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Rhode Island in early March 2020: $150 in, $50 a year, and a minimum tax that catches the C-corp electors

Articles of Organization filed through the Business Services portal, an annual report due November 1, and a $400 floor that only some LLCs ever meet

The Editors
Staff, Incorporator.org
10 min read Updated
Contents 6 sections
  1. The mechanics
  2. The annual report, which is a hard November 1 deadline
  3. The tax backdrop, and the $400 floor
  4. The resident-agent market and what to pay
  5. Who Rhode Island actually makes sense for
  6. Sources

hode Island LLC formation costs $150 to file Articles of Organization and $50 a year to keep the entity current. Both numbers are small; the number that surprises founders is the $400 minimum corporate tax that attaches the moment an LLC elects C-corp treatment, and sometimes when it does not.

This is a guide for someone forming in Rhode Island in early March 2020, written to the Secretary of State's Business Services portal as it actually behaves and to the Rhode Island Limited Liability Company Act as it actually reads at R.I. Gen. Laws § 7-16.

The mechanics

You file Articles of Organization with the Rhode Island Secretary of State, Business Services Division. The governing statute is the Rhode Island Limited Liability Company Act, codified at R.I. Gen. Laws Chapter 7-16, enacted in 1992 and amended in steady increments since. The Act was rewritten in material part by the 2005 session and again in 2011 to tighten the default rules around member authority and to conform dissolution mechanics to the practice other New England states had already adopted.

The Articles themselves are short. R.I. Gen. Laws § 7-16-6 lists the required content: the name of the LLC (which must include "limited liability company," "L.L.C.," or "LLC" per § 7-16-9), the address of the principal office, the name and street address of the resident agent in Rhode Island, whether the LLC is member-managed or manager-managed, the latest date on which the LLC must dissolve if a date is specified (most filers leave this open), and the name and signature of at least one authorized person. The Business Services portal at business.sos.ri.gov walks you through the fields in roughly ten minutes, or you can file Form 400 on paper.

The filing fee is $150, the same whether you file online or by mail. Rhode Island does not run a tiered expedite menu in the Delaware sense. Standard processing through the portal is typically one to three business days. Paper filings queue behind the portal and run somewhat slower; the Division does not surcharge paper, but there is no reason to use it unless your signatory cannot access a computer. If a deal is closing this week and the holding entity does not yet exist, Rhode Island is the wrong state to be racing in, and Delaware's same-hour tier is the reason.

You will then need an EIN, which the IRS issues on Form SS-4 online at no charge. You will need an operating agreement, which R.I. Gen. Laws § 7-16-22 recognizes as the controlling internal document but which the state does not require you to file. And you will need to decide, for federal tax purposes, whether to accept the default classification (disregarded entity for a single-member LLC, partnership for a multi-member LLC), or to file Form 8832 to elect C-corp treatment, or Form 2553 to elect S-corp treatment. The election has an unusual second-order effect in Rhode Island, because the state's minimum tax rule keys off the federal classification. More on that below.

Name reservation is available under R.I. Gen. Laws § 7-16-10 for a small fee and holds a name for 120 days. Most founders skip it and file the Articles directly; the Business Services name-availability search clears conflicts before submission.

The annual report, which is a hard November 1 deadline

Rhode Island's annual report is the compliance detail that catches out-of-state founders. Under R.I. Gen. Laws § 7-16-66, every domestic and foreign LLC must file an annual report with the Secretary of State between September 1 and November 1 of each year following the year of formation. The report asks for current fields: principal office address, resident agent, names of managers or members with authority, and the nature of the business. If nothing has changed, the filing is a two-minute confirmation.

The fee is $50. Late filings attract a $25 penalty under the Secretary's schedule, and the Secretary revokes the LLC's authority to transact business under § 7-16-67 if the delinquency persists. Revocation is not just a scolding. A revoked LLC loses its capacity to maintain an action in Rhode Island courts under § 7-16-67(c), which means a contract dispute where the LLC is the plaintiff stops where it started until the entity is reinstated. Reinstatement is available under § 7-16-41.1 upon filing the delinquent report, paying the fee, and paying the reinstatement surcharge, but the revocation period is a live exposure in any suit arising from that window.

The November 1 date is idiosyncratic enough that founders coming from states with anniversary-month reporting (Idaho, Florida) or calendar-month reporting (California) frequently miss the first filing. A Rhode Island LLC formed in March 2020 does not file an annual report in 2020; its first report window is September through November 2021, and every September through November thereafter. The gap year is a trap because it trains the founder to ignore the mail, and the second year's notice arrives looking like the first year's notice. A calendar reminder tied to October 15 is the cheap fix. Commercial resident agents typically include a reminder in the base service; in-house agents need a docket entry.

For the mechanics of catching up after a missed filing in any state, see how to handle an annual report you missed.

The tax backdrop, and the $400 floor

Rhode Island's income-tax system is middle-of-the-road on its face and has a tripwire underneath for C-corp electors.

The individual side is a graduated schedule with three brackets, running from 3.75% on the lowest taxable-income band through 4.75% in the middle and 5.99% at the top. The bracket thresholds adjust each year for inflation under R.I. Gen. Laws § 44-30-2.6. For a member of a Rhode Island LLC drawing pass-through profits, the member-level rate runs on this schedule and is applied to the member's share of Rhode Island-source income on the member's personal return. Non-Rhode Island members on the roster of a Rhode Island-source LLC owe non-resident tax on the Rhode Island-source share under § 44-30-32, filed on Form RI-1040NR.

The corporate side is a flat 7% of Rhode Island taxable income under R.I. Gen. Laws § 44-11-2. The rate was lowered from 9% to 7% in the 2014 budget act and has held at 7% through 2019. An LLC that elects C-corp treatment sits inside that 7% on Rhode Island taxable income, on top of the federal 21% corporate rate. The combined federal-plus- state corporate rate on Rhode Island taxable income lands around 27%, which is the number to run against the pass-through alternative when sizing an election.

The $400 minimum is the piece that catches founders off guard. Under R.I. Gen. Laws § 44-11-2(e), every C-corp subject to the Rhode Island corporate tax pays a minimum tax of $400 per year, regardless of income or activity. The floor applies to an LLC that has elected C-corp treatment for federal purposes, because Rhode Island's corporate tax statute follows the federal classification. A single-member Rhode Island LLC that files Form 8832 to elect C-corp treatment owes $400 to the state in the first year of the election, whether the entity has any income or not.

Pass-through LLCs (disregarded entities, partnerships, S-corps) do not pay the $400 minimum at the entity level. They are taxed at the member level on the member's individual return, under the 3.75% to 5.99% schedule. The result is that the federal classification choice, which in most states is a pure tax-optimization question, has a standing state-level dollar cost attached in Rhode Island the moment the election flips to C. For a closely held operating company with no intention of retaining earnings, the Rhode Island math penalizes the C election twice: once at 7% on every dollar of corporate income, and a second time through the $400 floor during any year where the pass-through alternative would have paid less in state tax.

One further wrinkle. An S-corp election at the federal level flows through to Rhode Island under R.I. Gen. Laws § 44-11-2(g), but the $400 minimum still applies to an S-corp on Rhode Island's books. The S-corp pays the minimum and no more if it has no built-in gains or excess passive income; the S-corp pays 7% plus the minimum on the limited categories the federal S rules tax at the entity level. An S election does not eliminate the $400 floor.

Rhode Island does not impose a separate franchise tax, a capital stock tax, or a privilege tax on LLCs. The $50 annual report is the only standing state-level compliance cost for a pass-through LLC filing on time. For a C-corp, the floor is $50 plus $400, and the 7% kicks in above that.

For the wider framing on when a Delaware charter is worth the out-of-state premium, the comparison in the 2016 Delaware guide is still the right starting point for New England founders.

The resident-agent market and what to pay

Every Rhode Island LLC needs a resident agent with a physical address in Rhode Island under R.I. Gen. Laws § 7-16-11. The market splits the usual way. Commodity agents charge in the range of $50 to $100 per year for a mailbox, a forwarding address, and nothing else. Full-service agents charge $150 to $300 per year for same-day forwarding of service of process, reminders before the September through November annual-report window, and a point of contact who will catch a misfiled amendment before it becomes a reinstatement problem.

For a first Rhode Island entity, pay more than the commodity rate. The November 1 annual-report deadline, the $400 minimum if the federal classification drifts in a way the founder did not appreciate, and the revocation exposure under § 7-16-67 together argue for a paid reminder service. The difference between a $60 agent and a $180 agent is usually one missed annual report or one piece of served process that sits for two weeks before it reaches counsel. The savings are not worth the exposure on a first-year entity where the founder is still learning the state's rhythm.

Who Rhode Island actually makes sense for

Rhode Island makes sense for founders operating in Rhode Island. That is the honest answer, and it covers the large majority of legitimate Rhode Island filings. A Providence consultancy, a Newport hospitality operator, a Pawtucket real-estate holding LLC, and a Warwick family business reorganization are better off forming at home than paying two states for the privilege of a Delaware charter and foreign-qualifying back. Foreign qualification in Rhode Island carries its own $150 filing fee plus the same $50 annual report burden, so a Delaware-formed LLC operating in Providence pays both states for the overlap.

Rhode Island makes sense for a Rhode Island real-estate portfolio. The statute is competent, the liability shield follows standard rules under § 7-16-23, the annual compliance is inexpensive, and there is no franchise tax on the upper box. For a holding structure containing Rhode Island real property, Rhode Island is the right place for the parent LLC. Multi-state portfolios complicate the picture and push toward Delaware or Wyoming for the upper tier, but a single-state Rhode Island real-estate holder does not need to leave home.

Rhode Island does not make sense for a software company on a venture track. Institutional investors raising a priced round will ask for a Delaware C-corp, and if they do not, their counsel will. Starting in Rhode Island and converting to Delaware later is a legal and tax exercise in the low four figures and a cosmetic blemish on the cap table. Founders who know they are headed into the venture pipeline should form Delaware on day one, operate from Rhode Island, and foreign-qualify the Delaware entity back into the state. The Business Services portal runs the foreign-qualification process on the same Form 400 template and the same $150 fee.

Rhode Island does not make sense as a tax-haven destination for non-Rhode Island operators. The 5.99% top individual rate is unremarkable, the 7% corporate rate is higher than most of the shoppable alternatives, and the $400 minimum on a C-corp election is a standing cost with no benefit to a filer who could have gone to Delaware or Wyoming for less. Privacy is ordinary: resident agent and authorized persons appear on the public filing, and manager or member detail appears on the annual report.

One tactical note for an early-2020 filer. A Rhode Island LLC formed in March 2020 has its first annual report due in the September through November 2021 window. The gap year means there is no compliance expense in 2020 beyond the $150 formation fee and whatever the resident agent charges. Tax returns for a pass-through single member flow through the member's 2020 personal return on Form RI-1040 and pay at the member-level rate on Rhode Island-source income. For most first-year Rhode Island founders, the total first-year state cost is the formation fee plus the agent, nothing more.

The only founder who should rethink is the one contemplating a C-corp election for the federal-side arithmetic. The 21% federal rate after the 2017 changes makes the C election newly attractive in a narrow set of cases where earnings will be retained. In Rhode Island, the $400 floor attaches to that election regardless of activity, and the 7% layer applies above it. Run the math with the state layer included before filing Form 8832. The federal answer alone is not the Rhode Island answer.

Sources

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