How to start an LLC in Rhode Island
When starting a new company, there are dozens of important tasks to complete. Few are more important, however than forming the business as a legal entity! Many entrepreneurs choose the limited liability company (LLC) structure, as it provides good liability protection for owners, and is a bit easier to set up and maintain than a corporation or S-corp. If you’re looking to set up an LLC in Rhode Island, this article is for you.
Rhode Island entrepreneurs will need to work with the Rhode Island Secretary of State to file the Articles of Organization and complete a few other steps. There is a mandatory filing fee of $150, paid directly to Rhode Island. The process of starting a RI LLC is explained step-by-step below.
Consider using an LLC formation service
Before you get started, consider this: You can save a substantial amount of time (and hassle) by using a professional LLC formation service.
There are several companies operating in Rhode Island that make it simple to set up a Rhode Island LLC. Essentially, you work directly with the formation company, instead of the Secretary of State. The company guides you through the entire process, ensuring that everything is done accurately and efficiently.
Two great options for this service are Northwest Registered Agent and ZenBusiness. Of these two, ZenBusiness is cheaper (the basic plan is just $49), while Northwest is famous for exceptional service.
If you don’t use a service, you’ll simply need to put in more effort on your own. The steps below explain what you’ll need to do to start a RI limited liability company.
Name your new company
Choosing a name for your new business is the next step. You will want to take your time with this process, and ensure that you pick an appropriate name that is relevant to your business, and hopefully memorable for your customers or clients.
There are also a few guidelines from Rhode Island relating to business names. For instance, a newly registered LLC name must be distinguishable/unique from all existing business names in the state. You can complete a Rhode Island business entity name search to see if your desired name is distinguishable from names that are already taken.
In addition to this, it is required that your business name ends in “LLC”, or “L.L.C.”, or “Limited Liability Company”. So you can register “ABC, LLC”, but not “ABC” or “ABC Plumbing”.
Finally, there are a handful of words or phrases that are restricted, and either cannot be used at all, or require additional permission. This includes government-related words like “FBI”, as well as regulated financial industry terms like “trust” or “banking”.
Once you have found a name that meets the requirements, you can move on to step #3 below.
Using a Fictitious Business Name in Rhode Island
Businesses in Rhode Island can use what is called a “fictitious business name”, otherwise known as a doing business as or DBA name. You can register a fictitious business name with Rhode Island, which allows you to do business under this new name.
There are several reasons why this is useful. For branding purposes, it’s quite helpful, as it allows you to legally operate under multiple names. And if you expand your business past its initial scope, you can use a fictitious name to essentially market yourself under a different business name, without having to actually form a new LLC or business entity.
Appoint a Resident Agent
Rhode Island requires that all LLCs in the state appoint what is called a Resident Agent. Note that in most other states, this is referred to as a Registered Agent.
The Resident Agent must be a resident of Rhode Island; OR, a company licensed to do business in the state. The agent, once appointed, becomes responsible for receiving important tax forms, documents, legal notices, etc. on behalf of the business. The resident agent’s address will become the primary mailing address for the business entity.
You will need to select a resident agent before you file any paperwork with the state. You have a few choices here: You can be your own resident agent, and simply use your office address or home address. Or you could appoint an employee.
A third option is to use a professional Resident Agent service in Rhode Island. These companies – like Northwest Registered Agent or ZenBusiness – can serve as your agent for a small yearly fee (usually around $150 per year). This ensures that everything is handled correctly and that documents won’t be missed even if the business owner is on vacation.
Create an operating agreement
Note: This step is optional, but recommended.
Operating agreements are important documents for most companies. However, they are internal documents, which means that they are simply kept on file with the business itself. Because you don’t need to submit the agreement anywhere, this is not a required step – but most businesses should still complete it.
An operating agreement is a signed agreement between business participants/shareholders that lays out important operating procedures, as well as ownership structure. For any company with multiple stakeholders, this is vital, because it can prevent ownership disputes in the future.
Services like ZenBusiness provide detailed templates that you can use to draft an operating agreement. You could also use a local attorney or business law expert.
File LLC Articles of Organization
The Rhode Island LLC Articles of Organization must be filed with the state government in order to move forward with forming the business entity. This document can be submitted through the mail, online, or in person. The filing fee is $150 and is non-refundable.
To file online
Use the RI Business Services Online Filing System to file the document online. Pay the $150 filing fee with a credit or debit card.
To file by mail
Fill out the RI Articles of Organization for Domestic Limited Liability Company. Include a check or money order payable to the Rhode Island Secretary of State. Mail the documents to:
Division of Business Services
148 W. River Street
Providence, RI 02904
Now, once the documents have been submitted, you will need to wait for Rhode Island to process everything. This typically takes 5-15 business days, depending on the current backlog.
Apply for an EIN
Most Rhode Island LLCs should register for an EIN (employer identification number). This is a federal tax ID number issued by the IRS – so it has nothing to do with Rhode Island. That said, almost every business should have one, and it is a requirement if you plan to hire employees.
You can apply for an EIN online with the IRS. The process takes just a few minutes and is free. Once your EIN is issued, you can open a business bank account, hire employees, and conduct other important business activities.
Apply for business licenses & permits
The actual formation of your LLC is just the beginning; there are various other requirements that must be met before you can operate legally in Rhode Island. This includes the need to obtain licenses and/or permits on the state, federal, and even local (city/county) levels.
The permits your business needs will vary depending on what type of business you are running, and how regulated the industry is. Local requirements will also depend on where the business is located.
On the federal level, permits may be required for regulated business activities, such as energy, agriculture, finance, etc.
On the state level, professional licenses may be required for certain professions. The state may also require specific business licenses or specialty permits like a liquor license. You will also need to register for employer taxes if you plan to hire employees, as well as a sales tax permit if you plan to sell taxable goods/services.
And on the local level, you will likely need a business license. For example, Providence requires all businesses to register for a local business license before operating in the city.
There may be other requirements, as well. Be sure to look into all the details before proceeding.
Keep your business in good standing
Even long after your business has been formed, there are a variety of important ongoing compliance tasks to take care of. This includes activities such as permit renewals, annual tax filings, reports, and more. You will need to ensure that you satisfy all of Rhode Island’s requirements, as well as requirements on the federal level with the IRS, and requirements from the local jurisdictions (counties and cities) that you operate in.
It’s difficult to list all the requirements here, simply because they vary based on the type of business and its location(s). However, here are some of the most common requirements for most businesses:
Rhode Island Annual Report – due annually for all LLCs in the state
Payroll tax/employer tax returns (state and federal)
Local tax returns
Sales tax returns
Federal business taxes and income taxes
Federal quarterly tax returns
Business license renewals
It’s important to start off on the right foot here so that you can stay on track with all your responsibilities. It’s wise to make a list – and mark key dates on your calendar – so that you don’t miss anything.
Using a service like ZenBusiness can also help with ongoing compliance needs. The service can remind you of key due dates, and can also help with the actual filing of certain reports, such as the annual report. Whether you use a service or do it yourself, we recommend taking the time now to research and understand all the requirements.
Open a business checking account
It is very important for business owners to keep their accounting efforts clean and simple, and to separate business and personal expenses. The easiest way to do this is to open a separate bank account for your business – and to use it exclusively for business purposes.
You can open an account at most financial institutions. You will want to call ahead to ask what documents they need, but at a minimum, you will likely need your EIN, business license, and of course a small opening deposit.
While you’re at it, you may also wish to look into business credit cards, business insurance, and other important financial products for your company.