If you’re planning to start a limited liability company (LLC) in Rhode Island, you need to know how much it will cost. But it can be challenging to figure out what all of your different expenses might be. Part of the problem is that the information you need is spread over multiple websites.
This article will outline the potential costs of forming a Rhode Island limited liability company.
By the time you reach the end of this article, you will know:
- The required expenses to create a Rhode Island LLC
- Additional expenditures you should consider making
- How to pick the most suitable LLC formation methods for your needs
Keep reading to learn the facts about the Rhode Island LLC formation costs.
Total Rhode Island LLC Cost – Starting at $150
According to the Rhode Island Secretary of State's Document Library, the bare minimum cost to form an LLC in Rhode Island is $150.
This only includes one item:
- Rhode Island Articles of Organization filing fee: $150
You might also need to register your business with the State of Rhode Island Division of Taxation, but it is free to do so. Depending on your industry and location, your LLC may also need professional and local business licenses, the costs of which vary.
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Rhode Island LLCs – the Basic Costs
The total cost of starting an LLC in Rhode Island varies. Still, the lowest possible cost is $150. The sections below explain the mandatory costs you may need to incur.
Articles of Organization Filing Fee — $150
Articles of Organization are the official papers that legally create LLCs. To start a Rhode Island LLC, you will need to file articles with the Secretary of State. It's simple: you just need to report basic information about your business.
State Tax Office Registration — Free
If your Rhode Island LLC sells tangible personal property or offers taxable services, you must register your business with the state Division of Taxation. This will allow you to collect sales tax from your customers.
Before July 1, 2022, there was a $10 fee to register a new business. But this fee is no longer required, and it is now free to register.
Professional Licenses and Business Permits — Variable
If your business operates in certain industries, you will need to get a state business license or permit for your LLC. The Department of Business Regulation’s website provides more information about the types of companies that need permits.
Your company might also need a local permit or business license. For instance, the city of Providence requires some LLCs to get business licenses.
Rhode Island LLCs – Optional Costs to Consider
On top of the mandatory costs, you may want to spend some extra cash on optional expenditures. These expenses aren’t required, but they can help your Rhode Island limited liability company run more smoothly.
Expedited LLC Filing Fees — N/A
Rhode Island does not offer expedited filing. Typically, your paperwork will take between 1 to 3 business days to process. So if you want to speed up the process, we recommend registering your LLC online.
Registered Agent Fee — about $100 per year
Every LLC must appoint a registered agent, known in Rhode Island as a “resident agent.” The resident agent’s job is to receive official papers for a business. You will include your registered agent’s info on your Rhode Island LLC Articles of Organization for no additional cost. But there is a $20 fee if you change your agent.
It’s common for new business owners to name themselves as their LLC’s resident agents. While this might seem convenient, it can cause problems for you and your business.
Resident agents must always be available during standard business hours to accept documents; no breaks are allowed. Also, resident agent addresses are listed online, so you might have to deal with a lot of junk mail or have your privacy compromised.
That’s why we recommend using a professional registered agent service instead. The cost is only about $100 per year, and your professional agent will handle all of your LLC’s resident agent responsibilities.
Check out our Best Registered Agent Services article for some of our recommendations.
Operating Agreement — Variable
A Rhode Island LLC operating agreement is a legal contract that sets the rules for how a business will run. It lists important terms such as each member’s rights and responsibilities and how members can join or exit the LLC.
Rhode Island law doesn’t require LLCs to have operating agreements. Still, we strongly suggest that you get one for your business. And although you can write your LLC’s operating agreement yourself, it’s better to work with an expert.
One option is to hire a lawyer to write your LLC’s operating agreement. You will get a professional and detailed document if you choose this method. Just know that law firms can be pricey. So if you want to spend less, an LLC formation service will draft an operating agreement for as little as $39.
DBA Fee — $50
Many LLCs have “doing business as” or “DBA” names. A DBA is a name that a business “goes by” in its day-to-day operations. For example, business owners often drop the “LLC” from the names they use to market their businesses.
In Rhode Island, DBAs are called “fictitious business names.” If you want to use a DBA for your LLC, you must file a Fictitious Business Name Statement with the Secretary of State.
You can use a paper form or register your DBA online. There is a $50 filing fee.
Name Reservation Fee — $50
If you have decided on the name you want for your LLC but can’t file the paperwork yet, Rhode Island lets you reserve a business entity name for 120 days. This will stop other people from being able to register the name during this time.
Domain Name — about $20 per year
A functional website is usually a critical part of a company’s marketing plan. If you plan to have a website for your LLC, you will first need to get a domain. Fortunately, domain names are affordable and readily available.
Just keep in mind that it’s best to buy your domain as soon as you can. If you wait too long to get it, it might already be taken. For instance, a “domain squatter” might buy your potential domain name and try to sell it to you at a markup.
You can purchase a domain from GoDaddy.com or a similar website for about $20 to $50 per year. Plus, you can usually find a sale or discount, so it’s often even cheaper.
Getting an Employer Identification Number (“EIN”) — Free
EINs are 9-digit identification numbers that the Internal Revenue Service assigns to businesses. They are similar to social security numbers for companies. While the IRS requires some LLCs to obtain EINs, others don’t have to.
Even if it’s not mandatory, we suggest that all LLC owners apply for EINs. This will help you in several ways. First, most banks will require an EIN to open a business bank account. Using an EIN can also prevent identity theft since you won’t be using your SSN to conduct business.
Foreign LLC Qualification Fees — about $100 per extra state
If you plan to do business outside Rhode Island, you should budget for extra costs. While you won’t need to start a new LLC in every state, you must register as a foreign limited liability company wherever you operate.
Foreign LLC filing fees will differ between states. However, most are in the $100 range.
Writing Formation Costs Off
Typically, you can deduct your LLC formation expenses on your federal income taxes as business startup costs. The IRS provides a broad range of guidance on this topic. So, if you want to learn more about deductions, you can review the IRS website.
LLCs are considered to be “pass-through” entities by default. This classification allows LLC owners to deduct up to $5,000 in startup costs from their federal income taxes for the year they start the business.
Wendy decides to start a single-member LLC and open a food truck in Providence, Rhode Island. Her formation costs are as follows:
- Rhode Island LLC Articles of Organization: $150
- Providence Mobile Food Establishment Permit: $75
- Operating Agreement: $50
- Rhode Island Registered Agent Service Fees: $100
- DBA (fictitious business name) Fee: $50
- Name Reservation Fee (online filing): $50
- Web Domain Costs: $25
Since the LLC is a pass-through entity, it won’t pay any income taxes. Rather, Wendy will report her profits from the LLC and any deductions on her personal state and federal income taxes.
Wendy's total formation expenses were $500. Before she deducted her costs, Wendy’s total taxable income was $42,000. But with deductions, her taxable income drops to $41,500. This will lower her 2022 federal income taxes from $4,989 to $4,879.
While these savings might not seem significant, LLC owners who regularly deduct their costs will notice the difference over time.
Cheapest Way to Start an LLC in Rhode Island
It can be tricky to decide which LLC formation approach best fits your needs. To help you choose, we’ve explained the pros and cons of three popular options in the sections below.
Formation Service – $39 + state fees
Business formation services are a popular option, particularly among first-time entrepreneurs. Although they are not licensed to practice law, these companies specialize in starting business entities like LLCs.
Using an LLC formation service is often a good decision. The advantages of this approach include:
- They’re easy. In most cases, a formation service will have helped hundreds of people through the exact process you are struggling with now. They have all the documents, information, and expertise you need right on hand.
- They don’t cost much. Because formation services have such a large volume of business, they don’t have to charge their clients that much money.
- They’re reliable. All of the formation services’ products and procedures have been tested hundreds of times over in the real world. That kind of experience should give you peace of mind and confidence going forward.
- They’re fast. Formation services have seen almost every business formation situation already. Chances are, they have many solutions for you that are ready right now before you even know you need them.
However, a formation service isn’t always the best fit. The drawbacks to this strategy include:
- They’re not the best solution for complex LLCs. If you are forming a complicated company or one in a heavily regulated industry, you will have concerns that probably need more focused expertise in that area of business.
- Even if a formation service is a good fit, you can expect upselling. Formation services have to make money too, and some of them may pressure you to buy formation products or business services you don’t need. Even when you are using a formation service, you need to be a smart and informed consumer.
Using a professional LLC formation service can be a great way to set up a business. Check out our Best LLC formation services article for some of our suggestions.
You should consider retaining a local business lawyer if you need a complex business structure or have other specialized needs. Just keep in mind that attorneys are not low-cost options. They usually charge an hourly rate for their services, often several hundred dollars per hour.
Even though it’s pricey, an attorney will offer significant advantages:
- Lawyers help you manage risk. If you are starting a business with complicated legal issues, hiring a lawyer would be the best choice.
- Lawyers offer more customization when you need it. Do you need specific things put in an operating agreement? Is your company going to have a unique ownership structure? You may need an attorney to make sure these issues are handled properly.
Still, the drawbacks to this approach outweigh the benefits for many:
- Lawyers cost more than any other option. The price tag alone should convince you that if you don’t need a lawyer, it’s not worth hiring one.
- Finding a lawyer takes a long time. Getting a lawyer who specializes in what you need, costs what you’re willing to pay, and can work with you well is a tall order.
- Lawyers also take longer to form a business than a formation service. Because lawyers are also very careful people, they will generally take much longer to form your company than non-lawyers would. Fortunately, most people don’t need a lawyer. In 90% of cases, a formation service will do just fine.
Do it Yourself
Of course, you can always choose to just form your LLC yourself. Whether this is the most cost-effective option for you depends on how much time you want to spend on formation documents. Many new business owners are swamped with responsibilities and find that it makes more sense to outsource LLC formation tasks.
Still, there are benefits to using a DIY formation method:
- Personal knowledge. A DIY business owner will learn a lot about the process while forming their own business, and they probably will retain that knowledge for years to come.
- It costs less upfront. If you don’t account for the value of your time, a DIY solution is the cheapest option.
But there are also disadvantages to keep in mind:
- You’re losing money when you consider how much time it takes to DIY. If you figure out that your time is worth $30 per hour, and you take 20 hours to complete your business formation, you have essentially spent $600 on business formation.
- There’s the risk of making a mistake. DIY business owners can easily make a mistake with all the paperwork that can cost them even more time and money.
- It’s a headache. State workers are very helpful, capable people. But they will also tell you that the laws and rules governing business formation are not easy, and they follow those rules for a living. It’s going to be even harder for you.
Annual Rhode Island LLC Fees: How Much Will it Cost to Maintain your LLC?
In addition, you may be required to renew your LLC's business licenses or permits on a periodic basis.
Some of your optional expenses may also be recurring. For example, you may be responsible for the following expenses each year:
- Registered agent service fee: approximately $100
- Domain name registration: $20 to $60
How Much are LLC Taxes in Rhode Island
Rhode Island LLCs aren't required to pay income taxes since they are “pass-through” entities. Instead, you will need to list your LLC’s profits on your personal income taxes.
However, Rhode Island imposes an annual fee on LLCs that equals the minimum amount of corporate income tax. This amount is currently $400.
Rhode Island LLC Formation Costs Quick Links
- Rhode Island Online Filing
- Rhode Island Document Library
- Rhode Island Secretary of State
- Rhode Island Division of Taxation
- IRS — apply for an EIN online
- IRS information regarding the federal tax treatment of LLCs
Rhode Island LLC Formation Costs FAQs
How much does it cost to start an LLC in Rhode Island?
The lowest possible cost is $150. But, it may cost more if you need a business license or permit.
What is the cheapest way to start an LLC in Rhode Island?
A do-it-yourself formation approach is the least expensive in terms of money spent. But if you consider the value of your time, an affordable LLC formation service is often the most cost-effective method.
Do I need to hire an attorney to form an LLC in Rhode Island?
No. Most LLCs can be started without the help of a lawyer. A DIY strategy or a formation service will be adequate for the average LLC.
Can I pay to form an LLC more quickly in Rhode Island?
No. Rhode Island does not offer expedited filing. We suggest online filing to get your documents processed as quickly as possible.