Do you have questions about creating a LLC? Rhode Island treats LLCs like any other state. We’ll answer your questions about costs, filing requirements, and other considerations for doing business in Rhode Island.
How much does it cost to start a Rhode Island LLC?
The filing fee for your LLC is $150 for the organizational items required. You may incur additional costs if you choose to reserve your LLC name before setting up your business, hire a registered commercial agent rather than a non-commercial agent, or hire a formation company to help you with the initial paperwork .
LLCs are required to file annual returns with the Secretary of State for a $50 filing fee. You may need additional business licenses or permits depending on the nature of your business and if you have a physical location.
What are the Rhode Island LLC Filing Requirements?
The document that makes your LLC official is the Articles of Organization – it is the only document absolutely necessary to start your business. You will need to hire a registered agent and include this information in your articles of association. You can also reserve your business name in advance, but this is not required.
To keep your business operational, you will need to file annual reports with the Rhode Island Secretary of State. If you have employees, you will have to pay state and federal employment taxes.
Are there different types of LLC?
Rhode Island recognizes four types of LLC:
- Domestic SARL
- Foreign LLC
- professional LLC
- Low Profit LLC (L3C)
A domestic LLC is created and operated in one state. Most types of businesses can operate as LLCs except banks and insurance.
A foreign LLC is created in one state and registered to do business in another. For example, if you are starting an LLC in Connecticut and want to serve clients in Rhode Island, you can register as a foreign LLC rather than creating a new business entity.
A professional LLC is made up of members who must be licensed by a state board to provide their services. Common examples are law firms, medical practices, or architectural firms. A PLLC is created the same way as a regular LLC. Rhode Island requires PLLC members to maintain current licenses in addition to annual reports and any other necessary permits.
A low-profit LLC, also known as an L3C, is an LLC with a primarily charitable purpose that overrides the goal of making a profit. The object of this entity cannot be of a political or legislative nature.
How many members should my LLC have?
Your Rhode Island LLC can have as few as one member and as many as you want. There is no maximum number of members.
An LLC with one member is a single member LLC, also known as a “disregarded entity” by the IRS because the entity is “disregarded as separate from the owner” for tax purposes. It is the legally protected equivalent of a sole proprietorship. A multi-member LLC is the equivalent of a partnership.
There are management implications for large LLCs compared to small ones. If you have a single-member LLC, you will likely be responsible for the day-to-day running of the business. This could also be true for a five-member LLC – the number is small enough that the members can make management decisions collectively (known as a “member-run” LLC).
The larger or more complex your LLC, you may want to consider have a “manager-managed” LLC where you designate certain members to act as managers or hire managers outside of the LLC. Trusting a few competent members or managers allows decisions to be made quickly without everyone agreeing. There are still some activities that require member consent, such as changing the operating agreement or purchasing land.
How will my LLC be taxed?
Your LLC can be taxed as a partnership, sole proprietorship, C-corporation or S corporation. If your LLC has only one member, the default tax status should be treated as a sole proprietorship, which means you only pay personal income tax – your LLC pays no taxes. Multi-member LLCs, by default, are taxed as partnerships. Again, members only pay personal income tax and the company pays no tax to Rhode Island Secretary of State. Companies pay their taxes differently.
C corporations pay corporate income tax on profits, and members still pay personal income tax on their earnings from the business. S corporations are special tax classes that shift tax liabilities to shareholders. Members of LLCs taxed as S corporations are considered employees for tax purposes, while they are considered business owners under default tax status. This allows LLCs to get more money out of the business without paying employment taxes.
The bottom line is that you have options. Start with a little research on how tax benefits work For Your Business. Next, consider consulting with a tax professional to determine how you want your LLC to be taxed.