Being an entrepreneur comes with many responsibilities. Since you are the business owner, you get to make big decisions. Some of these can have a long-lasting impact on your company.
Understanding What an LLC Is
One of the factors you need to consider before formally creating your business is the legal structure. For many startups, a limited liability company (LLC) is the most obvious choice. If you think that the characteristics of this business entity structure are beneficial for you, then it may be right for you to form an LLC.
- An LLC does not have to hold annual meetings.
- It does not have to comply with similar operational restrictions that corporations follow.
- There are no restrictions as to the type or number of owners.
- The owners of the LLC, who are known as members, can participate in the management of the company.
- It limits the owners’ personal liability for the company’s obligations.
- It allows the transferring of ownership of the company.
- It allows the business to continue even beyond the owner’s lifetime.
Why Choose Rhode Island
The laws governing businesses depend on the location as well. Each state has its regulations. So, the processes and requirements will vary depending on where you choose to form an LLC.
There are many reasons that make Rhode Island a good option for startups. The Ocean State is home to many big industries. Many companies thrive because of the strong business climate of the state, which is driven by the advantages and incentives that it offers.
- Business Privacy – Unlike other states, Rhode Island does not require LLCs to submit member information. So, your personal information will not be public record.
- Simplicity and Flexibility – LLCs in Rhode Island do not have to submit minutes of their meetings. In fact, the state does not require you to conduct meetings. Additionally, Rhode Island LLCs have much more flexibility in terms of taxation and profit distribution.
- No Franchise Tax – The state does not impose franchise taxes on businesses.
- Individual Income Tax – LLCs are pass-through entities by default. The members report the profits and losses in their individual tax returns. That means you can avoid double taxation. Generally, the state has tax brackets depending on the total taxable income.
- 3.75% – $0 +
- 4.75% – $65,250+
- 5.99% – $148,350+
- Protection from Creditors – Rhode Island LLCs have a certain level of protection against creditors. While other states allow creditors to have courts order foreclosure on an LLC, Rhode Island only allows creditors to seek a charging order that will put a lien on the debtor’s interest. The creditor will receive any of the distributions made to the debtor from the company only if the LLC makes a distribution.
Types of LLCs
If you are thinking of starting a Rhode Island LLC, you will have to understand that there are multiple types you can choose from. Make sure that you select the one that is suitable for the circumstances and activities of your company.
In Terms of Home State
- Domestic – Your LLC is a domestic business entity if you organized it in Rhode Island.
- Foreign – If you already have an LLC but want to expand your business operations to Rhode Island, then you will have to register as a foreign LLC. All companies doing business in Rhode Island that were formed in a different state have to register as a foreign business entity.
In Terms of Management Structure
- Member-Managed – If all members of your LLC decide to share the responsibility of managing the day-to-day operations of your company, then it is a member-managed LLC. That means that every member serves as an agent of the LLC. Everyone has a vote in all business decisions, which require consensus.
- Manager-Managed – LLCs can also choose to appoint one or more members or hire other people to handle the management of the company’s operations. It can be individuals, another LLC, or a corporation. If that is the case, your company is a manager-managed LLC.
In terms of the Number of Members
- Single-Member – If you are the sole owner of the company, then you will automatically be classified as a single-member LLC. In terms of taxes, a single-member LLC is treated as a sole proprietorship. So, it is classified as a disregarded entity by default. You, as the company owner, will have asset protection and will not be personally liable if the company incurs debts and obligations.
- Multi-Member LLC – If you have business partners, then the LLC is a multi-member LLC. In terms of taxes, a multi-member LLC is treated as a partnership. To avoid disagreements among the members, it is highly advisable to have an Operating Agreement. This internal document is where you will define the powers, responsibilities, and rights of each member. You and the other members will report taxes for your income share on your individual tax returns. Since it is an LLC, you will also not be personally liable for any of the company’s debts, liabilities, and judgments.
Special Type of LLC
- Professional – If you are a licensed professional in Rhode Island, then you can structure your company as a professional LLC. This type of LLC is for businesses that provide licensed professional services. Professional LLCs have the same protection as other types of LLCs.
Under state law, professional service is something that any of the following authorized individuals offer:
-
- Architects
- Attorneys-at-law
- Certified and Licensed Public Accountants
- Chiropractors
- Dentists
- Landscape Architects
- Land Surveyors
- Midwives
- Nurse-Midwives
- Opticians
- Optometrists
- Physical Therapists
- Physicians
- Physician Assistants
- Podiatrists
- Professional Engineers
- Psychologists
- Registered Nurses
- Veterinarians
How to Form an LLC in Rhode Island
Now that you know the various types of LLCs in Rhode Island, the next step is for you to properly organize it. You need to complete the registration process that the state has set. This way, you can be sure that your operations are legal.
Generally, you will have to file Articles of Organization with the Secretary of State. You can submit by mail, online, or in-person. The filing fee is $150. Professional LLCs may need to submit additional paperwork. Check out our article on how to form a Rhode Island LLC to learn more.
You also have to make sure that your company complies with state laws. For instance, your company name has to be distinguishable. So, you may have to conduct a name availability search to check if no other business entity in Rhode Island is using the name that you want for your LLC. The state also has naming guidelines for LLCs. You need to include the proper designator and are not allowed to use any term that could confuse your LLC with a government agency.
Additionally, your LLC should appoint a registered agent in Rhode Island. You can select an individual, who is a resident of Rhode Island and at least 18 years old. They should have a physical street address and are available during normal business hours. Another option is for you to hire a commercial registered agent. If you do this, make sure they are authorized to transact in the state. The registered agent will serve as the point of contact of the state. They will receive all legal correspondence on behalf of your LLC.
How DoMyLLC Can Help
Starting your own company can be exciting. However, it can also be challenging. Aside from thinking of ways to introduce your business to your target market, you also need to complete certain state requirements.
If you think you need help in handling the paperwork and filing, contact a reliable company like DoMyLLC. Our team can help make the registration process hassle-free. We can also serve as your registered agent. You can get a personalized solution that will fit your company’s needs. You can also get immediate answers to your queries by using our live support feature. Talk to us now and find out how your Rhode Island company can benefit from our services.