LLC in RI: Everything You Need to Know
An LLC in RI is easy to form and has requirements specific to Rhode Island.3 min read
An LLC in RI is easy to form and has requirements specific to Rhode Island. The LLC can be operated as a business or to hold assets such as aircraft, real estate, boats, and vehicles.
What Is a Limited Liability Company?
A limited liability company (LLC) is a legal structure combining portions of a corporation with portions of a partnership. To form an LLC in Rhode Island, it's important to understand the legal requirements and procedures necessary to form the LLC. Close attention must be paid to common business practices and tax obligations put in place by the Secretary of State of Rhode Island.
An LLC may have one owner, referred to as a member, or multiple members. Each member has an ownership interest in the LLC, which includes their share of the profits and losses, voting rights, management roles, and assets. An LLC's biggest advantage is in the event the LLC suffers a financial setback or the company is subject to a lawsuit, the LLC is responsible for making any payments if the suit is lost. The individual members aren't liable.
Forming a Rhode Island LLC
When forming an LLC, the first step is choosing a name and doing a search to be sure the name is not already in use. The end of the business name must contain either "LLC" or "L.L.C." The name cannot use the word "Inc.," "Corp," "Incorporated," or "Corporation." It must also be distinguishable from other Rhode Island registered businesses.
Search the Rhode Island Secretary of State entity search. If you find that the name is available, you can reserve it using Form 620 for 120 days and paying a $50 fee.
A resident agent may be an individual, a business, or yourself taking on the responsibility of accepting mail and legal paperwork on behalf of the LLC, such as tax notices, summons, subpoenas, and complaints. The resident agent, also known as a registered agent, must have an actual Rhode Island street address and be available during business hours of 9 a.m. to 5 p.m.
Articles of Organization
Anyone registering an LLC must complete and submit to the Secretary of State Division of Business Services their Articles of Organization plus a filing fee. The Articles of Organization document officially forms an LLC. The articles may be submitted in one of three ways:
- Via the United States Postal Service along with a $150 fee. The approval process takes approximately 2-3 days.
- Online filing also costs $150. It can take 1 to 2 days.
- In person. This takes a few hours for approval and requires the same $150 filing fee.
An operating agreement is an internal document between the LLC members that lays out several things. This includes:
- How the company will be operated.
- How it will be managed financially.
- How taxes are paid.
- How profits and losses are allocated to each member.
- Member names and their percentage of ownership in the LLC.
Rhode Island does not require an LLC to create an operating agreement but it is recommended especially if the LLC has more than one member. It serves as a working document that is meant to be updated as the business grows and changes take place.
There are several benefits for an LLC to have an operating agreement in place. If you are looking for financial assistance from a lender, purchasing real estate, in need of professional services such as a lawyer, or attempting to attract investors or partners, each will most likely ask to see the LLCs operating agreement.
Also, if the LLC is party to a legal action, the court may request to see the operating agreement. The agreement shows that the company is well-organized when it comes to handling issues that arise and pertain to the business.
Employer Identification Number
An Employer Identification Number is an identifier when filing taxes and available for free from the Internal Revenue Service. The LLC does not have to have employees. It allows a separate bank account to be opened in the LLC's name, payment of payroll, if applicable, and for applications for permits and licenses.
An annual report must be filed each year to keep the LLC in compliance with the Secretary of State. It is filed between September 1 and November 1. This can be filed online or by mail with a $50 filing fee.
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