires that all LLCs with employees purchase this insurance to cover their workers. This insurance will cover workers in cases of illness or injury that occur on the job.


Form a Rhode Island LLC with Professional Help Today

Many entrepreneurs may find there just isn’t enough time in the day between family and getting your business ideas started to form a Rhode Island LLC. If this is the case for you, then these businesses can help you get started.

#1: Start an LLC in RI With ZenBusiness

ZenBusiness is one of the newer LLC formation services, but they have become very popular for their great service. Customers tend to give them excellent reviews. They have great prices on their packages and many good features. They include a free operating agreement with all of their packages which is something every LLC should have. They are also willing to file your annual report for you, which can save you some time and trouble. Additionally, they give 25% off registered agent service with all of their packages.

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#2: Start an LLC in RI With Incfile

Incfile is one of the most popular LLC formation companies around, and it’s not surprising. Unlike most LLC formation companies, they have a free package. This package even has some nice features that come with it. You will get a year of free registered agent service, which is a good deal considering purchasing registered agent service separately can cost anywhere from $100 to $300 on average. You’ll even get lifetime company alerts that will help keep you informed about any upcoming state filing deadlines. This will help you stay in good standing with the state.

$0+State Fees

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Final Thoughts

When you are considering how to get your business off on the right foot, then a Rhode Island LLC is something you should consider. This structure can keep your personal assets safe, prevent double taxation, and allow your business to benefit from everything the Ocean State has to offer. So, consider getting started and forming your business today!


F.A.Q.s

Is It Necessary for My Rhode Island LLC To Have A Physical Office?

Yes. You need to have a principal office, and it has to have a physical address.

Learn How to Form an LLC in Any U.S. State:

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About the Author
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Founder & author

Ian Broderick is an avid author and owner of LLCGuys.com. He's been involved with the LLC formation field for over 4 years. On top of that, he has worked in several well-known LLC formation service providers. Now he decided to share his knowledge and advice with everybody. Since there are a lot of questions and concerns surrounding this field - his aim is to make LLCGuys a top-notch information provider in regards to LLC creation, service reviews and etc..

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