Prepared by U.S. Legal Forms, Inc.
Copyright - U.S. Legal Forms, Inc.
LIMITED LIABILITY COMPANYFORMATION PACKAGE
STATE OF RHODE ISLAND
Control Number: RI-00LLC
The contents of this package are as follows: 1. Statutory Reference
2. Introduction
3. Forms List
4. Notes on Downloading the Forms
5. Notes on Completing the Forms
6. Instructions and Steps
7. Accessories
8. Sample Ledger and Certificate
9. Disclaimer
LIMITED LIABILITY COMPANYFORMATION PACKAGE – RHODE ISLAND Electronic Version
Statutory Reference
RHODE ISLAND CODE, Chapter 7-16, Rhode Island Limited Liability Company Act RHODE ISLAND CODE, Chapter 7-5.1, Professional Service Corporations
Introduction & Notes
Created by state statutes to encourage business activity, a limited liabil ity company (LLC) is a
“hybrid” type of business organization, with characteristics of both a partnership and a
corporation and many of the advantages of both. Like a corporation, the limited liabil ity
company is a legal entity separate from its owners who are known as “members.” Barri ng some
other arrangement, members normally vote on any proposed action for the LLC, with the numbe r
of votes per member typically corresponding to his or her percentage of ownership interest in t he
business. Some of the advantageous benefits of an LLC include flexible ownership and
management, protection from liability for owners, and tax advantages.
FLEXIBILITY
A limited liability company generally has fewer legal formalities to observe than a corporation,
and is simpler to create and maintain. The ownership and management of an LLC is more
flexible than a corporation and very closely resembles that of a partnership. Keeping of corpora te
minutes is not required. Management and control of an LLC is vested with its me mbers unless
stated otherwise in the LLC’s Articles of Organization (called a Certificate of Formation in some
states). The owners of an LLC are called “members” and differ from the shareholders of a
corporation because members are allowed to participate in the management of a n LLC without
being appointed to a managerial position such as a director or officer of a corporation.
IRS rules now allow an LLC to choose between being taxed as a partnership or as a corporat ion
(most choose partnership, but see below). If an LLC has more than one member, the relationshi p
between those members is governed by a written operating agreement. Although an LLC used to
be required to be comprised of at least two LLC members, today most states and t he IRS
recognize the single-member LLC as a legitimate business structure.
LIMITED LIABILITY
In most cases, only the LLC is responsible for the company’s debts and the members are
protected from being individually liable. As a result, the member’s assets are typically not at risk
if the LLC is sued or cannot pay its debts. To maintain this limited liabi lity protection for the
members the LLC must follow requirements such as holding member meetings and docume nting
decisions through resolutions. However, there are some exceptions where individual members
may be held liable if he or she:
* Personally and directly injures someone
* Personally guarantees a bank loan or a business debt on which the LLC defaults
* Fails to deposit taxes withheld from employees’ wages
* Intentionally does something fraudulent, illegal, or clearly wrong that causes harm to the
company or to someone else, or
* Treats the LLC as an extension of her personal affairs, rather than as a separate legal entity.
TAXATION
Many tax benefits are available to LLCs and members including “pass through” tax t reatment of
profits and losses, easy allocation of profits and losses to different members, and elimi nation of
payroll taxes for members’ cash withdrawals. The earnings of an LLC are not subject to
corporate taxes; instead, the profits flow through to the owners in proportion to their ownership.
However, LLC owners can instead elect to have their LLC taxed like a corporation. This may
reduce taxes for LLC owners who will regularly need to retain a significant amount of profits in
the company.
DISADVANTAGES
An LLC does not allow ownership to be transferred through sale of shares in the same way as
corporate stock ownership allows. In most jurisdictions, ownership interest may only be
transferred or created with the consent of a majority of the other members, unless the articles of
organization provide for a greater or lesser level of consent.
An LLC may abruptly cease to exist. Unless otherwise provided in the articles of organi zation or
a written operating agreement (which may for example allow a majority of members to vote to
continue the LLC), an LLC is dissolved at the death, withdrawal, resignation, expul sion, or
bankruptcy of any member. The LLC operating agreement can prevent this kind of abrupt e nding
to your business by including certain provisions setting up guidelines for what will happen when
one member retires, dies, becomes disabled or leaves the LLC.
FORMATION
Not all businesses can operate as LLCs. Businesses in the banking, trust and insurance industry,
for example, are typically prohibited from forming LLCs. In addition, some states prohibit
professionals such as architects, accountants, doctors and other licensed healthcare workers from
forming LLCs, requiring a Professional Limited Liability Company (PLLC) or other entity.
State laws governing LLCs vary from state to state. However, if the LLC will have significant
business or member contacts (a.k.a. "presence") within a state, it should be formed in that st ate.
Otherwise, it may be subject to fees and/or taxes for doing business in an outside stat e. If an LLC
is required to qualify to do business in an outside state, it may have to pay filing fees and
franchise taxes as a foreign LLC to the outside state.
ARTICLES OF ORGANIZATION
The existence of an LLC begins when a document typically known as the “Article s of
Organization” are filed with the Secretary of State’s Business/Corporate Division. The Art icles
of Organization is the primary document constituting the legal identity of the LLC. If there are
any conflicting provisions in other LLC forms or documents (the operating agreement, member
agreements, or resolutions), the articles of organization override such provisions.
Requirements vary by state, but most states require the following minimum information:
* The name of the LLC. The name you select must not be the same as or decept ively similar to
an existing business name in your state. Most states require that the limited lia bility company
name be followed by the words “Limited Liability Company” or by the abbreviation “LLC.”
* The mailing address of the proposed entity.
* The name and address of a registered agent in the state of filing.
* The name and address of the LLC’s organizer.
* The LLC’s stated period of duration or date of termination (indefinite/perpetual durat ion is
normally allowed.
* Some states may require that your articles of organization list the name and addre ss of each
LLC member.
* The signature of the Organizer (person filing the Articles of Organization).
* Whether the LLC will be managed by one manager, more than one manager, or the members.
REGISTERED AGENT
Most states require that an LLC have a Registered Agent at a Registered Offi ce within the state
of formation. This Registered Office may be at an address that is different from the L LC’s
business address, but may not normally be a post office box.
The main purpose of the Registered Office/Agent requirement is to provide a public record of a
person who will accept service of process on behalf of the LLC if claims are brought aga inst it.
Because the Articles of Organization are a public record, potential claimants can usually contact
the Secretary of State’s office to obtain LLC’s registered agent information in orde r to serve your
LLC with a subpoena or summons. The agent may also be used to accept official doc uments,
such as tax notices.
OPERATING AGREEMENT
LLC members should enter into an Operating Agreement of some type (a detailed sample is
provided in this package). This Operating Agreement may be established either before or aft er
the filing of the Articles of Organization and may be either oral or in writing i n many states.
Regardless of state requirements, it is preferred practice to have a written Operati ng Agreement.
If you don’t create a written Operating Agreement, the LLC laws of your state will govern your
LLC. The Operating Agreement is kept by the members (each should have an updated copy), a nd
is not filed with the government.
The LLC operating agreement may vary in complexity, but normally contains the fol lowing
information:
* Company name and address information
* Name and address information for each LLC member
* LLC management structure and operation
* Items/Funds contributed by each Member
* Fair market value of each item contributed
* Date/triggers of company dissolution, if any
* Accounting methods
* Tax treatment decisions for your LLC
* Appointment of LLC officers, if any
* Designation of a final capital pay-in date, if any
OPEN A BANK ACCOUNT
Most banks require only a copy of your Articles of Organization and your federal Employer ID
Number to open a bank account. Some, however, may also require a resolution authorizing the
opening of the account passed by the LLC’s members and a copy of the LLC Operating
Agreement. Because bank requirements vary by bank, you should contact the branch manager
and ask about their requirements for new LLC accounts.
MEMBER MEETINGS
Although a corporation’s owners’ failure to hold shareholder or director meetings may subject
the owners to liability, this is not the case for LLCs in many states. If the L LC’s Articles of
Organization or Operating Agreement do not expressly require such meetings, such liability wi ll
normally not attach for failure to have member meetings. While many states do not require that
your limited liability company hold meetings on a regularly scheduled basis, it is advisable to
conduct member meetings to protect the integrity of the LLC’s operations and minimi ze
disagreements.
RHODE ISLAND NOTES
A limited liability company may be organized for the purpose of engaging in any lawful
business. It has perpetual existence until dissolved or terminated. A more limited purpose or
duration may be set forth in the articles of organization. If you are not forming the LLC for the
purpose of practicing a state-licensed profession, you may ignore the portions discussing
practice of a profession.
The RHODE ISLAND CODE provisions for limited liability companies (LLC) do not
directly address the use of a LLC for the practice of a profession. However, the provisions
of the RHODE ISLAND CODE, Chapter 7-5.1, Professional Service Corporations,
provides certain provisions that seem prudent to apply to of a LLC organized to engage in
the practice of a profession. Those provisions are noted herein.
A limited liability company may render professional services to the extent permi tted under law
or rules and regulations of the applicable regulatory agency or agencies. Each regulatory agency
is authorized to adopt rules and regulations regarding a domestic and foreign limited l iability
company rendering professional services. The rules and regulations cannot be inconsistent with
law or rules or regulations regarding the rendering of professional services through a
professional corporation.
The liability of an individual authorized to practice a profession for his or her own negli gence,
wrongful acts or misconduct, or that of any person under his or her direct supervision and
control, other than in an administrative capacity, shall not be affected by the i ndividual's
providing professional services as a member or agent of a domestic or foreign limited li ability
company.
An individual authorized to practice a profession and who is a member of a domestic or fore ign
limited liability company rendering professional services is not liable solely by re ason of being a
member for any negligence, wrongful acts or misconduct of another member or agent of the
limited liability company. A domestic or foreign limited liability company rendering professional
services is liable for the negligence, wrongful acts or misconduct of its members and a gents
providing professional services through the limited liability company within the scope of the ir
authority or apparent authority to act for the limited liability company.
Notwithstanding any other provisions of law, the personal liability of a member in a lim ited
liability company engaged in the rendering of professional services shall not be less than or
greater than the personal liability of a shareholder of a professional corporation engaged i n the
rendering of the same professional services.
A limited liability company that is organized to perform professional services must carry, if
reasonably available, liability insurance of a kind that is designed to cover the kinds of
negligence, wrongful acts or misconduct for which liability is limited by §7-16-3.2. The
insurance must be in the aggregate amount of fifty thousand dollars ($50,000) multiplied by the
number of professional employees of the limited liability company as of the policy anni versary
date; provided, however, that in no case shall the coverage be less than one hundred thousand
dollars ($100,000) but in no event shall the necessary coverage exceed a maximum of five
hundred thousand dollars ($500,000). Any policy for insurance coverage may include a
deductible provision in any amount not to exceed twenty-five thousand dollars ($25,000) for
each claim multiplied by the number of professional employees of the limited liability company
as of the date of the issuance of the policy. The policy or policies of insurance may be subject to
any terms, conditions, exclusions and endorsements that are typically contained in policies of
this type.
Professional Service Corporation provisions and restrictions (these are included in the operating
agreement in this form package):
§ 7-5.1-3 Authority to practice. – (a) Except as specifically provided in subsection (b) of t his
section, any corporation organized under this chapter may engage in rendering professional
services of not more than one of the professions enumerated in § 7-5.1-2, provided that every
officer, director, and shareholder of the corporation is an individual authorized to practice the
profession and is employed by the corporation in that practice. No individual may be an officer,
shareholder, director, or employee of any other corporation engaged in the practice of the same
profession without the prior written approval of the applicable regulatory agency or agencies.
§ 7-5.1-5 Eligibility of personnel – Transfer of stock. – (a) If any shareholder becomes
ineligible, he or she shall transfer his or her shares to an eligible person, or offer them t o the
corporation for redemption at their fair market value. If the articles of incorporation or the by-
laws of the corporation restrict transfer of its shares, and transfer of the shares to an eligibl e
person is prevented, the corporation shall redeem the shares of the ineligible shareholder, and
compensate the ineligible shareholder in full for the fair market value of his or her shares
determined as of the date that the ineligibility occurred. Nothing contained in these provisions is
to be interpreted to prevent a shareholder and the corporation from making a binding agreement
as to a method for determining the fair market value or for determining what constitutes the fair
market value of his or her shares. In the event the corporation and an ineligible shareholder
cannot agree as to the fair market value, the regulatory agency excluding the division of
professional regulation shall, upon application by either party, appoint a board of not less than
three (3) qualified persons engaged in performing similar professional services to determine the
fair market value of the shares, and the decision of the board is final and binding upon the
parties. The division of professional regulation shall, upon application by either party, appoint a
neutral arbitrator with experience in business valuation whose fees will be paid by t he
corporation petitioner to determine the fair market value of the shares, and the decision of the
arbitrator is final and binding upon the parties. The redemption of its shares by a professional
service corporation shall not be effected at a time or in a manner so as to impair or prej udice the
rights or remedies of any creditor of the corporation. As used in this chapter, "ineligi ble
shareholder" includes a shareholder electing to retire or withdraw from active employment in
the corporation. Nothing contained in these provisions is to be interpreted to prohibit the
temporary exercise of incidence of ownership of stock in any corporation by persons or
corporate fiduciaries not authorized to practice, solely for purposes of administering estates of
shareholders deceased or under legal disability to transfer their shares. For purposes of this
section, "temporary incidence of ownership" means any period of time not exceeding two (2)
years; and "administering estates of shareholders" shall include, but not be limited to,
contracting with licensed professionals to operate the practice upon the death of the person
licensed to practice.
§ 7-5.1-6 Qualifications of employees. – Every corporation organized under this chapter may
render its professional services only through employees who are authorized to practice.
However, nothing contained in these provisions is to be interpreted to prohibit any corporation
from employing unlicensed persons to perform functions not constituting professional services.
§ 7-5.1-9 Privileged communications. – Nothing contained in this chapter requires disclosure by
any employee of a corporation organized under this chapter, of any communication previously
privileged from disclosure.
BEFORE YOU FORM A LLC TO ENGAGE IN THE PRACTICE OF A PROFESSION,
YOU SHOULD FIRST CONFIRM WITH THE RHODE ISLAND BOARD OF
PROFESSIONAL LICENSURE FOR YOUR PROFESSION, AND WITH THE
DIVISION OF PROFESSIONAL REGUALTION THAT YOU ARE IN FULL
COMPLIANCE WITH ALL APPLICABLE RULES, REGULATIONS, AND
REQUIREMENTS.
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Forms List
The following forms are available for download with this package. RI-NAMERESV: Application for Reservation of Entity Name
RI-00LLCT: Articles of Organization
RI-LLC-TL: Sample Transmittal Letter
RI-00LLC-1: Sample Operating Agreement (Multi-Member LLC)
RI-00LLC-2: Sample Operating Arrangement (Single-Member LLC)
US-IRS-SS-4 : Application for Federal Tax Identification Number & Instructions
RI-2222LLC: Sample LLC Notices & Resolutions
Instructions on using the forms are either included with the forms and/or found in the Steps to
form LLC section, below.
* * *
Notes on Downloading the Forms
In order that we can provide you with the most up to date forms at all times, all forms are located
on our servers for you to down load, complete and print. Downloading instructions are provided
and we will assist if you have any problems.
From the the download page, the easiest procedure to download the forms is to right click on the
form links and select “save target as” to save each form to your hard drive.
You will have six days during which you can return to the forms download page to download the
forms again if needed. You are advised to save the forms to your computer as soon as possible to
avoid any problem with the six day limit. * * *
Notes on Completing the Forms
The forms in this package may be available in Adobe Acrobat (“.pdf”) and/or Microsoft Word
(“.doc”) format.
If available in .pdf format, the forms will contain “fillable” blanks which you can type directly
into, and print. However, you can still print the form and fill in with a typewriter or by hand if
you desire.
If available in .doc format, the forms may contain “form fields” created using Microsoft Word.
“Form fields” facilitate completion of the forms using your computer. They do not limit you
ability to print the form “in blank” and complete with a typewriter or by hand. To c omplete the
forms click on the gray shaded areas and type the information. For the separation agree ment
complete the gray shaded areas and also make any other changes or additions to resolve all
issues.
If you do not see the gray shaded form fields, go the View menu, click on Toolbars, and then
select Forms. This will open the forms toolbar. Look for the button on the forms toolbar that
resembles a shaded letter “a”. Click in this button and the form fields, if present , will become
visible. If there are no form fields, just type into the document, underlining if necessary, to
complete the form.
Some forms may be “locked” which means that the content of the forms cannot be cha nged
unless the form is unlocked. You can only fill in the information in the fields. If you need to
make any changes in the body of the form, it is necessary for you “unlock” or “unprotect” the
form. IF YOU INTEND TO MAKE CHANGES TO THE CONTENT, DO SO BEFORE YOU
BEGIN TO FILL IN THE FIELDS. IF YOU UNLOCK THE DOCUMENT AFTER YOU
HAVE BEGUN TO COMPLETE THE FIELDS, WHEN YOU RELOCK, ALL
INFORMATION YOU ENTERED WILL BE LOST. To unlock click on “Tools” in the Menu
bar and then selecting “unprotect document”. You may then be prompted to enter a password. If
so, the password is “uslf”. That is uslf in lower case letters without the quotation ma rks. After
you make the changes relock the document before you begin to complete the fields. Afte r any
required changes relock the form, then click on the first form field and enter the require d
information. You will be able to navigate through the document from form field to form fiel d
using your tab key. Tab to a form field and insert your data.
If you experience problems, please let us know.
* * *
Steps to form LLC
Step 1:See FORM: RI-NAMERESV
APPLICATION FOR RESERVATION OF NAME
It is recommended that you reserve a LLC name in order to assure that your
Articles of Organization are not rejected because the name you have selected is
not available
You may skip this step and go to Step 2, but if the name you have selected is
not available, the Articles of Organization will be rejected and returned to you.
The Application for Reservation of Name should by typewritten or printed
legibly in black ink.
Enter the LLC name you want to reserve.
(a) The name of the limited liability company MUST end with the words
“limited liability company” or the upper or lower case letters “L.L.C.”
with or without punctuation.
(b) A proposed name cannot be the same as, or deceptively similar to, the
name of any entity, name reservation or registration on file with the
Corporations Division.
(c) Name availability should be checked prior to submitting this form by calling (401) 222-3040. This is only a preliminary clearance. The final
decision regarding name availability will be made when the Application
is submitted for filing.
Check the box for Limited Liability Company.
Type or print the name and address of the Applicant.
Have the Applicant date and sign the Application, providing his/her address if
it is different from the one provided above.
A LLC name reservation is valid for a non-renewable 120 day period.
There is no provision in Rhode Island law for renewal of a name reservation.
You may make subsequent application for reservation of the LLC name
ONLY after the initial reservation has expired.
The filing fee to reserve a LLC name is $50.00.
File the original and one copy of the Application.
Mail the original and one copy of the Application for Reservation of Name
along with the $50.00 filing fee (Make check payable to the Rhode Island
Secretary of State) to:
Office of the Secretary of State
Corporations Division
100 North Main Street
Providence, Rhode island 02903-1335 (401) 222-3040
FAX: (401) 222-1309
Step 2: SEE FORM: RI-00LLCT
ARTICLES OF ORGANIZATION
Once you have reserved the limited liability company name, or if you have chosen
to proceed without reserving a name, you are ready to complete the Articles of
Organization.
Instructions to complete the Limited Liability Company Articles of
Organization:
The Articles of Organization should by typewritten or printed in black ink.
1. Provide the LLC name you have reserved.
2. Provide the address (STREET ADDRESS - NOT A P.O. BOX) and name
of the registered agent for the LLC. A registered agent must be an individual
resident of this state or a corporation, limited partnership, or limited liability
company, and in each case either domestic or one authorized to transact
business in this state.
3. Unless you have a specific reason to do otherwise, check the box "a
partnership." NOTE: The forms provided herein provide for the LLC to be
treated for tax purposes as a partnership.
4. Provide the address of the principal office address of the LLC.
5. There is nothing to be done to this section UNLESS you have a specific
reason to limit the purpose or the duration of the LLC.
6. In this space describe the purpose of the LLC.
7. Indicate whether the LLC will be managed by members or managers.
8. If the LLC will be managed by managers, provide their names and
addresses.
9. Articles of Organization are effective upon filing UNLESS a different
effective date is requested. Unless you have a specific reason to do otherwise,
you should allow the LLC to become effective on filing.
Have the Organizer date and sign the Articles of Organization.
The filing fee for the Articles of Organization is $150.00.
YOU MUST FILE DUPLICATE ORIGINALS (TWO ORIGINALS) OF
THE ARTICLES OF ORGANIZATION. DO NOT FILE A PHOTOCOPY!
SPECIAL NOTE
A limited liability company is responsible for filing an annual
Report each calendar year between September 1 and November 1,
beginning with the year following the year in which its original
Articles of Organization were filed with the Secretary of State. An
annual report form will be mailed to the resident agent prior to
September 1 each year. Be sure to follow up with your resident
agent concerning the filing of this report.
Step 3: Mail DUPLICATE ORIGINALS of the ARTICLES OF ORGANIZATION
and the $150.00 filing fee (make check payable to Secretary of State) to:
Office of the Secretary of State
Corporations Division
100 North Main Street
Providence, Rhode island 02903-1335 (401) 222-3040
FAX: (401) 222-1309
A cover letter to send with the Articles of is included in this packet.
See FORM: RI-LLC-TL
SAMPLE TRANSMITTAL LETTER
Step 4: Complete an Operating Agreement. See FORM: RI-00LLC-1
SAMPLE OPERATING AGREEMENT (MULTI-MEMBER LLC)
For a single-member LLC,
See FORM: RI-00LLC-2
SAMPLE OPERATING ARRANGEMENT (SINGLE-MEMBER LLC)
Step 5: Apply for a Federal Tax Identification Number. This is done with form US-IRS- SS-4. Mail to your regional IRS office.
See Supplemental Form: US-IRS-SS-4
FEDERAL TAX ID APPLICATION AND INSTRUCIONS
Step 6: Open a bank account and conduct business.
Ongoing: Sample Notices and Resolutions are provided for your convenience.See FORM: RI-2222LLC
Sample LLC Notices & Resolutions
* * *
Accessories
U. S. Legal Forms, Inc. offers the following LLC accessories:
LLC Seal: If you would like to order a LLC seal call U.S. Legal Forms, Inc. at (601)
825-0382. Engraved with your company name: $24.95 plus shipping, or see
http://www.uslegalbookstore.com/officeproducts/
Imprinted (or blank) Lithographed LLC Membership Certificates:
Preview
Order for your state
* * *
SAMPLE OWNERSHIP LEDGERand
SIMPLE MEMBERSHIP CERTIFICATE
Ownership Ledger
Name and Residence
Address of LLC Member Date of
Transfer % Ownership Amount Paid Subsequent
Transfer
Membership Certificate
No. _____ LIMITED LIABILITY COMPANY- STATE OF RHODE ISLAND Percentage: ___
This Certificate certifies that ____________________________, is a true and
lawful owner of ____ percent ownership of ______________________________,
a Rhode Island Limited Liability Company. Such ownership interest is only
transferable in accordance with the Operating Agreement between the M embers.
This certificate is issued by the Company by its duly authorized
officers on this the ____ day of _________, 20___.
__________________ ___________________
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