[Narrator]- How to form an LLC in Rhode Island.
Rhode Island is an excellent place to form a new LLC.
It has the sixth best access to funding in the nation,
and boasts high rates of entrepreneurship.
Every state has slightly different requirements
for forming an LLC.
Follow along closely to learn the required steps
for creating your own limited liability company
in the state of Rhode Island.
(light piano music)
There are two ways to form an LLC in Rhode Island.
You can form one yourself, or you can hire
a service to do it for you.
Let's start by looking at the five basic requirements
to form an LLC in Rhode Island on your own.
You can also find these steps and more detail
on our website, linked in the description below.
One, name your LLC.
Every state has its own rules about what kind of
names are allowed for LLC's.
In general, you will need to observe these
naming guildelines.
Your name must include the phrase limited liability
company, or one of its abbreviations, LLC or L.L.C
with a period following each letter.
Restricted words such as bank, attorney, law office,
et cetera, may require additional paperwork,
and may also need a licensed professional to be
part of the LLC.
Your name cannot include words that could confuse
your LLC with a government agency, such as FBI,
treasury, state department, et cetera.
You cannot use a name that has already been registered.
To see if your name is available in your state,
you'll need to do a name search.
This free service is available on your state's
Secretary of State website.
Check out our free guide for finding the direct
link to your state.
We also recommend that you check to see if your
business name is available as a web domain.
Even if you don't plan to make a business website today,
you may want to buy the URL in order to prevent
others from acquiring it.
Two, choose a registered agent.
Rhode Island requires that you nominate a registered
agent for your LLC, who is your businesses point
of contact with the state.
The registered agent can be an individual within
the company, including yourself, or you can hire
a professional service authorized to do
business in Rhode Island.
They will send and receive legal papers on your behalf.
These documents include official correspondence like
legal summons and document filings, which your registered
agent will receive and forward to you.
Your registered agent will help remind you to file
the necessary reports.
Failure to properly maintain your LLC can result
in fines and dissolution, so this assistance is valuable.
Three, file the articles of organization.
To register your Rhode Island LLC, you will need
to file the articles of organization with the
Rhode Island Secretary of State.
This can be done online, by mail, or in person.
You will also need to state whether the LLC will be
member-managed, or manager-managed.
Member-managed means all members of the LLC
manage the company.
This is good for small organizations
where everyone is involved in the day-to-day operations.
The second option is manager-managed, where individuals
are appointed to manage the LLC.
This is appropriate for larger organizations
where not everyone is involved in the day-to-day
affairs of the business.
Four, create an operating agreement.
Although not every state requires it,
you should always create an operating agreement
to establish ownership terms and member roles
for your LLC.
This foundational document is the core of your LLC,
and will help you maintain your organization,
as well as further establish your LLC as a
separate, legal entity.
There are six main sections of an operating agreement.
Organization outlines when and where the company
was created, who the members are,
and how the ownership is structured.
Management and voting addresses how the company is
managed, as well as how the members vote.
Capital contributions covers which members financially
support the LLC, and how more funds will be
raised in the future.
Distributions outlines how the company's profits
and losses are shared among members.
Membership changes describes the process for
adding or removing members, as well as if, and when
members can transfer their ownership shares.
And, dissolution, which explains the circumstances
in which the LLC may be dissolved.
An operating agreement is an internal document.
It does not need to be filed with the state,
however, it should be updated every time there is
a change in membership or management at the company.
You can download a free sample operating agreement,
or create a custom one using our free operating agreement
tool at www.howtostartanllc.com.
Five, obtain an EIN.
Lastly, you'll need to get an employer identification
number, or EIN from the IRS.
Also known as a federal tax identification number,
your EIN is like a social security number for your LLC,
and is how the IRS tracks your business for tax purposes.
An EIN is also necessary to open a business banking account,
and legally hire employees.
EIN's are free of charge, and can be obtained from the IRS
online, or through the mail.
And, with that, you'll have formed a Rhode Island LLC
on your own.
Option two, hire a professional service.
The second way to create a Rhode Island LLC
is to hire a professional service to create your
LLC for you.
Hiring a professional service to file your forms
and act as your registered agent for the LLC,
will cost you an additional $50 to $150 dollars.
However, there are several benefits to working with a pro.
A hired registered agent helps with getting your reports
filed on time, helps you stay organized by keeping
your business mail separate,
and is available at all regular business hours to accept
official mail and legal papers on your LLC's behalf.
A final, and important additional benefit of using a
service is privacy.
A professional service will provide a level
of privacy by withholding your personal name
and home address from the LLC's contact information.
There are many reasons why you might not want
your personal information easily accessible
and associated with your business.
Hiring a professional LLC formation service
is an easy way to accomplish this.
Now that you have seen the different requirements
and ways you can form an LLC in Rhode Island,
visit our site and take some time to research
your options, and establish a solid foundation
for your business activities.
Click on the links in the description below
to research the top five professional formation services,
or get more information on how to form a Rhode Island
LLC on your own.
Now you know all the steps to form an LLC in your state.
For a more detailed guide, go to www.howtostartanllc.com.
You can also create an operating agreement
and use our business plan tool free of charge.
Give the video a like if you found it useful,
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And, if you have questions or encounter any roadblocks,
leave a comment below.
Good luck on starting your small business.
(gentle music)