Once you decide to form a Rhode Island LLC, you have to be ready to make big decisions. The ones that you make at the early stages can have a long-lasting impact on your company. Two of the most important factors you have to consider are the business entity structure and location.
Why Form a Rhode Island LLC
A popular business entity structure for startups is the limited liability company (LLC). Whether you are the sole owner or have business partners, this structure may be right for you.
Before you find out how to set up an LLC, make sure you are 100% sure about this structure. Here are some of the benefits that you can get from this type of company:
- Limited Liability – Unlike a sole proprietorship or partnership, an LLC is considered a separate entity. That means that the business debts will not affect the owners’ assets. LLCs will be responsible for their actions and debts. While the owners, who are called members, may end up losing their investment in the company, their personal assets are protected against creditors.
- Less Paperwork – While a corporation also offers limited liability protection, it requires you to observe certain formalities and requirements. If you think these do not suit your business, then an Rhode Island LLC may be right for you. You do not have to hold annual shareholders meetings and maintain extensive records.
- Tax Advantages – In terms of taxation, LLCs enjoy flexibility. By default, the Internal Revenue Service (IRS) treats an LLC as a sole proprietorship or partnership. That means it is a pass-through entity. You do not have to worry about taxes at the corporate level. Instead, the members report profits and losses on their personal tax returns. LLCs also have the freedom to elect to be classified as a C corporation or S corporation if you think that suits your company more.
- Ownership – There is no restriction as to the number and type of LLC members. A single owner can form an LLC. Owners do not have to be residents. A company can also serve as a member.
- Management – LLCs do not have to elect officers and have a board of directors. You can also choose how to run your business. You can have a manager-managed or member-managed LLC, depending on what suits your company. Read this article to learn more about the LLC management structure.
- Profit Distribution – LLCs can select the way they will distribute profits to the members. You do not have to split them equally or according to the percentage of ownership. The distribution will depend on the agreement of the members.
Why Rhode Island
State laws governing LLCs vary. For some people, the state where they reside is the most obvious option. However, that is not a requirement. You can choose a state that you think offers you the most benefits. The process and fees to set up an LLC will vary from state to state.
Rhode Island is among the smallest states in the country. However, it is home to different big industries. A lot of small businesses also thrive due to the strong business climate that is driven by the various incentives and programs of the state.
Here are some of the programs that Rhode Island offers:
- Small Business Capital Investment Tax Incentives
- Disabled Access Credit for Small Businesses
- Small Business Loan Program
- Innovation Network Matching Grants
These incentives aim to help businesses in overcoming financing difficulties. Find out if your company qualifies for any of them to get assistance. Not only can they help to get started, but it can also promote expansion.
Aside from the supportive business community, the quality of life in Rhode Island is good. Many companies choose the state because it offers a low cost of living and labor compared to other major cities like New York City and Boston.
Rhode Island’s location can also be advantageous for businesses. Like other major commercial centers, the state offers easy access to leading companies. Transportation is also accessible. If you want to reach markets in Boston, you can get there in under 45 minutes. You can also get to New York City in less than 3 hours. There are also nearby shipping terminals and airports that allow you easy access to international markets.
Here are other benefits of having a Rhode Island LLC:
- Unlike in other states, Rhode Island gives you a certain level of privacy. LLCs do not have to submit personal information about their members.
- Rhode Island does not have business franchise taxes.
- The state offers a certain level of protection on LLCs against creditors. Generally, creditors can only seek a charging order to put a lien on the interest of the debtor. They cannot have courts order the foreclosure of an LLC.
Forming a Rhode Island LLC
Once you are sure that forming a Rhode Island LLC is right for you, the next step is to learn how to set up an LLC. You have to familiarize yourself with the requirements, fees, and processes that the state has set.
Here is a simple step-by-step guide:
- Choose the name of your LLC and follow the naming guidelines of the state.
- Select the right management structure.
- Appoint your company’s registered agent.
- File Articles of Organization with the Department of State and pay the $150 filing fee.
- Create an LLC operating agreement.
- Comply with other obligations.
If you want to better understand the process in the state, read our comprehensive guide.
As a business owner, formally registering your company is only one of the many tasks you need to handle. With the multiple steps and requirements involved, you may have to set aside time for this process.
If you think that the multi-step process of forming a Rhode Island LLC is a bit much for you, you can rely on a third-party organization like DoMyLLC. Our team of experts can prepare and file the necessary paperwork for you. We can serve as your registered agent. DoMyLLC can also help make sure that your LLC remains compliant with state obligations.
Business Filing Section