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Rhode Island LLC
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Advantages of Limited Liability Company
- Limited Liability: Owners of a LLC have the limited liability protection of a corporation.
- Flexible Profit Distribution: Limited liability companies can select varying forms of distribution of profits. Unlike a common partnership where the split is 50-50, LLC have much more flexibility.
- No Minutes: Corporations are required to keep formal minutes, have meetings, and record resolutions. The LLC business structure requires no corporate minutes or resolutions and is easier to operate.
- Flow Through Taxation: All your business losses, profits, and expenses flow through the company to the individual members. You avoid the double taxation of paying corporate tax and individual tax. Usually, this will be a tax advantage, but circumstances can favor a corporate tax structure.
Disadvantages of Limited Liability Company
- Limited Life: Corporations can live forever, whereas a LLC is dissolved when a member dies or undergoes bankruptcy.
- Going Public: Business owners with plans to take their company public, or issuing employee shares in the future, may be best served by choosing a corporate business structure.
- Added Complexity: Running a sole-proprietorship or partnership will have less paperwork and complexity. A LLC may federally be classified as a sole-proprietorship, partnership, or corporation for tax purposes. Classification can be selected or a default may apply.
By Rhode Island and other state law in order to proceed with forming a llc, you need to prepare a written abstract detailing your llc purpose, the names of your initial Rhode Island LLC members, the name and address of your Rhode Island registered agent, the details of which will be introduced into the body of your LLC operating agreement and related Rhode Island LLC formation documents assembled for application to the state of Rhode Island.
Rhode Island’s Business Tax Climate Ranks 46th
Rhode Island ranks 46th in the State Business Tax Climate Index, which measures the impact on business of five major elements of the tax system: the percentage of income taken by all taxes, the individual income tax rates, the corporate income taxes, the sales tax rate, and the complexity of the tax system. Neighboring states ranked as follows: Connecticut (37th) and Massachusetts (33rd).Rhode Island’s State/Local Tax Burden among the Highest in the Nation
For most of the past 14 years, Rhode Island has consistently had one of the nation’s higher tax burdens. Estimated now at 11.1% of income, Rhode Island’s state/local tax burden percentage stands at 5th highest nationwide, above the national average of 10.0%.
Rhode Island’s Individual Income Tax System
Rhode Island’s personal income tax system consists of a simple tax of 25% on the taxpayer’s federal liability. Rhode Island’s 2002 individual income tax collections were $771 per person (16th highest nationally).
Since most small businesses are either S Corporations or partnerships or sole proprietorships, they pay their business taxes at the rates for individuals. This makes the tax environment for small businesses in Rhode Island competitive compared to other states.
Rhode Island’s Corporate Income Tax System
Rhode Island’s corporate tax structure consists of a flat rate of 9% on all corporate income. Among states levying corporate income taxes, Rhode Island’s rate ranks 8th highest nationally. In 2001, corporate tax collections reached $74 per capita.
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