How to Start Your Own LLC in Rhode Island

The LLC is known to distance your personal assets and your business debts or lawsuits, implying that your assets are usually not at stake in case the business has to overcome its legal or financial issues. Furthermore, LLCs are normally pass through to tax structure hence profits and losses are transferred to the personal tax returns of those who own the business and this eliminates the possibility of taxation on the same profit. The LLCs of Rhode Island are also flexible in terms of ownership, control, and taxation, hence suitable to the small and medium-sized business.

This business handbook will take you through all the procedures to establish an LLC in Rhode Island, such as naming, registration, taxes, licenses, and maintenance.

1. Select a Name of Your Rhode Island LLC

Your brand identity and first impression is your business name. It must be visible, easy to recall and must be in line with the Rhode Island requirements.

Name ideas LLC: Begin by defining your business idea. Be sure of what you are doing and who you are addressing. Get creative names, and seek the advice of trusted friends or people. Search competitors or the likes online to create confusion. Another factor is the availability of domain name in case you intend to have an online presence. Although online business name generators may help create an idea, your judgment and knowledge of your brand are inexplicable.

It would be prudent to visit US patent and trademark office (USPTO) to confirm that the name is not federally trademarked to avoid national fights.

DBA / Fictitious Business Naming

In case you intend to work under a different name than your LLC, you will need to register DBA (also known as fictitious business name in Rhode Island). It would be found handy when you widen product lines or brands. As an example, an LLC (JJ Waffles LLC) may apply to register the name "JJ Muffins DBA.

A fictitious name registration is performed by filing with the Secretary of State Form 624B with a filing fee of $50. This also enables you to open a business bank account using DBA name, and finances are organized.

2. Appoint a Registered Agent

A registered agent is an individual or a company that is authorized to accept official legal and tax documents in place of your LLC. In Rhode Island, it is required to have one in every LLC.

A registered agent must:

• Be at least 18 years old
• Physically located in Rhode Island.
• Be present at normal time of business.
• Be incorporated to do business in Rhode Island in case the agent is a business entity.

To keep it in check and make sure that no unwanted problems appear, a number of LLC owners contract professional registered agent services to make sure that they keep the appropriate records and maintain privacy and reliability in the management of the official documents. When you are your own agent, then you have to be present in the address listed at all the business hours.

3. Decide on Your Management Structure

Rhode Island LLCs may be designed as either member-managed or manager-managed and the selection of the structure should depend on the degree at which the owners wish to be involved in the day to day operations.

Member-managed LLC

Everybody is involved in the day-to-day activities and decision-making. This structure is usually prevalent among small businesses in which owners are actively participating.

Manager-managed LLC

Members elect one or more managers to manage the company. The members can be passive and the managers can be members or external people. This is appropriate in LLCs having more than one member, whereby, some would rather avoid day to day operations.

In case the management type is not defined in the Articles of Organization, Rhode Island will use the default member-managed.

4. Submit Articles of Organization

The official document to form your LLC in Rhode Island is the Articles of Organization which is the legal form of forming your LLC. Submit it to the department of state- Division of business services either online or via mail.

The Articles must include:

• LLC name
• Principal office address
• Registered office and address of the agent.
• Provisions (if any)
• Member and/or management names.
• Effective date

Department of State Contact:
The location of the restaurant is 148 W. River St., Providence, RI 02904.
Phone: (401) 222-3040
Internet: Rhode Island State Department of State.

5. Create an Operating Agreement

An Operating Agreement is a legal document, which defines the way your LLC will function, ownership, management, and financial. Rhode Island does not mandate it, but its presence is very desirable even in single-member LLCs.

Essentials of an Operating Agreement

• LLC name and primary office
• Duration of the LLC
• Information of registered agents.
• Member and manager details
• Suffrage and organization of government.
• Distribution of profit and loss.
• Member addition/ removal procedures.
• Policies of dispute resolution and amendment.
• Record-keeping requirements

The templates can be found online, however, hiring an attorney is the most effective way of making sure that your agreement complies with the law and safeguards your interest.

6. Get Employer Identification Number (EIN)

EIN is a federal tax ID which is applied by IRS to identify your business. It is mandatory when your LLC employs the services of workers or there are more than two members in your LLC.

There is no fee associated with applications and they can be done online on the IRS site. The responsible party will also require his/her SSN or ITIN which is the individual in charge of the funds and decisions made by the entity.

7. Apply to obtain Business Licenses and Permits

The state of Rhode Island does not mandate a general statewide business license, however, there are certain industries that mandate a federal, state, or local permit or licenses.

Examples include:

• Licenses of contractors, architects or accountants.
• Childcare, food service or healthcare permits (OSHA).
• Seller's permit Sales tax license (seller) of taxable goods or services.
• permits Building, zoning, fire, and sign permits.

It can be fined, closed down or sued due to operating without necessary licenses. A business attorney or professional service will help you stay in the right track.

8. Determine Your Tax Status

The default definition of LLC is that of a pass-through entity. It implies that the personal tax returns of the members include the profits and losses.

Default Tax Treatment

• Single-member LLC: Income is taxed similarly as sole proprietorship; the income is declared on the Schedule C and is liable to self-employment tax.
• Multi-member LLC: The tax structure is similar to partnership; it prepares the Form 1065 and reports their share of the profits/loss on the personal returns, which subjects them to self-employment taxes on that amount.

Elections as Optional Corporate Tax

LLC has the option to be taxed in either a C-Corp or S-Corp:

• C-Corp: The company has to pay corporate taxes (21%), and the dividends paid to the members are treated as taxable income once more. Dividends are not subjected to self-employment tax by the members.
• S-Corp: Pass-through taxation will still be a thing, however, members will be required to make a reasonable salary that would be liable to payroll taxes. Any other profits that are given are not taxed as self-employment and may save on taxes to high-income LLCs.

9. Open Business Bank Account and Get Insurance

It is important to separate personal and business finances to safeguard your liability as well as ease accounting. Your EIN, Articles of Organization and Operating Agreement are usually required by most banks.

Business credit card can be useful in creating credit in the business and keeping the startup costs in control.

Business Insurance

Business protection secures your investment. Based on your business, you will require:

• General liability (bodily injury property damage)
• Malpractice / professional errors and omissions (E&O) insurance.
• Workers' compensation
• Commercial auto insurance, property, or equipment insurance.
• Key coverage bundling policy of the business owner (BOP).

10. Keep LLC Books and prepare Annual Reports

Maintain copies of documents of LLC formation, operating agreements, contracts, and financial/legal records in a safe place.

Rhode Island places an LLC on annual reporting, which should be submitted on May 1st of every year, and will have a fee of 50 dollars. Registration maintains good standing of your LLC and makes the state up-to-date.

Rhode Island LLC FAQs