Starting LLC in Rhode Island: Peculiarities & Detailed Manual
Want to start an LLC in Rhode Island? It is a profitable decision for a business, as the state has waived corporate tax in favor of gross corporate income tax. So you’ve decided to start an LLC? Not sure how to initiate the process? To start an LLC in Rhode Island, you need to get ready for several stages.
We’ve prepared a guide for you with just six steps to form your LLC and to get success! You can also refer to the virtual LLC formation service.
Note: ZenBusiness is the best service to file the LLC. You’ll surely appreciate reasonable prices, company values, and other peculiarities.
An Rhode Island LLC: The Notion & Essence
Many Rhode Island business owners choose to start an LLC. So, unlike a corporation, they can take advantage of flexible management. We’re talking about the protection of personal assets that sole proprietorships and general partnerships lack.
The state of Rhode Island puts forward simplified requirements for registration and maintenance of LLC and invites business owners to choose the type of taxation. Do you still have doubts about the LLC?
6 Stages to Form an LLC Correctly
Stage №1: Choose Your LLC Name
The LLC name is a significant aspect, as it is the name of your company that makes the first and strongest impression on the audience of your potential customers! The name must be different from existing company names and must meet Rhode Island’s regulatory requirements. Now get started with the following aspects.
LLC name in terms of jurisdiction
The State of Rhode Island obliges business owners to include the abbreviation DDS or the phrase – limited liability company in the name. Please note that the terms corporation or registered are prohibited. In addition, you cannot use the designations of other forms of business: banks or law firms.
Take care of the explanations
You must include in the title an explanation of the nature of your business. For example, if you are engaged in the computers’ repairing, write in the LLC title – computer wizard. If you have any values or principles, also indicate this. For example, if you are farming, use the term natural, nitrate-free, etc.
So, you need to get a little creative and fully comply with Rhode Island’s legal requirements.
Stage №2: Hire a Registered Agent
A registered agent is called a statutory agent in Rhode Island and will help you to start an LLC. The agent can be an Rhode Island resident, natural or legal attorney responsible for sending and receiving legal documentation on behalf of the future company. A company representative can also be an employee of the company or its owner. The State of Rhode Island notifies:
Every local or foreign LLC registered in Rhode Island must appoint a resident agent who assumes the responsibility of a legal representative on behalf of the business entity in question. It must be either (1) an individual, a resident of the island, (2) a company (corporation, limited partnership, or LLC). In either case, they should be legally qualified to run business in the state.
A registered agent guarantees an excellent reputation for your Rhode Island LLC. Also, if your business gets worse, Rhode Island can take legal action against it without notifying you. The registered agent will always receive appropriate notification and will be able to take timely measures to protect your interests as an attorney.
You should apply to the online service to get started a business in compliance with all regulations and requirements. So, you will have the opportunity to filter spam and protect your personal and contact information. If you use the ZenBusiness and Northwest Registered Agent to form an LLC, you will receive the free services of a registered agent.
Stage №3: Applying for Registration
To register a business in Rhode Island, you must file the Articles of Association with the Rhode Island State Secretariat. If you are anxious about your LLC formation, you can submit your documents for pre-processing, which will allow the Secretary of State’s office to advise you of the eligibility. It can be a good option if you get started for the first time in an LLC without consulting an attorney. Be sure to provide:
- The desired name of your business.
- Personal and contact details of the registered agent.
- Business management form.
- Personal and contact details of the manager of your company.
- Signature of the applicant and registered agent.
- Date of application submission.
You can either submit papers via an account created here or send them to the Secretary of State per post.
The fee to start an LLC: The state of Rhode Island levies a $150 charge for establishing an LLC.
Processing Time: The state of Rhode Island handles and sends back mailed-in documents in 2-4 business days. Alternatively, you have an option of filing forms online; in that scenario, you will have them back within 1-2 business days. It’s worth noting that processing will not begin until you have sent all papers needed and duly filled.
Stage №4: The Operating Agreement Background
While an operating agreement is not binding in Rhode Island, creating one could significantly improve the company’s climate. An operating agreement is a document that describes the structure of a project, the way it works, the rights and obligations of each partner.
This document reflects the consistency of partners and thereby reduces the chance of controversy and disputes. Therefore, it is significant that all members of the future LLC carefully read this document before joining the company.
An attorney can help draw up an operating agreement and determine the way income and liabilities will be distributed among the owners of your LLC. You will find more information about the operating agreement here. Prepare to enter the following information:
- Names of all participants.
- The rights and obligations of each of the listed participants.
- Description of procedures for voting or resolving differences between members.
- Regulations on the financial share of participation of LLC members.
- Description of the way you’re going to manage the LLC.
So, do not neglect this stage of LLC formation. It largely guarantees your safety and the observance of your rights by all members of the business project.
Stage №5: Tax Compliance
To conduct a business that you want to register as an LLC successfully, you need to comply with several tax requirements at various levels.
Requirements of Federal Significance
Does your LLC involve multiple owners? Then you need to take care of the EIN! The EIN, or Employer Identification Number, is a unique nine-digit number assigned by the IRS to US corporations. This number must be obtained by all business owners under whose leadership the hired employees work. A business owner can obtain an EIN from the IRS in person or by mail.
Your state’s cess requirements
The state taxes charged from LLC depend on the nature of the business entities. With a pass-through enterprise (generally, either a sole proprietorship or partnership), incomes taxes are calculated with reference to the individual tax returns.
Contrariwise, LLCs registered as a corporation should pay the state’s corporate income taxes. The current percentage is 7%. More detailed information on corporate taxation as well as necessary forms is available here.
LLCs, which operate in retail sales, pay respective streamlines sales tax to the state. Currently, it amounts to 7%. More points on sales taxes are listed here.
Besides, you have to cover staff-related taxes as well. LLCs owners are required to arrange withholding taxes paid. These are extracted straight from your staff’s wages and then forwarded to the state. Detailed instructions on withholding taxes are given here.
In the state of Rhode Island, entrepreneurs also contribute to the state’s unemployment insurance by making regular payments. For additional information consult the Rhode Island Division of Taxation.
Besides generally applicable taxes, Rhode Island may also charge you with industry-related fees. For instance, specific taxes are levied on LLCs working with propriety or selling alcoholic beverages. You will access a guide on managing state’s business taxes here.
Local Tax Business Demands
Running a business in some specific areas of the state may result in paying extra – you will have to cover local taxes on top of the fees you have already contributed to the state. Rhode Island is devoid of any local sales fees; however, you will be charged with property-related taxes all over the state. We advise you to consult a local government office so you won’t forget any local obligations.
Stage №6: Getting Business Licenses & Permits
LLCs owners do not need to get a statewide general business license to run a business in Rhode Island. Still, the federal government prescribes entrepreneurs to obtain permits specific to distinct business branches. We recommend you turn to Small Business Association’s listings to check federally-regulated industries demanding licensure.
Certain industries not only collect additional taxes but require specific licenses. Rhode Island offers hundreds of permits of any kind so you will find the one applicable to your LLC. You can browse the state database of business permits, available here. Please note that a local government may ask for specific licenses as well.
Other Stages for Business Owners After LLC Registration
After completing the six mandatory steps towards starting an LLC, you need to take care of the following.
Opening a business bank account
Separate your personal and LLC accounts. Thus, you will be sure of the safety of your personal and financial data. Besides, you won’t have any hassle when filing your charge returns. Your EIN will help you open a business account quickly, no matter what you choose a bank or credit union.
Business Insurance
All owners of companies/corporations, regardless of their form of management that attracts employees, must go through the compensation insurance procedure. All basic and detailed information is available with the Rhode Island Bureau of Workers’ Compensation.
This policy aims to protect the rights of workers who are injured at work and unable to work. It will not be superfluous to get a civil liability insurance policy, as well as pay attention to some other types of insurance.
Income reporting
It is obligatory to account for the profits you have made by filing a specific report every fiscal year. Please note that you are to send a report on your income even if your LLC bears losses in the course of the reported time. Income reporting is just what it sounds like, namely, reporting the profit you made from your business. The rules and fees dedicated to income reporting in Rhode Island are listed here.
Referring to the services of a qualified accountant
Rhode Island obliges all LLCs to present an annual report to the state. Business owners can file their report online here or use the pdf and deliver it per post. Be aware you must cover a $50 fee. If your report comes delayed, you will be charged an extra $25. An annual report must contain all pertinent information on your business and its development over the reported year.