Not every limited liability company (LLC) lasts forever. In fact, many LLCs in Rhode Island are only intended to operate for a designated time period. Whatever your reasoning for closing up shop, the state of Rhode Island has a specific process that all LLCs must go through before they are considered to be officially dissolved.
Which steps are involved in the Rhode Island LLC dissolution process? Are there different processes for businesses based in Rhode Island and those expanded from other states? When do you need to dissolve your LLC? We’ll answer all of these questions and more in this article.
How Do You Dissolve a Rhode Island LLC?
When closing a business registered as an LLC in the state of Rhode Island, you’ll need to take care to dissolve your business exactly as the state outlines. The most important part of this process is filing the correct paperwork with the relevant legal entities, but this is far from the only vital step.
In addition to filing documentation of your Rhode Island LLC dissolution, you will need to liquidate the assets of your business, notify all individuals and business entities that have an interest in your company, and resolve any outstanding liabilities with vendors, suppliers, or clients.
There are potentially severe penalties for failing to comply with the Rhode Island LLC dissolution process, and you as a business owner could be personally responsible for your LLC’s liabilities and debts. Therefore, it’s extremely important that you complete each step outlined in this guide to ensure an effective and compliant dissolution.
As for the question of when you should dissolve your LLC, you should do this as soon as you’re certain you will no longer conduct business through this entity. This gives you an opportunity to close up shop with the knowledge that you’re not transacting any business after you start the dissolution process.
Dissolution for Domestic Rhode Island LLCs
Is your LLC based in Rhode Island, and registered as a domestic entity in this state? If so, you’ll start your dissolution process by acquiring a tax clearance with the Rhode Island Division of Taxation. You will need to fill out their Request for Letter of Good Standing document and submit it with your $50 fee. It can take around four weeks to receive this clearance, so make sure you plan ahead.
Then, your dissolution begins with a document known as the Articles of Dissolution. This form will include some crucial information about your business, so you should fill it out carefully and accurately.
Among the info you’ll need to complete this form is the official business name of your LLC, your Rhode Island entity ID number, the date your LLC was originally registered, the dates you filed each amendment (if any) to your Articles of Organization, the reason for dissolving your business, the effective date of your dissolution, the date, the signature of your LLC’s authorized person, and any other information you deem to be relevant.
Once you’ve finished filling out this form, you will also need to complete the “Filer Contact Information” form, which is a simple document that merely asks for your address, email address, and phone number so the state can contact you if they need any further information. The Filer Contact Information form is attached to the Articles of Dissolution.
When you’re ready to file, you can file your documents with the Secretary of State by mail, online, or in person. No matter how you file it, this submission has a filing fee of $50. You can expect the state to process your dissolution within 7-10 business days, unless you drop your documents off in person, in which case they will be processed the same day.
But what does this process look like for a business that was formed outside the state and then expanded to Rhode Island?
Dissolution for Foreign LLCs in Rhode Island
If you operate a foreign LLC in the state of Rhode Island, the dissolution process looks quite different than it does for domestic entities. In fact, it’s actually technically called a cancellation rather than a dissolution. However, just like the domestic version, you’ll need to get a Letter of Good Standing from the Division of Taxation before you pursue your cancellation.
To dissolve a foreign LLC in this state, you’ll first complete the Certificate of Cancellation of a Foreign Limited Liability Company document. Much of the information for this form is the same as the info provided for the Articles of Dissolution, but there are some differences for the foreign version.
This form requires your Rhode Island entity ID number, the name of your LLC, the jurisdiction where your business was originally registered, a mailing address for potential future service of process deliveries, the effective date of your cancellation, the date, and your printed name and signature. In addition, this form also requires you to fill out the Filer Contact Information form that’s attached to it.
You can file your documents with the Secretary of State by mail, online, or in person, and this filing has a $75 fee. Like the domestic version, this document takes 7-10 business days to process, but the state will process it the same day if you drop it off in person.
Involuntary Dissolutions in Rhode Island
We should also discuss the potential for an LLC to be involuntarily dissolved by the state. There are several reasons this could happen, and most of them revolve around significant mistakes made by the LLC’s ownership group.
For instance, Rhode Island could involuntarily dissolve your LLC if you operate the LLC with no active members/owners for at least 90 days, procure the LLC’s Articles of Organization through fraudulent means, exceed or abused the authority conferred upon your LLC, fail to file your annual reports in a timely manner, fail to appoint or maintain a registered agent for at least 30 days, fail to notify the state that you have changed your registered agent, or misrepresent your LLC in any official documents.
It’s obviously never advisable to operate your LLC in a way that leads to the state dissolving it against your will. However, the penalties can be even steeper than you might realize. For example, to reinstate your LLC, you will need to obtain a Letter of Good Standing from the Division of Taxation, contact the Division of Business Services to find out what your reinstatement penalties will be, correct the issues that originally led to the LLC’s dissolution, and submit a penalty of $50 per year since your LLC was dissolved.
In addition, if you keep operating your business after the state involuntarily dissolves it, you could open yourself up to all sorts of legal issues due to the continued operation of a non-compliant entity. In general, you should be as careful as possible when it comes to following the rules and regulations in this state.
It’s not that the process for dissolving or withdrawing your LLC in Rhode Island is terribly difficult. However, it is a process that you need to take great care to complete in a compliant fashion, or you could expose your business to a wide variety of potential legal complications and financial penalties. Trust us when we say it’s much smarter and easier to simply follow the directions with care to avoid any issues.
Do you need more information about operating an LLC in Rhode Island? Take a look at the following resources: