How to Dissolve an LLC in Rhode Island? (Most Effective Way)
When a Rhode Island business is already completed, no longer viable, or the business owner wants to move on to other ventures, it may be necessary to legally dissolve the limited liability company. Dissolving an LLC is a relatively simple process in Rhode Island.
As part of a team of legal experts and business consultants with over a decade of experience, I’ll provide you with an in-depth guide backed by comprehensive research and legal information, so you could properly dissolve your Rhode Island LLC.
Quick Summary:
- To dissolve an LLC in Rhode Island, consult the operating agreement for dissolution procedures and file the necessary legal documents.
- After clearing your final tax returns, you must obtain a tax clearance certificate from the Rhode Island Department of Revenue.
- According to the U.S. Small Economic Profile, the unemployment rate in Rhode Island as of July 2023 was 15.8%, emphasizing the broader economic context within which businesses are operating and dissolving.
- From personal experience, navigating the dissolution process in Rhode Island requires meticulous attention to legal details and is a sobering reminder of the realities of business ownership.
6 Steps to Dissolving an LLC in Rhode Island
Follow these six steps to terminate your limited liability company in South Carolina.
Step 1: Vote to Dissolve the LLC
The first reference for the dissolution process should be in your LLC's operating agreement.
This document often outlines the procedures for making significant decisions, including dissolution. It may specify the percentage of votes needed to agree on dissolution.
In our case, our LLC members had agreed on a supermajority vote upon forming the LLC so during the meeting, this requirement for dissolution was met unanimously.
If you do not have an operating agreement to guide you on how to dissolve your LLC Rhode Island state law will provide default rules.
These are outlined in the Rhode Island Limited-Liability Company Act.
Step 2: Notify Creditors About Your LLC's Dissolution
When dissolving an LLC in Rhode Island, the owner must notify all creditors about the dissolution by preparing and sending a formal notice.
This notice should include the LLC's name, a statement of dissolution, a request for creditors to present their claims with specific details, and a deadline for submitting these claims.
We recommended sending these notices via certified mail for documentation and possibly publishing a notice in a local newspaper to reach unknown claimants.
In our case, the LLC owners responded to and settled valid claims, keeping detailed records of all communications and transactions with creditors.
This proactive approach was especially pertinent considering that between March 2020 and March 2021, 4,046 Rhode Island establishments closed, highlighting the broader economic challenges businesses faced, as per U.S. Small Economic Profile statistics [1].
In our case, the LLC owners responded to and settled valid claims, keeping detailed records of all communications and transactions with creditors.
Step 3: File Final Tax Returns and Obtain Tax Clearance
Close all various tax accounts and pay any outstanding obligations.
This includes filing a final return with the IRS and the Rhode Island Department of Revenue.
During our dissolution, we also needed to submit a tax clearance form to the Department of Revenue to ensure that all tax liabilities had been paid.
The urgency of settling all tax obligations was underscored by the fact that, as of July 2023, Rhode Island's unemployment rate stood at 15.8%, according to the U.S. Bureau of Labor Statistics, reflecting the economic impact on both individuals and businesses statewide [2].
After filing a Tax Clearance Certificate, LLCs in Rhode Island are also required to file an LLC annual report and pay a franchise tax.
Step 4: File Articles or Certificate of Dissolution
File Rhode Island LLC Articles of Dissolution with the Rhode Island Secretary of State. This document is available on the state's official website [3].
The filing fee is $50. You can file it online, in person, or send it by mail to:
Corporations Division
Office of the Secretary of State
148 W. River Street
Providence, Rhode Island, 02904-2615
The Rhode Island dissolution document must be signed by LLC members and must include the following:
- Business name
- The effective date of dissolution
- Reasons for dissolution
- Name and address of your Rhode Island LLC's registered agent.
According to the Rhode Island Secretary of State, it takes about 7–10 business days to officially dissolve a Rhode Island LLC.
In our case, it took 8 days before we received a confirmed copy of the dissolution papers via mail.
"After dissolving your business in Rhode Island, reinstatement or 'undoing' the dissolution after several years is generally not an option. Should you decide to operate under a limited liability company structure once more, forming a new LLC in Rhode Island would be necessary."
-Jon Morgan, Co-Founder & Co-Chief of Venture Smarter
Step 5: Distribute Assets
After clearing all company debt, you must distribute the remaining assets among members as per the guidelines in the operating agreements.
In our case, some of the assets of the LLC were not in cash (e.g., property, equipment), so we liquidated (sold) them and distributed the proceeds among the members.
Keep detailed records of how debts were paid, how assets were liquidated (if applicable), and how the proceeds were distributed among members. This documentation is important for legal and tax purposes.
Provide members with their final Schedule K-1 forms, which report each member's share of the LLC's income, deductions, and credits for the final year of operation.
Step 6: Close All Accounts and Cancel Licenses and Permits
Close all business bank accounts, terminate services, and close accounts with utility providers (electricity, water, internet, etc.) and any other service providers. Ensure all final bills are paid.
Cancel any operational permits your business may have required. This could include health department permits, environmental permits, building permits, and special event permits.
In our case, we needed to provide a formal notice to the issuing authority about the dissolution and request the cancellation of the license or permit.
Canceling licenses and permits is crucial to avoid ongoing fees or penalties associated with maintaining these licenses.
FAQs
How Much Does It Cost To Dissolve an LLC in Rhode Island?
It costs a $50 filing fee to dissolve an LLC in Rhode Island LLC, which covers the Articles of Dissolution.
How Do I Close My Rhode Island Withholding Account?
To close your Rhode Island withholding account, file a final tax return and settle all outstanding obligations.
How Long Does It Take To Dissolve an LLC in Rhode Island?
It takes 7-10 business to dissolve an LLC in Rhode Island if you submit the Articles of Dissolution by mail.
References:
- https://advocacy.sba.gov/wp-content/uploads/2022/08/Small-Business-Economic-Profile-RI.pdf
- https://www.bls.gov/eag/eag.ri.htm#eag_ri.f.1
- https://docs.sos.ri.gov/documents/BusinessServices/404-articles-of-dissolution.pdf
