How to Dissolve a Business in Rhode Island | Essential Steps

Steve Bennett
Business Formation Expert  |   Fact Checked by Editorial Team
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Dissolve Rhode Island LLC

Deciding to dissolve a Limited Liability Company can be difficult for business owners. Still, it is sometimes necessary due to changes in the business landscape, financial challenges, or personal reasons. Dissolving a business requires specific steps and regulations to complete the process correctly and legally. This comprehensive guide will teach you how to dissolve a business in Rhode Island.

Webinarcare Editorial Team will help you easily dissolve your business. You must be guided by all the factors gathered in this article.

If you are starting an LLC in Rhode Island, having an operating agreement is one of the key requirements in dissolving a business. Before starting the legal paperwork, there are a few things to remember. Initially, confirm that all LLC members agree with closing the business. Once everyone is ready, voting should be used to document everyone’s assent. They must vote in favor of the dissolution before the legal procedure may begin. The procedures for the dissolution are listed below.

How to Dissolve a Business in Rhode Island

Dissolving a business in Rhode Island requires following specific steps to ensure a smooth and legally compliant process. The process usually includes the following steps:

Step 1: Make the Decision

Before dissolving your business, ensure this decision is right for your Rhode Island business. Consider discussing the decision with your business partners, members, or legal counsel to weigh the pros and cons and determine if dissolving the business is best.

Step 2: Hold a Formal Vote

Once you’ve decided to dissolve your Rhode Island business, you’ll need to hold a formal vote among the members to approve the dissolution. This step is important because it ensures that all members know and agree to the decision to dissolve the business.

To hold a formal vote:

  • Review your Rhode Island Operating Agreement to determine the required voting procedures, such as the percentage of affirmative votes needed for approval.
  • Notify all Rhode Island members of the upcoming vote and give them sufficient time to review the matter and make an informed decision.
  • Conduct the vote according to the procedures outlined in your operating agreement.
  • Record the vote results in your business meeting minutes or a written resolution.

If most members approve the dissolution, you can proceed with the dissolution process.

Get a Professional Service

It’s important to get legal assistance when dissolving an LLC. With that, you must have a Resident Agent. Ensure that the Resident Agent you choose is qualified and legal since they will file the Article of Dissolution for your LLC. We reviewed the Best Resident Agent Services in Rhode Island for you to check out.

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Step 3: Settle the Outstanding Debts and Liabilities

You must settle all outstanding debts and liabilities before dissolving your Rhode Island business. This includes paying off loans, settling pending lawsuits, paying owed taxes, and fulfilling any remaining contractual obligations. You can inform your Rhode Island Business Attorney to ensure it is settled.

To settle your Rhode Island business’ debts and liabilities:

  • Review your business’ financial records to identify all outstanding debts and liabilities.
  • Contact creditors, lenders, and other parties to whom your business owes money or obligations, and arrange for payment or settlement.
  • If your business does not have sufficient funds or assets to cover all outstanding debts and liabilities, consult with legal counsel to determine the best course of action for settling these obligations.

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Step 4: Distribute the Remaining Assets to Members

Once all debts and liabilities have been settled, you can distribute any remaining assets to the business members. Your operating agreement should do this or, if no such agreement exists, in proportion to each member’s ownership interest in the business.

To distribute assets:

  • Determine the fair market value of the remaining assets, such as real estate, equipment, or inventory. 
  • Calculate each member’s ownership interest in the business based on the operating agreement or their initial capital contribution.
  • Distribute the assets to each member according to their ownership interest.
  • Keep detailed records of all asset distributions for tax and legal purposes.

Step 5: File the Articles of Dissolution

After settling debts and distributing assets, you’ll need to file the Articles of Dissolution with the Rhode Island Secretary of State to dissolve your Rhode Island business officially. This document provides the state with notice that your business is ceasing operations and will no longer conduct business.

To file the Articles of Dissolution:

  1. Obtain the appropriate form from the Rhode Island Secretary of State‘s website. Access the Rhode Island Secretary of State’s website and navigate to the Corporations Division for the required forms and instructions.
  2. Fill out the Articles of Dissolution Form with the required information, including your Rhode Island business name, the date of dissolution, and any other necessary details.
  3. Pay the filing fee of $50 in the Rhode Island Secretary of State’s office.
  4. Submit the completed form and payment to the Rhode Island Secretary of State’s office, either by mail or online, depending on your Rhode Island’s filing options.

Once your Articles of Dissolution have been processed and approved, your Rhode Island business will officially be dissolved.

Mail to: 
Rhode Island Secretary of State
Division of Business Services, 148 W. River Street, Providence, RI 02904

Filling Fee:
$50

Step 6: Notify the IRS and Government Agencies

After dissolving your business with the Rhode Island Secretary of State, you’ll need to notify the Internal Revenue Service (IRS) and other Rhode Island government agencies of the dissolution. This is important to ensure your business complies with tax laws and other regulations.

To notify the IRS of the dissolution:

  1. File your final federal tax return using Form 1065 and check the box indicating that it is the final return for your business.
  2. Cancel your Employer Identification Number (EIN) in Rhode Island by mailing a letter to the IRS at the address where you filed your tax return. Include your EIN, business name, and reason for cancellation in the letter.
  3. Update your Rhode Island business status with any other relevant government agencies, such as the Rhode Island Department of Revenue, Department of Labor, and local licensing and permitting offices.

Step 7: Cancel Licenses, Permits, and Insurance Policies

To fully dissolve your Rhode Island business, you’ll need to cancel any business licenses, permits, and insurance policies associated with your business. This may include Rhode Island Business Licenses, professional licenses, sales tax permits, and any other permits required for your industry.

You must contact the issuing agency to cancel your licenses and permits and follow their specific cancellation procedures. You should also contact your insurance provider to cancel any remaining business insurance policies. With the cancellation of the mentioned licenses, permits, and Business Insurances in Rhode Island, you also need to remove a Resident Agent since he won’t be able to continue filing documents for your business unless you are the Resident Agent of your business. 

Step 8: Maintain Records of the Dissolution Process

For legal and tax purposes, it’s important to maintain detailed records of the steps taken to dissolve your Rhode Island business. This includes documentation of the formal vote to dissolve the business, debt settlements, asset distribution records, and copies of filed state and federal tax returns.

Keep these records for at least seven years, as they may be needed in the event of an IRS audit or other legal issues arising from the dissolution.

Cost of Dissolving an LLC in Rhode Island

The cost of dissolving an LLC in Rhode Island can vary based upon various factors. The Rhode Island Articles of the Dissolution filing fee cost $50. Other costs include any outstanding taxes or debts the business owes and potential costs for settling business contracts or selling business assets.

It’s also important to factor in professional fees, such as if you hire an attorney or accountant to assist with the dissolution process. After the LLC is dissolved, the remaining company assets are divided among the members. The exact breakdown of these costs can often be complex and will depend on the specific circumstances of the LLC, so consulting with a legal or financial advisor can be helpful.

Reasons Why an LLC in Rhode Island Dissolves

There are numerous reasons why an LLC in Rhode Island dissolves, and these reasons could impact other LLCs. It is best to understand the why’s and how to deal with it rather than knowing that your LLC may dissolve sooner or later. Here is the list of possible reasons why an LLC dissolves.

  1. Expired Duration: In Rhode Island, an LLC will automatically dissolve if it reaches the end of its defined duration stated in the Articles of Organization.
  2. Member Vote: An LLC may dissolve in Rhode Island if the members vote for dissolution. Usually, the LLC Operating Agreement outlines the percentage of member votes required to dissolve the LLC.
  3. Judicial Dissolution: A court in Rhode Island may order the dissolution of an LLC if it is in the best interests of the members, especially in cases of fraud, illegal activities, or oppressive behavior.
  4. Bankruptcy: If the LLC becomes insolvent and cannot pay its debts, it may be forced into bankruptcy. This usually leads to the dissolution of the LLC.
  5. Non-compliance: If the LLC does not comply with state laws or fails to meet legal requirements, such as filing annual reports or paying taxes, the state may forcibly dissolve the LLC.
  6. Merger or Consolidation: If the LLC in Rhode Island merges or consolidates with another company and the LLC is not the surviving entity, it will be dissolved.
  7. Death or Withdrawal of a Member: Unless specified otherwise in the Operating Agreement, the death, withdrawal, bankruptcy, or incompetence of a member may cause the LLC to dissolve.

Please note that the process for dissolution typically includes settling all business debts, distributing any remaining assets among the members, and filing a formal notice of dissolution with the Rhode Island Secretary of State.

After the Rhode Island LLC Dissolution

Once your Rhode Island business has been dissolved, it typically cannot be reinstated or “taken back” after a few years. Instead, you would need to form a new LLC in Rhode Island if you wish to operate a business under a limited liability company structure again.

To create a new Rhode Island LLC, you would need to follow the standard formation process, which generally includes the following:

  • Choosing a Unique Business Name: Ensure that another business does not already use the name you choose in Rhode Island and complies with state-specific naming requirements.
  • Appointing a Resident Agent: Designate a Resident Agent who will be responsible for receiving legal correspondence on behalf of your LLC.
  • Filing Articles of Organization: Submit the Articles of Organization with the Rhode Island Secretary of State’s office, along with the required filing fee.
  • Creating an Operating Agreement: Draft an agreement outlining the rules and regulations governing your new LLC, including member roles, ownership percentages, and management structure.
  • Obtaining Necessary Licenses and Permits: Apply for any required business licenses, permits, and tax registrations with the appropriate state and local authorities.
  • Registering with the Internal Revenue Service (IRS): Obtain an Employer Identification Number (EIN) from the IRS, which will be necessary for tax purposes and other business activities.

Availability of the Business Name

When a business is in Rhode Island was dissolved, the business name becomes available for other business owners to use after a certain period. However, the specific rules and regulations regarding the availability of a dissolved business name can vary. Keep in mind that even if the name becomes available, other factors, such as trademarks or potential confusion with existing businesses, may still impact the ability of another business owner to use the name.

FAQs

How do I dissolve my Rhode Island LLC?
To dissolve a Rhode Island LLC, you must file a Certificate of Dissolution with the Rhode Island Secretary of State.
What is the fee to dissolve a Rhode Island LLC?
The filing fee to dissolve a Rhode Island LLC is $50.
Can I dissolve my Rhode Island LLC online?
No, you must file your Certificate of Dissolution by mail or in person at the Rhode Island Secretary of State’s office.
What information do I need to include on my Certificate of Dissolution?
Your Certificate of Dissolution should include the name of your LLC, its date of formation, and the reason for dissolution.
Do I need to notify my creditors before dissolving my Rhode Island LLC?
Yes, you should notify your creditors and provide them with a chance to file any outstanding claims before dissolving your Rhode Island LLC.
What happens if I don’t notify my creditors before dissolving my Rhode Island LLC?
If you fail to notify your creditors, you remain responsible for any outstanding debts or obligations.
Can I be personally liable for my LLC’s debts after dissolution?
Yes, if you did not properly dissolve the LLC or notify creditors, you can be held personally liable for any outstanding debts or obligations.
How long does it take to dissolve a Rhode Island LLC?
It can take several weeks to several months to dissolve a Rhode Island LLC, depending on the complexity and completeness of your filing.
Can I dissolve my Rhode Island LLC if I have outstanding taxes or fees due?
No, you must pay any outstanding taxes or fees before you can dissolve your Rhode Island LLC.
Do I need to hold a meeting or vote to dissolve my Rhode Island LLC?
No, you do not need to hold a meeting or vote to dissolve your Rhode Island LLC.
Can I re-open my Rhode Island LLC after it has been dissolved?
No, once your Rhode Island LLC is dissolved, you must file a new LLC formation document if you want to do business under that name again.
Will I receive confirmation when my Rhode Island LLC is dissolved?
Yes, you should receive confirmation from the Rhode Island Secretary of State once your LLC is dissolved, as long as your filing is complete and accurate.
Can I dissolve my Rhode Island LLC immediately after it is formed?
You may dissolve an LLC immediately after formation, but you must do so within 90 days of filing your Articles of Organization.
What happens to my Rhode Island LLC’s assets after dissolution?
Your Rhode Island LLC’s assets will be distributed according to its operating agreement or state law after all debts and obligations are settled.
Do I need to file a final tax return for my Rhode Island LLC?
Yes, you must file a final tax return for your Rhode Island LLC, even if it did not conduct any business in the year of dissolution.
Can I sell my Rhode Island LLC to someone else before dissolving it?
Yes, you can sell your Rhode Island LLC to another party before dissolving it, as long as the proper filings and notifications are completed.
Do I need to cancel my Rhode Island LLC’s business licenses before dissolving it?
Yes, you should cancel any business licenses or permits held by your Rhode Island LLC before dissolving it.
Can I dissolve my Rhode Island LLC if it has multiple members?
Yes, you can dissolve a Rhode Island LLC with multiple members, but all members must agree and sign the Certificate of Dissolution.
Can I dissolve my Rhode Island LLC if it has employees?
Yes, you can dissolve a Rhode Island LLC with employees, but you must follow all state and federal laws regarding layoffs or severances.
Can I incorporate a new business with the same name as my dissolved Rhode Island LLC?
No, another business cannot use the same name as your dissolved Rhode Island LLC, even if you were not actively using the name before dissolution.
Are there any exceptions to the requirement to notify creditors before dissolving my Rhode Island LLC?
Yes, Rhode Island law allows for exceptions to the requirement to notify creditors in cases of impending bankruptcy or where notice would adversely affect the debtor’s position.
What happens if I file my Certificate of Dissolution incorrectly?
If you file your Certificate of Dissolution incorrectly, it may be rejected or delayed, which can result in continued liability or additional fees.
Can I dissolve my Rhode Island LLC if it has pending lawsuits or legal claims?
Yes, you can dissolve a Rhode Island LLC with pending lawsuits or legal claims, but you must continue to satisfy any judgments or obligations.
Do I need to appoint a registered agent to dissolve my Rhode Island LLC?
No, you do not need to appoint a registered agent to dissolve your Rhode Island LLC.
Can I dissolve my Rhode Island LLC if it is in good standing?
Yes, you can dissolve a Rhode Island LLC that is in good standing as long as all requirements are met, including notifying creditors and cancelling any business licenses.
Can I file my Certificate of Withdrawal instead of a Certificate of Dissolution to dissolve my Rhode Island LLC?
No, Rhode Island does not have a separate process for withdrawal; you must file a Certificate of Dissolution to dissolve your Rhode Island LLC.
What happens if my Rhode Island LLC has outstanding fines or penalties before dissolution?
If your Rhode Island LLC has outstanding fines or penalties, you must pay these before dissolving your LLC to avoid personal liability.
Can I dissolve my Rhode Island LLC if it has outstanding loans or mortgages?
Yes, you can dissolve a Rhode Island LLC with outstanding loans or mortgages, but you will remain personally liable for these debts if you do not properly notify lenders or satisfy outstanding balances.
Can a member of the LLC file for dissolution in Rhode Island?
Yes, a member of the LLC can file for dissolution in Rhode Island.
Do I have to file Rhode Island taxes before dissolving my LLC?
Yes, you must file all Rhode Island tax returns and pay any outstanding taxes before dissolving your LLC.
What happens if I don’t file Rhode Island tax returns before dissolving my LLC?
If you don’t file your Rhode Island tax returns before dissolving your LLC, you may be subject to penalties and interest charges.
Is there a fee to dissolve my Rhode Island LLC?
Yes, there is a filing fee to dissolve your Rhode Island LLC.
How much does it cost to dissolve a Rhode Island LLC?
The filing fee to dissolve a Rhode Island LLC is $50, plus any additional fees for expedited processing.
What if my Rhode Island LLC has outstanding debts or obligations?
You must pay off any outstanding debts or obligations before you can dissolve your Rhode Island LLC.
What happens to my Rhode Island LLC’s assets when it is dissolved?
After you have paid off all outstanding debts and obligations, any remaining assets can be distributed to members according to the LLC operating agreement, or in accordance with Rhode Island law.
Do I need to notify creditors or other parties that my Rhode Island LLC is being dissolved?
Yes, you should notify creditors and other parties that your Rhode Island LLC is being dissolved.
Can I be held personally liable for my Rhode Island LLC’s debts after it is dissolved?
Generally, no. After your Rhode Island LLC is dissolved, you are protected from personal liability for its debts.
Do I need to submit a final tax return for my Rhode Island LLC?
Yes, you need to submit a final Rhode Island tax return for your LLC.
What if my Rhode Island LLC is not in good standing at the time of dissolution?
You must bring your Rhode Island LLC back into good standing before filing for dissolution.
Can I reinstate my Rhode Island LLC after it has been dissolved?
Yes, you can reinstate your Rhode Island LLC after it has been dissolved.
How do I reinstate my Rhode Island LLC after it has been dissolved?
To reinstate your Rhode Island LLC, you will need to file an Application for Reinstatement with the Rhode Island Secretary of State.
Is there a fee to reinstate my Rhode Island LLC?
Yes, there is a fee to reinstate your Rhode Island LLC, plus any additional fees for expedited processing.
Can I change my Rhode Island LLC’s name at the time of dissolution?
No, you cannot change your Rhode Island LLC’s name at the time of dissolution.
Can someone else file for dissolution of my Rhode Island LLC without my consent?
No, someone else cannot file for dissolution of your Rhode Island LLC without your consent.
How do I close my Rhode Island LLC bank account?
To close your Rhode Island LLC bank account, you will need to contact your bank and follow their specific procedures.
Can I transfer my Rhode Island LLC’s assets to another LLC before dissolving it?
Yes, you can transfer your Rhode Island LLC’s assets to another LLC before dissolving it.
Does Rhode Island require LLCs to file annual reports?
Yes, Rhode Island requires LLCs to file annual reports.
What if I forget to file an annual report for my Rhode Island LLC?
If you forget to file an annual report for your Rhode Island LLC, you may be subject to late fees and penalties.
Can I dissolve my Rhode Island LLC without notifying all members?
No, you must notify all members of your Rhode Island LLC if you are dissolving it.
How do I notify all members of my Rhode Island LLC if I am dissolving it?
You can notify all members of your Rhode Island LLC by following the procedures outlined in your LLC operating agreement, or by sending a written notice to all members.
Can I start a new LLC in Rhode Island after dissolving my old one?
Yes, you can start a new LLC in Rhode Island after dissolving your old one.
Do I need to file a certificate of dissolution with the state after dissolving my Rhode Island LLC?
Technically speaking, Rhode Island does not require LLCs to file a certificate of dissolution. However, some people choose to file such a document to provide proof that the LLC has been properly dissolved.
What happens if I change my mind about dissolving my Rhode Island LLC after filing my articles of dissolution?
If you change your mind about dissolving your Rhode Island LLC after filing your articles of dissolution, you may need to file a request for reinstatement or start a new LLC.

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Conclusion

Dissolving Rhode Island business can be complex and time-consuming, but following the steps outlined in this guide will help ensure a smooth and successful dissolution. By conducting a formal vote, settling debts and liabilities, distributing assets, filing the Articles of Dissolution, notifying government agencies, and canceling business licenses and permits, you can legally dissolve your Rhode Island business and move forward with the next chapter of your professional life.

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