There are many benefits of starting a corporation in Rhode Island. Some of the salient benefits of a corporation in the state include sales tax exemptions and pass-through taxation.
The following step-by-step guide will show you how to start a corporation in Rhode Island.
1. Select a name for your corporation
Every new business in the state of Rhode Island requires a business name. This is the first step in the process of starting a corporation in Rhode Island.
General corporate name guidelines
When deciding on a business name for your Rhode Island corporation, bear the following naming guidelines in mind:
- Your Rhode Island corporation name must contain the word limited, Inc., company, corporation, or an abbreviation of these words
- Your Rhode Island corporation name must be distinguishable from other businesses in the state, including Rhode Island’s reserved names
Refer to the Rhode Island state statute when it comes to additional guidance and direction on deciding on a business name in Rhode Island.
Trademark
Registering your Rhode Island corporation name is a good way to protect your business name from intellectual property theft and misuse. Additionally, it’s also a great way to ensure that your customers are fully aware of who they are doing business with you at all times.
To register your Rhode Island business name as a trademark, refer to the US Trademark Electronic Search System, which will tell you whether another business entity in the state has already trademarked your name.
Once you’ve determined that the name is indeed available to be trademarked, you can make it official. To give your business name nationwide protection, you’ll need to register a trademark with the USPTO or the United States Patent and Trademark Office.
If you’d like to trademark your Rhode Island corporation name in the state only, you may do so with the Rhode Island Secretary of State.
However, registering a trademark in the state of Rhode Island will only protect the name within the state. This means that other businesses in other US states may also choose to trademark your business name.
Entity name
Your Rhode Island entity name is your business’s legal name. This is the name that you use to register your corporation with the state, and it’s also the name that will be submitted on all of your formation documents.
DBA (Doing-business-as) name
DBA is short for (doing business as) name. It’s also referred to as an assumed or fictitious name. The purpose of a fictitious name is to allow your business to operate under a different name from its legal entity name.
To register a DBA in the state of Rhode Island, you’ll need to register with the Rhode Island Department of State. You should start with a new DBA name search on the Rhode Island Department of State’s website to ensure that the name isn’t already in use.
Once you’ve established that the name is indeed available, go ahead and file the application online with the Rhode Island Business Services Online Filing System.
2. Nominate a registered agent
A registered agent is referred to by many names, such as a statutory or resident agent. However, this individual fulfills an essential role within a corporation. The main purpose of a statutory agent is to accept compliance documents, government correspondence, and service of process on behalf of your Rhode Island corporation. Therefore, every corporation will need to nominate a statutory agent prior to filing the Articles of Incorporation.
You may nominate an individual to serve as your Rhode Island corporation’s statutory agent; however, that individual will need to meet a few requirements:
- The Rhode Island registered agent must be of the legal age
- The Rhode Island registered agent must consent to the appointment
- The Rhode Island registered agent must maintain normal business hours
- The Rhode Island statutory agent must have a physical address in the state
Most business owners choose to nominate a member of the corporation to serve as the statutory agent.
3. Appoint initial directors at the organizational meeting
Your Corporation will need to hold an organizational meeting before filing the Articles of Incorporation. This meeting is where a few formalities will be concluded, such as:
Executing an incorporator’s statement, determining your share structure, selecting a Board of Directors, and creating and approving bylaws. When it comes to appointing initial directors, the minimum requirement is at least one corporate director.
This individual will oversee the operations of the Rhode Island corporation until you call the first shareholder’s meeting. A corporate director is responsible for the adoption, amendment, and repeal of operational bylaws and the removal, supervision, and election of corporate officers.
4. File Articles of Incorporation
Your new business is not official until the Articles of Incorporation are filed with the Rhode Island Secretary of State.
The Articles of Incorporation are often referred to as the Certificate of Incorporation, and this document officially creates your Rhode Island corporation. Some of the information that the document will need to contain is as follows:
- Your Rhode Island corporation’s name
- The names and addresses of the Rhode Island incorporators
- The street address and name of the corporation’s registered agent
- The Rhode Island corporation’s effective date
- The number of authorized shares your Rhode Island corporation is allowed to issue
The Rhode Island Articles of Incorporation Form does give you the option to indicate whether your corporation will be issuing more than one share class or series.
Once you compile the relevant information, go ahead and file articles online with Rhode Island’s Business Services Filing System, or, alternatively, download the Articles of Incorporation Form and have it mailed to the following address:
Division of Business Services
148 W. River Street
Providence, Rhode Island 02904-2615
5. Create and approve bylaws
Corporate bylaws are your corporation’s internal operating manual. It doesn’t need to be filed with the state. However, it is necessary as it will clarify the rules and priorities for everyone involved in the corporation. Therefore, your bylaws must include the following information:
- How company contracts will be negotiated
- The date of the annual shareholders’ meeting
- The process of adding and amending bylaws
- How company disputes will be resolved
- The process of storing corporate records
- How annual meetings will be held
- How voting procedures will be conducted
- The process of nominating corporate officers and corporate directors
- The roles and responsibilities of the Board of Directors
- How the Rhode Island corporation will be operated
The following bylaws templates are available to be customized according to your corporation’s requirements.
6. Select a share structure
Authorized shares are the number of shares a corporation is allowed to issue. Issued shares are the total number of shares actually issued to shareholders, while a share class is a group of shares with a unique set of privileges and rights.
Your Rhode Island corporation will need to decide on a share structure and issue stock. The share of stock is the unit of ownership of the corporation. Therefore, each share of stock indicates the percentage of ownership of the corporation.
So if your corporation issues one share of stock to a shareholder, then a hundred percent of the corporation is owned by that shareholder.
Shares may be structured into classes holding a different set of rights and privileges, and multiple classes are allowed. Additionally, each class can hold any number of shares.
7. Obtain an EIN
Your Rhode Island corporation needs A Federal Tax Identification Number. It’s also referred to as an FTIN or EIN, which stands for Employer Identification Number.
The FTIN is a government-issued ID assigned by the federal government or Internal Revenue Service to identify businesses in the states. It’s essentially a Social Security number for your corporation.
Irrespective of your business type, without an FTIN, you would not be able to open up a business bank account, submit paperwork for tax purposes or hire employees for your corporation. Therefore the EIN is a compulsory part of forming your corporation in Rhode Island.
To obtain an EIN, you will need to submit an online application on the IRS website. The application is completely free of charge, and so is obtaining your Federal Tax Identification Number.
Alternatively, if you would like to avoid the online application, you may download IRS Form SS-4 and have it mailed to the Internal Revenue Service at the following address:
Internal Revenue Service
Attention: Employer Identification Number Operation
Cincinnati, OH 45999
8. File Rhode Island state taxes
Your Rhode Island corporation may be liable for one or more corporate taxes based on your business structure or the type of corporation you’re running:
- Business corporation tax: Rhode Island corporations are liable for business corporation tax. C corporations’ income is taxed at a flat rate of 7%.
- Employer taxes: Business owners need to register with the Rhode Island Division of Taxation website if they have employees working for the corporation in Rhode Island.
- Sales tax: Additionally, business owners should submit an application or register with the Rhode Island Division of Taxation’s website if they plan on selling physical products in the state. The application will result in a certificate that allows the new business to collect sales tax on taxable goods.
9. Rhode Island business licenses and permits
While is no statewide business license required in the state of Rhode Island, you may require one or more licenses and permits to legally operate in the state:
- Seller’s permit: If you plan on selling or leasing tangible property and are engaged in business in the state of Rhode Island, then a seller’s permit or sales tax permit is in order. Apply for the sales tax permit via the Division of Taxation website.
- Professional license: If you’re running a professional corporation, then you’ll need to apply for a professional license to legally operate in the state.
Refer to the Department of Business Regulation website to find out more about the licenses and permits you need to legally operate your Rhode Island corporation.
10. Annual report requirements in Rhode Island
You’ll need to submit an annual report for your Rhode Island corporation each year. The annual report must be submitted to the Department of State by the 1st of March. You may download a printable copy of the form and mail it to the Department of State; alternatively, complete the online Rhode Island Annual Report Form.
11. Costs of starting a corporation in Rhode Island
The filing fees below apply to all Rhode Island corporations:
- Name reservation: $50
- DBA name: $50
- Articles of Incorporation: $230
- Annual report: $50
- Rhode Island Certificate of Good Standing: $22
Next steps after forming a corporation
After filing the necessary paperwork and securing the relevant licenses and permits, your Rhode Island corporation is officially formed. However, in order to maintain your new business, there are a few additional steps that you should consider:
Rhode Island certificate of good standing
After covering the basics of your Rhode Island corporation, such as opening up a business bank account, securing a business credit card, as well as obtaining business insurance, you should consider applying for a Rhode Island certificate of good standing via the Rhode Island Department of State.
The purpose of the certificate is to verify that your corporation was formed legally and is being maintained properly. Additionally, it gives you leverage when obtaining funding from banks and renewing specific permits and licenses, or forming your business in another state.
Order your certificate of good standing online, via mail, or in person. There is no specific form when requesting a certificate by mail, so you just need to submit a request in writing.
FAQs
One of the main benefits of an LLC or limited liability company over a sole proprietorship is that with an LLC, a member’s liability is limited to the amount of their investment, so they have personal liability protection. Whereas with a sole proprietorship, the business owner is liable for the debts incurred by the business.
Nonprofit corporations are formed for public benefit or literary, religious, charitable, scientific, or educational purposes. Therefore, the founders of the nonprofit organization do not intend to benefit financially from the corporation.
A C corporation or a C Corp. pays tax twice on the corporation’s income and then on the dividends paid to shareholders. One of the ways in which you can avoid double taxation is to elect the S corporation structure.
Some of the ways your business can protect its personal assets are investing in business insurance, protecting your corporation with trusts, putting sound legal agreements in place, and investing in comprehensive risk management.
A shareholder agreement is often referred to as a stockholders agreement. It’s essentially an agreement or arrangement between shareholders that outlines how the company should be governed and also clarifies the rights and obligations of shareholders.
