If you’re looking for a reliable DIY guide for starting an LLC in Rhode Island, look no further. Below you’ll find all the information you need to launch your business and handle any associated costs. Follow each step carefully and your LLC will be established and ready to hit the ground running.
That said, the process can be complex, with various filings and costs, so if at any point you need help, you can hire an LLC formation service – they’ll take care of the paperwork so you can spend more time growing your business.
Recommended: Compare the Top LLC Services
If you’re new to the process of starting an LLC, you might also be unfamiliar with the LLC formation services that are reliable and offer great value – like ZenBusiness. As a reference point we compared them to the two most well known LLC formation services, IncFile and LegalZoom. See our comparison guides for more information:
Step 1: Name Your LLC
What’s in a name? Quite a bit, actually. Your business name is your Rhode Island LLC’s identity, its personality, its reputation. Find a name that sticks in customers’ minds – while conveying your brand qualities – and you’ve struck gold. A unique, memorable name can draw in new customers and keep existing ones coming back.
Your LLC name is going to appear everywhere: business cards, marketing collateral, websites, legal contracts, bank accounts, invoices, directories, and much more. So be sure that it conveys your product, service, brand, and values.
While you can (and should) be creative with your business name, there are certain state requirements that it must follow.
According to Rhode Island LLC Act § 7-16-9, your name of choice must designate its business type by including the words “Limited Liability Company,” or the upper/lower case abbreviation “L.L.C.,” either with or without punctuation. Plus, it must be distinguishable from every other business name reserved or registered with the Secretary of State.
But the definition of “distinguishable” can be different from state to state, and in Rhode Island, changes to the following name components will not be enough:
- Punctuation, capitalization, special characters, and spacing
- Articles (“a,” “an,” or “the”)
- Plural vs. singular forms of the same word
- Phonetic spellings or abbreviations of the same word
- Prefixes and suffixes
- Numeric designation
- The expression of numbers as Arabic numerals, Roman numerals, or written words
- Business type indicators like LLC, Inc., or LP
Essentially, to distinguish a name, you need to make significant changes to one or more of its keywords, not just its syntax.
Consider this: your friend Fanny wants to open a flower shop in Providence, Rhode Island. The name she is considering, Flowers by Fanny, LLC is already in use. So she comes up with a new one: Fanny’s Florals and Design, LLC. This name is similar to the original but includes new words, distinguishing it in the Secretary of State’s records.
Determine the Name is Available
Of course, you will only need to make distinguishable changes if your name is already taken. Don’t make the mistake of ordering business cards, creating advertisements, and using a name on documents like the Articles of Organization without first confirming it’s available. Use the Secretary of State’s entity search page to see if there’s an existing business using your desired name.
Maybe you pegged a distinguishable name right away, or maybe it took some modifications, but either way, once you have a unique name, you can lock it down by filing a name reservation.
Optional: Name Reservation
You may have fallen in love with a particular name, but still have some preparation and paperwork to sort out before starting your LLC, and you’re worried that someone will swipe it in the meantime. To calm your nerves, you can reserve that name in Rhode Island for a total of 120 days.
Think about Fanny. After making her name distinguishable, she’s ready to make it official, but if she’s waiting on some paperwork to start her LLC, she can file a name reservation either through the Business Services Online Filing System or by mailing/hand-delivering an Application for Reservation of Name to:
Office of the Secretary of State
148 W. River Street Providence
Rhode Island 02904-2615
Both online and hard copy filing options cost $50, so have a credit card or check ready. And while reserving a name can be helpful, if you’re ready to start your LLC, it’s better to use it on your Articles of Organization, which will automatically register it.
Step 2: Choose a Resident Agent
Fanny’s LLC is quickly taking shape, and if it’s going to operate in Rhode Island, she’ll need a go-between for state and legal communications. This is called the resident agent.
A resident agent is a key component of your budding LLC, handling all of its sensitive communication with the state so you don’t have to. But maintaining an agent isn’t just a convenience, it’s required. Rhode Island’s LLC Act says that “each domestic or foreign registered limited-liability company shall have a resident agent for service of process,” and the Articles of Organization instructions add that “the resident agent is an individual or entity that will accept all legal service for this entity.”
Now for the practical application, the “how-to.” It’s a one-step process: simply include your resident agent’s name on the Articles of Organization and that information will be added to your public record. Make sure you speak with your agent beforehand to get their approval.
You have two options for who can serve as a resident agent: an individual or a company.
Individual as Resident Agent
You may think that an individual resident agent would need specialized training or experience, but this isn’t the case. Anyone can serve as your resident agent, as long as they are a Rhode Island resident, and have a physical address in the state. You can even be the agent for your own LLC, as long as you meet these requirements.
Resident Agent Service
It can be a lot easier, though, to use an LLC formation service like IncFile or Northwest Registered Agent, so we highly recommend it. Not only will they take care of business formation requirements, but they’ll also include a free resident agent service. Or, if you’d rather start your Rhode Island LLC on your own, you can use a national resident agent service to cover your agent duties.
During the life of your LLC you may, at some point, need to change your resident agent. Perhaps you want to switch from an individual to a professional service, or maybe your existing resident agent resigns. Either way, you’ll want to make the change as soon as possible because operating without an agent on file can lead to administrative dissolution.
Step 3: File the Formation Documents with the State
This is where the LLC formation process kicks into high gear. Let’s check back in with Fanny.
She’s reserved her unique business name, designated a registered agent, and she’s ready to get her LLC off the ground. It’s time for Fanny to take on the most important LLC document: the Articles of Organization. This filing creates a record for Fanny’s Florals and Design, LLC with the Rhode Island Secretary of State, giving it the authorization to commence business in the state.
Maybe you want to file from the comfort of your own home, or perhaps you’d rather leave a paper trail – either way, there’s an Articles of Organization filing option for you. No matter what you choose, the fee is $150, payable by card or check.
If you want to file quickly without leaving your desk, file online through the Business Services Online Filing System.
Hard Copy Filing
Prefer the feel of a paper form? Download, complete, and print the hard copy application and mail or hand-deliver it to:
Division of Business Services
148 W. River Street
Providence, Rhode Island 02904-2615
Step 4: Create an Operating Agreement
The operating agreement is the framework that holds up an LLC, the vital underpinning that establishes processes for its procedures, activities, and conduct. Essentially, it serves as your company’s bylaws.
Your LLC is not technically required to adopt an operating agreement before doing business in Rhode Island. Even though the state doesn’t deem it overly important, an operating agreement is crucial to your business’ security and stability. Not only does it establish foundational procedures to help your LLC run smoothly, but it also makes the company legitimate in the eyes of courts, banks, government agencies, and more. So, it’s in your best interest to create one!
Let’s say our friend Fanny sells a percentage of her company to two other owners. Her operating agreement could stipulate how the LLC’s assets would be distributed among them in the case of dissolution. But if she decided to maintain sole ownership, the agreement could be used in court as evidence that the LLC’s assets are separate from her personal ones. These are just two examples, but the operating agreement governs everything from member duties to tax structure.
If you’ve decided to draft an agreement, there are two ways to go about it:
- Write it yourself. Don’t be intimidated by this option. There are plenty of free online templates that serve as helpful guides. You can create an effective document from most of the templates out there, but we recommend getting one through ZenBusiness, which includes a free LLC operating agreement with every package. This will save you a lot of time and money.
- Hire an attorney. If you want to be absolutely sure that you don’t miss any important details, an attorney can write or review the agreement for you, ensuring that it complies with state law, includes all necessary information, and avoids the state’s default laws.
What are default laws?
Each state has its own set of generic, baseline laws for how LLCs should operate. These laws, however, only govern matters not included in your operating agreement. Take dissolution, for example. If your LLC ever dissolves, your operating agreement would determine what happens to its remaining assets and debts. But if you fail to include it in the agreement, the state will make that decision for you.
Because default laws are broad and not tailored to your specific business, they often aren’t in your LLC’s best interest, so it’s best to avoid them by being as comprehensive as possible in your agreement.
Step 5: Get an EIN
There’s simply no way to avoid taxes. In fact, it’s illegal to try, so don’t do it.
Federally, LLCs are classified as “pass-through” entities, businesses that don’t file corporate tax returns, but whose owners include income and losses on their individual returns. Still, there are certain circumstances that require LLCs to pay federal taxes, like classifying as a corporation or partnership, hiring employees, or selling merchandise. So, in Fanny’s case, if she plans on hiring additional florists and selling bouquets, she will need to apply for an EIN.
The Employer Identification Number (EIN) is a nine-digit number that the IRS will use to identify your company’s tax accounts, so if you pay any business taxes, it’s extremely important to have one. Click the “Do I need an EIN?” link on this page to see if you fall into this category. If so, apply for an EIN one of three ways:
Need to get this done quick? File online – it’s by far the most efficient method. You can only complete the process between 7 a.m. and 10 p.m. EST, Monday through Friday, but you’ll receive your number immediately upon finishing the digital form. Keep in mind that you will need to provide a valid individual taxpayer number (like a Social Security Number) as part of the process.
You might prefer the feel and security of a paper form. In this case, download Form SS-4, complete it, and fax it to (855) 641-6935. You will receive your EIN within four business days.
Or, there’s always trusty postal mail. However, this is the slowest option, as processing typically takes around four weeks. If that doesn’t deter you, fill out Form SS-4 and send it to:
Internal Revenue Service Operation
Attn: EIN Operation
Cincinnati, OH 45999
Okay, so you’ve filed the Articles of Organization, designated a resident agent, adopted an operating agreement, and filed for an EIN. Time to start doing business, right? Sorry, there are a couple of additional steps you may need to take first. But don’t worry, you’re almost there!
Step 6: Taxes, Licensing & Income Reporting
For all intents and purposes, most LLCs will be official after completing all the prior steps. Still, it’s important for business owners like Fanny to keep looking ahead, as there are certain maintenance requirements to keep a Rhode Island LLC running smoothly and in good standing with the state.
Before you start doing business, create a plan for the following potential LLC requirements:
As mentioned earlier, LLCs are almost always classified as “pass-through” entities, which means that they don’t pay income taxes directly to the federal government. That responsibility falls instead on the owners, who must include business income and losses on their personal 1040 tax returns and/or Schedule C. LLCs are flexible with tax structure, so you can choose to have yours taxed like a corporation instead. In this case, it would need to file a separate corporate tax return.
Just like federal income taxes, Rhode Island’s state income taxes “pass-though” to individual income tax returns. However, LLC’s must pay the minimum business corporation tax, which is $450. To learn more about it, see this document from the state’s Department of Revenue.
On top of the minimum business corporation tax, your LLC may be responsible for other taxes based on certain circumstances. Do you sell merchandise? If so, it will owe a Sales Tax and Use Tax. Do you have any employees? Then you’ll need to pay a Withholding Tax and Unemployment Insurance Tax. As you start your LLC, you can register for any of these taxes using the Combined Online Registration Service, or by completing and mailing the appropriate paper forms.
Plus, depending on your LLC’s location, it may owe a local tax to its city, municipality, or county. Consult your local government’s website to find out.
The Articles of Organization may have already made your business legitimate, but your LLC might still need to obtain a license before doing business. This all depends, however, on the type of business you run.
Our friend Fanny, for example, may need to obtain a Nursery Stock Dealer license from the Department of Environmental Management before she can start selling flowers. You can find a complete list of Rhode Island licenses by occupations here, and if you need to apply for any, use the Department of Business Registration page.
Certain cities and counties require their own specific licenses, so you’ll also want to check with your local government.
Once you’ve taken all the steps to start your LLC, you’ll be off and running, making deals and growing the company. But when things are moving 100 miles per hour, don’t forget that Rhode Island requires all of its businesses to submit one important recurring filing: the Annual Report.
Each Annual Report costs $50 and is due between September 1 and November 1 each year, so mark it on your calendar! Don’t miss the deadline or you’ll be charged with a $25 late fee and your LLC could lose its good standing with the state.
And we’ve come to the end. It’s a long process, and not always easy, but the reward is well worth it. If you’ve made it this far, congratulations! Your Rhode Island LLC is ready for takeoff. So go ahead and start with that big sale, promotional campaign, or business deal. Maybe you’ll see Fanny out there in the business world, selling her beautiful floral creations.
Need Help Creating Your LLC?
If you even skimmed this guide to look over the steps, you likely got a sense of how many moving parts there are when starting an LLC. Can you do it all yourself? Absolutely. We have complete confidence in you.
But if you’d rather hand it off to someone else and not have to worry about it again, we recommend using an LLC formation service. This way, you can go about your other business responsibilities with the confidence that everything will be submitted correctly and punctually.
Plus, an LLC formation service can handle maintenance items like Annual Reports, so you can take them off your to-do list. And on top of that, many services also provide a resident agent.
Sound good? Whether you know that you’ll need an LLC service or you’re just exploring your options, take a look at IncFile and Northwest Registered Agent. These are two of the top services available. And you can take our word for it because we’ve done a whole lot of research on the topic.