Articles of Organization

The formation of a Rhode Island LLC means that you have to file articles of organization (along with the $150 filing fee) with the Corporations Division of the Rhode Island Secretary of State's office. The articles, which must be signed by at least two persons organizing the LLC, must include:

• The LLC's name
• The duration of the LLC and, if not perpetual, the date of its dissolution
• The LLC's business purpose
• A statement as to whether the LLC is intended to be treated as a partnership, corporation, or separate entity for federal income tax purposes
• The name and address of the LLC's initial registered agent
• The name and address of the LLC's principal office if it has been determined
• A statement as to whether the LLC will be manager-managed or member-managed
• If manager-managed, the name and address of each manager

Your new LLC is officially deemed "organized" after the LLC's articles of organization and an exact copy are delivered to the Corporations Division with the filing fee. The filed document must be signed by one or more persons, who are not required to be a member.

A certificate of organization will be issued by the state and delivered, along with the conformed copy, to the LLC's representative by the state. The original articles of organization will be filed with the Secretary of State.

Registered Agent and Office

All Rhode Island LLCs must continuously maintain a registered agent in the state-the person or office designated to receive official state legal and administrative correspondence. An LLC registered agent may be an individual who resides in Rhode Island or a business entity authorized to conduct business in the state. The registered agent's business office must be the same as the corporation's registered office.

The registered office may be-but doesn't have to be-the LLC's place of business.

Operating Agreement

The LLC's next most critical document is its operating agreement. Having an operating agreement is not officially required by the state, but it's a very important internal document that sets forth how the LLC will run. The operating agreement should list the LLC's members, how much each one has invested, how any profits will be distributed, and how much relative weight each member has when voting.

The operating agreement can also include requirements for meetings (notice, quorum, voting rules, etc.) and similar functions, but it doesn't have to. Often, however, it does include operating constraints and allowances that are already contained in state law and regulations. It also may contain constraints on the members' authority to change or repeal the operating agreement or any provision thereof.

Membership in the LLC

A Rhode Island LLC must have at least one member, who may be a natural person or a business entity. Members may acquire an interest in the LLC either in proportion to their contribution or in some other way that is in accordance with the LLC's operating agreement, such as by majority vote of the membership.

The contributions of a member to the LLC may consist of cash, property (tangible or intangible), services rendered, or a promissory note or other binding obligation to contribute cash or property or to perform services.

An LLC member may not resign except in accordance with the operating agreement or articles of organization. Upon withdrawal or resignation, a former member is not entitled to receive any distribution, is only entitled to the same rights as an assignee of interest, and is liable for damages caused by the withdrawal.

Ongoing Requirements

Rhode Island LLCs must submit an annual report to the state secretary of state that includes:

• The name and address of the LLC's principal office
• The state or other jurisdiction under the laws of which it is formed
• The name and address of its resident agent
• The LLC's mailing address of the LLC
• The name or title of a person to whom communications may be directed
• A brief statement of the character of the LLC's business
• If the LLC is manager-managed, the name and address of all managers

Every Rhode Island LLC must also keep the following records open to inspection at its office:

• The name and business address of each member and manager
• The capital values and the relative voting rights of the members
• A copy of the articles of organization and any restatements or amendments
• Executed copies of any relevant powers of attorney
• Copies of the LLC's federal, state, and local income tax returns for the past five years
• Copies of the written operating agreement
• Any written records of proceedings of the members or managers
• Copies of any financial statements for the past five years

Dissolution

A Rhode Island LLC is dissolved when any one of the following events occurs:

• The expiration of the LLC's duration as stated in the articles of organization
• An event specified in the articles or operating agreement
• By unanimous action of the members
• The death, retirement, resignation, expulsion, bankruptcy, or dissolution of a member, unless otherwise provided in the articles or operating agreement
• An event that ends the membership of the last member, unless within 90 days the successors in interest and any assignees agree in writing to admit at least one member to continue the LLC's business
• The written consent of the members controlling the majority of the capital values of the remaining members after the death, withdrawal, expulsion, bankruptcy, or dissolution of a member
• The occurrence of any event that ends the membership of a member unless otherwise stated in the articles of organization or operating agreement
• The entry of a court order

Taxes

An LLC by its nature offers some advantages when it comes to taxes over a corporation's organizational structure. This includes access to more deductions, since the LLC is not required to be a separate tax entity like a corporation. Instead, it is considered a "pass-through" entity for tax purposes, meaning that LLC owners report business profits and losses on their individual tax returns.

The tax rate for Rhode Island LLCs, therefore, varies, based on the amount of Rhode Island taxable net income per reporting period and the rest of the LLC owner/member's financial situation.

Rhode Island's personal income tax system consists of five brackets and a top rate of 9.9 percent, which takes effect at an income level of $349,700. Among states with personal state income taxes, Rhode Island's top rate of 9.9 percent is the second highest nationally.

Articles of Incorporation

Before it can legally operate in the state, a new Rhode Island corporation must file articles of incorporation with the Corporations Division of the state Secretary of State's office. In order to perfect the corporation's organization, incorporators have all the powers of shareholders or directors until stock is issued or directors are elected.

The minimum filing fee is $230, which includes a minimum $160 license fee plus a $70 filing fee. You may authorize up to (but not including) 75,000,000 shares in your articles for the minimum $160 license fee. However, if you authorize 75,000,00 or more shares, the fee jumps to an amount calculated at the rate of one-fifth cent ($.002) per share for each authorized share.

The following information must be included in the articles of incorporation:

• The name and address of each incorporator
• The specific business purpose of the corporation
• The names and addresses of the corporation's directors
• The address of the corporation's initial registered office
• The name of its initial registered agent at the address
• The number of shares the corporation is authorized to issue
• For corporations authorized to issue only one class of stock, the par value of shares or a statement that the shares are to be without a par value
• For corporations authorized to issue more than one class of stock, the number of shares to have par value and the par value of those shares
• The corporation's duration, which may be perpetual or for a specific time
• Any preemptive shareholder rights
• Any provisions desired to be listed by the incorporators to manage the business and regulate the corporation's affairs
• Limitations on a director's or officer's liability for money damages to the corporation or its shareholders in certain situations
• The date the corporation's existence begins, if later than the date of incorporation

Registered Agent and Office

Every Rhode Island corporation must have a registered agent in the state-the person or office designated to receive official state correspondence, both administrative and legal. The registered agent is required to acknowledge acceptance of the appointment as such in writing.

The registered agent must be either a Rhode Island resident whose business office is the same as the registered office, or a corporation authorized to conduct business in the state that has a business office identical to the registered office.

When a corporation's registered agent is an attorney, the business address of the agent does not have to be identical to the registered office, but may be the usual business address of the attorney.

Bylaws

Bylaws lay out the corporation's basic managerial and legal operating principles that manage their internal affairs. Rhode Island corporations must keep a copy of their bylaws at their principal executive office, but are not required to file them with the state. At its initial meeting, the incorporators or the board of directors should adopt corporate bylaws, and then keep them updated as time goes on.

The board of directors of a corporation may adopt, amend, or repeal bylaws, unless the articles reserve this right to the shareholders. Bylaws normally address:

• Shareholders and directors meetings
• The authority, number, and tenure of directors
• Voting procedures
• The duties, responsibilities, and tenure of officers
• How stock is issued
• How and when annual financial information is provided to shareholders

Directors and Officers

A corporation's board of directors consists of one or more individuals in accordance with the articles of incorporation or bylaws.

Officers are listed in the initial bylaws or elected by the board of directors, and may appoint other officers in accordance with the bylaws. At least one officer should be responsible for preparing minutes of director and shareholder meetings, and for maintaining and authenticating corporate records.

An officer or the corporation may hold more than one office simultaneously, unless otherwise prohibited by law or by the corporation's bylaws.

Required Reports

Every Rhode Island corporation must file an annual report with the Rhode Island Secretary of State between January 1 and March 1, except for the year of incorporation. This report must be current as of the date the report is executed and include:

• The corporation's name and its state or country of incorporation
• A statement as to the nature of the corporation's business in the state
• The names and addresses of the corporation's directors and officers
• A statement of the aggregate number of shares the corporation has authority to issue, itemized by classes, par value of shares, shares without par value, and series, if any, within a class;
• A statement of the aggregate number of issued shares, itemized by classes, par value of shares, shares without par value, and series, if any, within a class; and

Taxes

Rhode Island corporations are subject to a corporate income tax of nine percent on all corporate income. The minimum annual payment is $250. Among states levying corporate income taxes, Rhode Island's rate ranks 7th highest nationally.

"S corporation" status is recognized by the Rhode Island Secretary of State. A "subchapter S" corporation (frequently referred to as an "S corp") is treated as a pass-through entity for tax purposes in the same way as a sole proprietorship or partnership. The S corp does not file a tax return on its own behalf; instead, all tax-related data for the S corp is filed as part of the owner's individual income tax.